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FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS (Tables)
 12 Months Ended
Dec. 31, 2018
Fair Value Disclosures [Abstract]  
Financial instruments measured at fair value on a recurring basis
FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE ON A RECURRING BASIS
The following tables present, by level within the fair value hierarchy, TEP’s assets and liabilities accounted for at fair value on a recurring basis classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
 
Level 1
 
Level 2
 
Level 3
 
Total
(in millions)
December 31, 2018
Assets
 
Cash Equivalents(1)
$
125

 
$
—

 
$
—

 
$
125

Restricted Cash(1)
15

 
—

 
—

 
15

Energy Derivative Contracts, Regulatory Recovery(2)
—

 
10

 
—

 
10

Energy Derivative Contracts, No Regulatory Recovery(2)
—

 
—

 
2

 
2

Total Assets
140

 
10

 
2

 
152

Liabilities
 
 
 
 
 
 
 
Energy Derivative Contracts, Regulatory Recovery(2)
—

 
(35
)
 
(2
)
 
(37
)
Total Liabilities
—

 
(35
)
 
(2
)
 
(37
)
Total Assets (Liabilities), Net
$
140

 
$
(25
)
 
$
—

 
$
115

(in millions)
December 31, 2017
Assets
 
Cash Equivalents(1)
$
30

 
$
—

 
$
—

 
$
30

Restricted Cash(1)
12

 
—

 
—

 
12

Energy Derivative Contracts, Regulatory Recovery(2)
—

 
9

 
—

 
9

Energy Derivative Contracts, No Regulatory Recovery(2)
—

 
—

 
3

 
3

Total Assets
42

 
9

 
3

 
54

Liabilities
 
 
 
 
 
 
 
Energy Derivative Contracts, Regulatory Recovery(2)
—

 
(26
)
 
—

 
(26
)
Energy Derivative Contracts, No Regulatory Recovery(2)
—

 
—

 
(1
)
 
(1
)
Interest Rate Swap(3)
—

 
(1
)
 
—

 
(1
)
Total Liabilities
—

 
(27
)
 
(1
)
 
(28
)
Total Assets (Liabilities), Net
$
42

 
$
(18
)
 
$
2

 
$
26

(1) 
Cash Equivalents and Restricted Cash represent amounts held in money market funds, certificates of deposit, and insured cash sweep accounts valued at cost, including interest, which approximates fair market value. Cash Equivalents are included in Cash and Cash Equivalents on the Consolidated Balance Sheets. Restricted Cash is included in Investments and Other Property and in Current Assets—Other on the Consolidated Balance Sheets.
(2) 
Energy Derivative Contracts include gas swap agreements (Level 2) and forward purchased power and sales contracts (Level 3) entered into to reduce exposure to energy price risk. These contracts are included in Derivative Instruments on the Consolidated Balance Sheets.
(3) 
The Interest Rate Swap is valued using an income valuation approach based on the 6-month LIBOR and is included in Derivative Instruments on the Consolidated Balance Sheets.
Potential offset of assets by counterparty netting and cash collateral
The tables below present the potential offset of counterparty netting and cash collateral.
 
Gross Amount Recognized in the Balance Sheets
 
Gross Amount Not Offset in the Balance Sheets
 
Net Amount
 
 
Counterparty Netting of Energy Contracts
 
Cash Collateral Received/Posted
 
(in millions)
December 31, 2018
Derivative Assets
 
 
 
 
 
 
 
Energy Derivative Contracts
$
12

 
$
11

 
$
—

 
$
1

Derivative Liabilities
 
 
 
 
 
 
 
Energy Derivative Contracts
(37
)
 
(11
)
 
—

 
(26
)
(in millions)
December 31, 2017
Derivative Assets
 
 
 
 
 
 
 
Energy Derivative Contracts
$
12

 
$
10

 
$
—

 
$
2

Derivative Liabilities
 
 
 
 
 
 
 
Energy Derivative Contracts
(27
)
 
(10
)
 
—

 
(17
)
Interest Rate Swap
(1
)
 
—

 
—

 
(1
)
Potential offset of liabilities by counterparty netting and cash collateral
The tables below present the potential offset of counterparty netting and cash collateral.
 
Gross Amount Recognized in the Balance Sheets
 
Gross Amount Not Offset in the Balance Sheets
 
Net Amount
 
 
Counterparty Netting of Energy Contracts
 
Cash Collateral Received/Posted
 
(in millions)
December 31, 2018
Derivative Assets
 
 
 
 
 
 
 
Energy Derivative Contracts
$
12

 
$
11

 
$
—

 
$
1

Derivative Liabilities
 
 
 
 
 
 
 
Energy Derivative Contracts
(37
)
 
(11
)
 
—

 
(26
)
(in millions)
December 31, 2017
Derivative Assets
 
 
 
 
 
 
 
Energy Derivative Contracts
$
12

 
$
10

 
$
—

 
$
2

Derivative Liabilities
 
 
 
 
 
 
 
Energy Derivative Contracts
(27
)
 
(10
)
 
—

 
(17
)
Interest Rate Swap
(1
)
 
—

 
—

 
(1
)
Realized losses from cash flow hedges
The table below presents realized losses recorded to Interest Expense as well as total Interest Expense on the Consolidated Statements of Income:
 
Years Ended December 31,
(in millions)
2018
 
2017
 
2016
Realized Loss From Cash Flow Hedge
$
—

 
$
1

 
$
1

Interest Expense
68

 
65

 
66
Financial impact of energy contracts
The table below presents amounts recorded in Operating Revenues on the Consolidated Statements of Income:
 
Years Ended December 31,
(in millions)
2018
 
2017
 
2016
Operating Revenues
$
5

 
$
5

 
$
4

The table below presents the unrealized gains and losses recorded to a regulatory asset or a regulatory liability on the balance sheet:
 
Years Ended December 31,
(in millions)
2018
 
2017
 
2016
Unrealized Net Gain (Loss)

$
(9
)
 
$
(18
)
 
$
12
Derivative volumes
The following table presents volumes associated with the energy contracts:
 
December 31,
 
2018
 
2017
Power Contracts GWh
1,743

 
2,589

Gas Contracts BBtu
146,933

 
137,952
Following tables provide quantitative information regarding significant unobservable inputs in TEP’s Level 3 fair value measurements
The following tables provide quantitative information regarding significant unobservable inputs in TEP’s Level 3 fair value measurements:
 
Valuation
 
Fair Value of
 
 
 
Range of
 
Approach
 
Assets
 
Liabilities
 
Unobservable Inputs
 
Unobservable Input
(in millions)
December 31, 2018
Forward Power Contracts
Market approach
 
$
3

 
$
(2
)
 
Market price per MWh
 
$
16.80

 
$
47.05

 
December 31, 2017
Forward Power Contracts
Market approach
 
$
3

 
$
(1
)
 
Market price per MWh
 
$
17.65

 
$
34.60
Schedule of reconciliation of changes in the fair value of net assets and liabilities
The following table presents a reconciliation of changes in the fair value of net assets and liabilities classified as Level 3 in the fair value hierarchy and the gains (losses) attributable to the change in unrealized gains (losses) relating to assets (liabilities) still held at the end of the period:
 
Years Ended December 31,
(in millions)
2018
 
2017
Beginning of Period
$
2

 
$
1

Gains (Losses) Recorded
 
 
 
Regulatory Assets or Liabilities, Derivative Instruments
(4
)
 
1

Operating Revenues
5

 
4

Settlements
(2
)
 
(4
)
End of Period
$
1

 
$
2

 
 
 
 
Gains (Losses), Assets (Liabilities) Still Held
$
1

 
$
2
Schedule of different estimation methods and/or market assumptions may yield different estimated fair value amounts
The following table includes the face value and estimated fair value of TEP's long-term debt:
 
Fair Value Hierarchy
 
Face Value
 
Fair Value
 
 
 
December 31,
(in millions)
 
 
2018
 
2017
 
2018
 
2017
Liabilities
 
 
 
 
 
 
 
 
 
Long-Term Debt, including Current Maturities
Level 2
 
$
1,629

 
$
1,466

 
$
1,672

 
$
1,547