DERIVATIVE INSTRUMENTS (Notes)

3 Months Ended

Mar. 31, 2014

Notes To Financial Statements [Abstract]

DERIVATIVE INSTRUMENTS

NOTE 12. DERIVATIVE INSTRUMENTS

The following disclosures summarize the fair value of derivative instruments not designated as hedging instruments in the condensed consolidated balance sheets and the effect of changes in fair value related to those derivative instruments not designated as hedging instruments on the condensed consolidated statements of operations (in millions):

Derivative Instruments Not Designated As Hedging Instruments		Fair Value as of
	Balance Sheet Location	March 31, 2014		December 31, 2013
Asset Derivatives:
Note Hedge	Note Hedge	$	79	$	78
Liability Derivatives:
Cash Conversion Option	Current portion of long-term debt	$	79	$	78
Contingent interest features of the Debentures and 3.25% Notes		$	0	$	0

		Amount of Gain or (Loss) Recognized In Income on Derivatives
Effect on Income of Derivative Instruments Not Designated As Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	For the Three Months Ended March 31,
		2014			2013
Note Hedge	Non-cash convertible debt related expense	$	1		$	36
Cash Conversion Option	Non-cash convertible debt related expense	(1		)	(36		)
Contingent interest features of the 3.25% Notes and Debentures	Non-cash convertible debt related expense	—			—
Effect on income of derivative instruments not designated as hedging instruments		$	—		$	—

Cash Conversion Option, Note Hedge and Contingent Interest features related to the 3.25% Cash Convertible Senior Notes

The cash conversion option is a derivative instrument which is recorded at fair value quarterly with any change in fair value being recognized in our condensed consolidated statements of operations as non-cash convertible debt related expense. The note hedge is accounted for as a derivative instrument and, as such, is recorded at fair value quarterly with any change in fair value being recognized in our condensed consolidated statements of operations as non-cash convertible debt related expense.

We expect the gain or loss associated with changes to the valuation of the note hedge to substantially offset the gain or loss associated with changes to the valuation of the cash conversion option. However, they will not be completely offsetting as a result of changes in the credit valuation adjustment related to the note hedge. Our most significant credit exposure arises from the note hedge. The fair value of the note hedge reflects the maximum loss that would be incurred should the option counterparties fail to perform according to the terms of the note hedge agreement. For specific details related to the cash conversion option, note hedge and contingent interest features of the 3.25% Notes, refer to Note 11 of the Notes to Consolidated Financial Statements in our Form 10-K.

Energy Price Risk

Following the expiration of certain long-term energy sales contracts, we may have exposure to market risk, and therefore revenue fluctuations, in energy markets. We have entered into contractual arrangements that will mitigate our exposure to short-term volatility through a variety of hedging techniques, and will continue to do so in the future. Our efforts in this regard will involve only mitigation of price volatility for the energy we produce, and will not involve speculative energy trading. Consequently, we have entered into agreements with various financial institutions to hedge approximately 1.4 million MWh, 0.9 million MWh and 0.4 million MWh of energy production from exposure to market risk for fiscal years 2014, 2015 and 2016, respectively. As of March 31, 2014, the fair value of the energy derivatives of $14 million, pre-tax, was recorded as a current liability and as a component of AOCI. As of March 31, 2014, the amount of hedge ineffectiveness was not material.