COMMITMENTS. CONTINGENCIES, AND ENVIRONMENTAL MATTERS (Tables)

6 Months Ended

Jun. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Unrecorded Unconditional Purchase Obligations Disclosure

In addition to those reported in our 2013 Annual Report on Form 10-K, UNS Energy entered into the following long-term commitments through June 30, 2014:

	UNS Energy Purchase Commitments
	2014		2015		2016		2017		2018		Thereafter		Total
	Millions of Dollars
Fuel, including Transportation	$	—	$	9	$	9	$	9	$	8	$	8	$	43
Purchased Power	—		23		—		—		—		—		23
Capital Lease Obligations(1)	—		120		—		—		—		—		120
Total Purchase Commitments	$	—	$	152	$	9	$	9	$	8	$	8	$	186

TEP entered into the following long-term commitments:

	TEP Purchase Commitments
	2014		2015		2016		2017		2018		Thereafter		Total
	Millions of Dollars
Fuel, Including Transportation	$	—	$	8	$	8	$	8	$	8	$	8	$	40
Purchased Power	—		15		—		—		—		—		15
Capital Lease Obligations(1)	—		120		—		—		—		—		120
Total Purchase Commitments	$	—	$	143	$	8	$	8	$	8	$	8	$	175

⁽¹⁾  In April 2014, TEP entered into agreements to purchase certain Springerville Coal Handling Facilities leased interests. See Note 5.

Schedule of Environmental Loss Contingencies by Site

TEP's estimated costs involved in meeting these rules are:

Estimated NOx Emissions Control Costs:	Navajo (1)		San Juan (2)		Four Corners (3)		Sundt (4)
	Millions of Dollars
Capital Expenditures	$	42	$	35	$	35	$	12
Annual O&M Expenses	1		1		2		5-6

⁽¹⁾ The EPA is considering a better-than-BART plan wherein: one unit at Navajo will be shut down by 2020; SCR (or the equivalent) will be installed on the remaining two units by 2030; and conventional coal-fired generation will cease by December 2044. TEP expects the EPA to reach a decision in 2014. In addition, the installation of SCR technology could increase particulates which may require that baghouses be installed. TEP owns 7.5% of Navajo. TEP's share of the capital cost of baghouses in addition to the SCR costs reflected in the table above is approximately $43 million with O&M on the baghouses expected to be less than $1 million per year.

⁽²⁾ The Federal Implementation Plan (FIP) for San Juan requires SCRs for which TEP estimates its share of capital costs will be $180-$200 million with annual O&M of $6 million. As part of a proposal for an alternative, Public Service Company of New Mexico (PNM), the State of New Mexico, and the EPA signed a non-binding agreement in which PNM agreed to close Units 2 and 3 by December 2017 and install selective non-catalytic reduction (SNCR) on Units 1 and 4 by January 2016 or later depending on the timing of EPA approvals. Estimated costs for SNCR are reflected in the table above. The State of New Mexico has submitted this plan to the EPA and the EPA has proposed to approve the alternative state plan which would replace the existing FIP. TEP expects the EPA will reach a final decision in 2014. TEP owns 50% of San Juan Unit 2. At June 30, 2014, the net book value of TEP's share in San Juan Unit 2 was $112 million. If Unit 2 is retired early, TEP expects to request ACC approval to recover, over a reasonable time period, all costs associated with the early closure of the unit.

⁽³⁾ In December 2013, APS, on behalf of the co-owners of Four Corners, notified the EPA that they have chosen an alternative BART compliance strategy; as a result, APS closed Units 1, 2, and 3 in December 2013 and has agreed to the installation of SCR on Units 4 & 5 by July 2018. TEP owns 7% of Four Corners Units 4 and 5.

⁽⁴⁾ In June 2014, the EPA issued a final rule that would require TEP to either (i) install SNCR and dry sorbent injection technology on Unit 4 by mid-2017 or (ii) eliminate the use of coal by the end of 2017 as a better-than-BART alternative. TEP is required to notify the EPA of its decision by March 2017. At June 30, 2014, the net book value of the Sundt coal handling facilities was $27 million. If the coal handling facilities are retired early, TEP expects to request ACC approval to recover, over a reasonable time period, all the remaining costs of the coal handling facilities.

TEP's share of the estimated costs to comply with the MATS rules include the following:

Estimated Mercury Emissions Control Costs:	Navajo		Four Corners		Springerville(1)
	Millions of Dollars
Capital Expenditures	$	1	$	1	$	5
Annual O&M Expenses	1		1		1

⁽¹⁾ Total capital expenditures and annual O&M expenses represent amounts for both Springerville Units 1 & 2, with estimated costs split equally between the two units. TEP will own 49.5% of Springerville Unit 1 upon close of the lease option purchases in January 2015; after the completion of such purchases, third party owners will be responsible for 50.5% of environmental costs attributable to Springerville Unit 1. TEP will continue to be responsible for 100% of environmental costs attributable to Springerville Unit 2.