Regulatory (Tables)

9 Months Ended

Sep. 30, 2020

Schedule of Regulatory Assets and Regulatory Liabilities

Details of the regulatory assets and liabilities are presented in the following table:

Regulatory Assets and Liabilities
(millions)	September 30, 2020		December 31, 2019
Regulatory assets:
Regulatory tax asset ⁽¹⁾	$	87	$	74
Cost-recovery clauses ⁽²⁾		24		12
Environmental remediation⁽³⁾		22		20
Postretirement benefits ⁽⁴⁾		282		295
Asset retirement obligation ⁽⁵⁾		16		25
Other		12		11
Total regulatory assets		443		437
Less: Current portion		50		41
Long-term regulatory assets	$	393	$	396
Regulatory liabilities:
Regulatory tax liability⁽⁶⁾	$	681	$	699
Cost-recovery clauses ⁽²⁾		33		37
Accumulated reserve - cost of removal⁽⁷⁾		498		506
Storm reserve ⁽⁸⁾		48		48
Other		1		13
Total regulatory liabilities		1,261		1,303
Less: Current portion		77		93
Long-term regulatory liabilities	$	1,184	$	1,210

(1)

The regulatory tax asset is primarily associated with the depreciation and recovery of AFUDC-equity. This asset does not earn a return but rather is included in the capital structure, which is used in the calculation of the weighted cost of capital used to determine revenue requirements. It will be recovered over the expected life of the related assets. The regulatory tax asset balance reflects the impact of the federal tax rate reduction.

(2)	These assets and liabilities are related to FPSC clauses and riders. They are recovered or refunded through cost-recovery mechanisms approved by the FPSC on a dollar-for-dollar basis in the next year.

(3)

This asset is related to costs associated with environmental remediation primarily at MGP sites. The balance is included in rate base, partially offsetting the related liability, and earns a rate of return as permitted by the FPSC. The timing of recovery is based on a settlement agreement approved by the FPSC.

(4)

This asset is related to the deferred costs of postretirement benefits and it is amortized over the remaining service life of plan participants. Deferred costs of postretirement benefits that are included in expense are recognized as cost of service for rate-making purposes as permitted by the FPSC.

(5)

This asset is related to costs associated with an asset retirement obligation, which is a legal obligation for the future retirement of certain tangible, long-lived assets. This regulatory asset does not earn a return because it is offset with related assets and liabilities within rate base. It is recovered and removed as the obligation is settled and removed as the activities for the retirement of the related assets have been completed.

(6)

The regulatory tax liability is primarily related to the revaluation of TEC’s deferred income tax balances recorded on December 31, 2017 at the lower income tax rate due to U.S. tax reform. The liability related to the revaluation of the deferred income tax balances is amortized and returned to customers through rate reductions or other revenue offsets based on IRS regulations and the settlement agreement for tax reform benefits approved by the FPSC.

(7)

This item represents the non-ARO cost of removal in the accumulated reserve for depreciation. AROs are costs for legally required removal of property, plant and equipment. Non-ARO cost of removal represents estimated funds received from customers through depreciation rates to cover future non-legally required cost of removal of property, plant and equipment, net of salvage value upon retirement, which reduces rate base for ratemaking purposes. This liability is reduced as costs of removal are incurred.

(1)	See “Tampa Electric Storm Restoration Cost Recovery” discussion above for information regarding this reserve.