Tampa Electric 10-Q 2023 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No	Exact name of each registrant as specified in its charter, state of incorporation, address of principal executive offices, telephone number	I.R.S. Employer Identification Number
1-5007	TAMPA ELECTRIC COMPANY	59-0475140
	(a Florida corporation) TECO Plaza 702 N. Franklin Street Tampa, Florida 33602 (813) 228-1111

Securities registered or to be registered pursuant to Section 12(b) of the Act:

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

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.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

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 November 8, 2023, 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

Acronyms used in this and other filings with the U.S. Securities and Exchange Commission in 2023 and 2022 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
ASU	Accounting Standards Update
BCF	billion cubic feet
CCRs	coal combustion residuals
CMO	collateralized mortgage obligation
CNG	compressed natural gas
CO2	carbon dioxide
COVID-19	coronavirus disease 2019
CPI	consumer price index
CT	combustion turbine
D.C. Circuit Court	D.C. Circuit Court of Appeals
ECRC	environmental cost recovery clause
Emera	Emera Inc., a geographically diverse energy and services company headquartered in Nova Scotia, Canada and the indirect parent company of Tampa Electric Company
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
GHG	greenhouse gas
IGCC	integrated gasification combined-cycle
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
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, Inc., formerly Peoples Gas System

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PPA	power purchase agreement
PRP	potentially responsible party
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
SERP	Supplemental Executive Retirement Plan
SoBRAs	solar base rate adjustments
SPP	storm protection 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

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. The factors that could cause actual results to differ materially from the forward-looking statements made by TEC include those factors discussed herein, including those factors discussed with respect to TEC in (1) TEC’s 2022 Annual Report on Form 10-K in (a) Part I, Item 1A. Risk Factors, (b) Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (c) Part II, Item 8. Financial Statements: Note 8, Commitments and Contingencies; (2) this Quarterly Report on Form 10-Q in (a) Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and (b) Part 1, Item 1. Financial Statements: Note 8, Commitments and Contingencies, and (3) other factors discussed in filings with the SEC by TEC. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this Report. TEC does not undertake any obligation to publicly release any revision to its forward-looking statements to reflect events or circumstances after the date of this Form 10-Q.

All references to “dollars” and “$” in this and other filings with the U.S. Securities and Exchange Commission are references to U.S. dollars, unless specifically indicated otherwise.

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PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TAMPA ELECTRIC COMPANY

Consolidated Condensed Balance Sheets

Unaudited

Assets	September 30,			December 31,
(millions)	2023			2022
Property, plant and equipment
Utility plant
Electric	$	13,270		$	12,536
Gas		0			2,938
Utility plant, at original costs		13,270			15,474
Accumulated depreciation		(3,367	)		(3,845	)
Utility plant, net		9,903			11,629
Other property		16			15
Total property, plant and equipment, net		9,919			11,644
Current assets
Cash and cash equivalents		8			14
Receivables, less allowance for credit losses of $2 and $4 at September 30, 2023 and    December 31, 2022, respectively		372			295
Due from affiliates		908			22
Inventories, at average cost
Fuel		48			23
Materials and supplies		176			159
Regulatory assets		227			361
Prepayments and other current assets		38			35
Total current assets		1,777			909
Other assets
Regulatory assets		889			1,191
Other		53			59
Total other assets		942			1,250
Total assets	$	12,638		$	13,803

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

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TAMPA ELECTRIC COMPANY

Consolidated Condensed Balance Sheets - continued

Unaudited

Liabilities and Capitalization	September 30,			December 31,
(millions)	2023			2022
Capitalization
Common stock	$	4,505		$	5,075
Accumulated other comprehensive loss		(1	)		(1	)
Retained earnings		304			346
Total capital		4,808			5,420
Long-term debt		3,435			3,734
Total capitalization		8,243			9,154
Current liabilities
Long-term debt due within one year		300			0
Notes payable		1,158			1,019
Accounts payable		321			472
Due to affiliates		214			226
Customer deposits		118			145
Regulatory liabilities		86			85
Accrued interest		47			30
Accrued taxes		77			15
Other		40			45
Total current liabilities		2,361			2,037
Long-term liabilities
Deferred income taxes		880			1,045
Regulatory liabilities		727			1,055
Investment tax credits		238			243
Deferred credits and other liabilities		189			269
Total long-term liabilities		2,034			2,612
Commitments and Contingencies (see Note 8)
Total liabilities and capitalization	$	12,638		$	13,803

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

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TAMPA ELECTRIC COMPANY

Consolidated Condensed Statements of Income and Comprehensive Income

Unaudited

	Three months ended September 30,
(millions)	2023			2022
Revenues
Electric	$	795		$	752
Gas		0			160
Total revenues		795			912
Expenses
Fuel		179			200
Purchased power		31			69
Cost of natural gas sold		0			69
Operations and maintenance		172			159
Depreciation and amortization		107			110
Taxes, other than income		67			68
Total expenses		556			675
Income from operations		239			237
Other income
Allowance for equity funds used during construction		6			8
Interest income from affiliates		10			0
Other income, net		8			6
Total other income		24			14
Interest charges
Interest expense		60			48
Interest expense to affiliates		3			0
Allowance for borrowed funds used during construction		(2	)		(4	)
Total interest charges		61			44
Income before provision for income taxes		202			207
Provision for income taxes		32			38
Net income	$	170		$	169
Comprehensive income	$	170		$	169

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

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TAMPA ELECTRIC COMPANY

Consolidated Condensed Statements of Income and Comprehensive Income

Unaudited

	Nine months ended September 30,
(millions)	2023			2022
Revenues
Electric	$	2,024		$	1,923
Gas		0			501
Total revenues		2,024			2,424
Expenses
Fuel		455			518
Purchased power		65			110
Cost of natural gas sold		0			206
Operations and maintenance		447			455
Depreciation and amortization		316			322
Taxes, other than income		177			195
Total expenses		1,460			1,806
Income from operations		564			618
Other income
Allowance for equity funds used during construction		13			25
Interest income from affiliates		28			0
Other income, net		27			12
Total other income		68			37
Interest charges
Interest expense		176			126
Interest expense to affiliates		8			0
Allowance for borrowed funds used during construction		(4	)		(9	)
Total interest charges		180			117
Income before provision for income taxes		452			538
Provision for income taxes		71			106
Net income	$	381		$	432
Comprehensive income	$	381		$	432

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

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TAMPA ELECTRIC COMPANY

Consolidated Condensed Statements of Cash Flows

Unaudited

	Nine months ended September 30,
(millions)	2023			2022
Cash flows from operating activities
Net income	$	381		$	432
Adjustments to reconcile net income to cash from operating activities:
Depreciation and amortization		316			322
Deferred income taxes and investment tax credits		(18	)		105
Allowance for equity funds used during construction		(13	)		(25	)
Deferred recovery clauses		312			(327	)
Regulatory assets and liabilities		75			(56	)
Pension and post-retirement asset and liabilities		(20	)		(16	)
Other		15			(4	)
Changes in working capital:
Receivables, less allowance for credit losses		(132	)		(104	)
Inventories		(47	)		(23	)
Taxes accrued		81			64
Interest accrued		22			29
Accounts payable		(51	)		77
Other		(10	)		(10	)
Cash flows from operating activities		911			464
Cash flows used in investing activities
Capital expenditures		(889	)		(979	)
Net proceeds from sale of assets		0			10
Cash flows used in investing activities		(889	)		(969	)
Cash flows from financing activities
Equity contributions from Parent		300			470
Proceeds from long-term debt issuance		0			595
Repayment of long-term debt		0			(250	)
Net increase in short-term debt (maturities of 90 days or less)		139			105
Advances to affiliate		(160	)		0
Dividends to Parent		(302	)		(348	)
Other		(1	)		0
Cash flows from (used in) financing activities		(24	)		572
Net increase (decrease) in cash and cash equivalents		(2	)		67
Cash and cash equivalents at beginning of period (refer to Note 1)		10			18
Cash and cash equivalents at end of period	$	8		$	85
Supplemental disclosure of non-cash activities
Change in accrued capital expenditures	$	(19	)	$	(20	)
Change in notes receivable from PGS	$	(736	)	$	0

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

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TAMPA ELECTRIC COMPANY

Consolidated Condensed Statements of Capitalization

Unaudited

									Accumulated
									Other
			Common			Retained			Comprehensive			Total
(millions, except share amounts)	Shares		Stock			Earnings			Loss			Capital
Three months ended September 30, 2023
Balance, June 30, 2023		10	$	4,405		$	266		$	(1	)	$	4,670
Net income							170						170
Equity contributions from Parent				100									100
Dividends to Parent							(132	)					(132	)
Balance, September 30, 2023		10	$	4,505		$	304		$	(1	)	$	4,808
Three months ended September 30, 2022
Balance, June 30, 2022		10	$	4,750		$	384		$	(1	)	$	5,133
Net income							169						169
Equity contributions from Parent				190									190
Dividends to Parent							(146	)					(146	)
Balance, September 30, 2022		10	$	4,940		$	407		$	(1	)	$	5,346
Nine months ended September 30, 2023
Balance, December 31, 2022		10	$	5,075		$	346		$	(1	)	$	5,420
Net income							381						381
Separation of PGS equity from TEC				(871	)		(121	)					(992	)
Equity contributions from Parent				300									300
Dividends to Parent							(302	)					(302	)
Other				1									1
Balance, September 30, 2023		10	$	4,505		$	304		$	(1	)	$	4,808
Nine months ended September 30, 2022
Balance, December 31, 2021		10		4,470		$	323		$	(1	)	$	4,792
Net income							432						432
Equity contributions from Parent				470									470
Dividends to Parent							(348	)					(348	)
Balance, September 30, 2022		10	$	4,940		$	407		$	(1	)	$	5,346

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

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TAMPA ELECTRIC COMPANY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

UNAUDITED

1. Summary of Significant Accounting Policies

See TEC’s Annual Report on Form 10-K for the year ended December 31, 2022 for a complete discussion of accounting policies. The significant accounting policies for TEC include:

Principles of Consolidation and Basis of Presentation

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 prior to January 1, 2023, the natural gas division, referred to as PGS. See "Separation of PGS from TEC" below for further information.

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 September 30, 2023 and December 31, 2022, and the results of operations and cash flows for the periods ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that can be expected for the entire fiscal year ending December 31, 2023.

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.

Separation of PGS from TEC

PGS became an operating division of TEC in 1997 when TECO Energy purchased PGS and merged that corporation into TEC. Since then, PGS has operated as a stand-alone regulated utility, including having its own tariffs and its own books and records.

On January 1, 2023, TEC transferred the assets and liabilities of its PGS division into a separate corporation called Peoples Gas System, Inc. pursuant to a Contribution Agreement. This new corporation is a wholly owned subsidiary of a newly formed gas operations holding company, TECO Gas Operations, Inc., a wholly owned subsidiary of TECO Energy. On January 1, 2023, the assets, liabilities, and equity that had been recorded in the books of PGS were transferred from TEC to the newly formed company at book value in a tax-free transaction. PGS issued 100 shares of common stock to TEC related to the transfer, which were subsequently distributed to TECO Energy, Inc. and then contributed to TECO Gas Operations, Inc. As a result, from and after January 1, 2023, the PGS division is no longer operated by TEC. This is a transaction between entities under common control; therefore, TEC did not recognize a gain or loss on the transaction. TEC is not required to recast its prior period financial statements and disclosures to exclude PGS prior to January 1, 2023. The TEC consolidated condensed statement of cash flows for the nine months ended September 30, 2023 does not include the non-cash impact of separating the PGS assets, liabilities and equity from TEC on January 1, 2023 and excludes PGS’s opening cash balance. The impact of the separation of PGS from TEC on the consolidated condensed statements of capital for the nine months ended September 30, 2023 was $992 million, which represents the net assets of PGS transferred as of January 1, 2023. TEC recorded $121 million to retained earnings, which was the retained earnings of PGS as of January 1, 2023, and the remainder of $871 million was recorded to additional paid in capital, which is presented with common stock.

Included in the liabilities transferred was PGS’s allocation of outstanding unsecured notes and outstanding short-term borrowings issued by TEC. The obligations related to these combined borrowings are reflected in a loan agreement between TEC and PGS. The initial obligation of PGS under the loan agreement at January 1, 2023 was a term loan in the principal amount of $670 million and a revolving loan in the principal amount of $66 million. The maturity date for both is December 29, 2023. PGS intends to access the third-party lending market during 2023 but cannot predict when during the year that it will do so. To assist its affiliate and to facilitate an orderly transfer of its gas assets, Tampa Electric will continue to be responsible for providing capital as needed to PGS under a loan agreement. See Note 12 for further information regarding TEC's related party transactions with PGS.

For the stand alone PGS balance sheet as of December 31, 2022, see Note 1 of TEC’s Annual Report on Form 10-K for the year ended December 31, 2022.

Receivables and Allowance for Credit Losses

Receivables on the Consolidated Condensed Balance Sheets include receivables from contracts with customers, which consist of services to residential, commercial, industrial and other customers, totaling $362 million and $295 million as of September 30, 2023 and December 31, 2022, respectively. An allowance for credit losses 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 TEC’s

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estimates of credit losses include, but are not limited to, customer credit issues, generating fuel prices, customer deposits and general economic conditions. Accounts are reserved in the allowance or written off once they are deemed to be uncollectible.

As of September 30, 2023 and December 31, 2022, unbilled revenues of $81 million and $82 million, respectively, are included in the “Receivables” line item on the Consolidated Condensed Balance Sheets.

Accounting for Franchise Fees and Gross Receipts

TEC is 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 TEC are included as an expense on the Consolidated Condensed Statements of Income in “Taxes, other than income”. These amounts totaled $43 million and $41 million for the three months ended September 30, 2023 and 2022, respectively, and totaled $106 million and $110 million for the nine months ended September 30, 2023 and 2022, respectively.

2. New Accounting Pronouncements

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, were assessed and determined to be either not applicable to TEC or have an insignificant impact on the consolidated condensed financial statements.

3. Regulatory

Tampa Electric Base Rates

On August 6, 2021, Tampa Electric filed with the FPSC a joint motion for approval of a settlement agreement dated as of August 6, 2021 (the Settlement Agreement) by and among Tampa Electric and the intervenors in Tampa Electric’s rate case filed with the FPSC in April 2021. The Settlement Agreement agreed to an increase in base rates annually effective with January 2022 bills, to generate a $191 million increase in revenue consisting of $123 million of traditional base rate charges and $68 million in a new charge to recover the costs of retiring assets. The Settlement Agreement further included two subsequent year adjustments of $90 million and $21 million, effective January 2023 and January 2024, respectively. Under the agreement, the allowed equity in the capital structure continued to be 54% from investor sources of capital. The Settlement Agreement included an allowed regulatory ROE range of 9.0% to 11.0% with a 9.95% midpoint. The Settlement Agreement allows a 25 basis point increase in the allowed ROE range and mid-point, and $10 million of additional revenue, if the average 30-year United States Treasury Bond yield rate for any period of six consecutive months is at least 50 basis points greater than the yield rate on the date the FPSC votes to approve the agreement. Under the agreement, base rates will not change from January 1, 2022 through December 31, 2024, unless Tampa Electric’s earned ROE were to fall below the bottom of the range during that time. The Settlement Agreement contained a provision whereby Tampa Electric agreed to quantify the future impact of a decrease or increase in corporate income tax rates on net operating income through a reduction or increase in base revenues within 180 days of when such tax change becomes law or its effective date. The Settlement Agreement further created a mechanism to recover the costs of retiring coal generation units and meter assets over a period of 15 years which survives the term of that agreement. The Settlement Agreement set new depreciation and dismantlement rates effective January 1, 2022 and contained the provisions that Tampa Electric will not have to file another depreciation study during the term of the agreement but will file a new depreciation study no more than one year, nor less than 90 days, before the filing of its next general base rate proceeding. Additionally, Tampa Electric agreed to a financial hedging moratorium for natural gas ending on December 31, 2024. On October 21, 2021, the FPSC approved the Settlement Agreement and the final order, reflecting such approval, was issued on November 10, 2021.

Tampa Electric ROE Adjustment

Pursuant to the Settlement Agreement, on July 1, 2022, Tampa Electric requested to adjust its base rates to collect an additional $10 million annually (prorated in the first year) effective September 1, 2022 and increase its mid-point ROE and upper and lower allowed ranges. On August 16, 2022, the FPSC approved the change. The new mid-point ROE is 10.20%, and the range is 9.25% to 11.25% effective July 1, 2022.

Tampa Electric Mid-Course Adjustment to Fuel Recovery

In January 2022, Tampa Electric requested a mid-course adjustment to its fuel and capacity charges to recover an additional $169 million beginning April 1, 2022 through December 2022 due to an increase in fuel commodity and capacity costs. On March 1, 2022, the FPSC voted to approve the mid-course adjustment, and the order reflecting such approval was issued on March 18, 2022.

On January 23, 2023, Tampa Electric requested an adjustment to its fuel charges to recover the $518 million final 2022 fuel under-recovery over a period of 21 months. The request also included an adjustment to 2023 projected fuel costs to reflect the

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reduction in natural gas prices since September 2022 for a projected reduction of $170 million for the balance of 2023. The changes were approved by the FPSC on March 7, 2023, effective April 1, 2023.

Tampa Electric Storm Restoration Cost Recovery

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. Once the storm reserve regulatory liability is exhausted, TEC may petition the FPSC for recovery. This provision was also included in Tampa Electric’s subsequent 2017 amended and restated settlement agreement and in Tampa Electric’s 2021 rate case settlement agreement. In 2021, 2020 and 2019, Tampa Electric incurred total storm restoration costs for multiple hurricanes of approximately $10 million, which was charged to the storm reserve regulatory liability.

In September 2022, Tampa Electric was impacted by Hurricane Ian. Total restoration costs were $129 million, with $121 million charged to the storm reserve. Restoration costs charged to the storm reserve exceeded the reserve balance and this amount was deferred to be collected from customers in subsequent periods. In November 2022, Tampa Electric incurred costs of approximately $2 million related to Hurricane Nicole. In January 2023, Tampa Electric petitioned the FPSC for recovery of costs associated with Hurricanes Ian and Nicole that exceeded the reserve, $10 million of storm restoration costs charged to the reserve since 2018, and the replenishment of the balance in the reserve to the $56 million level that existed as of October 31, 2013 for a total of approximately $131 million. The storm cost recovery surcharge was approved by the FPSC on March 7, 2023, and Tampa Electric began applying the surcharge on April 2023 bills. Subsequently, on November 9, 2023, the FPSC approved Tampa Electric’s petition filed on August 16, 2023 to update the total storm cost collection to approximately $134 million and change the collection of the expected remaining balance of approximately $29 million as of December 31, 2023, from over the first three months of 2024 to over the 12 months of 2024. The storm recovery is subject to review of the underlying costs for prudency by the FPSC and issuance of an order by the FPSC is expected to occur by the third quarter of 2024.

In September 2023, Tampa Electric was impacted by Hurricane Idalia. The related storm restoration costs were $36 million, which were charged to the storm reserve regulatory asset and not included in the petition above. Tampa Electric will determine the timing of the request for recovery of Hurricane Idalia costs at a future time.

Tampa Electric Storm Protection Cost Recovery Clause and Settlement Agreement

On October 3, 2019, the FPSC issued a rule to implement a Storm Protection Plan (SPP) Cost Recovery Clause. This 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. A settlement agreement was approved on August 10, 2020 and Tampa Electric’s cost recovery began in January 2021. The current approved plan addresses the years 2023, 2024 and 2025 and was approved by the FPSC on October 4, 2022.

Regulatory Assets and Liabilities

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

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Regulatory Assets and Liabilities
(millions)	September 30, 2023		December 31, 2022
Regulatory assets:
Regulatory tax asset (1)	$	111	$	124
Cost-recovery clauses (2)		199		525
Capital cost recovery for early retired assets (3)		499		497
Environmental remediation (4)		0		20
Postretirement benefits (5)		238		272
Asset retirement obligation (6)		11		13
Storm reserve (7)		39		76
Other		19		25
Total regulatory assets		1,116		1,552
Less: Current portion		227		361
Long-term regulatory assets	$	889	$	1,191
Regulatory liabilities:
Regulatory tax liability (8)	$	478	$	601
Cost-recovery clauses - deferred balances (2)		23		30
Accumulated reserve - cost of removal (9)		288		498
Other		24		11
Total regulatory liabilities		813		1,140
Less: Current portion		86		85
Long-term regulatory liabilities	$	727	$	1,055

(1)

The regulatory tax asset is primarily associated with the depreciation and recovery of AFUDC-equity. This asset does not earn a return but rather is included in the capital structure, which is used in the calculation of the weighted cost of capital used to determine revenue requirements. It will be recovered over the expected life of the related assets.

(2)

These assets and liabilities are related to FPSC clauses and riders, primarily related to the fuel clause and the increase in natural gas prices experienced in 2022. They are recovered or refunded through cost-recovery mechanisms approved by the FPSC on a dollar-for-dollar basis in a subsequent period.

(3)

This asset is related to the remaining net book value of Big Bend Units 1 through 3 and meter assets that were retired. The balance earns a rate of return as permitted by the FPSC and will be recovered as a separate line item on customer bills for a period of 15 years. See “Tampa Electric Base Rates” above for further information.

(4)

This asset was related to PGS costs associated with environmental remediation primarily at MGP sites.

(5)

This asset is related to the deferred costs of postretirement benefits and it is amortized over the remaining service life of plan participants. Deferred costs of postretirement benefits that are included in expense are recognized as cost of service for rate-making purposes as permitted by the FPSC.

(6)

This asset is related to costs associated with an asset retirement obligation, which is a legal obligation for the future retirement of certain tangible, long-lived assets. This regulatory asset does not earn a return because it is offset with related assets and liabilities within rate base. It is recovered and removed as the obligation is settled and removed as the activities for the retirement of the related assets have been completed.

(7)

See "Tampa Electric Storm Restoration Cost Recovery" above for information regarding this reserve. The regulatory asset is included in rate base and earns interest as permitted by the FPSC.

(8)

The regulatory tax liability is primarily related to the revaluation of TEC’s deferred income tax balances recorded on December 31, 2017 at the lower corporate income tax rate due to U.S. tax reform. The liability related to the revaluation of the deferred income tax balances is amortized and returned to customers through rate reductions or other revenue offsets based on IRS regulations and the settlement agreement for tax reform benefits approved by the FPSC.

(9)

This item represents the non-ARO cost of removal in the accumulated reserve for depreciation. AROs are costs for legally required removal of property, plant and equipment. Non-ARO cost of removal represents estimated funds received from customers through depreciation rates to cover future non-legally required cost of removal of property, plant and equipment, net of salvage value upon retirement, which reduces rate base for ratemaking purposes. This liability is reduced as costs of removal are incurred.

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4. Income Taxes

Inflation Reduction Act

On August 16, 2022, the Inflation Reduction Act was signed into legislation and includes numerous tax incentives for clean energy, such as the extension and modification of existing investment and production tax credits for projects placed in service through 2024, and introduces new technology-neutral clean energy related credits beginning in 2025. TEC has determined that electing production tax credits for its solar plants placed in service in 2022 will be more beneficial for customers compared to ITCs and has recorded a $20 million regulatory liability in recognition of its obligation to pass the tax benefits to customers as of September 30, 2023.

Income Tax Expense

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 accounted for as either a capital contribution or a distribution.

TEC’s effective tax rates for the nine months ended September 30, 2023 and 2022 were 15.7% and 19.7%, respectively. The September 30, 2023 and 2022 effective tax rates are an estimate of the annual effective income tax rate. TEC’s effective tax rate for the nine months ended September 30, 2023 differed from the statutory rate principally due to production tax credits and amortization of the regulatory tax liability resulting from tax reform. TEC’s effective tax rate for the nine months ended September 30, 2022 differed from the statutory rate principally due to the amortization of the regulatory tax liability resulting from tax reform. The effective tax rate for the nine months ended September 30, 2023 is lower compared to the same period in 2022 primarily due to production tax credits and the PGS separation from TEC on January 1, 2023. See Note 1 for further information regarding the PGS separation from TEC and Note 3 for further information regarding the regulatory tax liability.

Unrecognized Tax Benefits

As of September 30, 2023 and December 31, 2022, 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. The unrecognized tax benefits, if recognized, would reduce TEC’s effective tax rate.

5. Employee Postretirement Benefits

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 September 30,	2023			2022			2023			2022
Components of net periodic benefit cost
Service cost	$	3		$	5		$	0		$	0
Interest cost		8			6			2			1
Expected return on assets		(13	)		(13	)		0			0
Amortization of:
Actuarial loss (gain)		2			4			0			1
Net periodic benefit cost	$	0		$	2		$	2		$	2
Nine months ended September 30,
Components of net periodic benefit cost
Service cost	$	11		$	14		$	0		$	1
Interest cost		26			18			6			4
Expected return on assets		(40	)		(39	)		0			0
Amortization of:
Actuarial loss (gain)		4			13			(1	)		1
Settlement cost (1)		2			1			0			0
Net periodic benefit cost	$	3		$	7		$	5		$	6

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(1) Represents TEC'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 September 30, 2023 and 2022, respectively, was $0 and $1 million for pension benefits, and $1 million and $2 million for other postretirement benefits. TEC’s portion of the net periodic benefit cost for the nine months ended September 30, 2023 and 2022, respectively, was $1 million and $5 million for pension benefits, and $4 million and $7 million for other postretirement benefits. TEC’s portion of net periodic benefit costs for pension and other benefits is included as an expense on the Consolidated Condensed Statements of Income in “Operations & maintenance”.

TECO Energy assumed a long-term EROA of 7.05% and a discount rate of 5.55% for pension benefits under its qualified pension plan for 2023. For TECO Energy’s other postretirement benefits, TECO Energy used a discount rate of 5.53% for 2023.

TECO Energy made contributions of $16 million and $19 million to its qualified pension plan in the nine months ended September 30, 2023 and 2022, respectively. TEC’s portion of these contributions was $10 million and $15 million, respectively. TECO Energy does not expect to make additional contributions to the pension plan for the remainder of 2023.

Included in the benefit cost discussed above, for the three and nine months ended September 30, 2023, $0 and $1 million, respectively, 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 $5 million and $14 million for the three and nine months ended September 30, 2022, respectively.

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6. Short-Term Debt

Details of TEC’s short-term borrowings are presented in the following table:

	September 30, 2023								December 31, 2022
			Borrowings		Borrowings		Letters				Borrowings		Borrowings		Letters
	Credit		Outstanding -		Outstanding -		of Credit		Credit		Outstanding -		Outstanding -		of Credit
(millions)	Facilities		Credit Facilities (1)		Commercial Paper (1)		Outstanding		Facilities		Credit Facilities (1)		Commercial Paper (1)		Outstanding
5-year facility (2)	$	800	$	0	$	758	$	1	$	800	$	0	$	619	$	1
1-year term facility (3)		400		400		0		0		400		400		0		0
1-year term facility (4)		200		0		0		0		0		0		0		0
1-year term facility (5)		200		0		0		0		0		0		0		0
Total	$	1,600	$	400	$	758	$	1	$	1,200	$	400	$	619	$	1

(1)

Borrowings outstanding are reported as notes payable.

(2)

This 5-year facility matures on December 17, 2026. TEC also has an active commercial paper program for up to $800 million, of which the full amount outstanding is backed by TEC’s credit facility. The amount of commercial paper issued results in an equal amount of its credit facility being considered drawn and unavailable.

(3)

This 1-year term facility was set to mature on December 16, 2022. On December 13, 2022, TEC extended the maturity date to December 13, 2023.

(4)

On March 1, 2023, TEC entered into a 1-year term facility that matures on February 28, 2024.

(5)

On April 3, 2023, TEC entered into a 1-year term facility that matures on April 1, 2024.

At September 30, 2023, these credit facilities required a commitment fee of 12.5 basis points. The weighted-average interest rate on borrowings outstanding under the credit facilities and commercial paper at September 30, 2023 and December 31, 2022 was 5.85% and 5.00%, respectively.

TEC Term Loans

On March 1, 2023, TEC entered into a 364-day, $200 million senior unsecured revolving loan credit facility with a maturity date of February 28, 2024. The credit agreement 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 term secured overnight financing rate (SOFR), The Bank of Nova Scotia’s prime rate, the federal funds rate or the one-month secured overnight financing rate, plus a margin.

On April 3, 2023, TEC entered into an additional 364-day, $200 million senior unsecured revolving loan credit facility with a group of banks. The credit facility has a maturity date of April 1, 2024. The credit agreement 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 term SOFR, Wells Fargo’s prime rate, the federal funds rate or the one-month secured overnight financing rate, plus a margin.

7. Long-Term Debt

Fair Value of Long-Term Debt

At September 30, 2023, TEC’s long-term debt, including the current portion, had a carrying amount of $3,735 million and an estimated fair market value of $3,046 million. At December 31, 2022, long-term debt had a carrying amount of $3,734 million and an estimated fair market value of $3,234 million. The fair value of the debt securities is determined using Level 2 measurements (see Note 11 for information regarding the fair value hierarchy).

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 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.

Superfund and Former Manufactured Gas Plant Sites

As of December 31, 2022, TEC, through its Tampa Electric division and former PGS division, was a PRP for certain superfund sites and, through its former PGS division, for certain former MGP sites. As a result of the separation of the PGS division, PGS is now

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the responsible party for those sites (in addition to third party PRPs for certain sites). See Note 1 for further information regarding the PGS separation from TEC.

Long-Term Commitments

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 September 30, 2023:

							Fuel		Long-term				Demand
	Purchased				Capital		and		Service		Operating		Side
(millions)	Power		Transportation		Projects		Gas Supply (1)		Agreements		Leases		Management		Total
2023	$	4	$	31	$	460	$	94	$	8	$	1	$	1	$	599
2024		0		132		163		201		34		3		5		538
2025		0		128		18		69		22		2		4		243
2026		0		125		4		18		23		1		1		172
2027		0		125		1		4		22		1		1		154
Thereafter		0		930		0		1		50		46		0		1,027
Total future minimum payments	$	4	$	1,471	$	646	$	387	$	159	$	54	$	12	$	2,733

(1) As of September 30, 2023, $3 million of fuel and gas supply contractual obligations were held between Tampa Electric and Emera Energy Services, a related party.

Debt Covenants

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 September 30, 2023, TEC was in compliance with all required covenants.

9. Segment Information

Due to the separation of PGS from TEC, TEC operates under a single operating and reportable segment effective January 1, 2023 because the operations of TEC only include the operations of the Electric division. See "Separation of PGS from TEC" in Note 1 for further information regarding the separation of PGS from TEC.

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(millions)	Tampa					Eliminations/				Tampa Electric
Three months ended September 30,	Electric		PGS			Reclassifications				Company
2023
Revenues - external	$	795								$	795
Intracompany sales		0									0
Total revenues		795									795
Total interest charges		61									61
Net income	$	170								$	170
2022
Revenues - external	$	752	$	160		$	0			$	912
Intracompany sales		1		1			(2	)			0
Total revenues		753		161			(2	)			912
Total interest charges		37		7			0				44
Net income	$	153	$	16		$	0			$	169
Nine months ended September 30,
2023
Revenues - external	$	2,024								$	2,024
Intracompany sales		0									0
Total revenues		2,024									2,024
Total interest charges		180									180
Net income	$	381								$	381
2022
Revenues - external	$	1,923	$	501		$	0			$	2,424
Intracompany sales		3		3			(6	)			0
Total revenues		1,926		504			(6	)			2,424
Total interest charges		99		18			0				117
Net income	$	367	$	65		$	0			$	432
Total assets at September 30, 2023	$	13,286				$	(648	)	(1)	$	12,638
Total assets at December 31, 2022	$	12,064	$	2,471	(2)	$	(732	)	(1)	$	13,803

(1)

Amounts primarily relate to consolidated deferred tax reclassifications. Deferred tax assets are reclassified and netted with deferred tax liabilities upon consolidation.

(2)

For the summary of the assets and liabilities of PGS as of December 31, 2022, see Note 1 of TEC’s Annual Report on Form 10-K for the year ended December 31, 2022.

10. Revenue
 

The following disaggregates TEC’s revenue by major source:

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(millions)	Tampa									Tampa Electric
Three months ended September 30, 2023	Electric				PGS		Eliminations			Company
Electric revenue
Residential	$	567								$	567
Commercial		234									234
Industrial		56									56
Regulatory deferrals		(137	)								(137	)
Unbilled revenue		(8	)								(8	)
Other (1)		83									83
Total electric revenue		795									795
Total revenue	$	795								$	795
Three months ended September 30, 2022
Electric revenue
Residential	$	445			$	0	$	0		$	445
Commercial		194				0		0			194
Industrial		45				0		0			45
Regulatory deferrals		(11	)			0		0			(11	)
Unbilled revenue		(12	)			0		0			(12	)
Other (1)		92		`		0		(1	)		91
Total electric revenue		753				0		(1	)		752
Gas revenue
Residential		0				47		0			47
Commercial		0				46		0			46
Industrial (2)		0				7		0			7
Other (3)		0				61		(1	)		60
Total gas revenue		0				161		(1	)		160
Total revenue	$	753			$	161	$	(2	)	$	912

(millions)	Tampa								Tampa Electric
Nine months ended September 30, 2023	Electric			PGS		Eliminations			Company
Electric revenue
Residential	$	1,322							$	1,322
Commercial		605								605
Industrial		152								152
Regulatory deferrals		(297	)							(297	)
Unbilled revenue		16								16
Other (1)		226								226
Total electric revenue		2,024								2,024
Total revenue	$	2,024							$	2,024
Nine months ended September 30, 2022
Electric revenue
Residential	$	1,063		$	0	$	0		$	1,063
Commercial		501			0		0			501
Industrial		129			0		0			129
Regulatory deferrals		(17	)		0		0			(17	)
Unbilled revenue		13			0		0			13
Other (1)		237			0		(3	)		234
Total electric revenue		1,926			0		(3	)		1,923
Gas revenue
Residential		0			172		0			172
Commercial		0			151		0			151
Industrial (2)		0			22		0			22
Other (3)		0			159		(3	)		156
Total gas revenue		0			504		(3	)		501
Total revenue	$	1,926		$	504	$	(6	)	$	2,424

(1)

Other electric revenue includes sales to public authorities, off-system sales to other utilities and various other items.

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(2)

Industrial gas revenue includes sales to power generation customers.

(3)

Other gas revenue includes off-system sales to other utilities and various other items.

Remaining Performance Obligations

Remaining performance obligations primarily represent lighting contracts and gas transportation contracts with fixed contract terms. As of September 30, 2023 and December 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $62 million and $140 million, respectively. The decrease is due to TEC's January 1, 2023 separation from its former PGS division. See Note 1 for further information regarding the separation of PGS from TEC. As allowed under ASC 606, these amounts exclude 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 2043.

11. Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

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:

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.

There were no Level 3 assets or liabilities for the periods presented.

As of September 30, 2023 and December 31, 2022, 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.

12. Related Party Transactions

A summary of activities between TEC and its affiliates follows:

Net transactions with affiliates

	Three months ended September 30,					Nine months ended September 30,
(millions)	2023		2022			2023		2022
Natural gas purchases (net of sales) from affiliates	$	21	$	71		$	57	$	185
Services to/(from) affiliates		8		(1	)		23		(4	)
Interest income from affiliates		10		0			28		0
Interest expense to affiliates		3		0			8		0
Equity contributions from TECO Energy		100		190			300		470
Dividends to TECO Energy		132		146			302		348

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Amounts due from or to affiliates

(millions)	September 30, 2023		December 31, 2022
Note receivable from PGS (1)	$	889	$	0
Interest receivable from PGS (1)		4		0
Accounts receivable related to asset management agreements to Emera Energy Services Inc. (2)		4		7
Accounts receivable excluding asset management agreements (2)		11		5
Taxes receivable (3)		0		10
Accounts payable (2)		14		31
Note payable to TECO Energy (4)		195		195
Interest payable to TECO Energy (4)		1		0
Taxes payable (3)		4		0

(1)

On January 1, 2023, TEC entered into a loan agreement with PGS for PGS’s allocation of outstanding unsecured notes issued by TEC and outstanding short-term borrowings associated with the separation of PGS from TEC on that date. As of September 30, 2023, the note receivable from PGS was a term loan in the principal amount of $670 million and a revolving loan in the principal amount of $226 million, offset by discounts and issuance costs of $7 million. The maturity date for both loans is December 29, 2023. The note receivable for the term loan bears interest at primarily the stated rate and the revolving loan rate is consistent with the market rate of TEC's commercial paper. See "Separation of PGS from TEC" in Note 1 for further information.

(2)

Accounts receivable and accounts payable were incurred in the ordinary course of business and do not bear interest.

(3)

Taxes receivable were due from EUSHI and taxes payable were due to EUSHI. See Note 4 for additional information.

(4)

The note payable with TECO Energy bears interest at a rate approximating the market rate of TEC's commercial paper.

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Item 2. MANAGEMENT’S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS

Earnings Summary - Unaudited

		Three months ended September 30,					Nine months ended September 30,
(millions)		2023		2022			2023		2022
Revenues
	Tampa Electric	$	795	$	753		$	2,024	$	1,926
	PGS				161					504
	Eliminations				(2	)				(6	)
	TEC	$	795	$	912		$	2,024	$	2,424
Net income
	Tampa Electric	$	170	$	153		$	381	$	367
	PGS				16					65
	TEC	$	170	$	169		$	381	$	432

Operating Results

See Operating Company Results below for detail on the increased results of operations at Tampa Electric during the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022. The increases to Tampa Electric's results were offset at TEC primarily due to the separation of PGS from TEC on January 1, 2023 (see section below for further information on the separation).

Separation of PGS From TEC

On January 1, 2023, TEC transferred the assets and liabilities of its PGS division into a separate corporation called Peoples Gas System, Inc. pursuant to a Contribution Agreement. This new corporation is a wholly owned subsidiary of a newly formed gas operations holding company, TECO Gas Operations, Inc., a wholly owned subsidiary of TECO Energy. On January 1, 2023, the assets, liabilities, and equity that had been recorded in the books of PGS were transferred from TEC to the newly formed company at book value in a tax-free transaction. PGS issued 100 shares of common stock to TEC related to the transfer, which were subsequently distributed to TECO Energy, Inc. and then contributed to TECO Gas Operations, Inc. As a result, from and after January 1, 2023, the PGS division is no longer operated by TEC. This is a transaction between entities under common control; therefore, TEC did not recognize a gain or loss on the transaction. TEC is not required to recast its prior period financial statements and disclosures to exclude PGS prior to January 1, 2023.

Included in the liabilities transferred was PGS’s allocation of outstanding unsecured notes and outstanding short-term borrowings issued by TEC. The obligations related to these combined borrowings are reflected in a loan agreement between TEC and PGS. The initial obligation of PGS under the loan agreement at January 1, 2023 was a term loan in the principal amount of $670 million and a revolving loan in the principal amount of $66 million. The maturity date for both is December 29, 2023. PGS intends to access the third-party lending market during 2023 but cannot predict when during the year that it will do so. To assist its affiliate and to facilitate an orderly transfer of its gas assets, Tampa Electric will continue to be responsible for providing capital as needed to PGS under a loan agreement. See Note 12 to the TEC Consolidated Condensed Financial Statements for details of the related party transactions as of September 30, 2023.

Operating Company Results

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

Tampa Electric’s net income for the third quarter of 2023 was $170 million, compared with $153 million for the same period in 2022. Results primarily reflected higher base revenues resulting from the 2021 rate case settlement agreement, favorable weather and customer growth, partially offset by higher interest expense and depreciation expense. Base revenues are energy sales excluding revenues from clauses, storm surcharges, gross receipts taxes and franchise fees. Clauses, storm surcharges, 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 clause and other pass-through costs.

Revenues were $42 million higher than in the same quarter in 2022 primarily driven by higher base revenue due to new base rates as a result of the 2021 rate case settlement agreement, favorable weather and customer growth and storm surcharge revenue (see Note 3), partially offset by changes in fuel recovery clause revenue compared to the same quarter in 2022. Total degree days (a measure of heating and cooling demand) in Tampa Electric's service area in the third quarter of 2023 were 13% above normal (a 20-year statistical degree day average) and 5% above the 2022 period, reflecting favorable weather in the third quarter of 2023 compared

22

to 2022. Total net energy for load, which is a calendar measurement of energy output, in the third quarter of 2023 was 6% higher than the same period in 2022.

Operations and maintenance expense was $53 million higher than same quarter in 2022 primarily due to storm restoration cost recognition of $43 million related to storm surcharge revenue and increased expenses related to clauses and regulatory deferrals of $9 million. Depreciation and amortization expense increased $7 million in the third quarter of 2023 compared to the same period in 2022, primarily due to additions to facilities and the in-service of generation projects.

Tampa Electric’s net income year-to-date 2023 was $381 million, compared with $367 million for the same period in 2022. Results primarily reflected higher base revenues resulting from the 2021 rate case settlement agreement and customer growth, partially offset by higher interest expense and depreciation expense.

Revenues were $98 million higher than year-to-date 2022 primarily driven by higher base revenue due to new base rates as a result of the 2021 rate case settlement agreement and customer growth and storm surcharge revenue, partially offset by changes in fuel recovery clause revenue and less favorable weather compared to the same period in 2022. Total degree days (a measure of heating and cooling demand) in Tampa Electric's service area year-to-date 2023 were 10% above normal (a 20-year statistical degree day average) and 2% below the 2022 period, reflecting less favorable weather year-to-date in 2023 compared to 2022. Total net energy for load year-to-date 2023 was 2% higher than year-to-date 2022.

Operations and maintenance expense was $111 million higher than year-to-date 2022 due to storm restoration cost recognition of $77 million related to storm surcharge revenue, increased expenses related to clauses and regulatory deferrals of $21 million, and increased operational expenses of $13 million. The increase in operational expenses was due to higher transmission and distribution, generation maintenance, and information technology costs. Depreciation and amortization expense increased $25 million year-to-date 2023 primarily due to additions to facilities and the in-service of generation projects.

Tampa Electric’s regulated operating statistics for the three and nine months ended September 30, 2023 and 2022 were as follows:

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(millions, except customers and total degree days)	Operating Revenues									Kilowatt-Hours Billed
Three months ended September 30,	2023			2022			% Change			2023		2022		% Change
By Customer Type
Residential (1)	$	567		$	445			27			3,400		3,252		5
Commercial (1)		234			194			21			1,901		1,839		3
Industrial (1)		56			45			24			579		527		10
Other (1)		68			58			17			543		529		3
Regulatory deferrals and unbilled revenue (2)		(145	)		(23	)		530
Total retail sales of electricity		780			719			8			6,423		6,147		4
Off system sales of electricity		3			13			(77	)		496		112		343
Other operating revenue		12			21			(43	)
Total revenues	$	795		$	753			6			6,919		6,259		11
By Sales Type
Base	$	431		$	380			13
Clause		241			284			(15	)
Capital cost recovery for early retired assets		21			20			5
Storm surcharge		43			0
Other		59			69			(14	)
Total revenues	$	795		$	753			6
Retail net energy for load (kilowatt hours)		6,714			6,336			6
Total degree days		1,908			1,821			5
(millions, except customers and total degree days)	Operating Revenues									Kilowatt-Hours Billed
Nine months ended September 30,	2023			2022			% Change			2023		2022		% Change
By Customer Type
Residential (1)	$	1,322		$	1,063			24			8,020		7,847		2
Commercial (1)		605			501			21			4,898		4,789		2
Industrial (1)		152			129			18			1,573		1,561		1
Other (1)		185			160			16			1,455		1,459		(0	)
Regulatory deferrals and unbilled revenue (2)		(281	)		(4	)		6,925
Total retail sales of electricity		1,983			1,849			7			15,946		15,656		2
Off system sales of electricity		6			32			(81	)		583		346		68
Other operating revenue		35			45			(22	)
Total revenues	$	2,024		$	1,926			5			16,529		16,002		3
By Sales Type
Base	$	1,134		$	1,030			10
Clause		614			680			(10	)
Capital cost recovery for early retired assets		52			52			0
Storm surcharge		77			0
Other		147			164			(10	)
Total revenues	$	2,024		$	1,926			5
Customers at September 30, (thousands)		836			823			2
Retail net energy for load (kilowatt-hours)		17,022			16,663			2
Total degree days		3,901			3,983			(2	)

(1)

Reflects a billing cycle measurement.

(2)

Primarily reflects unbilled revenue, which incorporates a calendar measurement, and postings for clause recovery deferrals.

Other Income

For the third quarter of 2023 and 2022, respectively, TEC’s other income was $24 million and $14 million, which included AFUDC-equity of $6 million and $8 million, interest income from affiliate of $10 million and $0, and other income of $8 million and

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$6 million. For the year-to-date periods in 2023 and 2022, respectively, TEC’s other income was $68 million and $37 million, which included AFUDC-equity of $13 million and $25 million, interest income from affiliate of $28 million and $0, and other income of $27 million and $12 million. The decrease in AFUDC-equity was primarily due to the in-service timing of Tampa Electric’s modernization of its Big Bend Power Station. The interest income from affiliate is related to the note receivable from PGS for PGS's allocation of short-term and long-term debt resulting from the separation of PGS from TEC as of January 1, 2023. See Notes 1 and 12 to the TEC Consolidated Condensed Financial Statements for details of the separation of PGS from TEC and the resulting related party transactions. The increase in Other Income is primarily due to interest income on the deferred fuel balance.

Interest Expense

For the third quarter of 2023 and 2022, TEC’s interest expense, including interest expense to affiliates and excluding AFUDC-debt, was $63 million and $48 million, respectively. For the year-to-date periods in 2023 and 2022, TEC’s interest expense, including interest expense to affiliates and excluding AFUDC-debt, was $184 million and $126 million, respectively. The increase was due to higher interest rates and higher borrowings to support TEC’s ongoing capital investment program and ongoing operations, including fuel under-recoveries and costs for hurricane restoration. The weighted-average interest rate on borrowings outstanding under the credit facilities and commercial paper at September 30, 2023 and 2022 was 5.85% and 2.11%, respectively. See Other Income above for information regarding the interest income from affiliate associated with PGS's allocation of short-term and long-term debt resulting from the separation of PGS from TEC as of January 1, 2023. The interest income from affiliate offsets the impact of TEC's interest expense in support of affiliate operations on the Consolidated Condensed Statement of Income.

Income Taxes

The provisions for income taxes were $32 million and $38 million for the three months ended September 30, 2023 and 2022, respectively, and $71 million and $106 million for the nine months ended September 30, 2023 and 2022, respectively. Compared to the 2022 periods, the decrease in the provision for income taxes for the three and nine months ended September 30, 2023 was primarily the result of lower pre-tax income due to PGS's separation from TEC on January 1, 2023 and production tax credits related to solar facilities.

Liquidity and Capital Resources

The table below sets forth the September 30, 2023 liquidity, cash balances and amounts available under the TEC credit facilities.

(millions)
Credit facilities/ commercial paper / advances from affiliates	$	1,795
Drawn amounts/letters of credit		(1,353	)
Available credit facilities		442
Cash and short-term investments		8
Total liquidity	$	450

Cash Impacts Related to Operating Activities

Cash flows from operating activities for the nine months ended September 30, 2023 were $911 million, an increase of $447 million compared to the same period in 2022. Increases to cash from operations were primarily the result of higher billed fuel revenues coupled with lower natural gas prices, partially offset by the timing of invoice payments.

Cash Impacts Related to Financing Activities

Cash flows from financing activities for the nine months ended September 30, 2023 resulted in net cash outflows of $24 million. TEC made dividend payments of $302 million and advances to affiliates of $160 million. These payments were partially offset by $300 million of equity contributions from Parent and $139 million of net proceeds from short-term debt with maturities with 90 days or less.

Covenants in Financing Agreements

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 September 30, 2023, TEC was in

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compliance with all applicable financial covenants. The following table contains the significant financial covenant and the performance relative to it at September 30, 2023.

Significant Financial Covenants

			Calculation at
Instrument (1)	Financial Covenant (2)	Requirement/Restriction	September 30, 2023
Credit facility - $800 million	Debt/capital	Cannot exceed 65%	50.4%
Term facility- $400 million	Debt/capital	Cannot exceed 65%	50.4%
Term facility - $200 million	Debt/capital	Cannot exceed 65%	50.4%
Term facility - $200 million	Debt/capital	Cannot exceed 65%	50.4%

(1)

See Note 6 to the TEC Consolidated Condensed Financial Statements for details of the credit facility.

(2)

As defined in the instrument.

Credit Ratings of Senior Unsecured Debt at September 30, 2023

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

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

Commitments and Contingencies

See Note 8 to the TEC Consolidated Condensed Financial Statements for information regarding TEC’s commitments and contingencies as of September 30, 2023.

Regulatory Matters

See Note 3 to the TEC Consolidated Condensed Financial Statements for information regarding TEC’s regulatory matters as of September 30, 2023.

Fair Value Measurements

TEC's fair value measurements 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 and the intent of the parties, indications of credit deterioration and whether the markets in which TEC transacts have experienced dislocation. At September 30, 2023, the fair value of derivatives was not materially affected by nonperformance risk.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates have not materially changed in 2023. For further discussion of critical accounting policies and estimates, see TEC’s Annual Report on Form 10-K for the year ended December 31, 2022.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

Item 4. CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures. TEC’s management, with the participation of its principal executive officer and principal financial officer, has evaluated the effectiveness of TEC’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2023. Based on such evaluation, TEC’s principal financial officer and principal executive officer have concluded that, as of September 30, 2023, TEC’s disclosure controls and procedures are effective.

(b)

Changes in Internal Controls. There was no change in TEC’s internal controls over financial reporting (as defined in Rules 13a–15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of TEC’s internal control over

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financial reporting that occurred during TEC’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, such controls.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

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.

Item 6. EXHIBITS

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	Credit Agreement dated as of March 1, 2023, among Tampa Electric Company, as Borrower, The Bank of Nova Scotia, as Administrative Agent, and the Lenders party thereto (Exhibit 10.1, Form 8-K dated March 1, 2023 of Tampa Electric Company).	*
10.2	Credit Agreement dated as of April 3, 2023, among Tampa Electric Company, as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders party thereto (Exhibit 10.1, Form 8-K dated April 3, 2023 of Tampa Electric Company).
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**	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document.
101.SCH**	Inline XBRL Taxonomy Extension Schema Document.
101.CAL**	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF**	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB**	Inline XBRL Taxonomy Label Linkbase Document.
101.PRE**	Inline XBRL Taxonomy Presentation Linkbase Document.
104	The cover page from TEC’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 has been formatted in Inline XBRL.

(1)

This certification accompanies the Quarterly Report on Form 10-Q and is not filed as part of it.

* Indicates exhibit previously filed with the Securities and Exchange Commission and incorporated herein by reference. Exhibits filed with periodic reports of TECO Energy, Inc. and TEC were filed under Commission File Nos. 1-8180 and 1-5007, respectively.

** The XBRL related information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

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SIGNATURES

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.

	TAMPA ELECTRIC COMPANY
	(Registrant)
Date: November 9, 2023	By:	/s/ Gregory W. Blunden
		Gregory W. Blunden
		Treasurer and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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