RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2019

TEP engages in various transactions with Fortis, UNS Energy, and the UNS Energy Affiliates. These transactions include: (i) the sale and purchase of power and transmission services; (ii) common cost allocations; and (iii) 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 Consolidated Balance Sheets:



	December 31,
(in millions)	2019		2018
Receivables from Related Parties
UNS Electric	$	6	$	7
UNS Gas	2		1
Total Due from Related Parties	$	8	$	8

Payables to Related Parties
SES	$	2	$	2
UNS Electric	1		1
UNS Gas	—		1
UNS Energy	1		1
Total Due to Related Parties	$	4	$	5

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



	Years Ended December 31,
(in millions)	2019		2018		2017
Goods and Services Provided by TEP to Affiliates
Transmission Revenues, UNS Electric ⁽¹⁾	$	7	$	6	$	7
Wholesale Revenues, UNS Electric ⁽¹⁾	1		1		—
Control Area Services, UNS Electric ⁽²⁾	4		3		3
Common Costs, UNS Energy Affiliates ⁽³⁾	19		18		16
Corporate Services, Fortis Affiliates ⁽⁴⁾	—		—		2

Goods and Services Provided by Affiliates to TEP
Supplemental Workforce, SES ⁽⁵⁾	15		15		15
Corporate Services, UNS Energy ⁽⁶⁾	6		6		5
Corporate Services, UNS Energy Affiliates ⁽⁷⁾	4		7		5
Capacity Charges, UNS Gas ⁽⁸⁾	1		1		—


⁽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 OATT.


⁽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⁾	TEP provides non-tariffed goods and services to Fortis affiliate companies at the higher of fully burdened cost or fair market value.


⁽⁵⁾	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.


⁽⁶⁾	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 83% 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 $6 million in 2019, $5 million in 2018, and $6 million in 2017.


⁽⁷⁾	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.


⁽⁸⁾	UNS Gas charges TEP for natural gas capacity used to supply one of TEP's generation facilities.

CONTRIBUTIONS FROM PARENT

In January 2020, an equity contribution of $125 million was received by TEP from UNS Energy.