|
Derivative Instruments and Hedging Activities (Tables)
|
6 Months Ended |
|
Jun. 30, 2011
|
| Derivative Instruments and Hedging Activities |
|
| Notional Volumes of Derivative Instruments for Electric Utility Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic Hedges |
|
Commodity
|
|
Unit of Measure
|
|
June 30,
2011
|
|
December 31,
2010
|
|
| |
|
|
Electricity options, swaps and forwards |
|
GWh |
|
|
34,471 |
|
|
32,138 |
|
|
Natural gas options, swaps and forwards |
|
Bcf |
|
|
255 |
|
|
250 |
|
|
CRRs |
|
GWh |
|
|
147,992 |
|
|
181,291 |
|
|
Tolling arrangements |
|
GWh |
|
|
105,631 |
|
|
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 June 30, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
|
Derivative Liabilities |
|
|
|
(in millions)
|
|
Short-
Term
|
|
Long-
Term
|
|
Subtotal
|
|
Short-
Term
|
|
Long-
Term
|
|
Subtotal
|
|
Net
Liability
|
|
| |
|
|
Non-trading activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Economic hedges |
|
$ |
89 |
|
$ |
200 |
|
$ |
289 |
|
$ |
243 |
|
$ |
579 |
|
$ |
822 |
|
$ |
533 |
|
|
Netting and collateral |
|
|
(11 |
) |
|
(21 |
) |
|
(32 |
) |
|
(12 |
) |
|
(21 |
) |
|
(33 |
) |
|
(1 |
) |
| |
|
|
|
|
Total |
|
$ |
78 |
|
$ |
179 |
|
$ |
257 |
|
$ |
231 |
|
$ |
558 |
|
$ |
789 |
|
$ |
532 |
|
| |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, |
|
Six months ended
June 30, |
|
(in millions)
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
| |
|
|
Realized losses |
|
$ |
(35 |
) |
$ |
(38 |
) |
$ |
(74 |
) |
$ |
(62 |
) |
|
Unrealized losses |
|
|
(227 |
) |
|
(276 |
) |
|
(323 |
) |
|
(857 |
) |
| |
|
| |
|
| Notional Volumes of Derivative Instruments for Competitive Power Generation Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 2011 |
|
|
|
|
|
|
|
|
|
Hedging Activities |
|
|
|
Commodity
|
|
Instrument
|
|
Classification
|
|
Unit of Measure
|
|
Cash Flow
Hedges
|
|
Economic
Hedges
|
|
Trading
Activities
|
|
| |
|
| Electricity |
|
Forwards/Futures |
|
Sales |
|
GWh |
|
|
18,901 |
1 |
|
17,660 |
3 |
|
39,629 |
|
| Electricity |
|
Forwards/Futures |
|
Purchases |
|
GWh |
|
|
203 |
1 |
|
17,750 |
3 |
|
42,863 |
|
| Electricity |
|
Capacity |
|
Sales |
|
MW-Day
(in thousands) |
|
|
171 |
2 |
|
— |
|
|
17 |
2 |
| Electricity |
|
Capacity |
|
Purchases |
|
MW-Day
(in thousands) |
|
|
17 |
2 |
|
— |
|
|
247 |
2 |
| Electricity |
|
Congestion |
|
Sales |
|
GWh |
|
|
— |
|
|
124 |
4 |
|
14,314 |
4 |
| Electricity |
|
Congestion |
|
Purchases |
|
GWh |
|
|
— |
|
|
5,459 |
4 |
|
287,221 |
4 |
| Natural gas |
|
Forwards/Futures |
|
Sales |
|
bcf |
|
|
— |
|
|
1.5 |
|
|
354.1 |
|
| Natural gas |
|
Forwards/Futures |
|
Purchases |
|
bcf |
|
|
— |
|
|
1.5 |
|
|
351.8 |
|
| Fuel oil |
|
Forwards/Futures |
|
Sales |
|
barrels |
|
|
— |
|
|
— |
|
|
45,000 |
|
| Fuel oil |
|
Forwards/Futures |
|
Purchases |
|
barrels |
|
|
— |
|
|
240,000 |
|
|
70,000 |
|
| Coal |
|
Forwards/Futures |
|
Sales |
|
tons |
|
|
— |
|
|
— |
|
|
2,564,250 |
|
| Coal |
|
Forwards/Futures |
|
Purchases |
|
tons |
|
|
— |
|
|
— |
|
|
2,564,250 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| (in millions) |
Instrument
|
|
Purpose
|
|
Type of Hedge
|
|
Notional Amount
|
|
Expiration Date
|
| |
| Amortizing interest rate swap |
|
Convert floating rate (6-month LIBOR) debt to fixed rate (3.175%) debt |
|
Cash flow |
|
$ |
84 |
|
June 2016 |
Amortizing interest rate swap |
|
Convert floating rate (6-month LIBOR) debt to fixed rate (3.415%) debt |
|
Cash flow |
|
|
110 |
|
December 2020 |
Amortizing interest rate swap |
|
Convert floating rate (3-month LIBOR) debt to fixed rate (4.29%) debt |
|
Cash flow |
|
|
120 |
|
December 2025 |
Amortizing interest rate swap |
|
Convert floating rate (3-month LIBOR) debt to fixed rate (3.46%) debt |
|
Cash flow |
|
|
67 |
|
March 2026 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, 2010 |
|
|
|
|
|
|
|
|
|
Hedging Activities |
|
|
|
Commodity
|
|
Instrument
|
|
Classification
|
|
Unit of Measure
|
|
Cash Flow
Hedges
|
|
Economic
Hedges
|
|
Trading
Activities
|
|
| |
|
| Electricity |
|
Forwards/Futures |
|
Sales |
|
GWh |
|
|
16,799 |
1 |
|
22,456 |
3 |
|
34,630 |
|
| Electricity |
|
Forwards/Futures |
|
Purchases |
|
GWh |
|
|
408 |
1 |
|
22,931 |
3 |
|
37,669 |
|
| Electricity |
|
Capacity |
|
Sales |
|
MW-Day
(in thousands) |
|
|
190 |
2 |
|
— |
|
|
136 |
2 |
| Electricity |
|
Capacity |
|
Purchases |
|
MW-Day
(in thousands) |
|
|
8 |
2 |
|
— |
|
|
419 |
2 |
| Electricity |
|
Congestion |
|
Sales |
|
GWh |
|
|
— |
|
|
136 |
4 |
|
12,020 |
4 |
| Electricity |
|
Congestion |
|
Purchases |
|
GWh |
|
|
— |
|
|
1,143 |
4 |
|
187,689 |
4 |
| Natural gas |
|
Forwards/Futures |
|
Sales |
|
bcf |
|
|
— |
|
|
— |
|
|
30.6 |
|
| Natural gas |
|
Forwards/Futures |
|
Purchases |
|
bcf |
|
|
— |
|
|
— |
|
|
34.3 |
|
| Fuel oil |
|
Forwards/Futures |
|
Sales |
|
barrels |
|
|
— |
|
|
250,000 |
|
|
10,000 |
|
| Fuel oil |
|
Forwards/Futures |
|
Purchases |
|
barrels |
|
|
— |
|
|
490,000 |
|
|
10,000 |
|
| Coal |
|
Forwards/Futures |
|
Sales |
|
tons |
|
|
— |
|
|
— |
|
|
2,630,500 |
|
| Coal |
|
Forwards/Futures |
|
Purchases |
|
tons |
|
|
— |
|
|
— |
|
|
2,645,500 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| (in millions) |
Instrument
|
|
Purpose
|
|
Type of Hedge
|
|
Notional
Amount
|
|
Expiration Date
|
| |
| Amortizing interest rate swap |
|
Convert floating rate (6-month LIBOR) debt to fixed rate (3.175%) debt |
|
Cash flow |
|
$ |
138 |
|
June 2016 |
Amortizing forward starting interest rate swap |
|
Convert floating rate (3-month LIBOR) debt to fixed rate (4.29%) debt |
|
Cash flow |
|
|
122 |
|
December 2025 |
Amortizing forward starting interest rate swap |
|
Convert floating rate (3-month LIBOR) debt to fixed rate (3.46%) debt |
|
Cash flow |
|
|
68 |
|
March 2026 |
| |
- 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
- EMG also entered into transactions that adjust financial and physical positions, or day-ahead and real-time positions to reduce costs or increase gross margin. These positions largely offset each other. 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| June 30, 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 |
|
$ |
27 |
|
$ |
2 |
|
$ |
29 |
|
$ |
14 |
|
$ |
34 |
|
$ |
48 |
|
$ |
(19 |
) |
| |
Economic hedges |
|
|
60 |
|
|
4 |
|
|
64 |
|
|
51 |
|
|
1 |
|
|
52 |
|
|
12 |
|
|
Trading activities |
|
|
141 |
|
|
88 |
|
|
229 |
|
|
98 |
|
|
20 |
|
|
118 |
|
|
111 |
|
| |
|
|
|
|
|
|
|
228 |
|
|
94 |
|
|
322 |
|
|
163 |
|
|
55 |
|
|
218 |
|
|
104 |
|
|
Netting and collateral received1 |
|
|
(189 |
) |
|
(31 |
) |
|
(220 |
) |
|
(157 |
) |
|
(32 |
) |
|
(189 |
) |
|
(31 |
) |
| |
|
|
|
|
Total |
|
$ |
39 |
|
$ |
63 |
|
$ |
102 |
|
$ |
6 |
|
$ |
23 |
|
$ |
29 |
|
$ |
73 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Non-trading activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash flow hedges |
|
$ |
54 |
|
$ |
2 |
|
$ |
56 |
|
$ |
10 |
|
$ |
25 |
|
$ |
35 |
|
$ |
21 |
|
| |
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 |
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Hedge Activity1
Six Months Ended
June 30, |
|
|
|
|
Income Statement
Location
|
(in millions)
|
|
2011
|
|
2010
|
| |
|
Beginning of period derivative gains |
|
$ |
27 |
|
$ |
175 |
|
|
|
Effective portion of changes in fair value |
|
|
(13 |
) |
|
30 |
|
|
|
Reclassification to net income |
|
|
(29 |
) |
|
(122 |
) |
Competitive power generation revenue |
| |
|
|
|
|
|
End of period derivative gains (losses) |
|
$ |
(15 |
) |
$ |
83 |
|
|
| |
- 1
- Unrealized derivative gains (losses) are before income taxes. The after-tax amounts recorded in accumulated other comprehensive income (loss) at June 30, 2011 and 2010 were $(9) million and $50 million, respectively.
|
|
| Effect of realized and unrealized gains (losses) from derivative instruments on Competitive Power Generation Segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
(in millions)
|
|
Income Statement Location
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
| |
|
|
Economic hedges |
|
Competitive power generation revenue |
|
$ |
20 |
|
$ |
(3 |
) |
$ |
26 |
|
$ |
(7 |
) |
|
|
|
Fuel |
|
|
(2 |
) |
|
(2 |
) |
|
4 |
|
|
(1 |
) |
|
Trading activities |
|
Competitive power generation revenue |
|
|
41 |
|
|
33 |
|
|
57 |
|
|
80 |
|
| |
|
|
|
| Summary of margin and collateral deposits provided to and received from counterparties |
|
|
|
|
|
|
|
|
|
(in millions)
|
|
June 30,
2011
|
|
December 31,
2010
|
|
| |
|
|
Collateral provided to counterparties: |
|
|
|
|
|
|
|
| |
Offset against derivative liabilities |
|
$ |
4 |
|
$ |
8 |
|
| |
Reflected in margin and collateral deposits |
|
|
64 |
|
|
65 |
|
|
Collateral received from counterparties: |
|
|
|
|
|
|
|
| |
Offset against derivative assets |
|
|
33 |
|
|
52 |
| |
|