Income Taxes (Tables)

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Schedule of Income Tax Expense

Income tax expense consists of the following components:

Income Tax Expense (Benefit)

(millions)
For the year ended December 31,	2022			2021			2020
Current income taxes
Federal	$	(13	)	$	48		$	35
State		(3	)		4			(7	)
Deferred income taxes
Federal		105			24			32
State		38			13			29
Investment tax credits amortization		(6	)		(9	)		(7	)
Total income tax expense	$	121		$	80		$	82

Schedule of Income Taxes Calculated on Income before Income Taxes and Provision for Income Taxes

For the three years presented, the overall effective tax rate differs from the U.S. federal statutory rate as presented below:

(millions)
For the year ended December 31,	2022			2021			2020
Income before provision for income taxes	$	661		$	526		$	506
Federal statutory income tax rates		21	%		21	%		21	%
Income taxes, at statutory income tax rate		139			110			106
Increase (decrease) due to
State income tax, net of federal income tax		27			13			17
Excess deferred tax amortization		(25	)		(26	)		(26	)
ITC amortization		(6	)		(9	)		(7	)
AFUDC-equity		(7	)		(9	)		(6	)
Tax credits		(9	)		(3	)		(8	)
Other		2			4			6
Total income tax expense on consolidated statements of income	$	121		$	80		$	82
Income tax expense as a percent of income before income taxes		18.3	%		15.2	%		16.2	%

Schedule of Deferred Tax Assets and Liabilities

The principal components of TEC’s deferred tax assets and liabilities recognized in the balance sheet are as follows:

(millions)
As of December 31,	2022		2021
Deferred tax liabilities (1)
Property related	$	1,318	$	1,210
Deferred fuel		133		21
Pension and postretirement benefits		111		98
Insurance reserves		15		0
Total deferred tax liabilities		1,577		1,329
Deferred tax assets (1)
Loss and credit carryforwards (2)		408		340
Medical benefits		24		26
Insurance reserves		0		15
Pension and postretirement benefits		57		46
Capitalized energy conservation assistance costs		23		20
Other		20		24
Total deferred tax assets		532		471
Total deferred tax liability, net	$	1,045	$	858

(1)Certain property related assets and liabilities have been netted. At December 31, 2022, PGS total deferred tax liabilities and deferred tax assets were $213 million and $37 million, respectively, with the majority of the balances related to property and capitalized energy conservation assistance costs.

(2)Deferred tax assets for net operating loss and tax credit carryforwards have been reduced by unrecognized tax benefits of $9 million and $6 million at December 31, 2022 and 2021, respectively.

Schedule of Unrecognized Tax Benefits

The following table provides details of the change in unrecognized tax benefits as follows:

(millions)	2022		2021			2020
Balance at January 1,	$	6	$	9		$	9
Decreases due to tax positions related to prior year	0		0				(2	)
Increases due to tax positions related to prior year	2		1			1
Increases due to tax positions related to current year	1		1			1
Decreases due to settlements with tax authorities	0			(5	)	0
Balance at December 31,	$	9	$	6		$	9

Summary of expiration of TEC's tax credits and NOL carryforwards

The expiration of TEC's tax credits and NOL carryforwards are as follows:

(millions)	December 31, 2022		Expiration Year
General business credits	$	304	2027-2042
Federal NOL carryforwards		312	2032-2037
Federal NOL carryforwards (1)		212	indefinite
State NOL carryforwards		83	2032-2037
State NOL carryforwards (1)		312	indefinite
Total tax credits and NOL carryforwards	$	1,223

(1)Indefinite carryforward for Federal NOLs and NOLs for states that have adopted the U.S. Tax Cuts and Jobs Act of 2017 provisions, generated in tax years beginning after December 31, 2017.