TECO ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of items, such as depreciation, for financial statement and tax purposes. These differences are reported as deferred taxes, measured
at current rates, in the consolidated financial statements. Management reviews all reasonably available current and historical
information, including forward-looking information, to determine if it is more likely than not that some or all of the deferred tax
assets will not be realized. If management determines that it is likely that some or all of deferred tax assets will not be realized,
then a valuation allowance is recorded to report the balance at the amount expected to be realized.
Investment Tax Credits
Investment tax credits have been recorded as deferred credits and are being amortized as reductions to income tax expense
over the service lives of the related property.
Revenue Recognition
TECO Energy recognizes revenues consistent with accounting standards for revenue recognition. Except as discussed below,
TECO Energy and its subsidiaries recognize revenues on a gross basis when earned for the physical delivery of products or
services and the risks and rewards of ownership have transferred to the buyer.
The regulated utilities' (Tampa Electric and PGS) retail businesses and the prices charged to customers are regulated by the
FPSC. Tampa Electric's wholesale business is regulated by the FERC. See Note 3 for a discussion of significant regulatory matters
and the applicability of the accounting guidance for certain types of regulation to the company.
Revenues for TECO Coal shipments, both domestic and international, are recognized when title and risk of loss transfer to the
customer.
Revenues for energy marketing operations at TECO Gas Services are presented on a net basis in accordance with the
accounting guidance for reporting revenue gross as a principal versus net as an agent and recognition and reporting of gains and
losses on energy trading contracts to reflect the nature of the contractual relationships with customers and suppliers. As a result,
costs netted against revenues for the years ended Dec. 31, 2011, 2010 and 2009 were $2.5 million, $8.7 million and $1.9 million,
respectively.
Shipping and Handling
TECO Coal includes the costs to ship product to customers in "Operation other expense - Mining related costs" on the
Consolidated Statements of Income which for the years ended Dec. 31, 2011, 2010 and 2009 were $16.6 million, $27.3 million and
$24.3 million, respectively.
Cash Flows Related to Derivatives and Hedging Activities
The company classifies cash inflows and outflows related to derivative and hedging instruments in the appropriate cash flow
sections associated with the item being hedged. In the case of diesel fuel swaps, which are used to mitigate the fluctuations in the
price of diesel fuel, primarily at TECO Coal, the cash inflows and outflows are included in the operating section. For natural gas,
primarily at Tampa Electric and PGS, and ongoing interest rate swaps, the cash inflows and outflows are included in the operating
section. For interest rate swaps that settle coincident with the debt issuance, the cash inflows and outflows are treated as premiums
or discounts and included in the financing section of the Consolidated Statements of Cash Flows.
Revenues and Cost Recovery
Revenues include amounts resulting from cost recovery clauses which provide for monthly billing charges to reflect increases
or decreases in fuel, purchased power, conservation and environmental costs for Tampa Electric and purchased gas, interstate
pipeline capacity and conservation costs for PGS. These adjustment factors are based on costs incurred and projected for a specific
recovery period. Any over- or under-recovery of costs plus an interest factor are taken into account in the process of setting
adjustment factors for subsequent recovery periods. Over-recoveries of costs are recorded as regulatory liabilities, and under-
recoveries of costs are recorded as regulatory assets.
Certain other costs incurred by the regulated utilities are allowed to be recovered from customers through prices approved in
the regulatory process. These costs are recognized as the associated revenues are billed. The regulated utilities accrue base
revenues for services rendered but unbilled to provide a closer matching of revenues and expenses (see Note 3). As of Dec. 31,
2011 and 2010, unbilled revenues of $50.2 million and $65.5 million, respectively, are included in the "Receivables" line item on
TECO Energy's Consolidated Balance Sheets.
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