Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2015 |
Commitments and Contingencies | 10. Commitments and Contingencies |
Legal Contingencies |
From time to time, TECO Energy 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 its 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. The company believes the claims in the pending actions described below are without merit and intends to defend the matters vigorously. The company is unable at this time to estimate the possible loss or range of loss with respect to these matters. While the outcome of such proceedings is uncertain, management does not believe that their ultimate resolution will have a material adverse effect on the company’s results of operations, financial condition or cash flows. |
Tampa Electric Legal Proceedings |
A thirty-six year old man died from mesothelioma in March 2014. His estate and his family are suing Tampa Electric as a result. The man allegedly suffered exposure to asbestos dust brought home by his father and grandfather, both of whom had been employed as insulators and worked at various job sites throughout the Tampa area. Plaintiff’s case against Tampa Electric and nineteen other defendants alleges, among other things, negligence, strict liability, household exposure, loss of consortium, and wrongful death. |
In September 2014, a man was electrocuted when allegedly two energized, downed primary conductors fell during a heavy storm, leading to his death. Plaintiff's wrongful death complaint against Tampa Electric alleged, among other things, negligence and code violations. In March 2015, Tampa Electric entered into a confidential settlement in connection with this matter. |
Peoples Gas Legal Proceedings |
In November 2010, heavy equipment operated at a road construction site being conducted by Posen Construction, Inc. struck a natural gas line causing a rupture and ignition of the gas and an outage in the natural gas service to Lee and Collier counties, Florida. PGS filed suit in April 2011 against Posen Construction, Inc. in Federal Court for the Middle District of Florida to recover damages for repair and restoration relating to the incident and Posen Construction, Inc. counter-claimed against PGS alleging negligence. In the first quarter of 2014, the parties entered into a settlement agreement that resolves the claims of the parties. In addition, the suit filed in November 2011 by the Posen Construction, Inc. employee operating the heavy equipment involved in the incident in Lee County Circuit Court against PGS and a PGS contractor involved in the project, seeking damages for his injuries, remains pending. |
New Mexico Gas Company Legal Proceedings |
In February 2011, NMGC experienced gas shortages due to weather-related interruptions of electric service, weather-related problems on the systems of various interstate pipelines and in gas fields that are the sources of gas supplied to NMGC, and high weather-driven usage. This gas supply disruption and high usage resulted in the declaration of system emergencies by NMGC causing involuntary curtailments of gas utility service to approximately 28,700 customers (residential and business). |
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In March 2011, a customer purporting to represent a class consisting of all “32,000 [sic] customers” who had their gas utility service curtailed during the early-February system emergencies filed a putative class action lawsuit against NMGC. In March 2011, the Town of Bernalillo, New Mexico, purporting to represent a class consisting of all “New Mexico municipalities and governmental entities who have suffered damages as a result of the natural gas utility shut off” also filed a putative class action lawsuit against NMGC, four of its officers, and John and Jane Does at NMGC. In July 2011, the plaintiff in the Bernalillo class action filed an amended complaint to add an additional plaintiff purporting to represent a class of all “similarly situated New Mexico private businesses and enterprises.” |
The two purported class action suits (three purported classes) were consolidated. The court dismissed the class actions in their entirety with prejudice in October 2014 and appeals from the dismissal were taken by the plaintiffs in November 2014 and are pending. |
Two lawsuits representing 18 insurance carriers have filed subrogation lawsuits for monies paid to their insureds as a result of the curtailment of natural gas service in February 2011. These subrogation matters are pending and discovery is proceeding. NMGC anticipates filing motions to dismiss similar to those filed in the class actions. |
TECO Guatemala Holdings, LLC v. The Republic of Guatemala |
On Dec. 19, 2013, the ICSID Tribunal hearing the arbitration claim of TGH, a wholly owned subsidiary of TECO Energy, Inc., against the Republic of Guatemala (Guatemala) under the DR – CAFTA, issued an award in the case (the Award). The ICSID Tribunal unanimously found in favor of TGH and awarded damages to TGH of approximately U.S. $21.1 million, plus interest from Oct. 21, 2010 at a rate equal to the U.S. prime rate plus 2%. In addition, the ICSID Tribunal ruled that Guatemala must reimburse TGH for approximately U.S. $7.5 million of the costs that it incurred in pursuing the arbitration. |
On Apr. 18, 2014, Guatemala filed an application for annulment of the entire Award (or, alternatively, certain parts of the Award) pursuant to applicable ICSID rules. |
Also on Apr. 18, 2014, TGH separately filed an application for partial annulment of the Award on the basis of certain deficiencies in the ICSID Tribunal’s determination of the amount of TGH’s damages. If TGH’s application is successful, TGH will be able to seek additional damages from Guatemala in a new arbitration proceeding. |
While the duration of the annulment proceedings is uncertain, a hearing is scheduled in October 2015 and the proceedings as a whole are expected to take approximately two years to conclude, with a decision by the ad hoc committee in mid- to late-2016. Pending the outcome of annulment proceedings, results to date do not reflect any benefit of this decision. |
Superfund and Former Manufactured Gas Plant Sites |
TEC, through its Tampa Electric and Peoples Gas divisions, is a PRP for certain superfund sites and, through its Peoples Gas division, for certain former manufactured gas plant sites. While the joint and several liability associated with these sites presents the potential for significant response costs, as of Mar. 31, 2015, TEC has estimated its ultimate financial liability to be $33.3 million, primarily at PGS. This amount has been accrued and is primarily reflected in the long-term liability section under “Other” on the Consolidated Condensed Balance Sheets. The environmental remediation costs associated with these sites, which are expected to be paid over many years, are not expected to have a significant impact on customer rates. |
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 actual 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. |
Guarantees and Letters of Credit |
A summary of the face amount or maximum theoretical obligation and the year of expiration under letters of credit and guarantees as of Mar. 31, 2015 is as follows: |
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(millions) | Year of expiration | | | Maximum | | | | | |
| | | | | | | | | After (1) | | | Theoretical | | | Liabilities Recognized | |
Guarantees for the Benefit of: | 2015 | | | 2016-2019 | | | 2019 | | | Obligation | | | at Mar. 31, 2015 (2) | |
TECO Energy | | | | | | | | | | | | | | | | | | | |
Fuel sales and transportation | $ | 0 | | | $ | 0 | | | $ | 92.9 | | | $ | 92.9 | | | $ | 0 | |
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(millions) | | | | | | | | | After (1) | | | Theoretical | | | Liabilities Recognized | |
Letters of Credit for the Benefit of: | 2015 | | | 2016-2019 | | | 2019 | | | Obligation | | | at Mar. 31, 2015 (2) | |
TEC | $ | 0 | | | $ | 0 | | | $ | 0.6 | | | $ | 0.6 | | | $ | 0.1 | |
NMGC | $ | 0 | | | $ | 0 | | | $ | 2.3 | | | $ | 2.3 | | | $ | 0 | |
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(1) These letters of credit and guarantees renew annually and are shown on the basis that they will continue to renew beyond 2019. | |
(2) The amounts shown are the maximum theoretical amounts guaranteed under current agreements. Liabilities recognized represent the associated obligation of TECO Energy, TEC or NMGC under these agreements at Mar. 31, 2015. The obligations under these letters of credit and guarantees include net accounts payable and net derivative liabilities. | |
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Financial Covenants |
In order to utilize their respective bank facilities, TECO Energy and its subsidiaries must meet certain financial tests, including a debt to capital ratio, as defined in the applicable agreements. In addition, TECO Energy and its subsidiaries have certain restrictive covenants in specific agreements and debt instruments. At Mar. 31, 2015, TECO Energy and its subsidiaries were in compliance with all applicable financial covenants. |
Tampa Electric Company [Member] | |
Commitments and Contingencies | 8. Commitments and Contingencies |
Legal Contingencies |
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 its 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. The company believes the claims in the pending actions described below are without merit and intends to defend the matters vigorously. The company is unable at this time to estimate the possible loss or range of loss with respect to these matters. While the outcome of such proceedings is uncertain, management does not believe that their ultimate resolution will have a material adverse effect on the company’s results of operations, financial condition or cash flows. |
Tampa Electric Legal Proceedings |
A thirty-six year old man died from mesothelioma in March 2014. His estate and his family are suing Tampa Electric as a result. The man allegedly suffered exposure to asbestos dust brought home by his father and grandfather, both of whom had been employed as insulators and worked at various job sites throughout the Tampa area. Plaintiff’s case against Tampa Electric and nineteen other defendants alleges, among other things, negligence, strict liability, household exposure, loss of consortium, and wrongful death. |
In September 2014, a man was electrocuted when allegedly two energized, downed primary conductors fell during a heavy storm, leading to his death. Plaintiff's wrongful death complaint against Tampa Electric alleged, among other things, negligence and code violations. In March 2015, Tampa Electric entered into a confidential settlement in connection with this matter. |
Peoples Gas Legal Proceedings |
In November 2010, heavy equipment operated at a road construction site being conducted by Posen Construction, Inc. struck a natural gas line causing a rupture and ignition of the gas and an outage in the natural gas service to Lee and Collier counties, Florida. PGS filed suit in April 2011 against Posen Construction, Inc. in Federal Court for the Middle District of Florida to recover damages for repair and restoration relating to the incident and Posen Construction, Inc. counter-claimed against PGS alleging negligence. In the first quarter of 2014, the parties entered into a settlement agreement that resolves the claims of the parties. In addition, the suit filed in November 2011 by the Posen Construction, Inc. employee operating the heavy equipment involved in the incident in Lee County Circuit Court against PGS and a PGS contractor involved in the project, seeking damages for his injuries, remains pending. |
Superfund and Former Manufactured Gas Plant Sites |
TEC, through its Tampa Electric and Peoples Gas divisions, is a PRP for certain superfund sites and, through its Peoples Gas division, for certain former manufactured gas plant sites. While the joint and several liability associated with these sites presents the potential for significant response costs, as of Mar. 31, 2015, TEC has estimated its ultimate financial liability to be $33.3 million, primarily at PGS. This amount has been accrued and is primarily reflected in the long-term liability section under “Other” on the Consolidated Condensed Balance Sheets. The environmental remediation costs associated with these sites, which are expected to be paid over many years, are not expected to have a significant impact on customer rates. |
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 actual 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. |
Guarantees and Letters of Credit |
A summary of the face amount or maximum theoretical obligation under TEC’s letters of credit as of Mar. 31, 2015 is as follows: |
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Letters of Credit - Tampa Electric Company | | | | | | | | | | | | | | | | | | | |
(millions) | | | | | | | | | After (1) | | | | | | | Liabilities Recognized | |
Letters of Credit for the Benefit of: | 2015 | | | 2016-2019 | | | 2019 | | | Total | | | at Mar. 31, 2015 | |
TEC (2) | $ | 0 | | | $ | 0 | | | $ | 0.6 | | | $ | 0.6 | | | $ | 0.1 | |
-1 | These letters of credit renew annually and are shown on the basis that they will continue to renew beyond 2019. | | | | | | | | | | | | | | | | | | |
-2 | The amounts shown are the maximum theoretical amounts guaranteed under current agreements. Liabilities recognized represent the associated obligation of TEC under these agreements at Mar. 31, 2015. The obligations under these letters of credit include net accounts payable and net derivative liabilities. | | | | | | | | | | | | | | | | | | |
Financial Covenants |
In order to utilize its bank credit facilities, TEC must meet certain financial tests, including a debt to capital ratio, as defined in the applicable agreements. In addition, TEC has certain restrictive covenants in specific agreements and debt instruments. At Mar. 31, 2015, TEC was in compliance with all applicable financial covenants. |
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