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Derivative Instruments and Hedging Activities (Tables)
 12 Months Ended
Dec. 31, 2011
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Notional Volumes of Derivative Instruments for Electric Utility Segment
The following table summarizes the notional volumes of derivatives used for hedging activities:
 
 
 
Economic Hedges
Commodity
Unit of Measure
 
December 31,
2011
 
December 31,
2010
Electricity options, swaps and forwards
GWh
 
30,881
 
32,138
Natural gas options, swaps and forwards
Bcf
 
300
 
250
Congestion revenue rights
GWh
 
166,163
 
181,291
Tolling arrangements
GWh
 
104,154
 
114,599
Fair Value of Derivative Instruments of Electric Utility Segment
The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2011:
 
Derivative Assets
 
Derivative Liabilities1
 
 
(in millions)
Short-Term
 
Long-Term
 
Subtotal
 
Short-Term
 
Long-Term
 
Subtotal
 
Net
Liability
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic hedges
$
86

 
$
85

 
$
171

 
$
303

 
$
856

 
$
1,159

 
$
988

Netting and collateral
(21
)
 
(15
)
 
(36
)
 
(37
)
 
(51
)
 
(88
)
 
(52
)
Total
$
65

 
$
70

 
$
135

 
$
266

 
$
805

 
$
1,071

 
$
936

1 
Includes the fair value of derivatives with SCE's consolidated affiliates; however, in Edison International’s consolidated financial statements, the fair value of such derivatives is eliminated.
The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2010:
 
Derivative Assets
 
Derivative Liabilities
 
 
(in millions)
Short-Term
 
Long-Term
 
Subtotal
 
Short-Term
 
Long-Term
 
Subtotal
 
Net
Liability
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic hedges
$
87

 
$
367

 
$
454

 
$
216

 
$
449

 
$
665

 
$
211

Netting and collateral
—

 
—

 
—

 
(4
)
 
—

 
(4
)
 
(4
)
Total
$
87

 
$
367

 
$
454

 
$
212

 
$
449

 
$
661

 
$
207
Summarization of economic hedging activities of Electric Utility
The following table summarizes the components of economic hedging activity:
 
Years ended December 31,
(in millions)
2011
 
2010
 
2009
Realized gains/(losses)
$
(165
)
 
$
(156
)
 
(344
)
Unrealized gains/(losses)
(768
)
 
36

 
470
Notional Volumes of Derivative Instruments for Competitive Power Generation Segment
The following table summarizes the notional volumes of derivatives used for hedging and trading activities:
December 31, 2011
 
 
 
 
 
 
 
 
 
Hedging Activities
 
 
 
Commodity
 
Instrument
 
Classification
 
Unit of Measure
 
Cash Flow
Hedges
 
Economic
Hedges
 
Trading
Activities
 
Electricity
 
Forwards/Futures
 
Sales, net
 
GWh
 
8,320

1 
425

3 
—

  
Electricity
 
Forwards/Futures
 
Purchases, net
 
GWh
 
—

 
—

 
2,926

 
Electricity
 
Capacity
 
Sales, net
 
MW-Day
(in thousands)
 
89

2 
—

  
—

 
Electricity
 
Capacity
 
Purchases, net
 
MW-Day
(in thousands)
 
—

 
—

  
184

2 
Electricity
 
Congestion
 
Purchases, net
 
GWh
 
—

  
2,528

4 
230,798

4 
Natural gas
 
Forwards/Futures
 
Sales, net
 
bcf
 
—

  
—

  
0.2

  
Fuel oil
 
Forwards/Futures
 
Purchases, net
 
barrels
 
—

  
240,000

  
—

  
At December 31, 2011, EME had interest rate contracts with notional values totaling $644 million that converted floating rate LIBOR-based debt to fixed rates ranging from 0.79% to 4.29%. These contracts expire May 2013 through March 2026. In addition, EME had forward starting interest rate contracts with notional values totaling $506 million that will convert floating rate LIBOR-based debt to fixed rates of 3.5429% and 4.0025%. These contracts have effective dates of June 2013 and December 2021 and expire May 2023 and December 2029.
December 31, 2010
 
 
 
 
 
 
 
 
 
Hedging Activities
 
 
 
Commodity
 
Instrument
 
Classification
 
Unit of Measure
 
Cash Flow
Hedges
 
Economic
Hedges
 
Trading
Activities
 
Electricity
 
Forwards/Futures
 
Sales, net
 
GWh
 
16,391

1 
—

 
—

 
Electricity
 
Forwards/Futures
 
Purchases, net
 
GWh
 
—

 
475

3 
3,039

 
Electricity
 
Capacity
 
Sales, net
 
MW-Day
(in thousands)
 
182

2 
—

 
—

2 
Electricity
 
Capacity
 
Purchases, net
 
MW-Day
(in thousands)
 
—

 
—

 
283

 
Electricity
 
Congestion
 
Purchases, net
 
GWh
 
—

 
1,007

4 
175,669

4 
Natural gas
 
Forwards/Futures
 
Purchases, net
 
bcf
 
—

 
—

 
3.7

 
Fuel oil
 
Forwards/Futures
 
Purchases, net
 
barrels
 
—

 
240,000

 
—

 
Coal
 
Forwards/Futures
 
Purchases, net
 
tons
 
—

 
—

 
15,000

 
1 
EMG's hedge products include forward and futures contracts that qualify for hedge accounting. This category excludes power contracts for the coal plants which meet the normal purchases and sales exception and are accounted for on the accrual method.
2 
EMG's hedge transactions for capacity result from bilateral trades. Capacity sold in the PJM Reliability Pricing Model (RPM) auction is not accounted for as a derivative.
3 
These positions adjust financial and physical positions, or day-ahead and real-time positions, to reduce costs or increase gross margin. The net sales positions of these categories are primarily related to hedge transactions that are not designated as cash flow hedges.
4 
Congestion contracts include financial transmission rights, transmission congestion contracts or congestion revenue rights. These positions are similar to a swap, where the buyer is entitled to receive a stream of revenues (or charges) based on the hourly day-ahead price differences between two locations.
Fair Value of Derivative Instruments of Competitive Power Generation Segment
The following table summarizes the fair value of derivative instruments reflected on EMG's consolidated balance sheets:
December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Assets
 
Derivative Liabilities
 
Net Assets
(Liabilities)
(in millions)
Short-term
 
Long-term
 
Subtotal
 
Short-term
 
Long-term
 
Subtotal
 
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$
41

 
$
1

 
$
42

 
$
2

 
$
3

 
$
5

 
$
37

Interest rate contracts
—

 
—

 
—

 
—

 
90

 
90

 
(90
)
Economic hedges
31

 
1

 
32

 
26

 
1

 
27

 
5

Trading activities
276

 
142

 
418

 
232

 
79

 
311

 
107

 
348

 
144

 
492

 
260

 
173

 
433

 
59

Netting and collateral received1
(308
)
 
(85
)
 
(393
)
 
(259
)
 
(83
)
 
(342
)
 
(51
)
Total
$
40

 
$
59

 
$
99

 
$
1

 
$
90

 
$
91

 
$
8

December 31, 2010
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative Assets
 
Derivative Liabilities
 
Net Assets
(Liabilities)
(in millions)
Short-term
 
Long-term
 
Subtotal
 
Short-term
 
Long-term
 
Subtotal
 
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$
54

 
$
2

 
$
56

 
$
10

 
$
9

 
$
19

 
$
37

Interest rate contracts
—

 
—

 
—

 
—

 
16

 
16

 
(16
)
Economic hedges
77

 
2

 
79

 
71

 
—

 
71

 
8

Trading activities
184

 
103

 
287

 
148

 
29

 
177

 
110

 
315

 
107

 
422

 
229

 
54

 
283

 
139

Netting and collateral received1
(269
)
 
(37
)
 
(306
)
 
(223
)
 
(35
)
 
(258
)
 
(48
)
Total
$
46

 
$
70

 
$
116

 
$
6

 
$
19

 
$
25

 
$
91

1 
Netting of derivative receivables and derivative payables and the related cash collateral received and paid is permitted when a legally enforceable master netting agreement exists with a derivative counterparty.
Activity of accumulated other comprehensive income for Competitive Power Generation Segment
The following table provides the cash flow hedge activity as part of accumulated other comprehensive loss:
 
Cash Flow Hedge Activity1
 
 
 
2011
 
2010
 
 
(in millions)
Commodity Contracts
 
Interest Rate Contracts
 
Commodity Contracts
 
Interest Rate Contracts
 
Income Statement
Location
Beginning of period derivative gains (losses)
$
43

 
$
(16
)
 
$
177

 
$
(2
)
 
 
Effective portion of changes in fair value
55

 
(74
)
 
106

 
(14
)
 
 
Reclassification to earnings
(63
)
 
—

 
(240
)
 
—

 
Competitive power generation revenue
End of period derivative gains (losses)
$
35

 
$
(90
)
 
$
43

 
$
(16
)
 
 
1 
Unrealized derivative gains (losses) are before income taxes. The after-tax amounts recorded in accumulated other comprehensive loss at December 31, 2011 and 2010 for commodity and interest rate contracts were $21 million and $(55) million and $26 million and $(10) million, respectively.
Effect of realized and unrealized gains (losses) from derivative instruments on Competitive Power Generation Segment
The effect of realized and unrealized gains (losses) from derivative instruments used for economic hedging and trading purposes on the consolidated statements of operations is presented below:
 
 
 
 
December 31,
(in millions)
 
Income Statement Location
 
2011
 
2010
Economic hedges
 
Competitive power generation revenue
 
$
21

 
$
8

 
 
Fuel
 
3

 
2

Trading activities
 
Competitive power generation revenue
 
76

 
114
Fair Value of Trading Derivative Instruments of Competitive Power Generation Segment
The change in the fair value of energy trading derivative instruments was as follows:
 
Years ended December 31,
(in millions)
2011
 
2010
Fair value of trading contracts at beginning of year
$
110

 
$
122

Net gains from energy trading activities
76

 
114

Amount realized from energy trading activities
(84
)
 
(131
)
Other changes in fair value
5

 
5

Fair value of trading contracts at end of year
$
107

 
$
110
Summary of margin and collateral deposits provided to and received from counterparties
The following table summarizes margin and collateral deposits provided to and received from counterparties:
(in millions)
December 31,
2011
 
December 31,
2010
Collateral provided to counterparties:
 
 
 
Offset against derivative liabilities
$
53

 
$
8

Reflected in margin and collateral deposits
58

 
65

Collateral received from counterparties:
 
 
 
Offset against derivative assets
53

 
52