Use of Collateral

We use margin deposits, prepayments and letters of credit as credit support with and from our counterparties for commodity procurement and risk management activities. In addition, we have granted additional first priority liens on the assets currently subject to first priority liens under various debt agreements as collateral under certain of our power and natural gas agreements and certain of our interest rate swap agreements in order to reduce the cash collateral and letters of credit that we would otherwise be required to provide to the counterparties under such agreements. The counterparties under such agreements share the benefits of the collateral subject to such first priority liens pro rata with the lenders under our various debt agreements.

The table below summarizes the balances outstanding under margin deposits, natural gas and power prepayments, and exposure under letters of credit and first priority liens for commodity procurement and risk management activities as of March 31, 2015 and December 31, 2014 (in millions):



	March 31, 2015		December 31, 2014
Margin deposits⁽¹⁾	$	107	$	96
Natural gas and power prepayments	21		22
Total margin deposits and natural gas and power prepayments with our counterparties⁽²⁾	$	128	$	118

Letters of credit issued	$	459	$	450
First priority liens under power and natural gas agreements	33		48
First priority liens under interest rate swap agreements	120		116
Total letters of credit and first priority liens with our counterparties	$	612	$	614

Margin deposits posted with us by our counterparties⁽¹⁾⁽³⁾	$	40	$	47
Letters of credit posted with us by our counterparties	60		61
Total margin deposits and letters of credit posted with us by our counterparties	$	100	$	108

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(1)

Balances are subject to master netting arrangements and presented on a gross basis on our Consolidated Condensed Balance Sheets. We do not offset fair value amounts recognized for derivative instruments executed with the same counterparty under a master netting arrangement for financial statement presentation, and we do not offset amounts recognized for the right to reclaim, or the obligation to return, cash collateral with corresponding derivative instrument fair values. See Note 5 for further discussion of our derivative instruments subject to master netting arrangements.


(2)	At March 31, 2015 and December 31, 2014, $115 million and $109 million, respectively, were included in margin deposits and other prepaid expense and $13 million and $9 million, respectively, were included in other assets on our Consolidated Condensed Balance Sheets.


(3)	Included in other current liabilities on our Consolidated Condensed Balance Sheets.

Future collateral requirements for cash, first priority liens and letters of credit may increase or decrease based on the extent of our involvement in hedging and optimization contracts, movements in commodity prices, and also based on our credit ratings and general perception of creditworthiness in our market.