ck0000096271-10q_20200630.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether Tampa Electric Company is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark whether Tampa Electric Company has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether Tampa Electric Company is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

As of August 10, 2020, there were 10 shares of Tampa Electric Company’s common stock issued and outstanding, all of which were held, beneficially and of record, by TECO Energy, Inc.

Tampa Electric Company meets the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format specified in General Instruction H(2) of Form 10-Q.

Acronyms used in this and other filings with the U.S. Securities and Exchange Commission in 2020 include the following:

Term		Meaning
AFUDC		allowance for funds used during construction
AFUDC-debt		debt component of allowance for funds used during construction
AFUDC-equity		equity component of allowance for funds used during construction
APBO		accumulated postretirement benefit obligation
ARO		asset retirement obligation
ASC		Accounting Standards Codification
CAD		Canadian dollars
CAIR		Clean Air Interstate Rule
CCRs		coal combustion residuals
CMO		collateralized mortgage obligation
CNG		compressed natural gas
CO₂		carbon dioxide
COVID-19		coronavirus disease 2019
CPI		consumer price index
CSAPR		Cross State Air Pollution Rule
CT		combustion turbine
ECRC		environmental cost recovery clause
Emera		Emera Inc., a geographically diverse energy and services company headquartered in Nova Scotia, Canada
EPA		U.S. Environmental Protection Agency
ERISA		Employee Retirement Income Security Act
EROA		expected return on plan assets
EUSHI		Emera US Holdings Inc., a wholly owned subsidiary of Emera, which is the sole shareholder of TECO Energy’s common stock
FASB		Financial Accounting Standards Board
FDEP		Florida Department of Environmental Protection
FERC		Federal Energy Regulatory Commission
FPSC		Florida Public Service Commission
IGCC		integrated gasification combined-cycle
IOU		investor owned utility
IRS		Internal Revenue Service
ITCs		investment tax credits
kWac		kilowatt on an alternating current basis
LNG		liquefied natural gas
MBS		mortgage-backed securities
MD&A		the section of this report entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations
Merger		Merger of Emera US Inc. with and into TECO Energy, with TECO Energy as the surviving corporation
MGP		manufactured gas plant
MMBTU		one million British Thermal Units
MRV		market-related value
MW		megawatt(s)
MWH		megawatt-hour(s)
NAV		net asset value
Note		Note to consolidated financial statements
NPNS		normal purchase normal sale
O&M expenses		operations and maintenance expenses
OCI		other comprehensive income
OPC		Office of Public Counsel
OPEB		other postemployment benefits
Parent		TECO Energy, Inc., the direct parent company of Tampa Electric Company
PBGC		Pension Benefit Guarantee Corporation
PBO		projected benefit obligation
PGA		purchased gas adjustment
PGS		Peoples Gas System, the gas division of Tampa Electric Company
PPA		power purchase agreement
PRP		potentially responsible party

Assets	June 30,			December 31,
(millions)	2020			2019
Property, plant and equipment
Utility plant
Electric	$	10,992		$	10,578
Gas		2,151			2,012
Utility plant, at original costs		13,143			12,590
Accumulated depreciation		(3,579	)		(3,472	)
Utility plant, net		9,564			9,118
Other property		14			13
Total property, plant and equipment, net		9,578			9,131

Current assets
Cash and cash equivalents		10			14
Receivables, less allowance for uncollectibles of $6 and $2 at June 30, 2020 and December 31, 2019, respectively		231			206
Due from affiliates		25			14
Inventories, at average cost
Fuel		35			36
Materials and supplies		107			104
Regulatory assets		39			41
Prepayments and other current assets		19			10
Total current assets		466			425

Deferred debits
Regulatory assets		389			396
Other		56			55
Total deferred debits		445			451
Total assets	$	10,489		$	10,007

The accompanying notes are an integral part of the consolidated condensed financial statements.

Liabilities and Capitalization	June 30,			December 31,
(millions)	2020			2019
Capitalization
Common stock	$	3,650		$	3,385
Accumulated other comprehensive loss		(1	)		(1	)
Retained earnings		354			311
Total capital		4,003			3,695
Long-term debt		2,592			2,869
Total capitalization		6,595			6,564

Current liabilities
Long-term debt due within one year		278			0
Notes payable		494			348
Accounts payable		245			296
Due to affiliates		17			20
Customer deposits		131			132
Regulatory liabilities		110			93
Accrued interest		15			13
Accrued taxes		52			14
Other		40			44
Total current liabilities		1,382			960

Long-term liabilities
Deferred income taxes		760			758
Regulatory liabilities		1,207			1,210
Investment tax credits		218			164
Deferred credits and other liabilities		327			351
Total long-term liabilities		2,512			2,483

Commitments and Contingencies (see Note 8)

Total liabilities and capitalization	$	10,489		$	10,007

The accompanying notes are an integral part of the consolidated condensed financial statements.

	Three months ended June 30,
(millions)	2020			2019
Revenues
Electric	$	453		$	520
Gas		96			107
Total revenues		549			627
Expenses
Fuel		67			139
Purchased power		25			13
Cost of natural gas sold		25			38
Operations and maintenance		126			132
Depreciation and amortization		92			94
Taxes, other than income		50			52
Total expenses		385			468
Income from operations		164			159
Other income
Allowance for equity funds used during construction		7			2
Other income, net		2			3
Total other income		9			5
Interest charges
Interest expense		35			34
Allowance for borrowed funds used during construction		(3	)		(1	)
Total interest charges		32			33
Income before provision for income taxes		141			131
Provision for income taxes		24			24
Net income	$	117		$	107
Comprehensive income	$	117		$	107

The accompanying notes are an integral part of the consolidated condensed financial statements.

	Six months ended June 30,
(millions)	2020			2019
Revenues
Electric	$	873		$	931
Gas		223			235
Total revenues		1,096			1,166
Expenses
Fuel		168			246
Purchased power		27			17
Cost of natural gas sold		67			85
Operations and maintenance		260			262
Depreciation and amortization		189			186
Taxes, other than income		101			102
Total expenses		812			898
Income from operations		284			268
Other income
Allowance for equity funds used during construction		13			4
Other income, net		3			5
Total other income		16			9
Interest charges
Interest expense		72			68
Allowance for borrowed funds used during construction		(6	)		(2	)
Total interest charges		66			66
Income before provision for income taxes		234			211
Provision for income taxes		40			40
Net income	$	194		$	171
Comprehensive income	$	194		$	171

The accompanying notes are an integral part of the consolidated condensed financial statements.

	Six months ended June 30,
(millions)	2020			2019
Cash flows from operating activities
Net income	$	194		$	171
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization		189			186
Deferred income taxes and investment tax credits		43			31
Deferred recovery clauses		37			1
Receivables, less allowance for uncollectibles		(22	)		1
Prepayments and other deposits		(9	)		(6	)
Taxes accrued		20			25
Accounts payable		(41	)		(54	)
Regulatory assets and liabilities		(12	)		5
Other		(17	)		(29	)
Cash flows from operating activities		382			331
Cash flows used in investing activities
Capital expenditures		(653	)		(581	)
Net proceeds from sale of assets		6			0
Cash flows used in investing activities		(647	)		(581	)
Cash flows from financing activities
Equity contributions from Parent		265			220
Net increase (decrease) in short-term debt (maturities of 90 days or less)		(154	)		165
Proceeds from other short-term debt (maturities over 90 days)		300			0
Dividends to Parent		(150	)		(140	)
Cash flows from financing activities		261			245
Net decrease in cash and cash equivalents		(4	)		(5	)
Cash and cash equivalents at beginning of period		14			15
Cash and cash equivalents at end of period	$	10		$	10
Supplemental disclosure of non-cash activities
Change in accrued capital expenditures	$	(12	)	$	(4	)

The accompanying notes are an integral part of the consolidated condensed financial statements.

								Accumulated
								Other
			Common		Retained			Comprehensive			Total
(millions, except share amounts)	Shares		Stock		Earnings			Loss			Capital
Three months ended June 30, 2020
Balance, March 31, 2020		10		3,530	$	316		$	(1	)	$	3,845
Net income						117						117
Equity contributions from Parent			120									120
Dividends to Parent						(77	)					(77	)
Other						(2	)					(2	)
Balance, June 30, 2020		10	$	3,650	$	354		$	(1	)	$	4,003

Three months ended June 30, 2019
Balance, March 31, 2019		10		3,100	$	302		$	(1	)	$	3,401
Net income						107						107
Equity contributions from Parent			110									110
Dividends to Parent						(64	)					(64	)
Balance, June 30, 2019		10	$	3,210	$	345		$	(1	)	$	3,554

Six months ended June 30, 2020
Balance, December 31, 2019		10		3,385	$	311		$	(1	)	$	3,695
Net income						194						194
Equity contributions from Parent			265									265
Dividends to Parent						(150	)					(150	)
Other						(1	)					(1	)
Balance, June 30, 2020	$	10	$	3,650	$	354		$	(1	)	$	4,003

Six months ended June 30, 2019
Balance, December 31, 2018		10		2,990	$	314		$	(1	)	$	3,303
Net income						171						171
Equity contributions from Parent			220									220
Dividends to Parent						(140	)					(140	)
Balance, June 30, 2019		10	$	3,210	$	345		$	(1	)	$	3,554

The accompanying notes are an integral part of the consolidated condensed financial statements.

See TEC’s Annual Report on Form 10-K for the year ended December 31, 2019 for a complete discussion of accounting policies. The significant accounting policies for TEC include:

TEC is a wholly owned subsidiary of TECO Energy, which is an indirect, wholly owned subsidiary of Emera. TEC is comprised of the electric division, referred to as Tampa Electric, and the natural gas division, referred to as PGS.

Intercompany balances and transactions within the divisions have been eliminated in consolidation. In the opinion of management, the unaudited consolidated condensed financial statements include all adjustments that are of a recurring nature and necessary to state fairly the financial position of TEC as of June 30, 2020 and December 31, 2019, and the results of operations and cash flows for the periods ended June 30, 2020 and June 30, 2019. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results that can be expected for the entire fiscal year ending December 31, 2020.

The use of estimates is inherent in the preparation of financial statements in accordance with U.S. GAAP. Actual results could differ from these estimates. The year-end Consolidated Condensed Balance Sheet was derived from audited financial statements; however, this quarterly report on Form 10-Q does not include all year-end disclosures required for an annual report on Form 10-K by U.S. GAAP.

Since December 31, 2019, the outbreak of the novel strain of coronavirus, specifically identified as COVID-19, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. While management considered the impact of COVID-19 in TEC’s estimates and results, the financial statements as of and for the three and six months ended June 30, 2020 were not significantly impacted by COVID-19. However, it is not possible to reliably estimate the length and severity of the COVID-19 pandemic and the impact on the financial results and condition of TEC in future periods. See Note 5 for further information regarding potential future impacts to TEC’s employee postretirement benefits.

Receivables from contracts with customers, which consist of services to residential, commercial, industrial and other customers, were $230 million and $205 million as of June 30, 2020 and December 31, 2019, respectively. An allowance for uncollectible accounts is established based on TEC’s collection experience and reasonable and supportable forecasts that affect the collectibility of the reported amount. Circumstances that could affect Tampa Electric’s and PGS’s estimates of uncollectible receivables include, but are not limited to, customer credit issues, fuel prices, customer deposits and general economic conditions, including the impacts of the COVID-19 pandemic. Accounts are reserved in the allowance or written off once they are deemed to be uncollectible.

As of June 30, 2020 and December 31, 2019, unbilled revenues of $84 million and $61 million, respectively, are included in the “Receivables” line item on the Consolidated Condensed Balance Sheets.

Tampa Electric and PGS are allowed to recover certain costs from customers on a dollar-for-dollar basis through rates approved by the FPSC. The amounts included in customers’ bills for franchise fees and gross receipt taxes are included as revenues on the Consolidated Condensed Statements of Income. Franchise fees and gross receipt taxes payable by Tampa Electric and PGS are included as an expense on the Consolidated Condensed Statements of Income in “Taxes, other than income”. These amounts totaled $26 million and $29 million for the three months ended June 30, 2020 and 2019, respectively, and $53 million and $56 million for the six months ended June 30, 2020 and 2019, respectively.

The new U.S. GAAP accounting policies that are applicable to and adopted by TEC in 2020 are described as follows:

TEC adopted Accounting Standard Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments effective January 1, 2020. The standard provides guidance regarding the measurement of credit losses for financial assets and certain other instruments that are not accounted for at fair value through net income, including trade and other receivables, debt securities, net investment in leases, and off-balance sheet credit exposures. The new guidance requires companies to replace the current incurred loss impairment methodology with a methodology that measures all expected credit losses for financial assets

based on historical experience, current conditions, and reasonable and supportable forecasts. There was no material impact on the condensed consolidated financial statements as a result of the adoption of this standard.

TEC considers the applicability and impact of all ASUs issued by the FASB. The ASUs that have been issued, but that are not yet effective, are consistent with those disclosed in TEC’s Annual Report on Form 10-K for the year ended December 31, 2019, with updates noted below.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard provides optional expedients and exceptions for applying U.S. GAAP to contract modifications and hedging relationships that reference LIBOR or another rate that is expected to be discontinued. The guidance was effective as of the date of issuance and entities may elect to apply the guidance prospectively through December 31, 2022. TEC is currently evaluating the impact of adoption of the standard, if elected, on its consolidated financial statements.

On September 27, 2017, Tampa Electric filed with the FPSC an amended and restated settlement agreement that replaced the existing 2013 base rate settlement agreement and extended it another four years through December 31, 2021. The FPSC approved the agreement on November 6, 2017.

The amended agreement provides for SoBRAs for TEC’s investments in up to 600 MW of cost-effective solar generation. Tampa Electric is investing approximately $850 million during 2017 through 2021 related to 600 MW of solar projects recoverable under the SoBRAs.

On December 12, 2017, TEC filed its first petition regarding the SoBRAs along with supporting tariffs demonstrating the cost-effectiveness of the September 1, 2018 tranche representing 145 MW and $24 million annually in estimated revenue requirements. The FPSC approved the tariffs on the first SoBRA filing on May 8, 2018 and TEC began receiving these revenues in September 2018. On June 29, 2018, TEC filed its second SoBRA petition along with supporting tariffs demonstrating the cost-effectiveness of the January 1, 2019 tranche representing 260 MW and $46 million annually in estimated revenue requirements. The FPSC approved the tariffs on the second SoBRA filing on October 29, 2018 and TEC began receiving these revenues in January 2019. On June 28, 2019, TEC filed its third SoBRA petition along with supporting tariffs demonstrating the cost-effectiveness of the January 1, 2020 tranche representing 149 MW and $26 million annually in estimated revenue requirements. On December 10, 2019, the FPSC approved the tariffs on this SoBRA filing, including an adjustment to reflect the reduction in the state corporate income tax discussed below, and TEC began receiving these revenues in January 2020. The 2017 settlement agreement provides for a potential revenue adjustment of an additional $10 million for 50 MWs effective on January 1, 2021. TEC expects to file its final SoBRA petition for the January 1, 2021 tranche in 2020.

The true-up filing for SoBRA tranche 1 and 2 revenue requirement estimates that were included in base rates as of September 2018 and January 2019, respectively, was submitted on April 30, 2020. Once approved, the final net true-up amount is expected to be a refund of $5 million, which will be returned to customers in 2020.

On November 13, 2019, as required by the 2017 settlement agreement, TEC filed its petition to reduce base rates and charges to reflect the impact of the temporary reduction of the state corporate income tax from 5.5% to 4.5%. The tax rate reduction was issued on September 12, 2019 and is effective retroactive from January 1, 2019 through December 31, 2021. The estimated base rate reduction due to customers of $5 million is subject to true-up, and the actual rate reduction may vary from year to year. The base rate reduction was approved on December 10, 2019 for rates effective January 2020.

Tampa Electric expects to invest approximately $850 million during 2018 through 2023 to modernize the Big Bend Power Station, of which approximately $414 million has been invested through June 30, 2020. The Big Bend modernization project will repower Big Bend Unit 1 with natural gas combined-cycle technology and eliminate coal as this unit’s fuel. As part of the Big Bend modernization project, on June 1, 2020, Tampa Electric retired the Unit 1 components that will not be used in the modernized plant. At June 1, 2020, Tampa Electric’s balance sheet included $223 million and $90 million in electric utility plant and accumulated depreciation, respectively, related to Unit 1 components. In accordance with Tampa Electric’s 2017 settlement agreement approved by the FPSC, Tampa Electric will continue to account for its existing investment in Unit 1 in electric utility plant and depreciate the assets using the current depreciation rates until the FPSC approves Tampa Electric’s next depreciation and dismantlement study. In addition, Tampa Electric plans to retire Big Bend Unit 2 in 2021 early as part of the Big Bend modernization project.

On October 3, 2019, the FPSC issued a rule to implement a Storm Protection Plan (SPP) Cost Recovery Clause. This new clause provides a process for Florida investor-owned utilities, including Tampa Electric, to recover transmission and distribution storm hardening costs for incremental activities not already included in base rates. Tampa Electric submitted its storm protection plan with the FPSC on April 10, 2020. On April 27, 2020, Tampa Electric submitted a settlement agreement with the FPSC which specified a $15 million base rate reduction for costs previously recovered in base rates related to SPP programs beginning January 1, 2021. On June 9, 2020, the FPSC approved this settlement agreement. On August 3, 2020, Tampa Electric submitted another settlement agreement to the FPSC for approval, including cost recovery of approximately $39 million in proposed storm protection project costs for 2020 and 2021. This cost recovery includes the $15 million of costs reduced from base rates. This settlement agreement was approved on August 10, 2020 and Tampa Electric’s cost recovery will begin in January 2021. Tampa Electric will file a new plan in 2022 to determine cost recovery in 2023, 2024, and 2025.

The June 9, 2020 settlement agreement approved by the FPSC disclosed above also included approval of Tampa Electric’s petition to eliminate its $16 million accumulated amortization reserve surplus for intangible software assets through a credit to amortization expense in 2020. As stipulated in the settlement, $8 million of this credit was recognized in the second quarter of 2020 with the remaining $8 million to be recognized over the remainder of 2020.

In March 2020, Tampa Electric requested a mid-course adjustment to its fuel and capacity charges, effective with June 2020 customer bills, due to a decline in expected fuel commodity and capacity costs in 2020. The FPSC approved the request on April 28, 2020. This will result in lower fuel and capacity clause rates to customers for the remainder of 2020, including an acceleration of the return of these savings in the three months starting June 2020 through customer bill credits.

As a result of Tampa Electric’s 2013 rate case settlement, in the event of a named storm that results in damage to its system, Tampa Electric can petition the FPSC to seek recovery of those costs over a 12-month period or longer as determined by the FPSC, as well as replenish its reserve to $56 million, the level of the reserve as of October 31, 2013.

In the third quarter of 2017, Tampa Electric was impacted by Hurricane Irma and incurred storm restoration costs of approximately $102 million. Tampa Electric petitioned the FPSC on December 28, 2017 for recovery of estimated storm costs and to replenish the balance in the reserve to the level that existed as of October 31, 2013. On March 1, 2018, the FPSC approved a settlement agreement filed by Tampa Electric that addressed both the recovery of storm costs and the return of U.S. tax reform benefits to customers while keeping customer rates stable in 2018. Beginning on April 1, 2018, the agreement authorized Tampa Electric to net the estimated amount of storm cost recovery against Tampa Electric’s estimated 2018 tax reform benefits of $103 million. On August 20, 2018, the FPSC approved lowering base rates by $103 million annually beginning on January 1, 2019 as a result of lower tax expense. On April 9, 2019, Tampa Electric reached a settlement agreement with consumer parties regarding eligible storm costs, which was approved by the FPSC on May 21, 2019. As a result, Tampa Electric refunded $12 million to customers in January 2020, resulting in minimal impact to the Consolidated Condensed Statements of Income.

In 2019, Tampa Electric incurred storm restoration preparation costs for Hurricane Dorian estimated to be approximately $8 million, which was charged to the storm reserve regulatory liability.

PGS’s base rates were established in 2009. In accordance with its 2018 settlement agreement, PGS reduced its base rates by $12 million for the impact of tax reform and reduced depreciation rates by $10 million on an annual basis beginning in January 2019.

PGS is permitted to initiate a general base rate proceeding during 2020 regardless of its earned ROE at the time, provided the new rates do not become effective before January 1, 2021. As a result of increased forecasted revenue requirements, on June 8, 2020, PGS filed a petition for an increase in rates and service charges effective January 2021. The new rates would be expected to result in an increase in revenue of approximately $62 million annually.

Tampa Electric and PGS apply the FASB’s accounting standards for regulated operations. Regulatory assets generally represent incurred costs that have been deferred, as their future recovery in customer rates is probable. Regulatory liabilities generally represent obligations to make refunds to customers from previous collections for costs that are not likely to be incurred or the advance recovery of expenditures for approved costs.

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

Regulatory Assets and Liabilities
(millions)	June 30, 2020		December 31, 2019
Regulatory assets:
Regulatory tax asset ⁽¹⁾	$	87	$	74
Cost-recovery clauses ⁽²⁾		7		12
Environmental remediation⁽³⁾		21		20
Postretirement benefits ⁽⁴⁾		287		295
Asset retirement obligation ⁽⁵⁾		16		25
Other		10		11
Total regulatory assets		428		437
Less: Current portion		39		41
Long-term regulatory assets	$	389	$	396
Regulatory liabilities:
Regulatory tax liability⁽⁶⁾	$	698	$	699
Cost-recovery clauses ⁽²⁾		70		37
Accumulated reserve - cost of removal⁽⁷⁾		500		506
Storm reserve ⁽⁸⁾		48		48
Other		1		13
Total regulatory liabilities		1,317		1,303
Less: Current portion		110		93
Long-term regulatory liabilities	$	1,207	$	1,210

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the Act) was signed into legislation. The Act includes several business provisions including deferral in employer payroll taxes and an employee retention payroll tax credit. TEC is continuing to evaluate the impact of the Act but does not expect any material impacts.

TEC is included in a consolidated U.S. federal income tax return with EUSHI and its subsidiaries. TEC’s income tax expense is based upon a separate return method, modified for the benefits-for-loss allocation in accordance with respective tax sharing agreements with TECO Energy and EUSHI. To the extent that TEC’s cash tax positions are settled differently than the amount reported as realized under the tax sharing agreement, the difference is reflected in common stock.

TEC’s effective tax rates for the six months ended June 30, 2020 and 2019 were 17.1% and 19.0%, respectively. The June 30, 2020 and 2019 effective tax rates are an estimate of the annual effective income tax rate. TEC’s effective tax rate for the six months ended June 30, 2020 and 2019 differed from the statutory rate principally due to the amortization of the regulatory tax liability resulting from tax reform. See Note 3 for further information regarding the regulatory tax liability.

As of June 30, 2020 and December 31, 2019, the amount of unrecognized tax benefits was $9 million, all of which was recorded as a reduction of deferred income tax assets for tax credit carryforwards. TEC believes that it is reasonably possible the total unrecognized tax benefits could decrease and be recognized within the next twelve months due to the ongoing audit examination of TECO Energy’s consolidated federal income tax return for the short tax year ending June 30, 2016. However, the impact of the COVID-19 pandemic on the timing of audit examinations cannot be reliably predicted at this time. TEC had $9 million of unrecognized tax benefits at June 30, 2020 and December 31, 2019, that, if recognized, would reduce TEC’s effective tax rate.

TEC is a participant in the comprehensive retirement plans of TECO Energy. The following table presents detail related to TECO Energy’s periodic benefit cost for pension and other postretirement benefits. Amounts disclosed for TECO Energy’s pension benefits include the amounts related to its qualified pension plan and non-qualified, non-contributory SERP and Restoration Plan.

TECO Energy Benefit Cost
(millions)	Pension Benefits							Other Postretirement Benefits
Three months ended June 30,	2020			2019				2020		2019
Components of net periodic benefit cost
Service cost	$	5		$	5			$	0	$	0
Interest cost		6			8				2		1
Expected return on assets		(12	)		(14	)			0		0
Amortization of:
Actuarial loss		5			5				0		0
Net periodic benefit cost	$	4		$	4			$	2	$	1
Six months ended June 30,
Components of net periodic benefit cost
Service cost	$	10		$	10			$	0	$	0
Interest cost		13			16				3		3
Expected return on assets		(25	)		(26	)			0		0
Amortization of:
Actuarial loss		10			8				0		0
Settlement cost		0			1		⁽¹⁾		0		0
Net periodic benefit cost	$	8		$	9			$	3	$	3

(1)Represents TECO Energy’s SERP and Restoration Plan settlement charges as a result of the prior retirements of certain executives.

TEC’s portion of the net periodic benefit cost for the three months ended June 30, 2020 and 2019, respectively, was $3 million and $3 million for pension benefits, and $1 million and $1 million for other postretirement benefits. TEC’s portion of the net periodic

benefit cost for the six months ended June 30, 2020 and 2019, respectively, was $6 million and $7 million for pension benefits, and $3 million and $3 million for other postretirement benefits.

TECO Energy assumed a long-term EROA of 7.00% and a discount rate of 3.22% for pension benefits under its qualified pension plan for 2020. For TECO Energy’s other postretirement benefits, TECO Energy used a discount rate of 3.32% for 2020.

TECO Energy made contributions of $10 million and $7 million to its qualified pension plan in the six months ended June 30, 2020 and 2019, respectively. TEC’s portion of these contributions was $8 million and $5 million, respectively. TECO Energy expects to make contributions to the pension plan of $10 million for the remainder of 2020, of which TEC estimates its portion to be $8 million.

Included in the benefit cost discussed above, for the three and six months ended June 30, 2020, $4 million and $9 million of unamortized prior service benefits and costs and actuarial gains and losses were reclassified by TEC from regulatory assets to the Consolidated Condensed Statement of Income, compared with $3 million and $6 million for the three and six months ended June 30, 2019.

The COVID-19 pandemic could impact key actuarial assumptions used to account for employee post-retirement benefits including the anticipated rates of return on plan assets and discount rates used in determining the accrued benefit obligation, benefit costs and annual pension funding requirements. Fluctuations in actual equity market returns and changes in interest rates as a result of the COVID-19 pandemic may also result in changes to pension costs and funding in future periods. The extent of the future impact of COVID-19 on TEC’s financial results and business operations cannot be predicted at this time and will depend on future developments, including the duration and severity of the pandemic, further potential government actions, future economic activity and energy usage. Actual results may differ significantly from these estimates.

Details of TEC’s credit facilities and related borrowings are presented in the following table:


	June 30, 2020						December 31, 2019
					Letters						Letters
	Credit		Borrowings		of Credit		Credit		Borrowings		of Credit
(millions)	Facilities		Outstanding ⁽¹⁾		Outstanding		Facilities		Outstanding ⁽¹⁾		Outstanding
5-year facility ⁽²⁾	$	400	$	194	$	1	$	400	$	295	$	1
3-year accounts receivable facility ⁽³⁾		150		0		0		150		53		0
1-year term facility ⁽⁴⁾		300		300		0		0		0		0
Total	$	850	$	494	$	1	$	550	$	348	$	1

At June 30, 2020, these credit facilities required commitment fees ranging from 12.5 to 35.0 basis points. The weighted-average interest rate on outstanding amounts payable under the credit facilities at June 30, 2020 and December 31, 2019 was 0.83% and 2.56%, respectively.

On July 14, 2020, TEC amended its $150 million accounts receivable collateralized borrowing facility (Loan Agreement) in order to change certain performance ratios. The amended Loan Agreement was effective as of June 30, 2020. TEC was in compliance with the requirements of the Loan Agreement at June 30, 2020. There were no other changes made to the Loan Agreement. There were no amounts outstanding on this facility at June 30, 2020.

On February 6, 2020, TEC entered into a 364-day, $300 million credit agreement with a group of banks. The credit agreement has a maturity date of February 4, 2021; contains customary representations and warranties, events of default, and financial and other covenants; and provides for interest to accrue at variable rates based on either the London interbank deposit rate, Wells Fargo Bank’s prime rate, or the federal funds rate, plus a margin.

At June 30, 2020, TEC’s long-term debt had a carrying amount of $2,870 million and an estimated fair market value of $3,482 million. At December 31, 2019, TEC’s total long-term debt had a carrying amount of $2,869 million and an estimated fair market value of $3,335 million. The fair value of the debt securities is determined using Level 2 measurements (see Note 11 for information regarding the fair value hierarchy).

From time to time, TEC and its subsidiaries are involved in various legal, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies in the ordinary course of business. Where appropriate, accruals are made in accordance with accounting standards for contingencies to provide for matters that are probable of resulting in an estimable loss.

TEC, through its Tampa Electric and PGS divisions, is a PRP for certain superfund sites and, through its PGS division, for certain former MGP sites. While the joint and several liability associated with these sites presents the potential for significant response costs, as of June 30, 2020, TEC has estimated its ultimate financial liability to be $21 million, primarily at PGS. This amount has been accrued and is primarily reflected in the long-term liability section under “Deferred credits and other liabilities” on the Consolidated Condensed Balance Sheets. The environmental remediation costs associated with these sites are expected to be paid over many years.

The estimated amounts represent only the portion of the cleanup costs attributable to TEC. The estimates to perform the work are based on TEC’s experience with similar work, adjusted for site-specific conditions and agreements with the respective governmental agencies. The estimates are made in current dollars, are not discounted and do not assume any insurance recoveries.

In instances where other PRPs are involved, most of those PRPs are creditworthy and are likely to continue to be creditworthy for the duration of the remediation work. However, in those instances that they are not, TEC could be liable for more than TEC’s currently assessed percentage of the remediation costs.

Factors that could impact these estimates include the ability of other PRPs to pay their pro-rata portion of the cleanup costs, additional testing and investigation which could expand the scope of the cleanup activities, additional liability that might arise from the cleanup activities themselves or changes in laws or regulations that could require additional remediation. Under current regulations, these costs are recoverable through customer rates established in subsequent base rate proceedings. See Note 3 for information regarding the related regulatory asset.

TEC has commitments for various purchases as disclosed below, including payment obligations under contractual agreements for fuel, fuel transportation and power purchases that are recovered from customers under regulatory clauses. The following is a schedule of future payments under PPAs, minimum lease payments with non-cancelable lease terms in excess of one year, and other net purchase obligations/commitments at June 30, 2020:

									Long-term				Demand
	Purchased				Capital		Fuel and		Service		Operating		Side
(millions)	Power		Transportation		Projects		Gas Supply		Agreements		Leases		Management		Total

2020	$	31	$	108	$	118	$	101	$	30	$	1	$	2	$	391
2021		3		234		84		52		6		3		3		385
2022		0		236		79		2		9		3		3		332
2023		0		208		68		1		12		3		0		292
2024		0		197		0		0		19		3		0		219
Thereafter		0		1,915		0		0		41		51		0		2,007
Total future minimum payments	$	34	$	2,898	$	349	$	156	$	117	$	64	$	8	$	3,626

TEC must meet certain financial tests, including a debt to capital ratio, as defined in the applicable debt agreements and has certain restrictive covenants in specific agreements and debt instruments. At June 30, 2020, TEC was in compliance with all required covenants.

(millions)	Tampa								Tampa Electric
Three months ended June 30,	Electric		PGS		Eliminations				Company
2020
Revenues - external	$	453	$	96	$	0			$	549
Intracompany sales		1		1		(2	)			0
Total revenues		454		97		(2	)			549
Total interest charges		28		4		0				32
Net income	$	106	$	11	$	0			$	117
2019
Revenues - external	$	520	$	107	$	0			$	627
Intracompany sales		1		4		(5	)			0
Total revenues		521		111		(5	)			627
Total interest charges		29		4		0				33
Net income	$	93	$	14	$	0			$	107

Six months ended June 30,
2020
Revenues - external	$	873	$	223	$	0			$	1,096
Intracompany sales		2		4		(6	)			0
Total revenues		875		227		(6	)			1,096
Total interest charges		58		8		0				66
Net income	$	165	$	29	$	0			$	194
2019
Revenues - external	$	931	$	235	$	0			$	1,166
Intracompany sales		2		8		(10	)			0
Total revenues		933		243		(10	)			1,166
Total interest charges		58		8		0				66
Net income	$	139	$	32	$	0			$	171
Total assets at June 30, 2020	$	9,409	$	1,710	$	(630	)	⁽¹⁾	$	10,489
Total assets at December 31, 2019	$	9,007	$	1,593	$	(593	)	⁽¹⁾	$	10,007

(millions)	Tampa								Tampa Electric
Three months ended June 30, 2020	Electric			PGS		Eliminations			Company
Electric revenue
Residential	$	254		$	0	$	0		$	254
Commercial		121			0		0			121
Industrial		32			0		0			32
Regulatory deferrals and unbilled revenue		(3	)		0		0			(3	)
Other ⁽¹⁾		50			0		(1	)		49
Total electric revenue		454			0		(1	)		453
Gas revenue
Residential		0			36		0			36
Commercial		0			28		0			28
Industrial ⁽²⁾		0			5		0			5
Other ⁽³⁾		0			28		(1	)		27
Total gas revenue		0			97		(1	)		96
Total revenue	$	454		$	97	$	(2	)	$	549
Three months ended June 30, 2019
Electric revenue
Residential	$	261		$	0	$	0		$	261
Commercial		141			0		0			141
Industrial		42			0		0			42
Regulatory deferrals and unbilled revenue		17			0		0			17
Other ⁽¹⁾		60			0		(1	)		59
Total electric revenue		521			0		(1	)		520
Gas revenue
Residential		0			36		0			36
Commercial		0			35		0			35
Industrial ⁽²⁾		0			6		0			6
Other ⁽³⁾		0			34		(4	)		30
Total gas revenue		0			111		(4	)		107
Total revenue	$	521		$	111	$	(5	)	$	627

(millions)	Tampa								Tampa Electric
Six months ended June 30, 2020	Electric			PGS		Eliminations			Company
Electric revenue
Residential	$	459		$	0	$	0		$	459
Commercial		246			0		0			246
Industrial		69			0		0			69
Regulatory deferrals and unbilled revenue		(5	)		0		0			(5	)
Other ⁽¹⁾		106			0		(2	)		104
Total electric revenue		875			0		(2	)		873
Gas revenue
Residential		0			84		0			84
Commercial		0			69		0			69
Industrial ⁽²⁾		0			11		0			11
Other ⁽³⁾		0			63		(4	)		59
Total gas revenue		0			227		(4	)		223
Total revenue	$	875		$	227	$	(6	)	$	1,096

Six months ended June 30, 2019
Electric revenue
Residential	$	467	$	0	$	0		$	467
Commercial		261		0		0			261
Industrial		76		0		0			76
Regulatory deferrals and unbilled revenue		10		0		0			10
Other ⁽¹⁾		119		0		(2	)		117
Total electric revenue		933		0		(2	)		931
Gas revenue
Residential		0		86		0			86
Commercial		0		77		0			77
Industrial ⁽²⁾		0		11		0			11
Other ⁽³⁾		0		69		(8	)		61
Total gas revenue		0		243		(8	)		235
Total revenue	$	933	$	243	$	(10	)	$	1,166

Remaining performance obligations primarily represent lighting contracts and gas transportation contracts with fixed contract terms. As of June 30, 2020 and December 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $140 million. As allowed under ASC 606, this amount excludes contracts with an original expected length of one year or less and variable amounts for which TEC recognizes revenue at the amount to which it has the right to invoice for services performed. TEC expects to recognize revenue for the remaining performance obligations through 2033.

Accounting guidance governing fair value measurements and disclosures provides that fair value represents the amount that would be received in selling an asset or the amount that would be paid in transferring a liability in an orderly transaction between market participants. As a basis for considering assumptions that market participants would use in pricing an asset or liability, accounting guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

As of June 30, 2020 and December 31, 2019, the carrying value of TEC’s short-term debt was not materially different from the fair value due to the short-term nature of the instruments and because the stated rates approximate market rates. The fair value of TEC’s short-term debt is determined using Level 2 measurements. See Note 7 for information regarding the fair value of long-term debt.

This Management’s Discussion & Analysis contains forward-looking statements, which are subject to the inherent uncertainties in predicting future results and conditions. Actual results may differ materially from those forecasted. The forecasted results are based on TEC's current expectations and assumptions, and TEC does not undertake to update that information or any other information contained in this Management’s Discussion & Analysis, except as may be required by law. Factors that could impact actual results include: regulatory actions or legislation by federal, state or local authorities; unexpected capital needs or unanticipated reductions in cash flow that affect liquidity; the ability to access the capital and credit markets when required; general economic conditions affecting customer growth and energy sales; economic conditions affecting the Florida economy; weather variations and customer energy usage patterns affecting sales and operating costs and the effect of weather conditions on energy consumption; the effect of extreme weather conditions or hurricanes; general operating conditions; input commodity prices affecting cost; natural gas demand; and the ability of TEC to operate equipment without undue accidents, breakdowns or failures. Additional information is contained under "Risk Factors" in Part II, Item 1A below and TEC’s Annual Report on Form 10-K for the year ended December 31, 2019.

		Three months ended June 30,						Six months ended June 30,
(millions)		2020			2019			2020			2019
Revenues
	Tampa Electric	$	454		$	521		$	875		$	933
	PGS		97			111			227			243
	Eliminations		(2	)		(5	)		(6	)		(10	)
	TEC	$	549		$	627		$	1,096		$	1,166

Net income
	Tampa Electric	$	106		$	93		$	165		$	139
	PGS		11			14			29			32
	TEC	$	117		$	107		$	194		$	171

Second quarter 2020 net income was $117 million, compared to $107 million in the second quarter of 2019. Second quarter 2020 results were impacted by higher AFUDC, lower O&M expense and lower depreciation and amortization expense as a result of a regulatory settlement agreement. Year-to-date 2020 net income was $194 million, compared to $171 million in the 2019 year-to-date period. Year-to-date 2020 results were impacted by higher base revenues and higher AFUDC, partially offset by lower other operating revenues and higher interest expense. See Operating Company Results below for further detail.

During 2020, the ongoing COVID-19 pandemic has affected the service territories in which TEC operates. To date, COVID-19 has not had a material financial impact on TEC. TEC provides essential services and continues to operate and meet customer demand. TEC’s top priority continues to be the health and safety of its customers and employees. Management continues to closely monitor developments related to COVID-19.

In March 2020, TEC activated its company-wide pandemic and business continuity plans, including travel restrictions, directing employees to work remotely whenever possible, restricting access to operating facilities, physical distancing and implementing additional protocols (including the expanded use of personal protective equipment) for work within customers’ premises. TEC is monitoring recommendations by local and national public health authorities related to COVID-19 and is adjusting operational requirements as needed.

Tampa Electric currently anticipates earning within its allowed ROE range in 2020 and expects rate base to be higher than 2019. An increase in residential sales and favorable weather in the six months ended June 30, 2020 have more than offset the impacts of a decrease in other revenue classes as a result of COVID-19. The number of customers increased 2% from June 30, 2019. Tampa Electric’s volumes could be negatively impacted by potential declines in future economic activity in Florida due to COVID-19 impacts, resulting in overall sales volumes for the year being similar or slightly lower than in 2019. Expected outcomes and actual results may differ given the many uncertainties related to the pandemic and its economic impact.

PGS anticipates earning below its allowed ROE range in 2020. Prior to the impact of COVID-19, PGS anticipated it would earn below its allowed ROE range in 2020 primarily due to significant capital investments and related growth in rate base. In addition, PGS

sales volumes are expected to be lower than in 2019 as a result of the economic impact of COVID-19 in Florida. Beginning mid-March, PGS sales volumes decreased as a result of the impact of government measures on commercial customers and reduced tourism. Therefore, as a result of forecasted revenue requirements being higher than what is in current rates, on June 8, 2020, PGS filed a petition for an increase in rates and service charges effective January 2021. The new rates would be expected to result in an increase in revenue of approximately $62 million annually.

TEC is working with customers on relief initiatives in response to the effect of the pandemic on customers’ ability to make payments and the need for continued service. To date, these initiatives include the temporary suspension of disconnection for non-payment of bills and the development of payment arrangements where necessary. In the second quarter of 2020, TEC experienced an increase in the aging of customer receivables resulting from the suspension of disconnections. To date, there have been no significant customer defaults as a result of bankruptcies with many customer accounts secured by deposits. As of and for the three and six months ended June 30, 2020, adjustments to the allowance for uncollectible accounts have not had a significant impact on net income, and the allowance for uncollectible accounts has increased slightly to less than 3% of total accounts receivables. The ultimate effect of potential credit losses due to customer non-payment is not be known at this time. TEC is continuing to monitor customer accounts and to work with customers on payment arrangements. TEC expects to end its temporary suspension of disconnections for non-payment in the third quarter of 2020.

The extent of the future impact of COVID-19 on TEC’s financial results and business operations is uncertain at this time and will depend on future developments, including the duration and severity of the pandemic, further potential government actions, future economic activity and energy usage. Please see Risk Factors for further information. TEC plans to complete its capital investments that were in progress prior to COVID-19 and continue to reliably and safely serve its customers. Depending on the duration of the COVID-19 pandemic, forecasted capital expenditures may be delayed due to supply chain disruptions, travel restrictions for contractors or the deferral of non-essential capital work. Capital project delays and supply chain disruptions have been immaterial to date. TEC currently expects to continue to have adequate liquidity given its cash position, existing bank facilities, and access to capital but will continue to monitor the impact of COVID-19 on future cash flows. Refer to Liquidity and Capital Resources for further details.

Amounts included in the operating company discussions below are pre-tax, except net income and income taxes.

Tampa Electric’s net income for the second quarter of 2020 was $106 million, compared with $93 million for the same period in 2019. Results primarily reflected higher AFUDC, higher base revenues, lower O&M expense, and lower depreciation and amortization expense.

Revenues were $67 million lower than in the same period in 2019 primarily driven by lower clause revenues, partially offset by increased base revenues from customer growth, a greater mix of residential sales and the in-service of additional solar generation projects. Results reflect a 2% increase in number of customers at June 30, 2020 compared to June 30, 2019. Total degree days (a measure of heating and cooling demand) in Tampa Electric's service area in the second quarter of 2020 were 5% above normal and 5% below the 2019 period. Total retail net energy for load, which is a calendar measurement of energy output, in the second quarter of 2020 was 3% lower than the same period in 2019, reflecting milder weather in the second quarter of 2020 compared to 2019. Base revenues are energy sales excluding revenues from clauses, gross receipts taxes and franchise fees. Clauses, gross receipts taxes and franchise fees do not have a material effect on net income as these revenues substantially represent a dollar-for-dollar recovery of clauses and other pass-through costs.

O&M expense, excluding all FPSC-approved cost-recovery clause, was $3 million lower than in the same period of 2019 primarily due to the timing of generation outage costs from 2019. Depreciation and amortization expense decreased $4 million in the second quarter of 2020 compared to the second quarter of 2019 primarily due to a regulatory agreement approved by the FPSC which eliminates Tampa Electric’s accumulated amortization reserve surplus for intangible software assets through a credit to amortization expense in 2020 (see Note 3 to the TEC Consolidated Condensed Financial Statements for further information), partially offset by an increase related to normal capital additions.

Tampa Electric’s net income year-to-date 2020 was $165 million, compared with $139 million for the same period in 2019. Results primarily reflected higher base revenues and higher AFUDC earnings, partially offset by lower other operating revenues and higher interest expense.

Revenues were $58 million lower than year-to-date 2019 driven by lower clause revenue, partially offset by increased base revenues from in-service of solar generation projects, customer growth, a greater mix of residential sales and favorable weather. Results reflect a 2% increase in number of customers at June 30, 2020 compared to June 30, 2019. Total degree days in Tampa Electric's service area in the year-to-date period of 2020 were 10% above normal and 4% above the 2019 period. Total net energy for

load increased 0.4% in the year-to-date period of 2020 compared with the same period in 2019. Other operating revenues were lower than year-to-date 2019 primarily due to lower reconnect fees, as Tampa Electric suspended disconnections for non-payment of bills.

In the 2020 year-to-date period, operations and maintenance expense was consistent with the 2019 year-to-date period. Depreciation and amortization expense remained similar to 2019 from normal additions to facilities to reliably serve customers and the in-service of solar generation projects offset by a software amortization settlement.

Tampa Electric’s regulated operating statistics for the three and six months ended June 30, 2020 and 2019 were as follows:

(millions, except customers and total degree days)	Operating Revenues								Kilowatt-Hours Billed
Three months ended June 30,	2020			2019		% Change			2020		2019		% Change
By Customer Type
Residential ⁽¹⁾	$	254		$	261		(3	)		2,518		2,366		6
Commercial ⁽¹⁾		121			141		(14	)		1,431		1,543		(7	)
Industrial ⁽¹⁾		32			42		(24	)		452		539		(16	)
Other ⁽¹⁾		39			45		(13	)		439		476		(8	)
Regulatory deferrals and unbilled revenue ⁽²⁾		(3	)		17		(118	)
Total retail sales of electricity		443			506		(12	)		4,840		4,924		(2	)
Off system sales of electricity		0			1		(100	)		11		30		(63	)
Other operating revenue		11			14		(21	)
Total revenues	$	454		$	521		(13	)		4,851		4,954		(2	)
Customers at June 30, (thousands)		786			771		2
Retail net energy for load (kilowatt hours)		5,388			5,581		(3	)
Total degree days		1,311			1,376		(5	)

Six months ended June 30,
By Customer Type
Residential ⁽¹⁾	$	459		$	467		(2	)		4,398		4,305		2
Commercial ⁽¹⁾		246			261		(6	)		2,804		2,913		(4	)
Industrial ⁽¹⁾		69			76		(9	)		949		1,001		(5	)
Other ⁽¹⁾		81			86		(6	)		883		922		(4	)
Regulatory deferrals and unbilled revenue ⁽²⁾		(5	)		10		(150	)
Total retail sales of electricity		850			900		(6	)		9,034		9,141		(1	)
Off system sales of electricity		1			2		(50	)		33		45		(27	)
Other operating revenue		24			31		(23	)
Total revenues	$	875		$	933		(6	)		9,067		9,186		(1	)
Customers at June 30, (thousands)		786			771		2
Retail net energy for load (kilowatt-hours)		9,939			9,902		0
Total degree days		2,034			1,962		4

PGS had net income of $11 million for the second quarter, compared with $14 million in the second quarter of 2019. Results reflect a 4.2% higher number of customers in the second quarter of 2020 compared to the second quarter of 2019. Revenues were $14 million lower than the prior year quarter primarily due to lower PGA clause-related revenues and lower off-system sales. Base revenues were $3 million lower than 2019 primarily due to COVID-19 impacts lowering commercial sales, which was partially offset by customer growth. Cast iron and bare steel replacement rider revenue increased $2 million. Operations and maintenance expense, excluding all FPSC-approved cost-recovery clauses, was $1 million higher than in the 2019 quarter primarily due to higher bad debt expense and personal protection equipment purchases. Depreciation and amortization increased $1 million due to normal asset growth. Return on investment in cast iron and bare steel replacement rider was $1 million higher in the 2020 period.

PGS had net income of $29 million for the 2020 year-to-date period, compared with $32 million in the 2019 period. Revenues were $16 million lower than the prior period primarily due to lower PGA clause-related revenues and lower off-system sales. Base revenues were $2 million lower than 2019 primarily due to COVID-19 impacts lowering commercial sales and warmer weather in 2020, which was

partially offset by customer growth. Operations and maintenance expense, excluding all FPSC-approved cost-recovery clauses and the impact of deferring tax reform benefits in 2018, was $2 million higher than in 2019 primarily due to higher bad debt expense, increased personal protection equipment purchases, and higher labor and contractor costs to safely and reliably operate and maintain the growing distribution system. Depreciation and amortization increased $2 million due to normal asset growth. Return on investment in cast iron and bare steel replacement rider was $2 million higher in the 2020 period.

PGS’s regulated operating statistics for the three and six months ended June 30, 2020 and 2019 were as follows:

(millions, except customers)	Operating Revenues							Therms
Three months ended June 30,	2020		2019		% Change			2020		2019		% Change
By Customer Type
Residential	$	36	$	36		0			19		18		6
Commercial		28		35		(20	)		99		122		(19	)
Industrial		4		4		0			118		105		12
Power generation		1		2		(50	)		238		229		4
Off system sales		8		14		(43	)		38		50		(24	)
Other operating revenues		17		16		6
Total	$	94	$	107		(12	)		512		524		(2	)
By Sales Type
System supply	$	50	$	60		(17	)		62		73		(15	)
Transportation		27		31		(13	)		450		451		(0	)
Other operating revenues		17		16		6
Total	$	94	$	107		(12	)		512		524		(2	)
Customers at June 30, (thousands)		414		397		4

Six months ended June 30,
By Customer Type
Residential	$	84	$	86		(2	)		52		51		2
Commercial		69		77		(10	)		244		268		(9	)
Industrial		8		8		0			230		210		10
Power generation		3		3		0			472		417		13
Off system sales		17		27		(37	)		80		87		(8	)
Other operating revenues		39		36		8
Total	$	220	$	237		(7	)		1,078		1,033		4
By Sales Type
System supply	$	118	$	134		(12	)		144		149		(3	)
Transportation		63		67		(6	)		934		884		6
Other operating revenues		39		36		8
Total	$	220	$	237		(7	)		1,078		1,033		4
Customers at June 30, (thousands)		414		397		4

For the second quarter of 2020 and 2019, TEC’s other income was $9 million and $5 million, respectively, and included AFUDC-equity of $7 million and $2 million, respectively. For the year-to-date periods in 2020 and 2019, TEC’s other income was $16 million and $9 million, respectively, and included AFUDC-equity of $13 million and $4 million, respectively. The increase in AFUDC-equity is primarily due to the timing of Tampa Electric’s solar projects and the modernization of its Big Bend Power Station.

For the second quarter of 2020 and 2019, TEC’s interest expense, excluding AFUDC-debt, was $35 million and $34 million, respectively. For the year-to-date periods in 2020 and 2019, TEC’s interest expense, excluding AFUDC-debt, was $72 million and $68 million, respectively. The increase is due to an increase in long-term borrowings to support TEC’s ongoing capital investments program.

The provisions for income taxes were $40 million for the six months ended June 30, 2020 and 2019. Compared to the 2019 period, the provision for income taxes for the six months ended June 30, 2020 was the result of higher pre-tax income, offset by higher tax benefits due to AFUDC, higher amortization of the regulatory liability related to tax reform and higher investment tax credits related to solar projects.

In the six months ended June 30, 2020, the impact of the COVID-19 pandemic and resulting government measures to address this pandemic have resulted in economic slowdowns in Florida. To date, COVID-19 has not had a material financial impact on TEC. Refer to the COVID-19 Pandemic section above for further discussion. The impact of COVID-19 may result in decreased cash flow from operations due to the potential of lower sales and slower or less collections of accounts receivable. The extent of the future impact of COVID-19 on TEC’s operating cash flow cannot be reliably predicted at this time and will depend on future developments, including the duration and severity of the pandemic, further potential government actions, future economic activity and energy usage. TEC currently expects to continue to have adequate liquidity given its cash position, existing bank facilities, and access to capital but will continue to monitor the impact of COVID-19 on future cash flows.

The table below sets forth the June 30, 2020 liquidity, cash balances and amounts available under the TEC credit facilities.

Cash flows from operating activities for the six months ended June 30, 2020 were $382 million, an increase of $51 million compared to the same period in 2019. The increase is primarily due to higher base revenues due to the in-service of solar generation projects, customer growth and favorable weather, and higher fuel over-recoveries, partially offset by the timing of accounts payable and storm settlement customer refunds.

Cash flows from financing activities for the six months ended June 30, 2020 resulted in net cash inflows of $261 million. TEC received $265 million of equity contributions and $300 million from short-term debt with maturities over 90 days (see Note 6 to the TEC Consolidated Condensed Financial Statements for further information regarding TEC’s short-term debt). These increases in cash flows were partially offset by a net repayment of $154 million of borrowings under credit agreements with maturities of 90 days or less and dividend payments to Parent of $150 million.

In order to utilize its bank credit facilities, TEC must meet certain financial tests as defined in the applicable agreements. In addition, TEC has certain restrictive covenants in specific agreements and debt instruments. At June 30, 2020, TEC was in compliance

with all applicable financial covenants. The table that follows lists the significant financial covenants and the performance relative to them at June 30, 2020. Reference is made to the specific agreements and instruments for more details.

Certain of TEC’s derivative instruments contain provisions that require TEC’s debt to maintain investment grade credit ratings.

See Note 8 to the TEC Consolidated Condensed Financial Statements for information regarding TEC’s commitments and contingencies as of June 30, 2020.

See Note 3 to the TEC Consolidated Condensed Financial Statements for information regarding TEC’s regulatory matters as of June 30, 2020.

The valuation methods used to determine fair value are described in Notes 7 and 11 to the TEC Consolidated Condensed Financial Statements. In addition, TEC considered the impact of nonperformance risk in determining the fair value of derivatives. TEC considered the net position with each counterparty, past performance of both parties and the intent of the parties, indications of credit deterioration and whether the markets in which TEC transacts have experienced dislocation. At June 30, 2020, the fair value of derivatives was not materially affected by nonperformance risk.

Critical accounting policies and estimates have not materially changed in 2020. For further discussion of critical accounting policies and estimates, see TEC’s Annual Report on Form 10-K for the year ended December 31, 2019.

Information required by Item 3 is omitted pursuant to General Instruction H(2) of Form 10-Q.

From time to time, TEC is involved in various legal, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies in the ordinary course of business. Where appropriate, accruals are made in accordance with accounting standards for contingencies to provide for matters that are probable of resulting in an estimable loss. For a discussion of legal proceedings and environmental matters, see Note 8 of the TEC Consolidated Condensed Financial Statements.

TEC is updating the risk factors in its 2019 Annual Report on Form 10-K as described below.

An outbreak of infectious disease, a pandemic or a similar public health threat may adversely affect TEC.

An outbreak of infectious disease, a pandemic or a similar public health threat, such as the COVID-19 pandemic, or a fear of any of the foregoing, could adversely impact TEC, including by causing operating, supply chain and project development delays and disruptions, labor shortages and shutdowns (including as a result of government regulation and prevention measures), and delays in regulation decisions and proceedings, which could have a negative impact on TEC’s operations.

Any adverse changes in general economic and market conditions arising as a result of a public health threat could negatively impact demand for electricity and natural gas, revenue, operating costs, timing and extent of capital expenditures, results of financing efforts, or credit risk and counterparty risk, which could result in a material adverse effect on TEC’s business.

While TEC maintains pandemic and business contingency plans in each of its operations to manage and mitigate the impact of any such public health threat, it cannot be assured that such mitigation efforts will be successful, therefore the extent of the evolving COVID-19 pandemic or other pandemics and their future impact on TEC is uncertain.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


Title of each class	Trading symbol(s)	Name of each exchange on which registered
None.

Term		Meaning
R&D		research and development
REIT		real estate investment trust
RFP		request for proposal
ROE		return on common equity
Regulatory ROE		return on common equity as determined for regulatory purposes
S&P		Standard and Poor’s
SCR		selective catalytic reduction
SEC		U.S. Securities and Exchange Commission
SoBRAs		solar base rate adjustments
SERP		Supplemental Executive Retirement Plan
STIF		short-term investment fund
Tampa Electric		Tampa Electric, the electric division of Tampa Electric Company
TEC		Tampa Electric Company
TECO Energy		TECO Energy, Inc., the direct parent company of Tampa Electric Company
TSI		TECO Services, Inc.
U.S. GAAP		generally accepted accounting principles in the United States
VIE		variable interest entity


Level 1:	Observable inputs, such as quoted prices in active markets;
Level 2:	Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3:	Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.


(millions)
Credit facilities	$	850
Drawn amounts/letters of credit		495
Available credit facilities		355
Cash and short-term investments		10
Total liquidity	$	365

			Calculation at
Instrument ⁽¹⁾	Financial Covenant ⁽²⁾	Requirement/Restriction	June 30, 2020
Credit facility - $400 million	Debt/capital	Cannot exceed 65%	46%
1-year term facility - $300 million	Debt/capital	Cannot exceed 65%	46%
Accounts receivable credit facility - $150 million	Debt/capital	Cannot exceed 65%	46%

	S&P	Moody’s	Fitch
Credit ratings of senior unsecured debt	BBB+	A3	A
Credit ratings outlook	Stable	Stable	Stable

Exhibit
No.	Description
3.1	Restated Articles of Incorporation of Tampa Electric Company, as amended on November 30, 1982 (Exhibit 3 to Registration Statement No. 2-70653 of Tampa Electric Company). (P)	*

3.2	Bylaws of Tampa Electric Company, as amended effective February 2, 2011 (Exhibit 3.4, Form 10-K for 2010 of Tampa Electric Company).	*

10.1	Amendment No. 4 dated as of July 14, 2020 to Loan and Servicing Agreement dated as of March 24, 2015, between Tampa Electric Company, as the Servicer, and TEC Receivables Corp., as the Borrower, certain lenders named therein, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Program Agent.

31.1	Certification of the Chief Executive Officer of Tampa Electric Company pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of the Chief Financial Officer of Tampa Electric Company pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32	Certification of the Chief Executive Officer and Chief Financial Officer of Tampa Electric Company pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ⁽¹⁾

101.INS	XBRL Instance Document

101.SCH	XBRL Taxonomy Extension Schema Document

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

101.LAB	XBRL Taxonomy Extension Label Linkbase Document

Exhibit
No.		Description

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

	TAMPA ELECTRIC COMPANY
	(Registrant)

Date: August 11, 2020	By:	/s/ Gregory W. Blunden
		Gregory W. Blunden
		Senior Vice President-Finance and Accounting, Treasurer and Chief Financial Officer (Chief Accounting Officer)
		(Principal Financial and Accounting Officer)