Income Taxes (Tables)

Provision for Consolidated Income Taxes – Continuing Operations


	For the Year Ended December 31,
	2014			2013			2012
	*(millions of dollars)*
Current Tax (Benefit) Expense
Federal	$	(137	)	$	(128	)	$	(166	)
State and local		(26	)		(9	)		(40	)

Total Current Tax (Benefit) Expense		(163	)		(137	)		(206	)

Deferred Tax Expense (Benefit)
Federal		261			393			254
State and local		41			65			58
Investment tax credit amortization		(1	)		(2	)		(3	)

Total Deferred Tax Expense		301			456			309

Total Consolidated Income Tax Expense Related to Continuing Operations	$	138		$	319		$	103

Reconciliation of Consolidated Income Tax Expense – Continuing Operations


	For the Year Ended December 31,
	2014					2013					2012
	*(millions of dollars)*
Income tax at Federal statutory rate	$	133		35.0	%	$	150		35.0	%	$	112		35.0	%
Increases (decreases) resulting from:
State income taxes, net of federal effect		23		6.1	%		27		6.3	%		19		6.0	%
Asset removal costs		(12	)	(3.2	)%		(14	)	(3.3	)%		(11	)	(3.4	)%
Change in estimates and interest related to uncertain and effectively settled tax positions		—		—			56		13.1	%		(8	)	(2.6	)%
Establishment of valuation allowances related to deferred tax assets		—		—			101		23.5	%		—		—
Merger related costs		7		1.8	%		—		—			—		—
Other, net		(13	)	(3.4	)%		(1	)	(0.2	)%		(9	)	(2.9	)%

Consolidated Income Tax Expense Related to Continuing Operations	$	138		36.3	%	$	319		74.4	%	$	103		32.1	%

Components of Consolidated Deferred Tax Liabilities (Assets)


	At December 31,
	2014			2013
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	2,962		$	2,628
Deferred electric service and electric restructuring liabilities		67			91
Cross-border energy lease investments		—			(6	)
Federal and state net operating losses		(400	)		(350	)
Valuation allowances on state net operating losses		61			21
Pension and other postretirement benefits		116			135
Deferred taxes on amounts to be collected through future rates		94			75
Other (a)		325			285

Total Deferred Tax Liabilities, net		3,225			2,879
Deferred tax assets included in Current Assets		50			51
Deferred tax liabilities included in Other Current Liabilities		(9	)		(2	)

Total Consolidated Deferred Tax Liabilities, net non-current	$	3,266		$	2,928

(a)

PCI established valuation allowances against certain of these other deferred taxes totaling $101 million in the first quarter of 2013. Management determined during the fourth quarter of 2013 to abandon the further pursuit of the related deferred tax assets and, accordingly, these assets were charged off against the valuation allowances.

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2014			2013			2012
	*(millions of dollars)*
Balance as of January 1,	$	831		$	200		$	357
Tax positions related to current year:
Additions		4			3			1
Reductions		(2	)		—			—
Tax positions related to prior years:
Additions		27			646	(a)		79
Reductions		(10	)		(12	)		(235	)(b)
Settlements		—			(6	)		(2	)

Balance as of December 31,	$	850		$	831		$	200

(a)	These additions of unrecognized tax benefits in 2013 primarily relate to the former cross-border energy lease investments of PCI.

(b)	These reductions of unrecognized tax benefits in 2012 primarily relate to a resolution reached with the IRS for determining deductible mixed service costs for additions to property, plant and equipment.


	2014		2013		2012
	*(millions of dollars)*
Gross Receipts/Delivery	$	123	$	133	$	135
Property		84		77		75
County Fuel and Energy		143		153		160
Environmental, Use and Other		63		65		62

Total	$	413	$	428	$	432

Provision for Income Taxes


	For the Year Ended December 31,
	2014			2013			2012
	*(millions of dollars)*
Current Tax Benefit
Federal	$	(79	)	$	(39	)	$	(84	)
State and local		(3	)		(1	)		(27	)

Total Current Tax Benefit		(82	)		(40	)		(111	)

Deferred Tax Expense (Benefit)
Federal		150			96			127
State and local		24			24			33
Investment tax credit amortization		—			(1	)		(1	)

Total Deferred Tax Expense		174			119			159

Total Income Tax Expense	$	92		$	79		$	48

Reconciliation of Income Tax Expense


	For the Year Ended December 31,
	2014					2013					2012
	*(millions of dollars)*
Income tax at Federal statutory rate	$	92		35.0	%	$	80		35.0	%	$	61		35.0	%
Increases (decreases) resulting from:
State income taxes, net of federal effect		15		5.7	%		13		5.7	%		10		5.7	%
Asset removal costs		(12	)	(4.6	)%		(14	)	(6.1	)%		(11	)	(6.3	)%
Change in estimates and interest related to uncertain and effectively settled tax positions		(1	)	(0.4	)%		(3	)	(1.3	)%		(11	)	(6.3	)%
Other, net		(2	)	(0.7	)%		3		1.2	%		(1	)	(0.5	)%

Income Tax Expense	$	92		35.0	%	$	79		34.5	%	$	48		27.6	%

Components of Deferred Income Tax Liabilities (Assets)


	At December 31,
	2014			2013
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	1,423		$	1,240
Pension and other postretirement benefits		103			105
Deferred taxes on amounts to be collected through future rates		59			43
Federal and state net operating losses		(186	)		(169	)
Other		180			145

Total Deferred Tax Liabilities, net		1,579			1,364
Deferred tax assets included in Current Assets		14			48

Deferred tax liabilities included in Other Current Liabilities		(9	)		—

Total Deferred Tax Liabilities, net non-current	$	1,584		$	1,412

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2014			2013			2012
	*(millions of dollars)*
Balance as of January 1	$	101		$	91		$	173
Tax positions related to current year:
Additions		1			1			—
Reductions		(2	)		—			—
Tax positions related to prior years:
Additions		1			12			60
Reductions		(4	)		(3	)		(142	)(a)
Settlements		—			—			—

Balance as of December 31	$	97		$	101		$	91

(a)	These reductions of unrecognized tax benefits in 2012 primarily relate to a resolution reached with the IRS for determining deductible mixed service costs for additions to property, plant and equipment.

These amounts are recoverable through rates.


	2014		2013		2012
	*(millions of dollars)*
Gross Receipts/Delivery	$	107	$	108	$	106
Property		51		45		46
County Fuel and Energy		143		153		160
Environmental, Use and Other		62		62		60

Total	$	363	$	368	$	372

Provision for Income Taxes


	For the Year Ended December 31,
	2014			2013			2012
	*(millions of dollars)*
Current Tax (Benefit) Expense
Federal	$	(45	)	$	(8	)	$	(9	)
State and local		—			—			(1	)

Total Current Tax Benefit		(45	)		(8	)		(10	)

Deferred Tax Expense (Benefit)
Federal		99			53			44
State and local		12			12			11
Investment tax credit amortization		(1	)		(1	)		(1	)

Total Deferred Tax Expense		110			64			54

Total Income Tax Expense	$	65		$	56		$	44

Reconciliation of Income Tax Expense


	For the Year Ended December 31,
	2014					2013					2012
	*(millions of dollars)*
Income tax at Federal statutory rate	$	59		35.0	%	$	51		35.0	%	$	41		35.0	%
Increases (decreases) resulting from:
State income taxes, net of federal effect		9		5.3	%		8		5.5	%		6		5.1	%
Other, net		(3	)	(1.8	)%		(3	)	(1.9	)%		(3	)	(2.5	)%

Income Tax Expense	$	65		38.5	%	$	56		38.6	%	$	44		37.6	%

Components of Deferred Income Tax Liabilities (Assets)


	As of December 31,
	2014			2013
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	797		$	712
Deferred taxes on amounts to be collected through future rates		19			16
Federal and state net operating losses		(115	)		(125	)
Pension and other postretirement benefits		80			80
Electric restructuring liabilities		(4	)		(5	)
Other		101			80

Total Deferred Tax Liabilities, net		878			758
Deferred tax assets included in Current Assets		16			59
Deferred tax liabilities included in Other Current Liabilities		(1	)		(1	)

Total Deferred Tax Liabilities, net non-current	$	893		$	816

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2014			2013		2012
	*(millions of dollars)*
Balance as of January 1	$	9		$	9	$	35
Tax positions related to current year:
Additions		1			—		—
Reductions		—			—		—
Tax positions related to prior years:
Additions		13			—		—
Reductions		(1	)		—		(26	)(a)
Settlements		—			—		—

Balance as of December 31	$	22		$	9	$	9

(a)	These reductions of unrecognized tax benefits in 2012 primarily relate to a resolution reached with the Internal Revenue Service (IRS) for determining deductible mixed service costs for additions to property, plant and equipment.

These amounts are recoverable through rates.


	2014		2013		2012
	*(millions of dollars)*
Gross Receipts/Delivery	$	16	$	15	$	14
Property		24		24		21
Environmental, Use and Other		2		1		1

Total	$	42	$	40	$	36

Provision for Consolidated Income Taxes


	For the Year Ended December 31,
	2014			2013			2012
	*(millions of dollars)*
Current Tax (Benefit) Expense
Federal	$	(7	)	$	(23	)	$	(31	)
State and local		(2	)		(10	)		(12	)

Total Current Tax Benefit		(9	)		(33	)		(43	)

Deferred Tax Expense (Benefit)
Federal		30			28			46
State and local		7			25			16
Investment tax credit amortization		—			(1	)		(1	)

Total Deferred Tax Expense		37			52			61

Total Consolidated Income Tax Expense	$	28		$	19		$	18

Reconciliation of Consolidated Income Tax Expense


	For the Year Ended December 31,
	2014					2013					2012
	*(millions of dollars)*
Income tax at Federal statutory rate	$	26		35.0	%	$	24		35.0	%	$	19		35.0	%
Increases (decreases) resulting from:
State income taxes, net of federal effect		4		5.5	%		5		7.2	%		3		5.7	%
Change in estimates and interest related to uncertain and effectively settled tax positions		(1	)	(1.4	)		(9	)	(13.0	)%		(1	)	(1.9	)%
Plant basis adjustments		—		—			(2	)	(2.9	)%		(1	)	(1.9	)%
Investment tax credit amortization		—		—			(1	)	(1.4	)%		(1	)	(1.9	)%
Other, net		(1	)	(0.7	)%		2		2.6	%		(1	)	(1.0	)%

Consolidated Income Tax Expense	$	28		38.4	%	$	19		27.5	%	$	18		34.0	%

Components of Consolidated Deferred Income Tax Liabilities (Assets)


	As of December 31,
	2014			2013
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	691		$	627
Deferred taxes on amounts to be collected through future rates		16			16
Payment for termination of purchased power contracts with NUGs		38			43
Deferred electric service and electric restructuring liabilities		71			96
Pension and other postretirement benefits		25			29
Purchased energy		1			2
Federal and state net operating losses		(26	)		(49	)
Other		39			55

Total Deferred Tax Liabilities, net		855			819
Deferred tax assets included in Current Assets		10			15
Deferred tax liabilities included in Other Current Liabilities		—			(1	)

Total Consolidated Deferred Tax Liabilities, net non-current	$	865		$	833

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2014			2013			2012
	*(millions of dollars)*
Balance as of January 1	$	9		$	17		$	79
Tax positions related to current year:
Additions		1			2			1
Reductions		—			—			—
Tax positions related to prior years:
Additions		5			1			8
Reductions		(2	)		(5	)		(69	)(a)
Settlements		—			(6	)		(2	)

Balance as of December 31	$	13		$	9		$	17

(a)	These reductions of unrecognized tax benefits in 2012 primarily relate to a resolution reached with the IRS for determining deductible mixed service costs for additions to property, plant and equipment.

These amounts are recoverable through rates.


	2014			2013		2012
	*(millions of dollars)*
Gross Receipts/Delivery	$	—		$	10	$	14
Property		3			3		3
Environmental, Use and Other		(1	)		1		1

Total	$	2		$	14	$	18