Regulatory

9 Months Ended

Sep. 30, 2011

Regulatory

3. Regulatory

Tampa Electric's and PGS's retail businesses are regulated by the FPSC. Tampa Electric also is subject to regulation by the Federal Energy Regulatory Commission (FERC) under the Public Utility Holding Company Act of 2005 (PUHCA 2005). However, pursuant to a waiver granted in accordance with the FERC's regulations, TECO Energy is not subject to certain accounting, record-keeping and reporting requirements prescribed by the FERC's regulations under PUHCA 2005. 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 requirements) equal to their cost of providing service, plus a reasonable return on invested capital.

Storm Damage Cost Recovery

Tampa Electric accrues $8.0 million annually to an FPSC-approved self-insured storm damage reserve. Tampa Electric's storm reserve was $41.5 million and $37.4 million as of Sep. 30, 2011 and Dec. 31, 2010, respectively.

Regulatory Assets and Liabilities

Tampa Electric and PGS maintain their accounts in accordance with recognized policies of the FPSC. In addition, Tampa Electric maintains its accounts in accordance with recognized policies prescribed or permitted by the FERC.

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; and the deferral of costs as regulatory assets to the period that the regulatory agency recognizes them when cost recovery is ordered over a period longer than a fiscal year.

Details of the regulatory assets and liabilities as of Sep. 30, 2011 and Dec. 31, 2010 are presented in the following table:

Regulatory Assets and Liabilities

(millions)	Sep. 30, 2011		Dec. 31, 2010
Regulatory assets:
Regulatory tax asset (1)	$	64.4	$	66.6
Other:
Cost recovery clauses		38.0		41.9
Postretirement benefit asset		228.9		237.5
Deferred bond refinancing costs (2)		12.2		15.4
Environmental remediation		23.2		23.6
Competitive rate adjustment		3.2		3.3
Other		17.1		16.3
Total other regulatory assets		322.6		338.0
Total regulatory assets		387.0		404.6
Less: Current portion		55.8		62.7
Long-term regulatory assets	$	331.2	$	341.9
Regulatory liabilities:
Regulatory tax liability (1)	$	16.7	$	17.7
Other:
Cost recovery clauses		70.7		76.2
Environmental remediation		21.2		21.2
Storm damage reserve		41.5		37.4
Deferred gain on property sales (3)		5.4		6.3
Provision for stipulation and other (4)		0.8		9.8
Accumulated reserve-cost of removal		576.7		572.2
Total other regulatory liabilities		716.3		723.1
Total regulatory liabilities		733.0		740.8
Less: Current portion		95.5		110.0
Long-term regulatory liabilities	$	637.5	$	630.8

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

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

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

(4) Includes a provision to reflect the FPSC-approved PGS stipulation regarding PGS's 2010 earnings above 11.75%. A one-time credit to customer bills totaling $3.0 million was applied in April 2011 and the $6.2 million remaining balance of the 2010 earnings above 11.75% was credited to accumulated depreciation reserves in June 2011.

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

Regulatory assets

(millions)	Sep. 30, 2011		Dec 31, 2010
Clause recoverable (1)	$	41.2	$	45.2
Components of rate base (2)		240.9		248.1
Regulatory tax assets (3)		64.4		66.6
Capital structure and other (3)		40.5		44.7
Total	$	387.0	$	404.6

(1) To be recovered through cost recovery clauses 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) "Regulatory tax assets" and "Capital structure and other" regulatory assets 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 Co [Member]

Regulatory

3. Regulatory

Tampa Electric's and PGS's retail businesses are regulated by the FPSC. Tampa Electric also is subject to regulation by the FERC under PUHCA 2005. However, pursuant to a waiver granted in accordance with the FERC's regulations, Tampa Electric is not subject to certain accounting, record-keeping and reporting requirements prescribed by the FERC's regulations under PUHCA 2005. 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 requirements) equal to their cost of providing service, plus a reasonable return on invested capital.

Storm Damage Cost Recovery

Tampa Electric accrues $8.0 million annually to an FPSC-approved self-insured storm damage reserve. Tampa Electric's storm reserve was $41.5 million and $37.4 million as of Sep. 30, 2011 and Dec. 31, 2010, respectively.

Regulatory Assets and Liabilities

Tampa Electric and PGS maintain their accounts in accordance with recognized policies of the FPSC. In addition, Tampa Electric maintains its accounts in accordance with recognized policies prescribed or permitted by the FERC.

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; and the deferral of costs as regulatory assets to the period that the regulatory agency recognizes them when cost recovery is ordered over a period longer than a fiscal year.

Details of the regulatory assets and liabilities as of Sep. 30, 2011 and Dec. 31, 2010 are presented in the following table:

Regulatory Assets and Liabilities

(millions)	Sep. 30, 2011		Dec. 31, 2010
Regulatory assets:
Regulatory tax asset (1)	$	64.4	$	66.6
Other:
Cost recovery clauses		38.0		41.9
Postretirement benefit asset		228.9		237.5
Deferred bond refinancing costs (2)		12.2		15.4
Environmental remediation		23.2		23.6
Competitive rate adjustment		3.2		3.3
Other		17.1		16.3
Total other regulatory assets		322.6		338.0
Total regulatory assets		387.0		404.6
Less: Current portion		55.8		62.7
Long-term regulatory assets	$	331.2	$	341.9
Regulatory liabilities:
Regulatory tax liability (1)	$	16.7	$	17.7
Other:
Cost recovery clauses		70.7		76.2
Environmental remediation		21.2		21.2
Storm damage reserve		41.5		37.4
Deferred gain on property sales (3)		5.4		6.3
Provision for stipulation and other (4)		0.8		9.8
Accumulated reserve-cost of removal		576.7		572.2
Total other regulatory liabilities		716.3		723.1
Total regulatory liabilities		733.0		740.8
Less: Current portion		95.5		110.0
Long-term regulatory liabilities	$	637.5	$	630.8

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

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

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

(4) Includes a provision to reflect the FPSC-approved PGS stipulation regarding PGS's 2010 earnings above 11.75%. A one-time credit to customer bills totaling $3.0 million was applied in April 2011 and the $6.2 million remaining balance of the 2010 earnings above 11.75% was credited to accumulated depreciation reserves in June 2011.

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

Regulatory assets

	Sep. 30,		Dec 31,
(millions)	2011		2010
Clause recoverable (1)	$	41.2	$	45.2
Components of rate base (2)		240.9		248.1
Regulatory tax assets (3)		64.4		66.6
Capital structure and other (3)		40.5		44.7
Total	$	387.0	$	404.6

(1) To be recovered through cost recovery clauses 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) "Regulatory tax assets" and "Capital structure and other" regulatory assets 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.