Derivative Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

18. DERIVATIVE INSTRUMENTS

Great Plains Energy and KCP&L are exposed to a variety of market risks including interest rates and commodity prices.  Management has established risk management policies and strategies to reduce the potentially adverse effects that the volatility of the markets may have on Great Plains Energy's and KCP&L's operating results. Great Plains Energy's and KCP&L's interest rate risk management activities have included using derivative instruments to hedge against future interest rate fluctuations on anticipated debt issuances. Commodity risk management activities, including the use of certain derivative instruments, are subject to the management, direction and control of an internal commodity risk committee.  Management maintains commodity price risk management strategies that use derivative instruments to reduce the effects of fluctuations in wholesale sales, fuel and purchased power expense caused by commodity price volatility.

Counterparties to commodity derivatives expose Great Plains Energy and KCP&L to credit loss in the event of nonperformance.  This credit loss is limited to the cost of replacing these contracts at current market rates. Derivative instruments, excluding those instruments that qualify for the NPNS election, which are accounted for by accrual accounting, are recorded on the balance sheet at fair value as an asset or liability.  Changes in the fair value of derivative instruments are recorded to a regulatory asset or liability consistent with KCC and MPSC regulatory orders.

Great Plains Energy and KCP&L have posted collateral, in the ordinary course of business, for the aggregate fair value of all derivative instruments with credit risk-related contingent features that are in a liability position.  At December 31, 2015, Great Plains Energy and KCP&L have posted collateral in excess of the aggregate fair value of their derivative instruments; therefore, if the credit risk-related contingent features underlying these agreements were triggered, Great Plains Energy and KCP&L would not be required to post additional collateral to their counterparties. For derivative contracts with counterparties under master netting arrangements, Great Plains Energy and KCP&L can net receivables and payables with each respective counterparty.

Commodity Risk Management

KCP&L's risk management policy uses derivative instruments to mitigate exposure to market price fluctuations for wholesale power. KCP&L has designated these financial contracts as economic hedges (non-hedging derivatives). The fair values of these instruments are recorded as derivative assets or liabilities with an offsetting entry recorded to a regulatory asset or liability. The settlement costs are included in KCP&L's fuel recovery mechanisms.  A regulatory asset or liability is recordedto reflect the change in the timing of recognition authorized by KCC and MPSC. Recovery of actual costs will not impact earnings, but will impact cash flows due to the timing of the recovery mechanism.

KCP&L and GMO have Transmission Congestion Rights (TCRs) that they utilize to hedge against congestion costs and protect load prices in the Southwest Power Pool, Inc. (SPP) Integrated Marketplace. These financial contracts have been designated as economic hedges (non-hedging derivatives). The fair values of these instruments are recorded as derivative assets or liabilities with an offsetting entry recorded to a regulatory asset or liability. The settlement costs are included in KCP&L's and GMO's fuel recovery mechanisms.  A regulatory asset or liability is recordedto reflect the change in the timing of recognition authorized by KCC and MPSC. Recovery of actual costs will not impact earnings, but will impact cash flows due to the timing of the recovery mechanism.

GMO's risk management policy uses derivative instruments to mitigate price exposure to natural gas price volatility in the market.  At December 31, 2015, GMO had financial contracts in place to hedge approximately 66%, 18% and 8% of the expected on-peak natural gas generation and natural gas equivalent purchased power price exposure for 2016, 2017 and 2018, respectively. The fair value of the portfolio will settle against actual purchases of natural gas and purchased power.  GMO has designated its natural gas hedges as economic hedges (non-hedging derivatives). In connection with GMO's 2005 Missouri electric rate case, it was agreed that the settlement costs of these contracts would be recognized in fuel expense. The settlement cost is included in GMO's fuel recovery mechanism.  A regulatory asset or liability is recordedto reflect the change in the timing of recognition authorized by the MPSC. Recovery of actual costs will not impact earnings, but will impact cash flows due to the timing of the recovery mechanism.

MPS Merchant, which has certain long-term natural gas contracts remaining from its former non-regulated trading operations, manages the daily delivery of its remaining contractual commitments with economic hedges (non-hedging derivatives) to reduce its exposure to changes in market prices.  Within the trading portfolio, MPS Merchant takes certain positions to hedge physical sale or purchase contracts.  MPS Merchant records the fair value of physical trading energy contracts as derivative assets or liabilities with an offsetting entry to the consolidated statements of comprehensive income.

The gross notional contract amount and recorded fair values of open positions for derivative instruments are summarized in the following table.  The fair values of these derivatives are recorded on the consolidated balance sheets.  The fair values below are gross values before netting agreements and netting of cash collateral.

	December 31
	2015					2014
	Notional Contract Amount		Fair Value			Notional Contract Amount		Fair Value
Great Plains Energy	(millions)
Non-hedging derivatives
Futures contracts	$	26.6	$	(5.7	)	$	14.9	$	(2.4	)
Forward contracts	15.6		3.1			29.7		4.1
Transmission congestion rights	5.6		(0.5		)	28.3		2.6
Option contracts	—		—			1.7		0.1
KCP&L
Non-hedging derivatives
Futures contracts	$	0.9	$	(0.1	)	$	—	$	—
Transmission congestion rights	4.1		(0.4		)	23.6		3.1

The fair values of Great Plains Energy's and KCP&L's open derivative positions and balance sheet classification are summarized in the following tables. The fair values below are gross values before netting agreements and netting of cash collateral.

Great Plains Energy
	Balance Sheet	Asset Derivatives			Liability Derivatives
December 31, 2015	Classification	Fair Value			Fair Value
Derivatives Not Designated as Hedging Instruments			(millions)
Commodity contracts	Other		$	3.3		$	6.4
December 31, 2014
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other		$	8.6		$	4.2

KCP&L
	Balance Sheet	Asset Derivatives			Liability Derivatives
December 31, 2015	Classification	Fair Value			Fair Value
Derivatives Not Designated as Hedging Instruments			(millions)
Commodity contracts	Other		$	0.2		$	0.7
December 31, 2014
Derivatives Not Designated as Hedging Instruments
Commodity contracts	Other		$	4.0		$	0.9

The following tables provide information regarding Great Plains Energy's and KCP&L's offsetting of derivative assets and liabilities.

Great Plains Energy
											Gross Amounts Not Offset in the Statement of Financial Position
Description	Gross Amounts Recognized			Gross Amounts Offset in the Statement of Financial Position				Net Amounts Presented in the Statement of Financial Position			Financial Instruments			Cash Collateral			Net Amount
December 31, 2015	(millions)
Derivative assets		$	3.3		$	(0.2	)		$	3.1		$	—		$	—		$	3.1
Derivative liabilities		6.4			(5.9		)		0.5			—			—			0.5
December 31, 2014
Derivative assets		$	8.6		$	(1.2	)		$	7.4		$	—		$	—		$	7.4
Derivative liabilities		4.2			(3.5		)		0.7			—			—			0.7

KCP&L
											Gross Amounts Not Offset in the Statement of Financial Position
Description	Gross Amounts Recognized			Gross Amounts Offset in the Statement of Financial Position				Net Amounts Presented in the Statement of Financial Position			Financial Instruments			Cash Collateral			Net Amount
December 31, 2015	(millions)
Derivative assets		$	0.2		$	(0.2	)		$	—		$	—		$	—		$	—
Derivative liabilities		0.7			(0.3		)		0.4			—			—			0.4
December 31, 2014
Derivative assets		$	4.0		$	(0.9	)		$	3.1		$	—		$	—		$	3.1
Derivative liabilities		0.9			(0.9		)		—			—			—			—

At December 31, 2015, and 2014, Great Plains Energy offset $5.7 million and $2.3 million, respectively, of cash collateral posted with counterparties against net derivative positions.

See Note 20 for information regarding amounts reclassified out of accumulated other comprehensive loss for Great Plains Energy and KCP&L.

Great Plains Energy's accumulated OCI at December 31, 2015, includes $9.2 million that is expected to be reclassified to expenses over the next twelve months.  KCP&L's accumulated OCI at December 31, 2015, includes $8.8 million that is expected to be reclassified to expenses over the next twelve months.

The following tables summarize the amounts of gain (loss) recognized for the change in fair value of commodity contract derivatives not designated as hedging instruments for Great Plains Energy and KCP&L.

Great Plains Energy
Derivatives Not Designated as Hedging Instruments	2015			2014			2013
Location of Gain (Loss)	(millions)
Electric revenues	$	(8.2	)	$	(14.2	)	$	—
Fuel	(2.5		)	1.5			(1.1		)
Purchased power	(1.5		)	(4.9		)	—
Regulatory asset	(6.8		)	(2.7		)	—
Regulatory liability	—			—			0.2
Total	$	(19.0	)	$	(20.3	)	$	(0.9	)

KCP&L
Derivatives Not Designated as Hedging Instruments	2015			2014			2013
Location of Gain (Loss)	(millions)
Electric revenues	$	(8.2	)	$	(14.2	)	$	—
Fuel	1.5			1.1			0.8
Regulatory asset	(0.5		)	(0.2		)	—
Total	$	(7.2	)	$	(13.3	)	$	0.8