REGULATORY MATTERS (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of regulatory asset (liability) balance related to the ACC Refund Order

The table below summarizes the regulatory asset (liability) balance related to the ACC Refund Order:



	Year Ended December 31,
(in millions)	2018
Beginning of Period	$	—
ACC Approved Refund (Reduction in Operating Revenues)	(33		)
Amount Returned to Customers Through Bill Credits	37
End of Period	$	4

Schedule of purchased power and fuel adjustment rates

The table below summarizes the PPFAC regulatory asset (liability) balance:



	Years Ended December 31,
(in millions)	2018			2017
Beginning of Period	$	(9	)	$	(38	)
Deferred Fuel and Purchased Power Costs	2			14
PPFAC Refunds (Recoveries) ⁽¹⁾	(10		)	15
End of Period	$	(17	)	$	(9	)


⁽¹⁾	The ACC approved a PPFAC credit to begin returning the over-collected PPFAC balance to customers for the period of March 2017 through April 2018.

Schedule of regulatory assets and liabilities

Regulatory assets and liabilities recorded in the balance sheet are summarized in the table below:



	Remaining Recovery Period (years)	December 31,
($ in millions)	Remaining Recovery Period (years)	2018		2017
Regulatory Assets
Pension and Other Postretirement Benefits (Note 9)	Various	$	126	$	126
Early Generation Retirement Costs ⁽¹⁾	Various	72		84
Income Taxes Recoverable through Future Rates ⁽²⁾	Various	47		40
Lost Fixed Cost Recovery	2	35		29
Final Mine Reclamation and Retiree Healthcare Costs ⁽³⁾	20	29		31
Derivatives (Note 12)	11	27		18
Property Tax Deferrals ⁽⁴⁾	1	23		24
Springerville Unit 1 Leasehold Improvements ⁽⁵⁾	5	11		14
Other Regulatory Assets	Various	30		22
Total Regulatory Assets		400		388
Less Current Portion	1	107		94
Total Non-Current Regulatory Assets		$	293	$	294



Regulatory Liabilities
Income Taxes Payable through Future Rates ⁽²⁾	Various	$	354	$	353
Net Cost of Removal ⁽⁶⁾	Various	171		180
Renewable Energy Standard	Various	52		44
Purchased Power and Fuel Adjustment Clause	1	17		9
Deferred Investment Tax Credits ⁽⁷⁾	Various	7		14
Other Regulatory Liabilities	Various	6		5
Total Regulatory Liabilities		607		605
Less Current Portion	1	95		89
Total Non-Current Regulatory Liabilities		$	512	$	516

⁽¹⁾

Includes the NBV and other related costs of Navajo and Sundt Units 1 and 2 reclassified from Utility Plant, Net on the Consolidated Balance Sheets due to the planned early retirement of the facilities. As of December 31, 2018, Navajo and Sundt Units 1 and 2 are being fully recovered in base rates using various useful lives through 2030. See Note 3 for additional information related to the planned early retirement of Navajo and Sundt Units 1 and 2.


⁽²⁾	Amortized over the life of the assets. The balances include changes related to the revaluation of tax assets and liabilities as a result of the TCJA. See Note 1 and Note 13 for additional information regarding income taxes.


⁽³⁾	Represents costs associated with TEP’s jointly-owned facilities at San Juan, Four Corners, and Navajo. TEP recognizes these costs at future value and is permitted to fully recover these costs on a pay-as-you-go basis through the PPFAC mechanism. The majority of final mine reclamation costs are expected to occur through 2038.

⁽⁴⁾

Property taxes are recorded as a regulatory asset based on historical ratemaking treatment allowing regulated utilities recovery of property taxes on a pay-as-you-go or cash basis. TEP records a liability to reflect the accrual for financial reporting purposes and an offsetting regulatory asset to reflect recovery for regulatory purposes. This asset is fully recovered in rates with a recovery period of approximately six months.


⁽⁵⁾	Represents investments TEP made, which were previously recorded in Plant in Service on the Consolidated Balance Sheets, to ensure that the facilities continued to provide safe, reliable service to TEP's customers. TEP received ACC authorization to recover leasehold improvement costs at Springerville Unit 1 over a 10-year amortization period.


⁽⁶⁾	Represents an estimate of the future cost of retirement net of salvage value. These are amounts collected through revenue for transmission, distribution, generation plant, and general and intangible plant which are not yet expended.


⁽⁷⁾	Represents federal energy credits generated after 2011 that are amortized over the tax life of the underlying asset.