REGULATORY MATTERS (Tables)

12 Months Ended

Dec. 31, 2022

Schedule of Purchased Power and Fuel Adjustment Rates

The table below summarizes the PPFAC regulatory asset (liability) balance:


	Years Ended December 31,
(in millions)	2022		2021
Beginning of Period	$	91	$	23
Deferred Fuel and Purchased Power Costs (1)	348		343
PPFAC and Base Power Recoveries (2)	(315)		(275)
End of Period	$	124	$	91

(1)Includes costs eligible for recovery through the PPFAC and base power rates.

(2)In March 2021, the ACC approved a PPFAC surcharge as part of TEP's annual rate adjustment request beginning in June 2021. The 2022 PPFAC rate adjustment became effective on April 29, 2022.

Schedule of Regulatory Assets and Liabilities

Regulatory assets and liabilities recorded on the balance sheet are summarized in the table below:


	Remaining Recovery Period (years)	December 31,
($ in millions)		2022		2021
Regulatory Assets
Under Recovered Purchased Energy Costs	2	$	124	$	91
Pension and Other Postretirement Benefits (Note 9)	Various	90		128
Early Generation Retirement Costs (1)	Various	58		38
Property Tax Deferrals (2)	1	29		27
Lost Fixed Cost Recovery	1	25		37
Final Mine Reclamation and Retiree Healthcare Costs (3)	6	11		17
Income Taxes Recoverable through Future Rates (4)	Various	6		17
Unamortized Loss on Reacquired Debt	Various	5		5
Derivatives (Note 12)	7	3		8
Tax Expense Adjustor Mechanism	1	3		3
Springerville Unit 1 Leasehold Improvements (5)	1	2		4
Other Regulatory Assets	Various	14		9
Total Regulatory Assets		370		384
Less Current Portion	1	185		116
Total Non-Current Regulatory Assets		$	185	$	268


Regulatory Liabilities
Income Taxes Payable through Future Rates (4)	Various	$	244	$	268
Derivatives (Note 12)	7	86		19
Renewable Energy Standard	Various	73		66
Net Cost of Removal (6)	Various	43		73
Demand Side Management	1	16		12
Transmission Cost Adjustor	1	9		9
Pension and Other Postretirement Benefits (Note 9)	Various	8		—
Deferred Investment Tax Credits	Various	7		1


Transmission Revenue Subject to Refund - FERC	1	1		15
Other Regulatory Liabilities	Various	2		—
Total Regulatory Liabilities		489		463
Less Current Portion	1	111		111
Total Non-Current Regulatory Liabilities		$	378	$	352

(1)Increase in Early Generation Retirement Costs is primarily due to the retirement of San Juan Unit 1 in June 2022.

(2)Recorded as a regulatory asset based on historical ratemaking treatment allowing regulated utilities recovery of property taxes on a pay-as-you-go or cash basis. TEP records a liability to reflect the accrual for financial reporting purposes and an offsetting regulatory asset to reflect recovery for regulatory purposes.

(3)Represents costs associated with TEP’s jointly-owned facilities at San Juan and Four Corners. TEP recognizes these costs at future value and is permitted to fully recover these costs on a pay-as-you-go basis through the PPFAC mechanism. Final mine reclamation costs are expected to be funded by TEP through 2028. San Juan Unit 1 was retired in June 2022.

(4)Amortized over five years, 10 years, or the lives of the assets. See Note 1 and Note 13 for additional information regarding income taxes.

(5)Represents investments TEP made, which were previously recorded in Plant in Service on the Consolidated Balance Sheets, to ensure that the facilities continued to provide safe, reliable service to TEP's customers. TEP received ACC authorization to recover leasehold improvement costs at Springerville Unit 1 over a 10-year period.

(6)Represents an estimate of the future cost of retirement, net of salvage value. These are amounts collected through revenue for transmission, distribution, generation, and general and intangible plant which are not yet expended. The decrease in Net Cost of Removal is primarily due to the retirement of San Juan Unit 1 in June 2022.