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Risk Management and Hedging Activities
 9 Months Ended
Sep. 30, 2016
Derivative [Line Items]  
Risk Management and Hedging Activities
Risk Management and Hedging Activities

The Company is exposed to the impact of market fluctuations in commodity prices, interest rates and foreign currency exchange rates. The Company is principally exposed to electricity, natural gas, coal and fuel oil commodity price risk primarily through BHE's ownership of PacifiCorp, MidAmerican Energy Company, Nevada Power Company and Sierra Pacific Power Company (the "Utilities") as they have an obligation to serve retail customer load in their regulated service territories. The Company also provides nonregulated retail electricity and natural gas services in competitive markets. The Utilities' load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity, wholesale electricity that is purchased and sold, and natural gas supply for retail customers. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. Interest rate risk exists on variable-rate debt, future debt issuances and mortgage commitments. Additionally, the Company is exposed to foreign currency exchange rate risk from its business operations and investments in Great Britain and Canada. The Company does not engage in a material amount of proprietary trading activities.

Each of the Company's business platforms has established a risk management process that is designed to identify, assess, manage, mitigate, monitor and report each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, the Company uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. The Company manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, the Company may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, forward sale commitments, or mortgage interest rate lock commitments, to mitigate the Company's exposure to interest rate risk. The Company does not hedge all of its commodity price, interest rate and foreign currency exchange rate risks, thereby exposing the unhedged portion to changes in market prices.

There have been no significant changes in the Company's accounting policies related to derivatives. Refer to Note 11 for additional information on derivative contracts.

The following table, which reflects master netting arrangements and excludes contracts that have been designated as normal under the normal purchases or normal sales exception afforded by GAAP, summarizes the fair value of the Company's derivative contracts, on a gross basis, and reconciles those amounts to the amounts presented on a net basis on the Consolidated Balance Sheets (in millions):
 
Other
 
 
 
Other
 
Other
 
 
 
Current
 
Other
 
Current
 
Long-term
 
 
 
Assets
 
Assets
 
Liabilities
 
Liabilities
 
Total
As of September 30, 2016
 
 
 
 
 
 
 
 
 
Not designated as hedging contracts:
 
 
 
 
 
 
 
 
 
Commodity assets(1)
$
15

 
$
81

 
$
11

 
$
2

 
$
109

Commodity liabilities(1)
(3
)
 
—

 
(66
)
 
(164
)
 
(233
)
Interest rate assets
12

 
—

 
—

 
—

 
12

Interest rate liabilities
—

 
—

 
(6
)
 
(14
)
 
(20
)
Total
24

 
81

 
(61
)
 
(176
)
 
(132
)
 
 

 
 

 
 

 
 

 
 
Designated as hedging contracts:
 

 
 

 
 

 
 

 
 
Commodity assets
—

 
—

 
1

 
1

 
2

Commodity liabilities
—

 
—

 
(21
)
 
(16
)
 
(37
)
Interest rate assets
—

 
—

 
—

 
—

 
—

Interest rate liabilities
—

 
—

 
(4
)
 
(7
)
 
(11
)
Total
—

 
—

 
(24
)
 
(22
)
 
(46
)
 
 

 
 

 
 

 
 

 
 
Total derivatives
24

 
81

 
(85
)
 
(198
)
 
(178
)
Cash collateral receivable
—

 
—

 
20

 
65

 
85

Total derivatives - net basis
$
24

 
$
81

 
$
(65
)
 
$
(133
)
 
$
(93
)
 
 
Other
 
 
 
Other
 
Other
 
 
 
Current
 
Other
 
Current
 
Long-term
 
 
 
Assets
 
Assets
 
Liabilities
 
Liabilities
 
Total
As of December 31, 2015
 
 
 
 
 
 
 
 
 
Not designated as hedging contracts:
 
 
 
 
 
 
 
 
 
Commodity assets(1)
$
25

 
$
72

 
$
7

 
$
2

 
$
106

Commodity liabilities(1)
(4
)
 
—

 
(113
)
 
(175
)
 
(292
)
Interest rate assets
7

 
—

 
—

 
—

 
7

Interest rate liabilities
—

 
—

 
(3
)
 
(6
)
 
(9
)
Total
28

 
72

 
(109
)
 
(179
)
 
(188
)
 
 
 
 
 
 
 
 
 
 
Designated as hedging contracts:
 
 
 
 
 
 
 
 
 
Commodity assets
—

 
—

 
1

 
2

 
3

Commodity liabilities
—

 
—

 
(33
)
 
(17
)
 
(50
)
Interest rate assets
—

 
3

 
—

 
—

 
3

Interest rate liabilities
—

 
—

 
(4
)
 
(1
)
 
(5
)
Total
—

 
3

 
(36
)
 
(16
)
 
(49
)
 
 
 
 
 
 
 
 
 
 
Total derivatives
28

 
75

 
(145
)
 
(195
)
 
(237
)
Cash collateral receivable
—

 
—

 
40

 
63

 
103

Total derivatives - net basis
$
28

 
$
75

 
$
(105
)
 
$
(132
)
 
$
(134
)
 
(1)
The Company's commodity derivatives not designated as hedging contracts are generally included in regulated rates, and as of September 30, 2016 and December 31, 2015, a net regulatory asset of $195 million and $250 million, respectively, was recorded related to the net derivative liability of $124 million and $186 million, respectively. The difference between the net regulatory asset and the net derivative liability relates primarily to a power purchase agreement derivative at BHE Renewables.

Not Designated as Hedging Contracts

The following table reconciles the beginning and ending balances of the Company's net regulatory assets and summarizes the pre-tax gains and losses on commodity derivative contracts recognized in net regulatory assets, as well as amounts reclassified to earnings (in millions):
 
Three-Month Periods
 
Nine-Month Periods
 
Ended September 30,
 
Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Beginning balance
$
185

 
$
233

 
$
250

 
$
223

Changes in fair value recognized in net regulatory assets
18

 
47

 
5

 
104

Net losses reclassified to operating revenue
(3
)
 
(11
)
 
(6
)
 
(4
)
Net losses reclassified to cost of sales
(5
)
 
(16
)
 
(54
)
 
(70
)
Ending balance
$
195

 
$
253

 
$
195

 
$
253



Designated as Hedging Contracts

The Company uses commodity derivative contracts accounted for as cash flow hedges to hedge electricity and natural gas commodity prices for delivery to nonregulated customers, spring operational sales, natural gas storage and other transactions. Certain commodity derivative contracts have settled and the fair value at the date of settlement remains in AOCI and is recognized in earnings when the forecasted transactions impact earnings. The following table reconciles the beginning and ending balances of the Company's accumulated other comprehensive (income) loss (pre-tax) and summarizes pre-tax gains and losses on commodity derivative contracts designated and qualifying as cash flow hedges recognized in other comprehensive income ("OCI"), as well as amounts reclassified to earnings (in millions):
 
Three-Month Periods
 
Nine-Month Periods
 
Ended September 30,
 
Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Beginning balance
$
26

 
$
38

 
$
46

 
$
32

Changes in fair value recognized in OCI
15

 
20

 
35

 
37

Net gains reclassified to operating revenue
1

 
1

 
1

 
4

Net losses reclassified to cost of sales
(7
)
 
(14
)
 
(47
)
 
(28
)
Ending balance
$
35

 
$
45

 
$
35

 
$
45


  
Realized gains and losses on hedges and hedge ineffectiveness are recognized in income as operating revenue, cost of sales, operating expense or interest expense depending upon the nature of the item being hedged. For the three- and nine-month periods ended September 30, 2016 and 2015, hedge ineffectiveness was insignificant. As of September 30, 2016, the Company had cash flow hedges with expiration dates extending through June 2026 and $24 million of pre-tax unrealized losses are forecasted to be reclassified from AOCI into earnings over the next twelve months as contracts settle.
 
Derivative Contract Volumes

The following table summarizes the net notional amounts of outstanding derivative contracts with fixed price terms that comprise the mark-to-market values as of (in millions):
 
Unit of
 
September 30,
 
December 31,
 
Measure
 
2016
 
2015
Electricity purchases
Megawatt hours
 
2

 
10

Natural gas purchases
Decatherms
 
321

 
317

Fuel purchases
Gallons
 
3

 
11

Interest rate swaps
US$
 
730

 
653

Mortgage sale commitments, net
US$
 
(375
)
 
(312
)


Credit Risk

The Utilities are exposed to counterparty credit risk associated with wholesale energy supply and marketing activities with other utilities, energy marketing companies, financial institutions and other market participants. Credit risk may be concentrated to the extent the Utilities' counterparties have similar economic, industry or other characteristics and due to direct or indirect relationships among the counterparties. Before entering into a transaction, the Utilities analyze the financial condition of each significant wholesale counterparty, establish limits on the amount of unsecured credit to be extended to each counterparty and evaluate the appropriateness of unsecured credit limits on an ongoing basis. To further mitigate wholesale counterparty credit risk, the Utilities enter into netting and collateral arrangements that may include margining and cross-product netting agreements and obtain third-party guarantees, letters of credit and cash deposits. If required, the Utilities exercise rights under these arrangements, including calling on the counterparty's credit support arrangement.

Collateral and Contingent Features

In accordance with industry practice, certain wholesale derivative contracts contain credit support provisions that in part base certain collateral requirements on credit ratings for senior unsecured debt as reported by one or more of the three recognized credit rating agencies. These derivative contracts may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance," or in some cases terminate the contract, in the event of a material adverse change in creditworthiness. These rights can vary by contract and by counterparty. As of September 30, 2016, the applicable credit ratings from the three recognized credit rating agencies were investment grade.

The aggregate fair value of the Company's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $227 million and $288 million as of September 30, 2016 and December 31, 2015, respectively, for which the Company had posted collateral of $73 million and $75 million, respectively, in the form of cash deposits. If all credit-risk-related contingent features for derivative contracts in liability positions had been triggered as of September 30, 2016 and December 31, 2015, the Company would have been required to post $139 million and $198 million, respectively, of additional collateral. The Company's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation, or other factors.
PacifiCorp [Member]  
Derivative [Line Items]  
Risk Management and Hedging Activities
Risk Management and Hedging Activities

PacifiCorp is exposed to the impact of market fluctuations in commodity prices and interest rates. PacifiCorp is principally exposed to electricity, natural gas, coal and fuel oil commodity price risk as it has an obligation to serve retail customer load in its regulated service territories. PacifiCorp's load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity and wholesale electricity that is purchased and sold. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. Interest rate risk exists on variable-rate debt and future debt issuances. PacifiCorp does not engage in a material amount of proprietary trading activities.

PacifiCorp has established a risk management process that is designed to identify, assess, manage, mitigate, monitor and report each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, PacifiCorp uses commodity derivative contracts, which may include forwards, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. PacifiCorp manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, PacifiCorp may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate PacifiCorp's exposure to interest rate risk. No interest rate derivatives were in place during the periods presented. PacifiCorp does not hedge all of its commodity price and interest rate risks, thereby exposing the unhedged portion to changes in market prices.

There have been no significant changes in PacifiCorp's accounting policies related to derivatives. Refer to Note 7 for additional information on derivative contracts.

The following table, which reflects master netting arrangements and excludes contracts that have been designated as normal under the normal purchases or normal sales exception afforded by GAAP, summarizes the fair value of PacifiCorp's derivative contracts, on a gross basis, and reconciles those amounts to the amounts presented on a net basis on the Consolidated Balance Sheets (in millions):
 
Other
 
 
 
Other
 
Other
 
 
 
Current
 
Other
 
Current
 
Long-term
 
 
 
Assets
 
Assets
 
Liabilities
 
Liabilities
 
Total
 
 
 
 
 
 
 
 
 
 
As of September 30, 2016
 
 
 
 
 
 
 
 
 
Not designated as hedging contracts(1):
 
 
 
 
 
 
 
 
 
Commodity assets
$
5

 
$
2

 
$
4

 
$
—

 
$
11

Commodity liabilities
(2
)
 
—

 
(27
)
 
(87
)
 
(116
)
Total
3

 
2

 
(23
)
 
(87
)
 
(105
)
 
 

 
 

 
 

 
 

 
 

Total derivatives
3

 
2

 
(23
)
 
(87
)
 
(105
)
Cash collateral receivable
—

 
—

 
14

 
59

 
73

Total derivatives - net basis
$
3

 
$
2

 
$
(9
)
 
$
(28
)
 
$
(32
)
 
 
 
 
 
 
 
 
 
 
As of December 31, 2015
 
 
 
 
 
 
 
 
 
Not designated as hedging contracts(1):
 
 
 
 
 
 
 
 
 
Commodity assets
$
10

 
$
—

 
$
2

 
$
—

 
$
12

Commodity liabilities
(1
)
 
—

 
(58
)
 
(89
)
 
(148
)
Total
9

 
—

 
(56
)
 
(89
)
 
(136
)
 
 
 
 
 
 
 
 
 
 
Total derivatives
9

 
—

 
(56
)
 
(89
)
 
(136
)
Cash collateral receivable
—

 
—

 
18

 
57

 
75

Total derivatives - net basis
$
9

 
$
—

 
$
(38
)
 
$
(32
)
 
$
(61
)


(1)
PacifiCorp's commodity derivatives are generally included in rates and as of September 30, 2016 and December 31, 2015, a regulatory asset of $102 million and $133 million, respectively, was recorded related to the net derivative liability of $105 million and $136 million, respectively.

Not Designated as Hedging Contracts

The following table reconciles the beginning and ending balances of PacifiCorp's net regulatory assets and summarizes the pre-tax gains and losses on commodity derivative contracts recognized in net regulatory assets, as well as amounts reclassified to earnings (in millions):
 
 
Three-Month Periods
 
Nine-Month Periods
 
 
Ended September 30,
 
Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
89

 
$
99

 
$
133

 
$
85

Changes in fair value recognized in net regulatory assets
 
15

 
38

 
(4
)
 
65

Net (losses) gains reclassified to operating revenue
 
(2
)
 
1

 
8

 
29

Net losses reclassified to energy costs
 
—

 
(10
)
 
(35
)
 
(51
)
Ending balance
 
$
102

 
$
128

 
$
102

 
$
128



Derivative Contract Volumes

The following table summarizes the net notional amounts of outstanding commodity derivative contracts with fixed price terms that comprise the mark-to-market values as of (in millions):
 
Unit of
 
September 30,
 
December 31,
 
Measure
 
2016
 
2015
Electricity (sales) purchases
Megawatt hours
 
(6
)
 
1

Natural gas purchases
Decatherms
 
92

 
111

Fuel oil purchases
Gallons
 
3

 
11



Credit Risk

PacifiCorp is exposed to counterparty credit risk associated with wholesale energy supply and marketing activities with other utilities, energy marketing companies, financial institutions and other market participants. Credit risk may be concentrated to the extent PacifiCorp's counterparties have similar economic, industry or other characteristics and due to direct or indirect relationships among the counterparties. Before entering into a transaction, PacifiCorp analyzes the financial condition of each significant wholesale counterparty, establishes limits on the amount of unsecured credit to be extended to each counterparty and evaluates the appropriateness of unsecured credit limits on an ongoing basis. To further mitigate wholesale counterparty credit risk, PacifiCorp enters into netting and collateral arrangements that may include margining and cross-product netting agreements and obtains third-party guarantees, letters of credit and cash deposits. If required, PacifiCorp exercises rights under these arrangements, including calling on the counterparty's credit support arrangement.

Collateral and Contingent Features

In accordance with industry practice, certain wholesale derivative contracts contain credit support provisions that in part base certain collateral requirements on credit ratings for senior unsecured debt as reported by one or more of the three recognized credit rating agencies. These derivative contracts may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance," or in some cases terminate the contract, in the event of a material adverse change in PacifiCorp's creditworthiness. These rights can vary by contract and by counterparty. As of September 30, 2016, PacifiCorp's credit ratings from the three recognized credit rating agencies were investment grade.

The aggregate fair value of PacifiCorp's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $109 million and $142 million as of September 30, 2016 and December 31, 2015, respectively, for which PacifiCorp had posted collateral of $73 million and $75 million, respectively, in the form of cash deposits. If all credit-risk-related contingent features for derivative contracts in liability positions had been triggered as of September 30, 2016 and December 31, 2015, PacifiCorp would have been required to post $28 million and $64 million, respectively, of additional collateral. PacifiCorp's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation, or other factors.
MidAmerican Energy Company [Member]  
Derivative [Line Items]  
Risk Management and Hedging Activities
Risk Management and Hedging Activities

MidAmerican Energy is exposed to the impact of market fluctuations in commodity prices and interest rates. MidAmerican Energy is principally exposed to electricity, natural gas, coal and fuel oil commodity price risk as it has an obligation to serve retail customer load in its regulated service territory. Prior to January 1, 2016, MidAmerican Energy also provided nonregulated retail electricity and natural gas services in competitive markets, which created contractual obligations to provide electric and natural gas services. MidAmerican Energy's load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity, wholesale electricity that is purchased and sold, and natural gas supply for retail customers. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather; market liquidity; generating facility availability; customer usage; storage; and transmission and transportation constraints. Interest rate risk exists on variable-rate debt and future debt issuances. MidAmerican Energy does not engage in a material amount of proprietary trading activities.

MidAmerican Energy has established a risk management process that is designed to identify, assess, manage, mitigate, monitor and report each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, MidAmerican Energy uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. MidAmerican Energy manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, MidAmerican Energy may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate its exposure to interest rate risk. MidAmerican Energy does not hedge all of its commodity price and interest rate risks, thereby exposing the unhedged portion to changes in market prices.

There have been no significant changes in MidAmerican Energy's accounting policies related to derivatives. Refer to Note 10 for additional information on derivative contracts and to Note 3 for a discussion of discontinued operations.

The following table, which reflects master netting arrangements and excludes contracts that have been designated as normal under the normal purchases or normal sales exception afforded by GAAP, summarizes the fair value of MidAmerican Energy's derivative contracts, on a gross basis, and reconciles those amounts to the amounts presented on a net basis on the Balance Sheets (in millions):
 
Other Current
Assets
 
Other
Assets
 
Other Current
Liabilities
 
Other Long-term
Liabilities
 
Total
As of September 30, 2016:
 
 
 
 
 
 
 
 
 
Not designated as hedging contracts(1)(2):
 
 
 
 
 
 
 
 
 
Commodity assets
$
2

 
$
—

 
$
3

 
$
—

 
$
5

Commodity liabilities
—

 
—

 
(7
)
 
(2
)
 
(9
)
Total
2

 
—

 
(4
)
 
(2
)
 
(4
)
 
 
 
 
 
 
 
 
 
 
Designated as hedging contracts(2):
 
 
 
 
 
 
 
 
 
Commodity assets
—

 
—

 
—

 
—

 
—

Commodity liabilities
—

 
—

 
—

 
—

 
—

Total
—

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
Total derivatives
2

 
—

 
(4
)
 
(2
)
 
(4
)
Cash collateral receivable
—

 
—

 
1

 
—

 
1

Total derivatives - net basis
$
2

 
$
—

 
$
(3
)
 
$
(2
)
 
$
(3
)
 
Other Current
Assets
 
Other
Assets
 
Other Current
Liabilities
 
Other Long-
Term Liabilities
 
Total
As of December 31, 2015:
 
 
 
 
 
 
 
 
 
Not designated as hedging contracts(1):
 
 
 
 
 
 
 
 
 
Commodity assets
$
12

 
$
4

 
$
5

 
$
2

 
$
23

Commodity liabilities
(3
)
 
—

 
(36
)
 
(10
)
 
(49
)
Total
9

 
4

 
(31
)
 
(8
)
 
(26
)
 
 
 
 
 
 
 
 
 
 
Designated as hedging contracts:
 
 
 
 
 
 
 
 
 
Commodity assets
—

 
—

 
1

 
2

 
3

Commodity liabilities
—

 
—

 
(32
)
 
(17
)
 
(49
)
Total
—

 
—

 
(31
)
 
(15
)
 
(46
)
 
 
 
 
 
 
 
 
 
 
Total derivatives
9

 
4

 
(62
)
 
(23
)
 
(72
)
Cash collateral receivable
—

 
—

 
22

 
6

 
28

Total derivatives - net basis
$
9

 
$
4

 
$
(40
)
 
$
(17
)
 
$
(44
)
(1)
MidAmerican Energy's commodity derivatives not designated as hedging contracts are generally included in regulated rates, and as of September 30, 2016 and December 31, 2015, a net regulatory asset of $5 million and $20 million, respectively, was recorded related to the net derivative liability of $4 million and $26 million, respectively.
(2)
The changes in derivative values from December 31, 2015, are substantially due to the transfer of MidAmerican Energy's unregulated retail services business to a subsidiary of BHE.
Not Designated as Hedging Contracts

The following table reconciles the beginning and ending balances of MidAmerican Energy's net regulatory assets and summarizes the pre-tax gains and losses on commodity derivative contracts recognized in net regulatory assets, as well as amounts reclassified to earnings (in millions):
 
Three-Month Periods
 
Nine-Month Periods
 
Ended September 30,
 
Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Beginning balance
$
3

 
$
28

 
$
20

 
$
38

Changes in fair value recognized in net regulatory assets
5

 
10

 
8

 
29

Net losses reclassified to operating revenue
(1
)
 
(12
)
 
(14
)
 
(34
)
Net losses reclassified to cost of gas sold
(2
)
 
(3
)
 
(9
)
 
(10
)
Ending balance
$
5

 
$
23

 
$
5

 
$
23



Designated as Hedging Contracts

MidAmerican Energy used commodity derivative contracts accounted for as cash flow hedges to hedge electricity and natural gas commodity prices related to its unregulated retail services business, which was transferred to a subsidiary of BHE. The following table reconciles the beginning and ending balances of MidAmerican Energy's accumulated other comprehensive loss (pre-tax) and summarizes pre-tax gains and losses on commodity derivative contracts designated and qualifying as cash flow hedges recognized in other comprehensive income ("OCI"), as well as amounts reclassified to earnings (in millions):
 
Three-Month Periods
 
Nine-Month Periods
 
Ended September 30,
 
Ended September 30,
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
Beginning balance
$
—

 
$
39

 
$
45

 
$
34

Transfer to affiliate
—

 
—

 
(45
)
 
—

Changes in fair value recognized in OCI
—

 
21

 
—

 
40

Net gains reclassified to nonregulated cost of sales
—

 
(14
)
 
—

 
(28
)
Ending balance
$
—

 
$
46

 
$
—

 
$
46



Derivative Contract Volumes

The following table summarizes the net notional amounts of outstanding commodity derivative contracts with fixed price terms that comprise the mark-to-market values as of (in millions):
 
Unit of
 
September 30,
 
December 31,
 
Measure
 
2016
 
2015
 
 
 
 
 
 
Electricity purchases
Megawatt hours
 
—

 
15

Natural gas purchases
Decatherms
 
17

 
17



Credit Risk

MidAmerican Energy is exposed to counterparty credit risk associated with wholesale energy supply and marketing activities with other utilities, energy marketing companies, financial institutions and other market participants. Credit risk may be concentrated to the extent MidAmerican Energy's counterparties have similar economic, industry or other characteristics and due to direct or indirect relationships among the counterparties. Before entering into a transaction, MidAmerican Energy analyzes the financial condition of each significant wholesale counterparty, establishes limits on the amount of unsecured credit to be extended to each counterparty, and evaluates the appropriateness of unsecured credit limits on an ongoing basis. To further mitigate wholesale counterparty credit risk, MidAmerican Energy enters into netting and collateral arrangements that may include margining and cross-product netting agreements and obtains third-party guarantees, letters of credit and cash deposits. If required, MidAmerican Energy exercises rights under these arrangements, including calling on the counterparty's credit support arrangement.

Collateral and Contingent Features

In accordance with industry practice, certain wholesale derivative contracts contain credit support provisions that in part base MidAmerican Energy's collateral requirements on its credit ratings for senior unsecured debt as reported by one or more of the three recognized credit rating agencies. These derivative contracts may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance," or in some cases terminate the contract, in the event of a material adverse change in MidAmerican Energy's creditworthiness. These rights can vary by contract and by counterparty. As of September 30, 2016, MidAmerican Energy's credit ratings from the three recognized credit rating agencies were investment grade.

The aggregate fair value of MidAmerican Energy's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $7 million and $66 million as of September 30, 2016 and December 31, 2015, respectively, for which MidAmerican Energy had posted collateral of $- million at each date. If all credit-risk-related contingent features for derivative contracts in liability positions had been triggered as of September 30, 2016 and December 31, 2015, MidAmerican Energy would have been required to post $3 million and $55 million, respectively, of additional collateral. MidAmerican Energy's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation, or other factors. MidAmerican Energy's exposure to contingent features declined significantly as a result of the transfer of its unregulated retail services business to a subsidiary of BHE.
MidAmerican Funding, LLC and Subsidiaries [Domain]  
Derivative [Line Items]  
Risk Management and Hedging Activities
Risk Management and Hedging Activities

Refer to Note 9 of MidAmerican Energy's Notes to Financial Statements.
Nevada Power Company [Member]  
Derivative [Line Items]  
Risk Management and Hedging Activities
Risk Management and Hedging Activities

Nevada Power is exposed to the impact of market fluctuations in commodity prices and interest rates. Nevada Power is principally exposed to electricity, natural gas and coal market fluctuations primarily through Nevada Power's obligation to serve retail customer load in its regulated service territory. Nevada Power's load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity and wholesale electricity that is purchased and sold. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. The actual cost of fuel and purchased power is recoverable through the deferred energy mechanism. Interest rate risk exists on variable-rate debt and future debt issuances. Nevada Power does not engage in proprietary trading activities.

Nevada Power has established a risk management process that is designed to identify, assess, manage, mitigate, monitor and report each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, Nevada Power uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. Nevada Power manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, Nevada Power may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate Nevada Power's exposure to interest rate risk. Nevada Power does not hedge all of its commodity price and interest rate risks, thereby exposing the unhedged portion to changes in market prices.

There have been no significant changes in Nevada Power's accounting policies related to derivatives. Refer to Note 7 for additional information on derivative contracts.

The following table, which excludes contracts that have been designated as normal under the normal purchases or normal sales exception afforded by GAAP, summarizes the fair value of Nevada Power's derivative contracts, on a gross basis, and reconciles those amounts to the amounts presented on a net basis on the Consolidated Balance Sheets (in millions):

 
 
Other
 
Other
 
 
 
 
Current
 
Long-term
 
 
 
 
Liabilities
 
Liabilities
 
Total
As of September 30, 2016
 
 
 
 
 
 
Commodity liabilities(1)
 
$
(9
)
 
$
(10
)
 
$
(19
)
 
 
 
 
 
 
 
As of December 31, 2015
 
 
 
 
 
 
Commodity liabilities(1)
 
$
(8
)
 
$
(14
)
 
$
(22
)

(1)
Nevada Power's commodity derivatives not designated as hedging contracts are included in regulated rates and as of September 30, 2016 and December 31, 2015, a regulatory asset of $19 million and $22 million, respectively, was recorded related to the derivative liability of $19 million and $22 million, respectively.

Derivative Contract Volumes

The following table summarizes the net notional amounts of outstanding derivative contracts with indexed and fixed price terms that comprise the mark-to-market values as of (in millions):
 
Unit of
 
September 30,
 
December 31,
 
Measure
 
2016
 
2015
Electricity sales
Megawatt hours
 
(2
)
 
(2
)
Natural gas purchases
Decatherms
 
143

 
126



Credit Risk

Nevada Power is exposed to counterparty credit risk associated with wholesale energy supply and marketing activities with other utilities, energy marketing companies, financial institutions and other market participants. Credit risk may be concentrated to the extent Nevada Power's counterparties have similar economic, industry or other characteristics and due to direct and indirect relationships among the counterparties. Before entering into a transaction, Nevada Power analyzes the financial condition of each significant wholesale counterparty, establish limits on the amount of unsecured credit to be extended to each counterparty and evaluate the appropriateness of unsecured credit limits on an ongoing basis. To further mitigate wholesale counterparty credit risk, Nevada Power enters into netting and collateral arrangements that may include margining and cross-product netting agreements and obtain third-party guarantees, letters of credit and cash deposits. If required, Nevada Power exercises rights under these arrangements, including calling on the counterparty's credit support arrangement.

Collateral and Contingent Features

In accordance with industry practice, certain wholesale derivative contracts contain credit support provisions that in part base certain collateral requirements on credit ratings for unsecured debt as reported by one or more of the three recognized credit rating agencies. These derivative contracts may either specifically provide rights to demand cash or other security in the event of a credit rating downgrade ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance," in the event of a material adverse change in creditworthiness. These rights can vary by contract and by counterparty. As of September 30, 2016, credit ratings from the three recognized credit rating agencies were investment grade.

The aggregate fair value of Nevada Power's derivative contracts in liability positions with specific credit-risk-related contingent features was $3 million as of September 30, 2016 and December 31, 2015, which represents the amount of collateral to be posted if all credit risk related contingent features for derivative contracts in liability positions had been triggered. Nevada Power's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation or other factors.