UTILITY PLANT AND JOINTLY-OWNED FACILITIES (Tables)

12 Months Ended

Dec. 31, 2018

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,
($ in millions)	Annual Depreciation Rate ⁽⁴⁾	Average Remaining Life in Years ⁽⁴⁾	2018		2017
Plant in Service
Generation Plant	3.19%	24	$	2,667	$	2,548
Transmission Plant	1.48%	31	1,010		1,001
Distribution Plant	1.56%	35	1,692		1,632
General Plant	5.89%	11	409		389
Intangible Plant, Software Costs, and Other ⁽¹⁾	Various	Various	239		207
Plant Held for Future Use	—	—	3		4
Total Plant in Service ⁽²⁾			$	6,020	$	5,781

Utility Plant Under Capital Leases ⁽³⁾			$	249	$	85

⁽¹⁾

Primarily represents computer software. Unamortized computer software costs were $73 million and $59 million as of December 31, 2018 and 2017, respectively. The amortization of computer software costs was $24 million in 2018, $19 million in 2017, and $17 million in 2016. Computer software is being amortized over its expected useful life ranging from three to five years for smaller application software and average remaining life of three years for large enterprise software.


⁽²⁾	Includes plant acquisition adjustments of $(134) million as of December 31, 2018 and 2017.


⁽³⁾	In May 2018, TEP recorded capital lease obligations related to the Tolling PPA. See Note 7 for additional information regarding the Tolling PPA and Springerville leases.


⁽⁴⁾	Represents a composite of the depreciation rates of assets within each major class of utility plant and is based on the 2015 depreciation study available for the major classes of Plant in Service. TEP implemented 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)	2018		2017		2016
Lease Expense
Interest Expense included in:
Interest Expense, Capital Leases	$	2	$	3	$	3
Operating Expenses, Fuel	8		—		—
Amortization of Capital Lease Assets included in:
Operating Expenses, Amortization	6		6		5
Total Lease Expense	$	16	$	9	$	8

Schedule of jointly owned utility plants

As of December 31, 2018, TEP was a participant in the following jointly-owned generation facilities and transmission systems:



(in millions)	Ownership Percentage ⁽¹⁾	Plant in Service		Construction Work in Progress		Accumulated Depreciation		Net Book Value
San Juan Unit 1	50.0%	$	290	$	1	$	134	$	157
Four Corners Units 4 and 5	7.0%	173		2		76		99
Luna	33.3%	58		—		4		54
Gila River Unit 3	75.0%	204		4		67		141
Gila River Common Facilities	18.8%	25		—		9		16
Springerville Coal Handling Facilities	83.0%	208		—		86		122
Transmission Facilities	Various	532		13		290		255
Total		$	1,490	$	20	$	666	$	844


⁽¹⁾	TEP also has a 7.5% ownership interest in Navajo. Navajo's NBV is classified as a regulatory asset. See Note 2 for additional information related to Navajo's NBV.

Schedule of asset retirement obligations

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



	December 31,
(in millions)	2018		2017
Beginning of Period	$	46	$	33
Liabilities Incurred ⁽¹⁾	10		3
Liabilities Settled	—		(1		)
Regulatory Deferral/Accretion Expense	3		2
Revisions to the Present Value of Estimated Cash Flows ⁽²⁾	13		9
End of Period	$	72	$	46


⁽¹⁾	Primarily related to closure of the ash landfill at Springerville.


⁽²⁾	Primarily related to changes in expected cost estimates for certain generation facilities.