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Derivative Instruments and Hedging Activities (Tables)
 9 Months Ended
Sep. 30, 2012
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
September 30,
2012
 
December 31,
2011
Electricity options, swaps and forwards
GWh
18,304
 
30,881
Natural gas options, swaps and forwards
Bcf
142
 
300
Congestion revenue rights
GWh
140,263
 
166,163
Tolling arrangements
GWh
102,123
 
104,154
Fair Value of Derivative Instruments of Electric Utility Segment
The following table summarizes the gross and net fair values of commodity derivative instruments at September 30, 2012:
 
 
Derivative Assets
 
Derivative Liabilities1
 
 
(in millions)
 
Short-Term
 
Long-Term
 
Subtotal
 
Short-Term
 
Long-Term
 
Subtotal
 
Net
Liability
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic hedges
 
$
55

 
$
80

 
$
135

 
$
177

 
$
1,002

 
$
1,179

 
$
1,044

Netting and collateral
 
(18
)
 
(6
)
 
(24
)
 
(49
)
 
(19
)
 
(68
)
 
(44
)
Total
 
$
37

 
$
74

 
$
111

 
$
128

 
$
983

 
$
1,111

 
$
1,000

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, 2011:
 
 
Derivative Assets
 
Derivative Liabilities
 
 
(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
Summarization of Economic Hedging Activities of Electric Utility
The following table summarizes the components of economic hedging activity:
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
2012
 
2011
 
2012
 
2011
Realized gains (losses)
$
(77
)
 
$
(58
)
 
$
(199
)
 
$
(132
)
Unrealized gains (losses)
(91
)
 
(110
)
 
(29
)
 
(433
)
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:
September 30, 2012
 
 
 
 
 
 
 
 
Hedging Activities
 
 
 
Commodity
 
Instrument
 
Classification
 
Unit of
Measure
 
Cash Flow
Hedges
 
Economic
Hedges
 
Trading
Activities
 
Electricity
 
Forwards/Futures
 
Sales, net
 
GWh
 
5,644

 
58

2
—

  
Electricity
 
Forwards/Futures
 
Purchases, net
 
GWh
 
—

 
—

 
550

 
Electricity
 
Capacity
 
Purchases, net
 
GW-Day
 
—

 
—

 
97

1
Electricity
 
Congestion
 
Purchases, net
 
GWh
 
—

  
241

3
281,251

3
Natural gas
 
Forwards/Futures
 
Sales, net
 
bcf
 
—

 
—

 
0.4

 
Fuel oil
 
Forwards/Futures
 
Sales, net
 
barrels
 
—

  
—

  
100,000

  
Fuel oil
 
Forwards/Futures
 
Purchases, net
 
barrels
 
—

 
120,000

 
—

 
At September 30, 2012, EME had interest rate contracts with notional values totaling $727 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, at September 30, 2012, EME had forward starting interest rate contracts with notional values totaling $641 million that will convert floating rate LIBOR-based debt to fixed rates ranging from 0.7825% to 4.0025%. These contracts have effective dates beginning December 2012 through December 2021 and expire December 2013 through December 2029.
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

 
335

2
—

  
Electricity
 
Forwards/Futures
 
Purchases, net
 
GWh
 
—

 
—

 
2,926

  
Electricity
 
Capacity
 
Sales, net
 
GW-Day
 
61

1
—

  
—

 
Electricity
 
Capacity
 
Purchases, net
 
GW-Day
 
—

 
—

  
184

1
Electricity
 
Congestion
 
Purchases, net
 
GWh
 
—

  
1,261

3
230,798

3
Natural gas
 
Forwards/Futures
 
Sales, net
 
bcf
 
—

  
—

  
0.2

  
Fuel oil
 
Forwards/Futures
 
Purchases, net
 
barrels
 
—

  
240,000

  
—

  
1 
EME's hedge transactions for capacity result from bilateral trades. Capacity sold in the PJM Interconnection, LLC Reliability Pricing Model (PJM RPM) auction is not accounted for as a derivative.
2 
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.
3 
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 EME's consolidated balance sheets:
September 30, 2012
 
Derivative Assets
 
Derivative Liabilities
 
 
(in millions)
Short-term
 
Long-term
 
Subtotal
 
Short-term
 
Long-term
 
Subtotal
 
Net Assets (Liabilities)
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$
14

 
$
2

 
$
16

 
$
9

 
$
1

 
$
10

 
$
6

Interest rate contracts
—

 
—

 
—

 
—

 
125

 
125

 
(125
)
Economic hedges
25

 
1

 
26

 
23

 
1

 
24

 
2

Trading activities
321

 
145

 
466

 
265

 
98

 
363

 
103

 
360

 
148

 
508

 
297

 
225

 
522

 
(14
)
Netting and collateral received1
(321
)
 
(105
)
 
(426
)
 
(296
)
 
(100
)
 
(396
)
 
(30
)
Total
$
39

 
$
43

 
$
82

 
$
1

 
$
125

 
$
126

 
$
(44
)
December 31, 2011
 
Derivative Assets
 
Derivative Liabilities
 
 
(in millions)
Short-term
 
Long-term
 
Subtotal
 
Short-term
 
Long-term
 
Subtotal
 
Net Assets (Liabilities)
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$
40

 
$
1

 
$
41

 
$
2

 
$
—

 
$
2

 
$
39

Interest rate contracts
—

 
—

 
—

 
—

 
90

 
90

 
(90
)
Economic hedges
24

 
—

 
24

 
20

 
—

 
20

 
4

Trading activities
277

 
142

 
419

 
232

 
79

 
311

 
108

 
341

 
143

 
484

 
254

 
169

 
423

 
61

Netting and collateral received1
(301
)
 
(81
)
 
(382
)
 
(253
)
 
(79
)
 
(332
)
 
(50
)
Total
$
40

 
$
62

 
$
102

 
$
1

 
$
90

 
$
91

 
$
11

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
 
 
 
Nine months ended September 30,
 
 
 
2012
 
2011
 
 
(in millions)
Commodity Contracts
 
Interest Rate Contracts
 
Commodity Contracts
 
Interest Rate Contracts
 
Income Statement
Location
Beginning of period derivative gains (losses)
$
35

 
$
(90
)
 
$
43

 
$
(16
)
 
 
Effective portion of changes in fair value
3

 
(35
)
 
2

 
(64
)
 
 
Reclassification to earnings
(31
)
 
—

 
(29
)
 
—

 
Competitive power generation revenue
End of period derivative gains (losses)
$
7

 
$
(125
)
 
$
16

 
$
(80
)
 
 

1 
Unrealized derivative gains (losses) are before income taxes. The after-tax amounts recorded in accumulated other comprehensive loss at September 30, 2012 and 2011 for commodity and interest rate contracts were $7 million and $(79) million, and $10 million and $(49) 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:
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
Income Statement Location
2012
 
2011
 
2012
 
2011
Economic hedges
Competitive power generation revenues
$
8

 
$
(3
)
 
$
25

 
$
5

 
Fuel
3

 
(3
)
 
2

 
1

Trading activities
Competitive power generation revenues
22

 
11

 
72

 
68
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)
September 30,
2012
 
December 31,
2011
Collateral provided to counterparties:
 
 
 
Offset against derivative liabilities
$
54

 
$
53

Reflected in margin and collateral deposits
88

 
58

Collateral received from counterparties:
 
 
 
Offset against derivative assets
39

 
53