REGULATORY MATTERS (Tables)

12 Months Ended

Dec. 31, 2019

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



	Years Ended December 31,
(in millions)	2019			2018
Beginning of Period	$	4		$	—
ACC Approved Refund (Reduction in Operating Revenues)	(34		)	(33		)
Amount Returned to Customers Through Bill Credits	22			37
Regulatory Deferral	8			—
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)	2019			2018
Beginning of Period	$	(17	)	$	(9	)
Deferred Fuel and Purchased Power Costs	31			2
PPFAC Refunds (Recoveries) ⁽¹⁾	22			(10		)
End of Period	$	36		$	(17	)

⁽¹⁾

In March 2019, the ACC approved a PPFAC credit as part of TEP's annual rate adjustment request.

Schedule of Regulated Operating Revenue

The table below summarizes the LFCR revenues recognized in Operating Revenues on the Consolidated Statements of Income:



	Years Ended December 31,
(in millions)	2019		2018		2017
LFCR Revenues	$	33	$	26	$	22

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)	2019		2018
Regulatory Assets
Pension and Other Postretirement Benefits (Note 10)	Various	$	135	$	126
Derivatives (Note 13)	10	72		27
Early Generation Retirement Costs	Various	68		72
Lost Fixed Cost Recovery	2	46		35
Income Taxes Recoverable through Future Rates ⁽¹⁾	Various	38		47
Under Recovered Purchased Energy Costs	1	36		—
Property Tax Deferrals ⁽²⁾	1	24		23
Final Mine Reclamation and Retiree Healthcare Costs ⁽³⁾	19	19		29
Springerville Unit 1 Leasehold Improvements ⁽⁴⁾	4	9		11
Other Regulatory Assets	Various	18		30
Total Regulatory Assets		465		400
Less Current Portion	1	138		107
Total Non-Current Regulatory Assets		$	327	$	293



Regulatory Liabilities
Income Taxes Payable through Future Rates ⁽¹⁾	Various	$	327	$	354
Net Cost of Removal ⁽⁵⁾	Various	164		171
Renewable Energy Standard	Various	59		52
Deferred Investment Tax Credits ⁽⁶⁾	Various	3		7
Over Recovered Purchased Energy Costs	Various	—		17
Other Regulatory Liabilities	Various	20		6
Total Regulatory Liabilities		573		607
Less Current Portion	1	96		95
Total Non-Current Regulatory Liabilities		$	477	$	512


⁽¹⁾	Amortized over the life of the assets. See Note 14 for additional information regarding income taxes.

⁽²⁾

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.


⁽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⁾	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 period.


⁽⁵⁾	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.

⁽⁶⁾

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