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Derivative Instruments and Hedging Activities (Tables)
 12 Months Ended
Dec. 31, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Notional Volumes of Derivative Instruments
The following table summarizes notional volumes of derivatives used for hedging and trading activities:
 
 
 
 
December 31, 2013
 
 
 
 
Economic Hedges
 
Trading Activities
 
Commodity
Instrument
Classification
Unit of
Measure
Midwest Generation
Other EME Sub- sidiaries
EME
 
Other EME Sub- sidiaries
 
Electricity
Forwards/Futures
Sales, net
GWh1
170

7

177

2 
—

 
Electricity
Forwards/Futures
Purchases, net
GWh
—

—

—

 
1

 
Electricity
Congestion
Purchases, net
GWh
—

56

56

4 
262,188

4 
 
 
 
 
December 31, 2012
 
 
 
 
Cash Flow Hedges
 
Economic Hedges
 
Trading Activities
 
Commodity
Instrument
Classification
Unit of
Measure
Midwest Generation
Other EME Sub- sidiaries
EME
 
Midwest Generation
Other EME Sub- sidiaries
EME
 
Other EME Sub- sidiaries
 
Electricity
Forwards/Futures
Sales, net
GWh
3,615

—

3,615

 
1

47

48

2 

—

 
Electricity
Forwards/Futures
Purchases, net
GWh
—

—

—

 
—

—

—

 
492

 
Electricity
Capacity
Purchases, net
GW-Day
—

—

—

 
—

—

—

 
60

3 
Electricity
Congestion
Purchases, net
GWh
—

—

—

 
—

263

263

4 

268,529

4 
Natural gas
Forwards/Futures
Purchase, net
bcf
—

—

—

 
—

—

—

 
9.9

 
1 
gigawatt-hours (GWh); gigawatts-day (GW-Day); billion cubic feet (bcf).
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 
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.
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.
Schedule of interest rate swaps
The following table summarizes EME's interest rate swaps:
 
 
 
 
 
 
 
Notional Value (in millions)
 
Effective Date
 
Expiration Date
 
Fixed Swap Rate Paid
 
December 31, 2013
 
December 31, 2012
Project Financing
 
 
 
 
 
 
 
 
 
Viento Funding II
June 2009
 
June 2016
 
3.18
%
 
48

 
65

Viento Funding II
March 2011
 
December 2020
 
3.42
%
 
30

 
108

Viento Funding II
July 2013
 
July 2023
 
3.03
%
 
103

 
—

Cedro Hill
December 2010
 
December 2025
 
4.29
%
 
106

 
112

Laredo Ridge
March 2011
 
March 2026
 
3.46
%
 
62

 
64

Tapestry
December 2011
 
December 2021
 
2.21
%
 
181

 
189

Broken Bow 1
December 2012
 
December 2013
 
0.83
%
 
—

 
47

Broken Bow 1
December 2013
 
December 2027
 
2.96
%
 
45

 
—

Crofton Bluffs1
December 2012
 
December 2013
 
0.78
%
 
—

 
24

Crofton Bluffs1
December 2013
 
December 2027
 
2.75
%
 
23

 
—

Walnut Creek Energy2
November 2011
 
May 2013
 
0.81
%
 
—

 
181

Walnut Creek Energy2
June 2013
 
May 2023
 
3.54
%
 
375

 
—

WCEP Holdings2
July 2011
 
May 2013
 
0.79
%
 
—

 
$
26

WCEP Holdings2
June 2013
 
May 2023
 
4.00
%
 
$
48

 
—

Forward Starting Swaps
 
 
 
 
 
 
 
 
 
Tapestry
December 2021
 
December 2029
 
3.57
%
 
60

 
60

Viento Funding II
July 2023
 
June 2028
 
4.99
%
 
65

 
—

1 
During the fourth quarter of 2013, the existing interest rate swaps for the Broken Bow and Crofton Bluffs projects expired and the forward starting swaps became effective.
2 
During the second quarter of 2013, the existing interest rate swaps for the Walnut Creek Project expired and, in conjunction with the conversion to term loans, the forward starting swaps became effective.
Schedule of Changes in Accumulated Other Comprehensive Income
The following table provides the cash flow hedge activity as part of Midwest Generation's AOCI:
 
Years Ended December 31,
(in millions)
2013
 
2012
Beginning of period derivative gains (losses)
(2
)
 
34

Effective portion of changes in fair value
(2
)
 
7

Reclassification to operating revenues
4

 
(43
)
End of period derivative gains (losses)1
—

 
(2
)
1
Unrealized derivative gains (losses) are before income taxes. Amounts recorded in AOCI include commodity contracts. For additional information, see Note 11—Accumulated Other Comprehensive Loss.
The following table provides the cash flow hedge activity as part of EME's AOCI:
 
Years Ended December 31,
 
2013
 
2012
(in millions)
Commodity Contracts
 
Interest Rate Contracts
 
Commodity Contracts
 
Interest Rate Contracts
Beginning of period derivative gains (losses)
(1
)
 
(118
)
 
35

 
(90
)
Effective portion of changes in fair value
(2
)
 
55

 
5

 
(28
)
Reclassification to operating revenues
3

 
—

 
(41
)
 
—

Reclassification to interest expense
—

 
5

 
—

 
—

End of period derivative gains (losses)1
—

 
(58
)
 
(1
)
 
(118
)
1 
Unrealized derivative gains (losses) are before income taxes. Amounts recorded in AOCI include commodity and interest rate contracts. For additional information, see Note 11—Accumulated Other Comprehensive Loss.
Schedule of Realized and Unrealized Gains (Losses) from Derivative Instruments
The effect of realized and unrealized gains from derivative instruments used for economic hedging and trading purposes on the consolidated statements of operations is presented below:
 
 
Years Ended December 31,
(in millions)
Income Statement Location
2013
 
2012
Economic hedges
Operating revenues
$
(9
)
 
$
31

 
Fuel
—

 
2

 
Interest expense, net
6

 
—

Trading activities
Operating revenues
75

 
68

The effect of realized and unrealized gains from derivative instruments used for non-trading purposes on the consolidated statements of operations is presented below:
(in millions)
Income Statement Location
Years Ended December 31,
2013
 
2012
Economic hedges
Operating revenues
$
(9
)
 
$
31

 
Fuel
—

 
2
Fair Value of Derivative Instruments
The following table summarizes EME's derivative instruments, including amounts offset by collateral and under master netting agreements:
 
December 31, 2013
 
Short Term
 
Long Term
 
 
(in millions)
Gross
Netting and Collateral
Subtotal
 
Gross
Netting and Collateral
Subtotal
 
Net
Assets
 
 
 
 
 
 
 
 
 
Electricity contracts
$
81

$
(37
)
$
44

 
$
23

$
(10
)
$
13

 
$
57

Natural gas contracts
47

(47
)
—

 
4

(4
)
—

 
—

Total derivatives subject to a master netting agreement
128

(84
)
44

 
27

(14
)
13

 
57

Total derivatives not subject to a master netting agreement1
—

—

—

 
5

—

5

 
5

Total assets
128

(84
)
44

 
32

(14
)
18

 
62

Liabilities
 
 
 
 
 
 
 
 
 
Electricity contracts
36

(36
)
—

 
9

(9
)
—

 
—

Natural gas contracts
46

(46
)
—

 
5

(5
)
—

 
—

Total derivatives subject to a master netting agreement
82

(82
)
—

 
14

(14
)
—

 
—

Total derivatives not subject to a master netting agreement1
—

—

—

 
56

—

56

 
56

Total liabilities
$
82

$
(82
)
$
—

 
$
70

$
(14
)
$
56

 
$
56

1    EME's interest rate swaps are not subject to master netting agreements and do not require EME to post collateral.
 
December 31, 2012
 
Short Term
 
Long Term
 
 
(in millions)
Gross
Netting and Collateral
Subtotal
 
Gross
Netting and Collateral
Subtotal
 
Net
Assets
 
 
 
 
 
 
 
 
 
Electricity contracts
120

(67
)
53

 
52

(15
)
37

 
90

Natural gas contracts
33

(33
)
—

 
1

(1
)
—

 
—

Coal contracts
2

(2
)
—

 
—

—

—

 
—

Total assets
155

(102
)
53

 
53

(16
)
37

 
90

Liabilities
 
 
 
 
 
 
 
 

Electricity contracts
71

(71
)
—

 
15

(15
)
—

 
—

Natural gas contracts
36

(36
)
—

 
1

(1
)
—

 
—

Coal contracts
2

(2
)
—

 
—

—

—

 
—

Total derivatives subject to a master netting agreement
109

(109
)
—

 
16

(16
)
—

 
—

Total derivatives not subject to a master netting agreement1
—

—

—

 
118

—

118

 
118

Total liabilities
109

(109
)
—

 
134

(16
)
118

 
118

1 
EME's interest rate swaps are not subject to master netting agreements and do not require EME to post collateral.
The following table summarizes Midwest Generation's commodity short-term derivative instruments for non-trading purposes, including amounts offset by collateral and under master netting agreements:
 
December 31, 2013
 
December 31, 2012
(in millions)
Gross
Netting and Collateral
Net
 
Gross
Netting and Collateral
Net
Assets
 
 
 
 
 
 
 
Electricity contracts
$
1

$
(1
)
$
—

 
$
12

$
(10
)
$
2

Liabilities
 
 
 
 
 
 
 
Electricity contracts
1

(1
)
—

 
13

(10
)
3
Schedule of Change in Fair Value of Energy Trading Derivative Instruments
The change in the fair value of energy trading derivative instruments was as follows:
(in millions)
2013
 
2012
Fair value of trading contracts at beginning of period
$
84

 
$
107

Net gains from energy trading activities
75

 
68

Amount realized from energy trading activities
(88
)
 
(93
)
Other changes in fair value
(12
)
 
2

Fair value of trading contracts at end of period
$
59

 
$
84