UTILITY PLANT AND JOINTLY-OWNED FACILITIES (Tables)

12 Months Ended

Dec. 31, 2016

Public Utility Property, Plant, and Equipment

The following table shows Plant in Service on the Consolidated Balance Sheets by major class:



	Annual Depreciation Rate ⁽⁴⁾	Average Remaining Life in Years ⁽⁴⁾	December 31,
(dollars in millions)	Annual Depreciation Rate ⁽⁴⁾	Average Remaining Life in Years ⁽⁴⁾	2016		2015
Plant in Service
Generation Plant	3.31%	22	$	2,866	$	2,612
Transmission Plant	1.48%	32	1,024		1,008
Distribution Plant	2.08%	35	1,512		1,456
General Plant	5.48%	11	381		358
Intangible Plant, Software Costs and Other ⁽¹⁾	Various	Various	185		179
Plant Held for Future Use	—	—	7		5
Total Plant in Service ⁽²⁾			$	5,975	$	5,618

Utility Plant under Capital Leases ⁽³⁾			$	167	$	132

⁽¹⁾

Unamortized computer software costs were $52 million and $45 million as of December 31, 2016 and 2015, respectively. The amortization of computer software costs were $17 million in 2016, $14 million in 2015, and $17 million in 2014. Intangible Plant, Software Costs and Other primarily represents computer software. Computer software is being amortized over its expected useful life ranging from three to five years for smaller application software and its average remaining life of three years for large enterprise software.


⁽²⁾	Included in Plant in Service are plant acquisition adjustments of $(139) million and $(97) million as of December 31, 2016 and 2015, respectively.


⁽³⁾	In 2016, TEP committed to purchase an undivided ownership interest in the Springerville Common Facilities upon the expiration of the first lease term in December 2017. As a result of this commitment, Utility Plant Under Capital Leases increased by the present value of the purchase commitment. See Note 6 for additional information regarding the Springerville leases.


⁽⁴⁾	The depreciation rates represent a composite of the depreciation rates of assets within each major class of utility plant. Annual Depreciation Rate and Average Remaining Life in Years are based on the 2012 depreciation study available for the major classes of Plant in Service. TEP will implement new depreciation rates effective March 1, 2017, as approved in the 2017 Rate Order.

Amount Of Lease Expense Incurred Related Capital Leases

The following table shows the amount of lease expense incurred for capital leases:



	Years Ended December 31,
(in millions)	2016		2015		2014
Lease Expense
Interest Expense Included in:
Interest Expense, Capital Leases	$	3	$	4	$	10
Operating Expenses, Fuel	—		—		1
Amortization of Capital Lease Assets Included in:
Operating Expenses, Fuel	—		2		6
Operating Expenses, Amortization	5		6		16
Total Lease Expense	$	8	$	12	$	33

Schedule of Jointly Owned Utility Plants

As of December 31, 2016, TEP was a participant in the following jointly-owned generation facilities and transmission systems:



(in millions)	Ownership Percentage	Plant in Service		Construction Work in Progress		Accumulated Depreciation		Net Book Value
San Juan Units 1 and 2	50.0%	$	496	$	3	$	262	$	237
Navajo Units 1, 2, and 3	7.5%	149		4		114		39
Four Corners Units 4 and 5	7.0%	110		27		76		61
Luna Energy Facility	33.3%	55		—		2		53
Gila River Unit 3	75.0%	202		3		59		146
Gila River Common Facilities	18.8%	25		—		8		17
Springerville Coal Handling Facility ⁽¹⁾	83.0%	201		—		80		121
Transmission Facilities	Various	383		3		175		211
Total		$	1,621	$	40	$	776	$	885

⁽¹⁾

As of December 31, 2015, an undivided interest in Springerville Coal Handling Facilities was classified as Assets Held for Sale, Net. In 2016, TEP reclassified the undivided interest in the Springerville Coal Handling Facilities from Assets Held for Sale, Net to Utility Plant on the Consolidated Balance Sheets. See Note 6 for additional information regarding the Springerville Coal Handling Facilities lease interests.

Schedule of Asset Retirement Obligations

The following table reconciles the beginning and ending aggregate carrying amounts of ARO accruals in the Consolidated Balance Sheets:



	December 31,
(in millions)	2016			2015
Beginning of Period	$	32		$	28
Liabilities Incurred	—			4
Accretion Expense or Regulatory Deferral	2			1
Revisions to the Present Value of Estimated Cash Flows ⁽¹⁾	(1		)	(1		)
End of Period	$	33		$	32


⁽¹⁾	Primarily related to changes in expected cost estimates, in conjunction with changes of asset retirement dates of generation facilities.