Income Taxes (Tables)

Provision for Consolidated Income Taxes – Continuing Operations


	For the Year Ended December 31,
	2015			2014			2013
	(millions of dollars)
Current Tax (Benefit) Expense
Federal	$	(3	)	$	(137	)	$	(128	)
State and local		12			(26	)		(9	)

Total Current Tax Expense (Benefit)		9			(163	)		(137	)


Deferred Tax Expense (Benefit)
Federal		92			261			393
State and local		30			41			65
Investment tax credit amortization		(2	)		(1	)		(2	)

Total Deferred Tax Expense		120			301			456

Total Consolidated Income Tax Expense Related to Continuing Operations	$	129		$	138		$	319

Reconciliation of Consolidated Income Tax Expense – Continuing Operations


	For the Year Ended December 31,
	2015					2014					2013
	(millions of dollars)
Income tax at Federal statutory rate	$	156		35.0	%	$	133		35.0	%	$	150		35.0	%
Increases (decreases) resulting from:
State income taxes, net of federal effect		27		6.0	%		23		6.1	%		27		6.3	%
Asset removal costs		(14	)	(3.1	)%		(12	)	(3.2	)%		(14	)	(3.3	)%
Change in estimates and interest related to uncertain and effectively settled tax positions		(46	)	(10.3	)%		—		—			56		13.1	%
Deferred tax basis adjustments		7		1.6	%		—		—			—		—
Establishment of valuation allowances related to deferred tax assets		—		—			—		—			101		23.5	%
Merger related costs		4		0.9	%		7		1.8	%		—		—
Other, net		(5	)	(1.2	)%		(13	)	(3.4	)%		(1	)	(0.2	)%

Consolidated Income Tax Expense Related to Continuing Operations	$	129		28.9	%	$	138		36.3	%	$	319		74.4	%

Components of Consolidated Deferred Tax Liabilities (Assets)


	At December 31,
	2015			2014
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	3,273		$	2,962
Deferred electric service and electric restructuring liabilities		43			67
Federal and state net operating losses		(446	)		(400	)
Valuation allowances on state net operating losses		63			61
Pension and other postretirement benefits		92			116
Deferred taxes on amounts to be collected through future rates		86			94
Other		267			325

Total Deferred Tax Liabilities, net		3,378			3,225
Deferred tax assets included in Other Assets		15			17

Total Consolidated Deferred Tax Liabilities, net	$	3,393		$	3,242

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2015			2014			2013
	*(millions of dollars)*

Balance as of January 1,	$	850		$	831		$	200
Tax positions related to current year:
Additions		—			4			3
Reductions		—			(2	)		—
Tax positions related to prior years:
Additions		13			27			646	(b)
Reductions		(201	)(a)		(10	)		(12	)
Settlements		(628	)(a)		—			(6	)

Balance as of December 31,	$	34		$	850		$	831

(a)

Reductions and settlements in 2015 resulted from the Global Tax Settlement. Settlements represent unrecognized tax benefits that were satisfied with cash or use of net operating losses and tax credits. The majority of the settlements were associated with the treatment of the former cross-border energy lease investments of PCI.

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


	2015		2014		2013
	*(millions of dollars)*
Gross Receipts/Delivery	$	124	$	123	$	133
Property		92		84		77
County Fuel and Energy		143		143		153
Environmental, Use and Other		68		63		65

Total	$	427	$	413	$	428

Provision for Consolidated Income Taxes


	For the Year Ended December 31,
	2015			2014			2013
	*(millions of dollars)*
Current Tax (Benefit) Expense
Federal	$	(2	)	$	(7	)	$	(23	)
State and local		3			(2	)		(10	)

Total Current Tax Benefit		1			(9	)		(33	)

Deferred Tax Expense (Benefit)
Federal		25			30			28
State and local		5			7			25
Investment tax credit amortization		—			—			(1	)

Total Deferred Tax Expense		30			37			52

Total Consolidated Income Tax Expense	$	31		$	28		$	19

Reconciliation of Consolidated Income Tax Expense


	For the Year Ended December 31,
	2015					2014					2013
	*(millions of dollars)*
Income tax at Federal statutory rate	$	24		35.0	%	$	26		35.0	%	$	24		35.0	%
Increases (decreases) resulting from:
State income taxes, net of federal effect		4		5.8	%		4		5.5	%		5		7.2	%
Change in estimates and interest related to uncertain and effectively settled tax positions		3		4.3	%		(1	)	(1.4	)%		(9	)	(13.0	)%
Deferred tax basis adjustments		2		2.9	%		—		—			(2	)	(2.9	)%
Investment tax credit amortization		—		—			—		—			(1	)	(1.4	)%
Other, net		(2	)	(3.1	)%		(1	)	(0.7	)%		2		2.6	%

Consolidated Income Tax Expense	$	31		44.9	%	$	28		38.4	%	$	19		27.5	%

Components of Consolidated Deferred Income Tax Liabilities (Assets)


	As of December 31,
	2015			2014
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	773		$	691
Deferred taxes on amounts to be collected through future rates		17			16
Payment for termination of purchased power contracts with NUGs		34			38
Deferred electric service and electric restructuring liabilities		47			71
Pension and other postretirement benefits		20			25
Federal and state net operating losses		(9	)		(26	)
Other		6			40

Total Consolidated Deferred Tax Liabilities, net	$	888		$	855

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2015			2014			2013
	*(millions of dollars)*
Balance as of January 1	$	13		$	9		$	17
Tax positions related to current year:
Additions		—			1			2
Reductions		—			—			—
Tax positions related to prior years:
Additions		—			5			1
Reductions		(10	)(a)		(2	)		(5	)
Settlements		(3	)(a)		—			(6	)

Balance as of December 31	$	—		$	13		$	9

(a)	Reductions and settlements in 2015 resulted from the Global Tax Settlement. Settlements represent unrecognized tax benefits that were satisfied with cash or use of net operating losses and tax credits.

These amounts are recoverable through rates.


	2015		2014			2013
	*(millions of dollars)*
Gross Receipts/Delivery	$	—	$	—		$	10
Property		4		3			3
Environmental, Use and Other		1		(1	)		1

Total	$	5	$	2		$	14

Provision for Income Taxes


	For the Year Ended December 31,
	2015			2014			2013
	*(millions of dollars)*
Current Tax Benefit
Federal	$	(57	)	$	(79	)	$	(39	)
State and local		6			(3	)		(1	)

Total Current Tax Benefit		(51	)		(82	)		(40	)

Deferred Tax Expense (Benefit)
Federal		125			150			96
State and local		24			24			24
Investment tax credit amortization		—			—			(1	)

Total Deferred Tax Expense		149			174			119

Total Income Tax Expense	$	98		$	92		$	79

Reconciliation of Income Tax Expense


	For the Year Ended December 31,
	2015					2014					2013
	*(millions of dollars)*

Income tax at Federal statutory rate	$	100		35.0	%	$	92		35.0	%	$	80		35.0	%
Increases (decreases) resulting from:
State income taxes, net of federal effect		15		5.3	%		15		5.7	%		13		5.7	%
Asset removal costs		(14	)	(4.9	)%		(12	)	(4.6	)%		(14	)	(6.1	)%
Change in estimates and interest related to uncertain and effectively settled tax positions		(6	)	(2.1	)%		(1	)	(0.4	)%		(3	)	(1.3	)%
Deferred tax basis adjustments		6		2.1	%		—		—			—		—
Other, net		(3	)	(1.0	)%		(2	)	(0.7	)%		3		1.2	%

Income Tax Expense	$	98		34.4	%	$	92		35.0	%	$	79		34.5	%

Components of Deferred Income Tax Liabilities (Assets)


	At December 31,
	2015			2014
	*(millions of dollars)*

Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	1,541		$	1,423
Pension and other postretirement benefits		95			103
Deferred taxes on amounts to be collected through future rates		55			59
Federal and state net operating losses		(141	)		(186	)
Other		171			180

Total Deferred Tax Liabilities, net	$	1,721		$	1,579

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2015			2014			2013
	*(millions of dollars)*

Balance as of January 1	$	97		$	101		$	91
Tax positions related to current year:
Additions		—			1			1
Reductions		—			(2	)		—
Tax positions related to prior years:
Additions		10			1			12
Reductions		(55	)(a)		(4	)		(3	)
Settlements		(40	)(a)		—			—

Balance as of December 31	$	12		$	97		$	101

(a)	Reductions and settlements in 2015 resulted from the Global Tax Settlement. Settlements represent unrecognized tax benefits that were satisfied with cash or use of net operating losses and tax credits.

Other Taxes

Taxes other than income taxes for each year are shown below. These amounts are recoverable through rates.


	2015		2014		2013
	*(millions of dollars)*
Gross Receipts/Delivery	$	107	$	107	$	108
Property		55		51		45
County Fuel and Energy		143		143		153
Environmental, Use and Other		64		62		62

Total	$	369	$	363	$	368

Provision for Income Taxes


	For the Year Ended December 31,
	2015			2014			2013
	*(millions of dollars)*

Current Tax (Benefit) Expense
Federal	$	(26	)	$	(45	)	$	(8	)
State and local		2			—			—

Total Current Tax Benefit		(24	)		(45	)		(8	)

Deferred Tax Expense (Benefit)
Federal		73			99			53
State and local		1			12			12
Investment tax credit amortization		(1	)		(1	)		(1	)

Total Deferred Tax Expense		73			110			64

Total Income Tax Expense	$	49		$	65		$	56

Reconciliation of Income Tax Expense


	For the Year Ended December 31,
	2015					2014					2013
	*(millions of dollars)*

Income tax at Federal statutory rate	$	44		35.0	%	$	59		35.0	%	$	51		35.0	%
Increases (decreases) resulting from:
State income taxes, net of federal effect		7		5.6	%		9		5.3	%		8		5.5	%
Change in estimates and interest related to uncertain and effectively settled tax positions		3		2.4	%		—		—			(1	)	(0.7	)%
Other, net		(5	)	(3.8	)%		(3	)	(1.8	)%		(2	)	(1.2	)%

Income Tax Expense	$	49		39.2	%	$	65		38.5	%	$	56		38.6	%

Components of Deferred Income Tax Liabilities (Assets)


	As of December 31,
	2015			2014
	*(millions of dollars)*
Deferred Tax Liabilities (Assets)
Depreciation and other basis differences related to plant and equipment	$	899		$	797
Deferred taxes on amounts to be collected through future rates		15			19
Federal and state net operating losses		(122	)		(115	)
Pension and other postretirement benefits		75			80
Electric restructuring liabilities		(4	)		(4	)
Other		78			101

Total Deferred Tax Liabilities, net	$	941		$	878

Reconciliation of Beginning and Ending Balances of Unrecognized Tax Benefits


	2015			2014			2013
	*(millions of dollars)*
Balance as of January 1	$	22		$	9		$	9
Tax positions related to current year:
Additions		—			1			—
Reductions		—			—			—
Tax positions related to prior years:
Additions		3			13			—
Reductions		(13	)(a)		(1	)		—
Settlements		(9	)(a)		—			—

Balance as of December 31	$	3		$	22		$	9

(a)	Reductions and settlements in 2015 resulted from the Global Tax Settlement. Settlements represent unrecognized tax benefits that were satisfied with cash or use of net operating losses and tax credits.


	2015		2014		2013
	*(millions of dollars)*
Gross Receipts/Delivery	$	17	$	16	$	15
Property		28		24		24
Environmental, Use and Other		2		2		1

Total	$	47	$	42	$	40