SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

2020 FORTIS RESTRICTED STOCK UNIT PLAN

The Fortis Board of Directors ratified the 2020 Restricted Stock Unit Plan (2020 Plan) effective January 2020. Under the 2020 Plan, executive officers of Fortis and its subsidiaries may be granted time-based RSUs annually, which may be settled in cash or shares. Each RSU granted is valued based on one share of Fortis common stock traded on the Toronto Stock Exchange, converted to U.S. dollars. UNS Energy allocates the obligation and expense for this plan to its subsidiaries based on the Massachusetts Formula. Fortis accounts for forfeitures as they occur.

The following table represents RSUs awarded by Fortis for UNS Energy:


	2021	2020
RSUs	20,794	15,751

The awards are initially classified as liability awards because: (i) executive officers have the option to elect the cash or share settlement feature; and (ii) this election is contingent on an event within the executive officers' control. The liability awards may be reclassified as equity awards if the executive officers elect the share settlement feature on the modification date. Liability awards are measured at their fair value at the end of each reporting period and will fluctuate based on the price of Fortis' common stock. The awards are payable on the third anniversary of the grant date. TEP's allocated share of probable payout was $2 million and $1 million as of December 31, 2021 and 2020, respectively.

TEP's allocated portion of compensation expense is recognized in Operations and Maintenance Expense on the Consolidated Statements of Income. Compensation expense associated with unvested RSUs is recognized on a straight-line basis over the minimum required service period in an amount equal to the fair value on the measurement date or each reporting period. TEP recorded no compensation expense in 2021 and $1 million in 2020 based on its share of Fortis' compensation expense.

2015 SHARE UNIT PLAN

The Human Resources and Governance Committee of UNS Energy approved and UNS Energy's Board of Directors ratified the 2015 Share Unit Plan (2015 Plan) effective January 2015. Under the 2015 Plan, key employees, including executive officers of UNS Energy and its subsidiaries, may be granted long-term incentive awards of PSUs and RSUs annually. Each PSU and RSU granted is valued based on one share of Fortis common stock traded on the Toronto Stock Exchange, converted to U.S. dollars. UNS Energy allocates the obligation and expense for this plan to its subsidiaries based on the Massachusetts Formula. UNS Energy accounts for forfeitures as they occur.

The following table represents PSUs and RSUs awarded by UNS Energy:


	2021	2020	2019
PSUs	44,931	35,328	66,978
RSUs (1)	2,401	1,918	33,489

(1)Effective January 2020, executive officer RSU awards are issued through the 2020 Plan. Certain key employees will continue to be awarded RSUs through the 2015 Plan.

The awards are classified as liability awards based on the cash settlement feature. Liability awards are measured at their fair value at the end of each reporting period and will fluctuate based on the price of Fortis' common stock as well as the level of achievement of the financial performance criteria. The awards are payable on the third anniversary of the grant date. TEP's allocated share of probable payout was $9 million and $10 million as of December 31, 2021 and 2020, respectively.

TEP's allocated portion of compensation expense is recognized in Operations and Maintenance Expense on the Consolidated Statements of Income. Compensation expense associated with unvested PSUs and RSUs is recognized on a straight-line basis over the minimum required service period in an amount equal to the fair value on the measurement date or each reporting period. TEP recorded $4 million in 2021, $3 million in 2020, and $4 million in 2019 based on its share of UNS Energy's compensation expense.