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Fair Value Measurements and Credit Concentration (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2015

Dec. 31, 2014

Fair Value of Assets and Liabilities Measured on Recurring Basis

The assets and liabilities measured at fair value were:


	June 30, 2015									December 31, 2014
	Total		Level 1			Level 2		Level 3		Total		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	352	$	352		$	—	$	—	$	352	$	352	$	—	$	—

Restricted cash and cash equivalents (a)		126		126			—		—		193		193		—		—

Price risk management assets:
Energy commodities		1,035		—			951		84		1,318		6		1,171		141

Total price risk management assets		1,035		—			951		84		1,318		6		1,171		141

NDT funds:
Cash and cash equivalents		15		15			—		—		19		19		—		—
Equity securities
U.S. large-cap		620		461			159		—		611		454		157		—
U.S. mid/small-cap		92		37			55		—		89		37		52		—
Debt securities
U.S. Treasury		87		87			—		—		99		99		—		—
U.S. government sponsored agency		8		—			8		—		9		—		9		—
Municipality		81		—			81		—		76		—		76		—
Investment-grade corporate		49		—			49		—		42		—		42		—
Other		6		—			6		—		3		—		3		—
Receivables (payables), net		—		(2	)		2		—		2		—		2		—

Total NDT funds		958		598			360		—		950		609		341		—

Auction rate securities (b)		7		—			—		7		8		—		—		8

Total assets	$	2,478	$	1,076		$	1,311	$	91	$	2,821	$	1,160	$	1,512	$	149

Liabilities
Price risk management liabilities:
Energy commodities	$	960	$	—		$	886	$	74	$	1,217	$	5	$	1,182	$	30

Total price risk management liabilities	$	960	$	—		$	886	$	74	$	1,217	$	5	$	1,182	$	30

(a)	Current portion is included in “Restricted cash and cash equivalents” and long-term portion is included in “Other noncurrent assets” on the Balance Sheets.

(b)	Included in “Other investments” on the Balance Sheets.

Reconciliation of Net Assets and Liabilities Classified as Level 3

A reconciliation of net assets and liabilities classified as Level 3 for the period ended June 30, 2015 is as follows:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Six Months
	Energy Commodities, net			Auction Rate Securities			Total
Balance at beginning of period	$	111		$	8		$	119
Total realized/unrealized gains (losses)
Included in earnings		(141	)		—			(141	)
Purchases (a)		(39	)		—			(39	)
Sales		65			(1	)		64
Settlements		3			—			3
Transfers into Level 3		10			—			10
Transfers out of Level 3		1			—			1

Balance at end of period	$	10		$	7		$	17

(a)	Positions acquired through the acquisition of RJS Power.

A reconciliation of net assets and liabilities classified as Level 3 for the period ended June 30, 2014 is as follows:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Six Months
	Energy Commodities, net			Auction Rate Securities			Total
Balance at beginning of period	$	24		$	16		$	40
Total realized/unrealized gains (losses)
Included in earnings		(63	)		—			(63	)
Purchases		(6	)		—			(6	)
Sales		—			(3	)		(3	)
Settlements		119			—			119

Balance at end of period	$	74		$	13		$	87

Significant Unobservable Inputs Used in Fair Value Measurement of Assets and Liabilities Classified as Level 3

The significant unobservable inputs used in and quantitative information about the fair value measurement of assets and liabilities classified as Level 3 are as follows:


	June 30, 2015
	Fair Value, net Asset (Liability)			Valuation Technique	Significant Unobservable Input(s)	Range (Weighted Average) (a)
Energy commodities
Natural gas contracts (b)	$	42		Discounted cash flow	Proprietary model used to calculate forward prices	11% - 100% (50%)
FTR purchase contracts (d)		(1	)	Discounted cash flow	Historical settled prices used to model forward prices	100% (100%)
Heat rate call options (e)		(28	)	Discounted cash flow	Proprietary model used to calculate forward prices	100% (100%)
CRR purchase contracts (g)		(3	)	Discounted cash flow	Proprietary model used to calculate forward prices	100% (100%)
Auction rate securities (f)		7		Discounted cash flow	Modeled from SIFMA Index	53% - 71% (59%)


	December 31, 2014
	Fair Value, net Asset (Liability)			Valuation Technique	Significant Unobservable Input(s)	Range (Weighted Average) (a)
Energy commodities
Natural gas contracts (b)	$	59		Discounted cash flow	Proprietary model used to calculate forward prices	11% - 100% (52%)
Power sales contracts (c)		(1	)	Discounted cash flow	Proprietary model used to calculate forward prices	10% - 100% (59%)
FTR purchase contracts (d)		3		Discounted cash flow	Historical settled prices used to model forward prices	100% (100%)
Heat rate call options (e)		50		Discounted cash flow	Proprietary model used to calculate forward prices	23% - 51% (45%)
Auction rate securities (f)		8		Discounted cash flow	Modeled from SIFMA Index	51% - 69% (63%)

(a)	The range and weighted average represent the percentage of fair value derived from the unobservable inputs.

(b)	As the forward price of natural gas increases/(decreases), the fair value of purchase contracts increases/(decreases). As the forward price of natural gas increases/(decreases), the fair value of sales contracts (decreases)/increases.

(c)

As forward market prices increase/(decrease), the fair value of contracts (decreases)/increases. As volumetric assumptions for contracts in a gain position increase/(decrease), the fair value of contracts increases/(decreases). As volumetric assumptions for contracts in a loss position increase/(decrease), the fair value of the contracts (decreases)/increases.

(d)	As the forward implied spread increases/(decreases), the fair value of the contracts increases/(decreases).

(e)

The proprietary model used to calculate fair value incorporates market heat rates, correlations and volatilities. As the market implied heat rate increases/(decreases), the fair value of purchased calls increases/(decreases). As the market implied heat rate increases/(decreases), the fair value of sold calls (decreases)/increases.

(f)	The model used to calculate fair value incorporates an assumption that the auctions will continue to fail. As the modeled forward rates of the SIFMA Index increase/(decrease), the fair value of the securities increases/(decreases).

(g)	As the forward implied spread increases/(decreases), the fair value of the contracts increases/(decreases).

The significant unobservable inputs used in and the quantitative information about the nonrecurring fair value measurement of assets and liabilities classified as Level 3 are as follows:


	Fair Value, net Asset (Liability)		Valuation Technique	Significant Unobservable Input(s)	Range (Weighted Average) (a)
Kerr Dam Project:
March 31, 2014	$	29	Discounted cash flow	Proprietary model used to calculate plant value	38% (38%)

(a)	The range and weighted average represent the percentage of fair value derived from the unobservable inputs.

Fair Value of Assets and Liabilities Classified as Level 3 Measured on Recurring Basis Included in Earnings

Net gains and losses on assets and liabilities classified as Level 3 and included in earnings for the period ended June 30 are reported in the Statements of Income as follows:


	Six Months
	Energy Commodities, net
	Wholesale Energy						Retail Energy						Energy Purchases
	2015			2014			2015			2014			2015			2014
Total gains (losses) included in earnings	$	(110	)	$	(31	)	$	(32	)	$	(51	)	$	1		$	19
Change in unrealized gains (losses) relating to positions still held at the reporting date		(42	)		(44	)		—			(21	)		(4	)		(3	)

Fair Value of Assets and Liabilities Measured on Nonrecurring Basis

The following nonrecurring fair value measurement occurred during the six months ended June 30, 2014, resulting in an asset impairment:


	Carrying Amount (a)		Fair Value Measurements Using Level 3		Loss (b)
Kerr Dam Project	$	47	$	29	$	18

(a)	Represents carrying value before fair value measurement.

(b)	The loss on the Kerr Dam Project is included in “Other operation and maintenance” on the Statement of Income.

Fair Value of Financial Instruments Not Recorded at Fair Value - Other

The carrying amounts of long-term debt on the Balance Sheets and its estimated fair values are set forth below. The fair value was estimated using an income approach by discounting future cash flows at estimated current cost of funding rates, which incorporates the credit risk of Talen Energy Supply. Long-term debt is classified as Level 2.


	June 30, 2015				December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt	$	4,060	$	4,036	$	2,218	$	2,204

PPL Energy Supply LLC [Member]

Fair Value of Assets and Liabilities Measured on Recurring Basis

Recurring Fair Value Measurements

The assets and liabilities measured at fair value were:


	December 31, 2014								December 31, 2013
	Total		Level 1		Level 2		Level 3		Total		Level 1			Level 2		Level 3
Assets
Cash and cash equivalents	$	352	$	352					$	239	$	239

Restricted cash and cash equivalents (a)		193		193						85		85

Price risk management assets:
Energy commodities		1,318		6	$	1,171	$	141		1,188		3		$	1,123	$	62

Total price risk management assets		1,318		6		1,171		141		1,188		3			1,123		62

NDT funds:
Cash and cash equivalents		19		19						14		14
Equity securities
U.S. large-cap		611		454		157				547		409			138
U.S. mid/small-cap		89		37		52				81		33			48
Debt securities
U.S. Treasury		99		99						95		95
U.S. government sponsored agency		9				9				6					6
Municipality		76				76				77					77
Investment-grade corporate		42				42				38					38
Other		3				3				5					5
Receivables (payables), net		2				2				1		(1	)		2

Total NDT funds		950		609		341				864		550			314

Auction rate securities (b)		8						8		16							16

Total assets	$	2,821	$	1,160	$	1,512	$	149	$	2,392	$	877		$	1,437	$	78

Liabilities

Price risk management liabilities:
Energy commodities	$	1,217	$	5	$	1,182	$	30	$	1,070	$	4		$	1,028	$	38

Total price risk management liabilities	$	1,217	$	5	$	1,182	$	30	$	1,070	$	4		$	1,028	$	38

(a)	Current portion is included in “Restricted cash and cash equivalents” and long-term portion is included in “Other noncurrent assets” on the Balance Sheets.

(b)	Included in “Other investments” on the Balance Sheets.

Reconciliation of Net Assets and Liabilities Classified as Level 3

A reconciliation of net assets and liabilities classified as Level 3 for the years ended December 31 is as follows:


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Energy Commodities, net			Auction Rate Securities			Total
2014
Balance at beginning of period	$	24		$	16		$	40
Total realized/unrealized gains (losses
Included in earnings		(32	)					(32	)
Included in OCI (a)					1			1
Purchases		(6	)					(6	)
Sales		67			(9	)		58
Settlements		50						50
Transfers into Level 3		7						7
Transfers out of Level 3		1						1

Balance at end of period	$	111		$	8		$	119

2013
Balance at beginning of period	$	22		$	13		$	35
Total realized/unrealized gains (losses)
Included in earnings		(5	)					(5	)
Sales		(2	)					(2	)
Settlements		(3	)					(3	)
Transfers into Level 3		10			3			13
Transfers out of Level 3		2						2

Balance at end of period	$	24		$	16		$	40

(a)	“Energy Commodities, net” are included in “Qualifying derivatives” and “Auction Rate Securities” are included in “Available-for-sale securities” on the Statements of Comprehensive Income.

Significant Unobservable Inputs Used in Fair Value Measurement of Assets and Liabilities Classified as Level 3

The significant unobservable inputs used in and quantitative information about the fair value measurement of assets and liabilities classified as Level 3 are as follows:

December 31, 2014

Fair Value, net Asset
(Liability)

Valuation Technique

Significant Unobservable
Input(s)

Range (Weighted Average)
(a)

Energy commodities

Natural gas
contracts (b)

Discounted cash flow

Proprietary model used to calculate forward prices

11% – 100% (52%)

Power sales
contracts (c)

)

Discounted cash flow

Proprietary model used to calculate forward prices

9.1% – 100% (59%)

FTR purchase
contracts (d)

Discounted cash flow

Historical settled prices used to model forward prices

100% (100)

Heat Rate
Options (e)

Discounted cash flow

Proprietary model used to calculate forward prices

23% – 51% (45%)

Auction rate
securities (f)

Discounted cash flow

Modeled from SIFMA Index

51% – 69% (63%)

December 31, 2013

Fair Value, net Asset
(Liability)

Valuation Technique

Significant Unobservable

Input(s)

Range (Weighted Average)
(a)

Energy commodities

Natural gas
contracts (b)

Discounted cash flow

Proprietary model used to calculate forward prices

10% – 100% (86%)

Power sales
contracts (c)

(12

)

Discounted cash flow

Proprietary model used to calculate forward prices

100% (100%)

Auction rate
securities (f)

Discounted cash flow

Modeled from SIFMA Index

10% – 80% (63%)

(a)	For energy commodities and auction rate securities, the range and weighted average represent the percentage of fair value derived from the unobservable inputs.

(b)	As the forward price of natural gas increases/(decreases), the fair value of purchase contracts increases/ (decreases). As the forward price of natural gas increases/(decreases), the fair value of sales contracts (decreases)/increases.

(c)

(d)	As the forward implied spread increases/(decreases), the fair value of the contracts increases/(decreases).

(e)	The proprietary model used to calculate fair value incorporates market heat rates, correlations and volatilities. As the market implied heat rate increases/(decreases), the fair value of the contracts increases/ (decreases).

(f)	The model used to calculate fair value incorporates an assumption that the auctions will continue to fail. As the modeled forward rates of the SIFMA Index increase/(decrease), the fair value of the securities increases/ (decreases).

The significant unobservable inputs used in and the quantitative information about the nonrecurring fair value measurement of assets and liabilities classified as Level 3 are as follows:


	Fair Value, net Asset (Liability)		Valuation Technique	Significant Unobservable Input (s)	Range (Weighted Average)
Kerr Dam Project:
March 31, 2014	$	29	Discounted cash flow	Proprietary model used to calculate plant value	38%(38%)
Corette plant and emission allowances: December 31, 2013			Discounted cash flow	Long-term forward price curves and capital expenditure projections	100%(100%)

Fair Value of Assets and Liabilities Classified as Level 3 Measured on Recurring Basis Included in Earnings

Net gains and losses on assets and liabilities classified as Level 3 and included in earnings for the years ended December 31 were reported in the Statements of Income as follows:


	Energy Commodities, net
	Unregulated Wholesale Energy						Unregulated Retail Energy				Fuel			Energy Purchases
	2014			2013			2014		2013		2014	2013		2014			2013
Total gains (losses) included in earnings	$	(77	)	$	(36	)	$	23	$	25		$	3	$	22		$	3
Change in unrealized gains (losses) relating to positions still held at the reporting date		50			(23	)		37		24					(4	)		1

Fair Value of Assets and Liabilities Measured on Nonrecurring Basis

The following nonrecurring fair value measurements occurred during the reporting periods, resulting in asset impairments.


	Carrying Amount (a)		Level 3 Fair Value		Loss (b)
Kerr Dam Project (c):
March 31, 2014	$	47	$	29	$	18
Corette plant and emission allowances:
December 31, 2013	$	65			$	65

(a)	Represents carrying value before fair value measurement.

(b)	The loss on the Kerr Dam Project was recorded in “Income (Loss) from Discontinued Operations (net of income taxes)” on the Statement of Income. The loss on the Corette plant and emission allowances was recorded in “Other operation and maintenance” on the Statement of Income.

(c)	The Kerr Dam Project was included in the sale of the Montana Hydroelectric facilities and the assets were removed from the Balance Sheet. See Note 4 for additional information.

Fair Value of Financial Instruments Not Recorded at Fair Value - Other

The carrying amount of long-term debt on the Balance Sheets and its estimated fair value is set forth below. The fair value was estimated using an income approach by discounting future cash flows at estimated current cost of funding rates, which incorporate the credit risk of PPL Energy Supply. Long-term debt is classified as Level 2. The effect of third-party credit enhancements is not included in the fair value measurement.


	December 31, 2014				December 31, 2013
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt	$	2,218	$	2,204	$	2,525	$	2,658