This Management's Discussion and Analysis contains forward-looking statements, which are subject to the inherent uncertainties in predicting future results and conditions. Actual results may differ materially from those forecasted. The forecasted results are based on the company's current expectations and assumptions, and the company does not undertake to update that information or any other information contained in this Form 10-Q, except as may be required by law. Factors that could impact actual results include: regulatory actions by federal, state or local authorities; unexpected capital needs or unanticipated reductions in cash flow that affect liquidity; the availability of adequate rail transportation capacity for the shipment of TECO Coal's production; general economic conditions affecting energy sales at the utility companies; economic conditions, both national and international, affecting the Florida economy and demand for TECO Coal's production; weather variations and changes in customer energy usage patterns affecting sales and operating costs at Tampa Electric and Peoples Gas and the effect of extreme weather conditions or hurricanes, which are common during the summer months; operating conditions, commodity price and operating cost changes affecting the production levels and margins at TECO Coal, fuel cost recoveries and cash at Tampa Electric or natural gas demand at Peoples Gas; the ability of TECO Energy's subsidiaries to operate equipment without undue accidents, breakdowns or failures; and changes in electric tariffs or contract terms affecting TECO Guatemala's operations. Additional information is contained under "Risk Factors" in TECO Energy, Inc.'s Annual Report on Form 10-K for the period ended Dec. 31, 2007, as updated by the information contained in Item 1A of Part II of this Form 10-Q.

Earnings Summary - Unaudited
                                                            Three months ended Jun. 30,          Six months ended Jun. 30,
(millions, except per share amounts)                         2008                2007              2008              2007
Consolidated revenues                                   $         887.2     $         866.5   $      1,678.9    $      1,687.8

Net income from continuing operations                              51.4                59.4             82.2             132.2
Discontinued operations                                              -                 14.3               -               14.3

Net income                                              $          51.4     $          73.7   $         82.2    $        146.5

Average common shares outstanding
Basic                                                             210.4               208.9            210.1             208.8
Diluted                                                           212.1               210.0            211.6             209.7

Earnings per share - basic
Continuing operations                                   $          0.24     $          0.28   $         0.39    $         0.63
Discontinued operations                                              -                 0.07               -               0.07

Earnings per share - basic                              $          0.24     $          0.35   $         0.39    $         0.70

Earnings per share - diluted
Continuing operations                                   $          0.24     $          0.28   $         0.39    $         0.63
Discontinued operations                                              -                 0.07               -               0.07

Earnings per share - diluted                            $          0.24     $          0.35   $         0.39    $         0.70

Operating Results

Three Months Ended Jun. 30, 2008:

Second quarter net income and earnings per share from continuing operations were $51.4 million and $0.24 per share, respectively, compared to $59.4 million and $0.28 per share in the same period in 2007. In 2007, second quarter results included a $14.3 million tax benefit recorded in discontinued operations as a result of reaching a favorable conclusion with taxing authorities related to the 2005 disposition of the Union and Gila River merchant power plants. As a result of the sale of TECO Transport in December 2007 and the conclusion of the program for tax credits from the production of synthetic fuel at the end of 2007, second quarter net income in 2008 included no benefits from the operations of TECO Transport or from the production of synthetic fuel, which contributed $9.6 million and $11.0 million, respectively, or $0.10 per share collectively, in the 2007 period.

Six Months Ended Jun. 30, 2008:

Year-to-date net income and earnings per share were $82.2 million or $0.39 per share in 2008, compared to $146.5 million or $0.70 per share in the same period in 2007. Year-to-date net income and earnings per share from continuing operations were $82.2 million or $0.39 per share in 2008, compared to $132.2 million or $0.63 per share in the same period in 2007. TECO Transport and the production of synthetic fuel contributed $16.0 million and $41.7 million, respectively, or $0.28 per share collectively, to year-to-date 2007 net income.

Operating Company Results

All amounts included in the operating company and Other and Eliminations discussions are after-tax, unless otherwise noted.

Tampa Electric Company - Electric division (Tampa Electric)

Net income for the second quarter was $40.2 million, compared with $34.7 million for the same period in 2007. Results for the quarter reflect higher retail energy sales due to hotter weather than 2007, and increased sales to other utilities. Net income included $1.7 million of Allowance for Funds Used During Construction (AFUDC) - Equity, which represents allowed equity cost capitalized to construction costs, related to the installation of nitrogen oxide (NOx) pollution control equipment, compared to $1.1 million included in the 2007 period. Base revenues increased $7.6 million pretax in the quarter due to more favorable weather.

Operations and maintenance expense, excluding all Florida Public Service Commission (FPSC)-approved cost recovery clauses, increased $1.9 million after tax in the second quarter of 2008, primarily reflecting $1.2 million higher spending on planned outage requirements on power generating equipment compared to 2007 and $0.4 million higher bad-debt expense.

Compared to the second quarter of 2007, net income included $1.5 million lower depreciation expense, largely as a result of a depreciation study that reduced depreciation rates approved by the FPSC in the third quarter of 2007 and $0.3 million lower property tax expense, as a result of lower property tax rates from legislation passed in Florida in 2007, and as adjustments to property valuations previously agreed to with various taxing authorities.

Tampa Electric's retail energy sales increased 2.7% in the second quarter due to hotter weather and the operation of a large water desalinization facility that was idle in 2007, partially offset by lower sales to industrial customers due to phosphate production facility outages and economic conditions. Total heating and cooling degree-days for the Tampa area in the second quarter were 3% above normal and 8% above actual 2007 levels.

Average customer growth of 0.2% and 0.4% in the 2008 quarter and year-to-date periods, respectively, reflected the weak Florida housing market and the general statewide economic slowdown.

Year-to-date net income was $56.1 million, compared to $56.5 million in the 2007 period, driven primarily by $1.8 million higher earnings on investments in emissions control equipment recovered through the Environmental Cost Recovery Clause, which were offset by higher operations and maintenance expense. These results reflect 0.4% higher retail energy sales and off-system energy sales that were essentially unchanged from the same period last year. Total heating and cooling degree days were 1% below normal due to mild winter weather, but 1% above actual 2007 degree days. Year-to-date pretax base revenue growth of $4.3 million was limited by slow customer growth and mild first quarter weather.

Excluding all FPSC-approved cost recovery clause-related expenses, net income reflects $6.4 million higher operations and maintenance expense, including $3.7 million higher spending on planned outage requirements on power generating equipment compared to 2007, and $0.9 million higher bad-debt expense. Net income also included $3.0 million of AFUDC - Equity related to the installation of NOx pollution control equipment, compared to $2.8 million included in the 2007 period.

Compared to the 2007 year-to-date period, net income also reflected $2.2 million lower depreciation expense, and $0.7 million lower property tax expense for the reasons described above. Interest expense at Tampa Electric increased $1.3 million, due to higher levels of long-term debt outstanding and higher interest on auction-rate bonds for one month in the first quarter of the year. In addition, interest income decreased due to lower cash balances and lower interest earned on under-recovered fuel balances early in the year.

On Jun. 12, 2008, Tampa Electric notified the FPSC that it plans to file for an increase to its base rates, the first time the company has made such a request since 1992. In that notification Tampa Electric indicated that a base revenue increase in a range between $225 million and $235 million will be needed, and that it would file all details related to its proposal in 60 days. That filing will start an eight-month process during which the request for new base rates is considered by the FPSC, with new rates effective at its conclusion.

A summary of Tampa Electric's operating statistics for the three months and six months ended Jun. 30, 2008 and 2007 follows:

                                                        Operating Revenues                Kilowatt-hour sales
(millions, except average customers)               2008        2007      % Change      2008      2007     % Change
Three months ended Jun. 30,
By Customer Type
Residential                                      $   247.3   $   238.4        3.7     2,153.5   2,068.3        4.1
Commercial                                           161.9       160.3        1.0     1,621.5   1,598.2        1.5
Industrial - Phosphate                                16.5        17.4       (5.2 )     240.2     249.1       (3.6 )
Industrial - Other                                    30.3        30.1        0.7       324.2     334.9       (3.2 )
Other sales of electricity                            46.8        43.4        7.8       464.0     425.2        9.1
Deferred and other revenues (1)                       13.0        10.9       19.3          -         -          -

                                                     515.8       500.5        3.1     4,803.4   4,675.7        2.7
Sales for resale                                      19.2        17.6        9.1       230.6     223.1        3.4
Other operating revenue                               10.1         9.0       12.2          -         -          -
SO2 Allowance sales                                    1.0        17.6      (94.3 )        -         -          -

                                                 $   546.1   $   544.7        0.3     5,034.0   4,898.8        2.8

Average customers (thousands)                        668.0       666.0        0.3
Retail output to line (kilowatt hours)                                                5,278.0   5,168.6        2.1


Six months ended Jun. 30,
By Customer Type
Residential                                      $   454.3   $   454.7       (0.1 )   3,931.5   3,930.9        0.0
Commercial                                           309.3       306.9        0.8     3,089.5   3,057.0        1.1
Industrial - Phosphate                                33.1        36.1       (8.3 )     484.8     520.5       (6.9 )
Industrial - Other                                    57.7        58.8       (1.9 )     630.1     654.6       (3.7 )
Other sales of electricity                            89.4        83.9        6.6       882.6     817.2        8.0
Deferred and other revenues (1)                        5.8         7.4      (21.6 )        -         -          -

                                                     949.6       947.8        0.2     9,018.5   8,980.2        0.4
Sales for resale                                      35.2        33.1        6.3       419.8     421.2       (0.3 )
Other operating revenue                               20.9        18.2       14.8          -         -          -
SO2 Allowance sales                                    1.9        17.6      (89.2 )        -         -          -

                                                 $ 1,007.6   $ 1,016.7       (0.9 )   9,438.3   9,401.4        0.4

Average customers (thousands)                        668.3       665.4        0.4
Retail output to line (kilowatt hours)                                                9,635.7   9,580.9        0.6

(1) Primarily reflects the timing of environmental and fuel clause recoveries.

Tampa Electric Company - Natural gas division (PGS)

Peoples Gas reported net income of $5.3 million for the second quarter, compared to $5.4 million in the same period in 2007. Quarterly results reflect higher off-system sales, higher volumes transported for power generation and industrial customers and average customer growth of 0.3%, which reflects the continued slowdown in the Florida housing market. Higher residential therm sales reflect weather that was cooler than 2007 and increased therm sales to industrial customers reflect a new customer with significant usage. The effects of these higher volumes were more than offset by higher non-fuel operations and maintenance costs, higher depreciation expense due to routine additions to facilities to serve customers and increased interest expense due to higher levels of long-term debt outstanding. Volumes for commercial customers in 2008, particularly the restaurant sector, were lower reflecting the slowdown in the Florida economy.

Year-to-date net income was $15.3 million, compared to $16.4 million in the 2007 period, driven largely by the same factors as the second quarter. Results also reflect average customer growth of 0.3% and lower sales to weather-sensitive residential customers in the first quarter due to very mild winter weather.

On Jun. 12, 2008, Peoples Gas notified the FPSC that it plans to file for an increase to its base rates, the first time the company has made such a request since 2002. In that notification Peoples Gas indicated that a base revenue increase of about $25 million will be needed, and that it would file all details related to its proposal in 60 days. That filing will start an eight-month process during which the request for new base rates is considered by the FPSC, with new rates effective at its conclusion.

A summary of PGS' regulated operating statistics for the three months and six months ended Jun. 30, 2008 and 2007 follows:

                                            Operating Revenues                   Therms
(millions, except average customers)    2008      2007     % Change     2008    2007    % Change
Three months ended Jun. 30,
By Customer Type
Residential                            $  32.2   $  31.0        3.9      14.8    14.5        2.1
Commercial                                38.0      41.4       (8.2 )    90.8    92.1       (1.4 )
Industrial                                 2.3       2.4       (4.2 )    53.4    48.4       10.3
Off system sales                          97.8      53.6       82.5      82.1    65.9       24.6
Power generation                           3.8       3.6        5.6     132.9   117.1       13.5
Other revenues                             8.6       9.4       (8.5 )      -       -          -

                                       $ 182.7   $ 141.4       29.2     374.0   338.0       10.7
By Sales Type
System supply                            151.7     109.7       38.3     111.0    96.4       15.1
Transportation                            22.4      22.3        0.4     263.0   241.6        8.9
Other revenues                             8.6       9.4       (8.5 )      -       -          -

                                       $ 182.7   $ 141.4       29.2     374.0   338.0       10.7

Average customers (thousands)            336.3     335.2        0.3


Six months ended Jun. 30,
By Customer Type
Residential                            $  80.9   $  85.4       (5.3 )    42.6    43.6       (2.3 )
Commercial                                82.4      91.7      (10.1 )   197.8   199.6       (0.9 )
Industrial                                 4.5       4.9       (8.2 )   100.2    99.8        0.4
Off system sales                         166.4     100.4       65.7     160.6   128.6       24.9
Power generation                           7.2       6.3       14.3     239.6   182.6       31.2
Other revenues                            18.4      20.3       (9.4 )      -       -          -

                                       $ 359.8   $ 309.0       16.4     740.8   654.2       13.2
By Sales Type
System supply                            294.4     242.4       21.5     234.9   208.5       12.7
Transportation                            47.0      46.3        1.5     505.9   445.7       13.5
Other revenues                            18.4      20.3       (9.4 )      -       -          -

                                       $ 359.8   $ 309.0       16.4     740.8   654.2       13.2

Average customers (thousands)            336.2     335.1        0.3

TECO Coal

TECO Coal achieved second quarter net income of $4.2 million, compared to $20.8 million in the same period in 2007. In 2007, TECO Coal's results included an $11.0 million benefit related to synthetic fuel production.

Second quarter total sales were 2.4 million tons, compared to 2.2 million tons in the second quarter of 2007, which included 1.5 million tons of synthetic fuel. TECO Coal experienced slightly lower than expected production due to difficult mining conditions in an underground mine, which temporarily reduced production from that mine in the first two months of the second quarter. Compared to the second quarter in 2007, results reflect an average per ton selling price almost 10% higher across all products, excluding transportation allowances. In the second quarter of 2008, the cash cost of production per ton increased almost 20% over 2007's level, driven by diesel fuel prices that were more than double 2007 prices; the per-ton cost for steel products used in underground mining, such as roof bolts, that were more than double 2007 levels, and the cost of explosives used in surface mining operations that were 42% higher than in 2007.

TECO Coal recorded year-to-date net income of $11.7 million in 2008, compared to $63.2 million in the 2007 period, which included a $41.7 million benefit associated with the production of synthetic fuel.

Year-to-date 2008 total sales were 4.9 million tons, compared to 4.3 million tons in the 2007 period, which included 2.8 million tons of synthetic fuel. Results in 2008 reflect an average net per-ton selling price across all products, excluding transportation allowances, that was more than 5% higher than 2007. In 2008, the cash cost of production for the year-to-date period was approximately 13% higher than 2007, driven by the same factors as in the second quarter. Results also reflect a $0.6 million benefit in the first quarter of 2008 from the true-up of the 2007 synthetic fuel tax credit rate, compared to a $1.6 million benefit included in the first quarter of 2007.

TECO Guatemala

TECO Guatemala reported second quarter net income of $14.9 million in 2008, compared to $12.8 million in the 2007 period. Year-to-date 2008 net income was $25.4 million, compared to $23.1 million in the 2007 period. Proceeds from spot energy sales at the San José Power Station significantly improved due to higher spot market prices. Earnings under the power sales contract were down slightly due to the timing of a scheduled maintenance outage. Interest expense for both the Alborada and San José power stations decreased in both periods due to lower interest rates and lower project debt balances. At EEGSA, the distribution utility, 2008 second quarter and year-to-date results reflect customer growth and higher energy sales, which resulted in higher net income, offset by higher costs at EEGSA. The earnings from the unregulated EEGSA-affiliated companies (DECA II), which provide, among other things, electricity transmission services, telecommunication carrier service, wholesale power sales to unregulated electric customers and engineering services, increased in both periods from fundamental growth in the businesses. Results for EEGSA and affiliated companies also include a $3.1 million benefit related to an adjustment to previously estimated 2007 income and year-end equity balances, compared to a similar $1.9 million benefit in 2007.

Other and Eliminations

The cost for "Parent/other" in the second quarter of 2008 was $13.2 million, compared to a cost of $23.9 million in the same period in 2007, which included $8.3 million of charges related to the sale of TECO Transport. Results in the 2008 quarter were driven by lower interest expense partially offset by lower investment income due to lower cash balances. Total parent/TECO Finance interest expense declined by $4.9 million in the second quarter of 2008, reflecting parent debt retirements.

The year-to-date "Parent/other" cost was $26.3 million in 2008, compared to $43.0 million in the 2007 period. The 2008 year-to-date cost includes $0.6 million of costs related to previously estimated transaction costs associated with the sale of TECO Transport, compared to the 2007 year-to-date cost, which included $10.1 million of charges related to the sale of TECO Transport. Year-to-date 2008 total parent/TECO Finance interest expense declined by $11.3 million, due to parent debt retirements.

TECO Transport

The sale of TECO Transport closed Dec. 4, 2007. Due to the ongoing contractual relationship for solid fuel waterborne transportation services, TECO Transport was not classified as a discontinued operation and is included in TECO Energy's historical results.

In 2007, TECO Transport recorded second quarter net income of $9.6 million, and year-to-date net income of $16.0 million.

Discontinued Operations

Net income from discontinued operations was $14.3 million in 2007, reflecting a favorable conclusion reached with taxing authorities related to the 2005 disposition of the Union and Gila River merchant power plants.

Income Taxes

The provision for income taxes from continuing operations for the six month periods ended Jun. 30, 2008 and Jun. 30, 2007 was an expense of $35.5 million and $57.1 million, respectively. The provision for income taxes from continuing operations in the six months ended Jun. 30, 2008 was impacted by the termination of the synthetic fuel operations tax credit program and its related investor income, as well as by the sale of TECO Transport on Dec. 4, 2007. In addition to the income taxes on recurring operations, the 2007 provision for income taxes includes an income tax benefit related to the application of the "tonnage tax" to qualified vessels.

During the six month periods ended Jun. 30, 2008 and Jun. 30, 2007, the company experienced a number of events that have impacted the overall effective tax rate on continuing operations. These events included permanent reinvestment of foreign income under APB No. 23, depletion, repatriation of foreign source income to the United States and reduction of income tax expense under the new "tonnage tax" regime.

Interest Charges

Total interest charges for the three and six months ended Jun. 30, 2008 were $55.9 million and $113.6 million, respectively, compared to $65.7 million and $132.8 million for the three and six months ended Jun. 30, 2007. The lower interest expense reflects parent debt redemption and refinancing activities including the retirement of $300 million of 6.125% notes at maturity in May 2007 and $297.2 million of 7.5% notes due in 2010 in December 2007, partially offset by the impact of higher long-term debt balances at the regulated utilities.

Liquidity and Capital Resources

The table below sets forth the Jun. 30, 2008 consolidated liquidity and cash
balances, the cash balances at the operating companies and TECO Energy parent,
and amounts available under the TECO Energy/TECO Finance and Tampa Electric
Company credit facilities.



                                                           Balances as of Jun. 30, 2008
                                                                 Tampa Electric
(millions)                                     Consolidated         Company         Other     Parent
Credit facilities                             $        675.0    $          475.0    $   -     $ 200.0
Drawn amounts / LCs                                     10.9                 1.4        -         9.5

Available credit facilities                            664.1               473.6        -       190.5

Cash and short-term investments                        174.2                60.1      60.4       53.7

Total liquidity                               $        838.3    $          533.7    $ 60.4    $ 244.2

Consolidated restricted cash (not included
above)                                        $          7.5    $             -     $  0.2    $   7.3

Consolidated other cash and short-term investments includes $10.3 million of cash at the unregulated operating companies for normal operations and $50.0 million of consolidated cash and short-term investments at TECO Guatemala held offshore due to the tax deferral strategy associated with EEGSA. In addition to consolidated cash, as of Jun. 30, 2008, unconsolidated affiliates owned by TECO Guatemala, CGESJ (San José) and TCAE (Alborada), had unrestricted cash and short-term investment balances of $18.1 million, which is not included in the table above. The table above also excludes consolidated restricted cash of $7.5 million, primarily at TECO Energy parent.

Tampa Electric's liquidity position reflects its current 2008 $72 million under-recovery in its fuel and purchased power clause, which is projected to increase to approximately $209 million by year-end. Tampa Electric will seek to recover under-recovered 2008 fuel costs through the 2009 fuel adjustment process.

Covenants in Financing Agreements

In order to utilize their respective bank credit facilities, TECO Energy/TECO Finance and Tampa Electric Company must meet certain financial tests as defined in the applicable agreements. In addition, TECO Energy, Tampa Electric Company and other operating companies have certain restrictive covenants in specific agreements and debt instruments. TECO Energy, Tampa Electric Company and the other operating companies are in compliance with all applicable financial covenants. The table that follows lists the covenants and the performance relative to them at Jun. 30, 2008. Reference is made to the specific agreements and instruments for more details.