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Derivative Instruments and Hedging Activities (Tables)
9 Months Ended
Sep. 30, 2011
Derivative Instruments and Hedging Activities Disclosure [Abstract] 
Notional Volumes of Derivative Instruments for Electric Utility Segment
 
 
 
Economic Hedges
Commodity
Unit of Measure
 
September 30,
2011
 
December 31,
2010
Electricity options, swaps and forwards
GWh
 
30,143
 
32,138
Natural gas options, swaps and forwards
Bcf
 
266
 
250
CRRs
GWh
 
146,628
 
181,291
Tolling arrangements
GWh
 
104,822
 
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 September 30, 2011:
 
Derivative Assets
 
Derivative Liabilities1
 
 
(in millions)
Short-
Term
 
Long-
Term
 
Subtotal
 
Short-
Term
 
Long-
Term
 
Subtotal
 
Net
Liability
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic hedges
$
82

 
$
145

 
$
227

 
$
305

 
$
577

 
$
882

 
$
655

Netting and collateral
(14
)
 
(13
)
 
(27
)
 
(18
)
 
(23
)
 
(41
)
 
(14
)
Total
$
68

 
$
132

 
$
200

 
$
287

 
$
554

 
$
841

 
$
641

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
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
2011
 
2010
 
2011
 
2010
Realized losses
$
(58
)
 
$
(53
)
 
$
(132
)
 
$
(116
)
Unrealized losses
(110
)
 
(165
)
 
(433
)
 
(1,022
)
Notional Volumes of Derivative Instruments for Competitive Power Generation Segment
September 30, 2011
 
 
 
 
 
 
 
 
 
Hedging Activities
 
 
 
 
Commodity
 
Instrument
 
Classification
 
Unit of Measure
 
Cash Flow
Hedges
 
 
Economic
Hedges
 
 
Trading
Activities
 
Electricity
 
Forwards/Futures
 
Sales
 
GWh
 
15,910

1
 
13,353

3
 
36,597

 
Electricity
 
Forwards/Futures
 
Purchases
 
GWh
 
101

1
 
13,230

3
 
42,429

  
Electricity
 
Capacity
 
Sales
 
MW-Day
(in thousands)
 
134

2
 
—

 
 
12

2
Electricity
 
Capacity
 
Purchases
 
MW-Day
(in thousands)
 
12

2
 
—

 
 
219

2
Electricity
 
Congestion
 
Sales
 
GWh
 
—

 
 
90

4
 
15,910

4
Electricity
 
Congestion
 
Purchases
 
GWh
 
—

 
 
4,023

4
 
253,688

4
Natural gas
 
Forwards/Futures
 
Sales
 
bcf
 
—

 
 
—

  
 
55.3

  
Natural gas
 
Forwards/Futures
 
Purchases
 
bcf
 
—

 
 
—

  
 
53.4

  
Fuel oil
 
Forwards/Futures
 
Sales
 
barrels
 
—

 
 
—

  
 
100,000

 
Fuel oil
 
Forwards/Futures
 
Purchases
 
barrels
 
—

 
 
240,000

  
 
140,000

 
Coal
 
Forwards/Futures
 
Sales
 
tons
 
—

 
 
—

  
 
1,485,000

 
Coal
 
Forwards/Futures
 
Purchases
 
tons
 
—

 
 
—

  
 
1,485,000

 

(in millions)
Instrument
 
Purpose
 
Type of Hedge
 
Notional Amount
 
Expiration Date
Accreting forward starting interest rate swap
 
Convert floating rate (1-month LIBOR debt to fixed rate (0.8135%) debt
 
Cash flow
 
$
39

 
May 2013
Accreting interest rate swap
 
Convert floating rate (1-month LIBOR debt to fixed rate (0.79%) debt
 
Cash flow
 
24

 
May 2013
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 forward starting interest rate swap
 
Convert floating rate (3-month LIBOR debt to fixed rate (3.5429%) debt
 
Cash flow
 
398

 
May 2023
Amortizing forward starting interest rate swap
 
Convert floating rate (3-month LIBOR debt to fixed rate (4.0025%) debt
 
Cash flow
 
48

 
May 2023
Amortizing interest rate swap
 
Convert floating rate (3-month LIBOR debt to fixed rate (4.29%) debt
 
Cash flow
 
119

 
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
September 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
$
34

 
$
8

 
$
42

 
$
16

 
$
90

 
$
106

 
$
(64
)
Economic hedges
29

 
3

 
32

 
31

 
2

 
33

 
(1
)
Trading activities
132

 
102

 
234

 
96

 
37

 
133

 
101

 
195

 
113

 
308

 
143

 
129

 
272

 
36

Netting and collateral received1
(163
)
 
(54
)
 
(217
)
 
(140
)
 
(49
)
 
(189
)
 
(28
)
Total
$
32

 
$
59

 
$
91

 
$
3

 
$
80

 
$
83

 
$
8

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
Nine Months Ended
September 30,
 
Income Statement
Location
(in millions)
2011
 
2010
 
Beginning of period derivative gains
$
27

 
$
175

 
 
Effective portion of changes in fair value
(62
)
 
102

 
 
Reclassification to net income
(29
)
 
(134
)
 
Competitive power generation revenue
End of period derivative gains (losses)
$
(64
)
 
$
143

 
 
1 
Unrealized derivative gains (losses) are before income taxes. The after-tax amounts recorded in accumulated other comprehensive income (loss) at September 30, 2011 and 2010 were $(39) million and $86 million, respectively.
Effect of realized and unrealized gains (losses) from derivative instruments on Competitive Power Generation Segment
 
 
 
 
Three months ended
September 30,
 
Nine months ended
September 30,
(in millions)
 
Income Statement Location
 
2011
 
2010
 
2011
 
2010
Economic hedges
 
Competitive power generation revenue
 
$
(6
)
 
$
7

 
$
20

 
$
—

 
 
Fuel
 
(3
)
 
2

 
1

 
—

Trading activities
 
Competitive power generation revenue
 
11

 
28

 
68

 
108

Summary of margin and collateral deposits provided to and received from counterparties
(in millions)
September 30,
2011
 
December 31,
2010
Collateral provided to counterparties:
 
 
 
Offset against derivative liabilities
$
16

 
$
8

Reflected in margin and collateral deposits
53

 
65

Collateral received from counterparties:
 
 
 
Offset against derivative assets
30

 
52