Revenue from Contracts with Customers

Disaggregation of Revenues with Customers

The following table represents a disaggregation of our revenue for the three months ended March 31, 2018 by reportable segment (in millions). See Note 13 for a description of our segments.



	Wholesale
	West		Texas		East		Retail		Elimination			Total
Third Party:
Energy & other products	$	199	$	304	$	132	$	443	$	—		$	1,078
Capacity	19		26		149		—		—			194
Revenues relating to physical or executory contracts – third party	$	218	$	330	$	281	$	443	$	—		$	1,272

Affiliate⁽¹⁾:	$	8	$	4	$	21	$	1	$	(34	)	$	—

Revenues relating to leases and derivative instruments⁽²⁾												$	737
Total operating revenues												$	2,009

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(1)	Affiliate energy, other and capacity revenues reflect revenues on transactions between wholesale and retail affiliates excluding affiliate activity related to leases and derivative instruments. All such activity supports retail supply needs from the wholesale business and/or allows for collateral margin netting efficiencies at Calpine Corporation.

(2)

Revenues relating to contracts accounted for as leases and derivatives include energy and capacity revenues relating to PPAs that we are required to account for as operating leases and physical and financial commodity derivative contracts, primarily relating to power, natural gas and environmental products. For revenue related to derivative instruments, includes revenue recorded in Commodity revenue and mark-to-market gain (loss) on our Consolidated Condensed Statement of Operations.

For contracts that do not meet the requirements of a lease and either do not meet the definition of a derivative instrument or are exempt from derivative accounting, we have applied the new revenue recognition guidance beginning in the first quarter of 2018. Under the new guidance, the majority of our operating revenue continues to be recognized as the underlying commodity or service is delivered to our customers.

Energy and Other Products

Variable payments for power and steam that are based on generation, including retail sales of power, are recognized over time as the underlying commodity is generated and control is transferred to our customer upon transmission and delivery. Ancillary service revenues are also included within energy-related revenues and are recognized over time as the service is provided.

For our power, steam and ancillary service contracts, we have elected the practical expedient that allows us to recognize revenue in the amount to which we have the right to invoice to the extent we determine that we have a right to consideration in an amount that corresponds directly with the value provided to date. To the extent this practical expedient cannot be utilized, we will recognize revenue over time based on the quantity of the commodity delivered to the customer for power and steam sales and over time as the service is provided for our ancillary service sales.

Energy and other revenues also includes revenues generated from the sale of natural gas and environmental products, including RECs and are recognized at either a point in time or over time when control of the commodity has transferred. Revenues from the sale of RECs are primarily related to credits that are generated upon generation of renewable power from our Geysers Assets and are recognized over a period of time similar to the timing of the related energy sale. Revenues from sales of RECs or other environmental products that are not generated from our assets are recognized once all certifications have been completed and the credits are delivered to the customer at a point in time. Revenues from our natural gas sales are recognized at a point in time when delivery of the natural gas is provided. Revenues from natural gas and emission product sales are generally at the contracted transaction price, which may be fixed or index-based.

Capacity

Capacity revenues include fixed and variable capacity payments, which are based on generation volumes and include capacity payments received from RTO and ISO capacity auctions. For these contracts, we have elected the practical expedient that allows us to recognize revenue in the amount to which we have the right to invoice to the extent we determine that we have a right to consideration in an amount that corresponds directly with the value provided to date. To the extent this practical expedient cannot be utilized, we will recognize revenue over time as the service is being provided to the customer.

Performance Obligations and Contract Balances

Certain of our contracts have multiple performance obligations. The revenues associated with each individual performance obligation is based on the relative stand-alone sales price of each good or service or, when not available, is based on a cost incurred plus margin approach. For a significant portion of our contracts with multiple performance obligations, management has applied the practical expedient that results in recognition of revenue commensurate with the invoiced amount and no allocation is required as all performance obligations are transferred over the same period of time.

Certain of our contracts include volumetric optionality based on the customer’s needs. The transaction price within these contracts are based on a stand-alone sale price of the good or service being provided and revenue is recognized based on the customer’s usage. On a monthly basis, revenue is recognized based on estimated or actual usage by the customer at the transaction price. To the extent estimated usage is used in the recognition of revenue, revenues are adjusted for actual usage once known; however, this adjustment is not material to the revenues recognized. Generally, we have applied the practical expedient that allows us to recognize revenue based on the invoiced amount for these contracts.

Changes in estimates for our contracts are not material and revisions to estimates are recognized when the amounts can be reasonably estimated. Unbilled retail sales are based upon estimates of customer usage since the date of the last meter reading provided by the ISOs or electric distribution companies by applying the estimated revenue per KWh by customer class to the estimated number of KWhs delivered but not yet billed. Estimated amounts are adjusted when actual usage is known and billed. During the three months ended March 31, 2018, there were no significant changes to revenue amounts recognized in prior periods as a result of a change in estimates. Sales and other taxes we collect concurrent with revenue-producing activities are excluded from our operating revenues.

Billing requirements for our wholesale customers generally result in billing customers on a monthly basis in the month following the delivery of the good or service. Once billed, payment is generally required within 20 days resulting in payment for the delivery of the good or service in the month following delivery of the good or service. Billing requirements for our retail customers are generally once every 30 days and may result in billed amounts relating to our retail customers extending up to 60 days. Based on the terms of our agreements, payment is generally received at or shortly after delivery of the good or service.

Changes in accounts receivable relating to our customers is primarily due to the timing difference between payment and when the good or service is provided. During the three months ended March 31, 2018, there were no significant changes in accounts receivable other than normal billing and collection transactions and there were no material credit or impairment losses recognized relating to accounts receivable balances associated with contracts with customers.

When we receive consideration from a customer prior to transferring goods or services to the customer under the terms of a contract, we record deferred revenue, which represents a contract liability. Such deferred revenue typically results from consideration received prior to the transfer of goods and services relating to our capacity contracts and the sale of RECs that are not generated from our power plants. Based on the nature of these contracts and the timing between when consideration is received and delivery of the good or service is provided, these contracts do not contain any material financing elements.

At March 31, 2018 and December 31, 2017, deferred revenue balances relating to contracts with our customers were included in other current liabilities on our Consolidated Condensed Balance Sheets. We classify deferred revenue as current or long-term based on the timing of when we expect to recognize revenue. The balances outstanding at both March 31, 2018 and December 31, 2017 were not material. The revenue recognized during the three months ended March 31, 2018, relating to the deferred revenue balance at the beginning of the period was immaterial and resulted from our performance under the customer contracts. The change in deferred revenues during the period ended March 31, 2018 was primarily due to the timing difference of when consideration was received and when the related good or service was transferred.

Contract Costs

For certain retail contracts, we incur third party incremental broker costs that are capitalized on our Consolidated Condensed Balance Sheets. Capitalized contract costs are amortized on a straight line basis over the term of the underlying sales contract to the extent the term extends beyond one year. Contract costs associated with sales contracts that are less than one year are expensed as incurred under a practical expedient.

At both March 31, 2018 and December 31, 2017, the capitalized contract cost balance was not material. There were no impairment losses or changes in amortization during the three months ended March 31, 2018 and amortization of contract costs during the period ending March 31, 2018 was immaterial.

Performance Obligations not yet Satisfied

As of March 31, 2018, we have entered into certain contracts with customers under which we have not yet completed our performance obligations. This includes agreements for which we are providing power and/or capacity from our generating facilities for an aggregate transaction price of approximately $200 million based on current market conditions. We expect to recognize such amounts as revenue through 2029 as we transfer control of the commodities to our customers. These contracts do not include contracts where we have elected the practical expedient that allows us to recognize revenue in the amount to which we have the right to invoice to the extent we determine that we have a right to consideration in an amount that corresponds directly with the value provided to date.