RELATED PARTY TRANSACTIONS

TEP engages in various transactions with Fortis, UNS Energy, and its affiliated subsidiaries including UNS Electric, Inc. (UNS Electric), UNS Gas, Inc. (UNS Gas), and Southwest Energy Solutions, Inc. (SES) (collectively, UNS Energy Affiliates). These transactions include the sale and purchase of power and transmission services, common cost allocations, and the provision of corporate and other labor related services.

The following table presents the components of related party balances included in Accounts Receivable, Net and Accounts Payable on the Condensed Consolidated Balance Sheets:



(in millions)	September 30, 2018		December 31, 2017
Receivables from Related Parties
UNS Electric	$	4	$	5
UNS Gas	1		2
UNS Energy	1		—
Total Due from Related Parties	$	6	$	7

Payables to Related Parties
SES	$	2	$	3
UNS Energy	1		1
UNS Electric	—		—
Total Due to Related Parties	$	3	$	4

The following table presents the components of related party transactions included in the Condensed Consolidated Statements of Income:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in millions)	2018		2017		2018		2017
Goods and Services Provided by TEP to Affiliates
Transmission Revenues, UNS Electric ⁽¹⁾	$	2	$	2	$	5	$	5
Wholesale Revenues, UNS Electric ⁽¹⁾	1		—		1		—
Control Area Services, UNS Electric ⁽²⁾	1		1		2		2
Common Costs, UNS Energy Affiliates ⁽³⁾	4		4		13		12

Goods and Services Provided by Affiliates to TEP
Supplemental Workforce, SES ⁽⁴⁾	4		4		11		11
Corporate Services, UNS Energy ⁽⁵⁾	2		1		5		4
Corporate Services, UNS Energy Affiliates ⁽⁶⁾	2		1		5		3


⁽¹⁾	TEP and UNS Electric sell power and transmission services to each other. Wholesale power is sold at prevailing market prices while transmission services are sold at FERC-approved rates through the applicable Open Access Transmission Tariff.


⁽²⁾	TEP charges UNS Electric for Control Area Services under a FERC-approved Control Area Services Agreement.


⁽³⁾	Common Costs (information systems, facilities, etc.) are allocated on a cost-causative basis and recorded as revenue by TEP. The method of allocation is deemed reasonable by management and is reviewed by the ACC as part of the rate case process.


⁽⁴⁾	SES provides supplemental workforce and meter-reading services to TEP based on related party service agreements. The charges are based on cost of services performed and deemed reasonable by management.

⁽⁵⁾

Costs for Corporate Services at UNS Energy are allocated to its subsidiaries using the Massachusetts Formula, an industry accepted method of allocating common costs to affiliated entities. TEP's allocation is approximately 82% of UNS Energy's allocated costs. Corporate Services, UNS Energy includes legal, audit, and Fortis management fees. TEP's share of Fortis' management fees were $1 million and $4 million for the three and nine months ended September 30, 2018, respectively, and $1 million and $3 million, for the three and nine months ended September 30, 2017, respectively.


⁽⁶⁾	Costs for Corporate Services (e.g., finance, accounting, tax, legal, and information technology) and other labor services for UNS Energy Affiliates are directly assigned to the benefiting entity at a fully burdened cost when possible.