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Derivative Instruments and Hedging Activities (Tables)
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12 Months Ended |
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Dec. 31, 2013
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| Derivative Instruments and Hedging Activities Disclosure [Abstract] |
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| 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. |
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| 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 |
| | — |
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| | 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. |
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| 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. |
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| 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 |
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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 |
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| 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 |
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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 |
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| | 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 |
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| 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 |
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