Regulatory

6 Months Ended

Jun. 30, 2015

3. Regulatory

Tampa Electric’s retail business and PGS are regulated by the FPSC. Tampa Electric is also subject to regulation by the FERC. The operations of PGS are regulated by the FPSC separately from the operations of Tampa Electric. The FPSC has jurisdiction over rates, service, issuance of securities, safety, accounting and depreciation practices and other matters. In general, the FPSC sets rates at a level that allows utilities such as Tampa Electric and PGS to collect total revenues (revenue requirement) equal to their cost of providing service, plus a reasonable return on invested capital.

NMGC is subject to regulation by the NMPRC. The NMPRC has jurisdiction over the regulatory matters related, directly and indirectly, to NMGC providing service to its customers, including, among other things, rates, accounting procedures, securities issuances, and standards of service. NMGC must follow certain accounting guidance that pertains specifically to entities that are subject to such regulation. Comparable to the FPSC, the NMPRC sets rates at a level that allows utilities such as NMGC to collect total revenues (revenue requirement) equal to their cost of providing service, plus a reasonable return on invested capital.

Regulatory Assets and Liabilities

Tampa Electric, PGS and NMGC apply the accounting standards for regulated operations. Areas of applicability include: deferral of revenues under approved regulatory agreements; revenue recognition resulting from cost-recovery clauses that provide for monthly billing charges to reflect increases or decreases in fuel, purchased power, conservation and environmental costs; the deferral of costs as regulatory assets to the period in which the regulatory agency recognizes them when cost recovery is ordered over a period longer than a fiscal year; and the advance recovery of expenditures for approved costs such as future storm damage or the future removal of property.

Details of the regulatory assets and liabilities as of June 30, 2015 and Dec. 31, 2014 are presented in the following table:

Regulatory Assets and Liabilities
(millions)	June 30, 2015		Dec. 31, 2014
Regulatory assets:
Regulatory tax asset ⁽¹⁾	$	71.7	$	69.2
Other:
Cost-recovery clauses		27.0		45.1
Postretirement benefit asset ⁽²⁾		188.8		194.0
Deferred bond refinancing costs ⁽³⁾		6.8		7.2
Debt basis adjustment ⁽³⁾		19.2		20.9
Environmental remediation		52.5		53.1
Competitive rate adjustment		2.5		2.8
Other		14.2		9.8
Total other regulatory assets		311.0		332.9
Total regulatory assets		382.7		402.1
Less: Current portion		39.4		53.6
Long-term regulatory assets	$	343.3	$	348.5
Regulatory liabilities:
Regulatory tax liability ⁽¹⁾	$	6.3	$	6.9
Other:
Cost-recovery clauses		20.6		25.9
Transmission and delivery storm reserve		56.1		56.1
Deferred gain on property sales ⁽⁴⁾		0.2		0.8
Accumulated reserve - cost of removal		679.1		695.2
Other		0.8		1.1
Total other regulatory liabilities		756.8		779.1
Total regulatory liabilities		763.1		786.0
Less: Current portion		49.9		57.0
Long-term regulatory liabilities	$	713.2	$	729.0

(1)	Primarily related to plant life and derivative positions.

(2)	Amortized over remaining service life of plan participants.

(3)	Amortized over the term of the related debt instruments.

(4)	Amortized over a 5-year period with various ending dates.

All regulatory assets are recovered through the regulatory process. The following table further details the regulatory assets and the related recovery periods:

Regulatory Assets
	June 30,		Dec. 31,
(millions)	2015		2014
Clause recoverable ⁽¹⁾	$	29.5	$	47.9
Components of rate base ⁽²⁾		193.8		199.0
Regulatory tax assets ⁽³⁾		71.7		69.2
Capital structure and other ⁽³⁾		87.7		86.0
Total	$	382.7	$	402.1

(1)	To be recovered through cost-recovery mechanisms approved by the FPSC or NMPRC, as applicable, on a dollar-for-dollar basis in the next year.

(2)	Primarily reflects allowed working capital, which is included in rate base and earns a rate of return as permitted by the FPSC or NMPRC, as applicable.

(3)

“Regulatory tax assets” and “Capital structure and other” regulatory assets, including environmental remediation, have a recoverable period longer than a fiscal year and are recognized over the period authorized by the regulatory agency. Also included are unamortized loan costs, which are amortized over the life of the related debt instruments. See footnotes 1 and 2 in the prior table for additional information.

Tampa Electric Company [Member]

Regulatory

3. Regulatory

Tampa Electric’s and PGS’s retail businesses are regulated by the FPSC. Tampa Electric is also subject to regulation by the FERC. The operations of PGS are regulated by the FPSC separately from the operations of Tampa Electric. The FPSC has jurisdiction over rates, service, issuance of securities, safety, accounting and depreciation practices and other matters. In general, the FPSC sets rates at a level that allows utilities such as Tampa Electric and PGS to collect total revenues (revenue requirement) equal to their cost of providing service, plus a reasonable return on invested capital.

Regulatory Assets and Liabilities

Tampa Electric and PGS apply the accounting standards for regulated operations. Areas of applicability include: deferral of revenues under approved regulatory agreements; revenue recognition resulting from cost-recovery clauses that provide for monthly billing charges to reflect increases or decreases in fuel, purchased power, conservation and environmental costs; the deferral of costs as regulatory assets to the period in which the regulatory agency recognizes them when cost recovery is ordered over a period longer than a fiscal year; and the advance recovery of expenditures for approved costs such as future storm damage or the future removal of property.

Details of the regulatory assets and liabilities as of June 30, 2015 and Dec. 31, 2014 are presented in the following table:

Regulatory Assets and Liabilities
(millions)	June 30, 2015		Dec. 31, 2014
Regulatory assets:
Regulatory tax asset ⁽¹⁾	$	71.7	$	69.2
Other:
Cost-recovery clauses		27.0		43.6
Postretirement benefit asset ⁽²⁾		183.1		187.8
Deferred bond refinancing costs⁽³⁾		6.8		7.2
Environmental remediation		52.5		53.1
Competitive rate adjustment		2.5		2.8
Other		12.6		8.0
Total other regulatory assets		284.5		302.5
Total regulatory assets		356.2		371.7
Less: Current portion		39.3		52.1
Long-term regulatory assets	$	316.9	$	319.6
Regulatory liabilities:
Regulatory tax liability⁽¹⁾	$	4.6	$	5.1
Other:
Cost-recovery clauses		20.2		23.5
Transmission and delivery storm reserve		56.1		56.1
Deferred gain on property sales ⁽⁴⁾		0.2		0.8
Accumulated reserve - cost of removal		572.3		591.5
Provision for stipulation and other		0.6		1.1
Total other regulatory liabilities		649.4		673.0
Total regulatory liabilities		654.0		678.1
Less: Current portion		49.5		54.7
Long-term regulatory liabilities	$	604.5	$	623.4

(1)	Primarily related to plant life and derivative positions.

(2)	Amortized over the remaining service life of plan participants.

(3)	Amortized over the term of the related debt instruments.

(4)	Amortized over a 5-year period with various ending dates.

All regulatory assets are recovered through the regulatory process. The following table further details the regulatory assets and the related recovery periods:

Regulatory Assets
	June 30,		Dec. 31,
(millions)	2015		2014
Clause recoverable ⁽¹⁾	$	29.5	$	46.4
Components of rate base ⁽²⁾		186.5		191.0
Regulatory tax assets ⁽³⁾		71.7		69.2
Capital structure and other ⁽³⁾		68.5		65.1
Total	$	356.2	$	371.7

(1)	To be recovered through cost-recovery mechanisms approved by the FPSC on a dollar-for-dollar basis in the next year.

(2)	Primarily reflects allowed working capital, which is included in rate base and earns a rate of return as permitted by the FPSC.

(3)