Derivative Instruments

9 Months Ended

Sep. 30, 2011

Derivative Instruments

Derivative Instruments

Derivative Instruments

Risks, Objectives, and Strategies

Substantially all of our risk management activities involving derivatives occur in our competitive businesses. In carrying out our competitive business activities, we purchase and sell power, fuel, and other energy-related commodities in competitive markets. These activities expose us to significant risks, including market risk from price volatility for energy commodities and the credit risks of counterparties with which we enter into contracts.

        To lower our exposure to the risk of unfavorable fluctuations in commodity prices, interest rates, and foreign currency rates, we routinely enter into derivative contracts, such as fixed price forward physical purchase and sales contracts, futures, financial swaps, and option contracts traded in the over-the-counter markets or on exchanges, for hedging purposes. We also enter into derivative contracts for trading purposes.

        We discuss the nature of our business and associated risks in connection with our objectives and strategies for using derivatives for both risk management and non-risk management activities in Note 13 of our 2010 Annual Report on Form 10-K.

Accounting for Derivative Instruments

We recognize all qualifying derivative instruments on the balance sheet at fair value as either assets or liabilities.

Accounting Designation

We must evaluate new and existing transactions and agreements to determine whether they meet the definition of a derivative, for which there are several possible accounting treatments. The permissible accounting treatments include:

• -

  normal purchase normal sale (NPNS),

  -

  cash flow hedge,

  -

  fair value hedge, and

  -

  mark-to-market.

        Mark-to-market is required as the default accounting treatment for all derivatives unless they qualify, and we specifically designate them, for one of the other accounting treatments. Derivatives designated for any of the elective accounting treatments must meet specific, restrictive criteria, both at the time of designation and on an ongoing basis.

        We discuss our accounting policies for derivatives and hedging activities and their impacts on our financial statements in Note 1 to our 2010 Annual Report on Form 10-K.

        In the sections below, we describe the significant activity in 2011 by accounting treatment.

NPNS

We continue to elect NPNS accounting for certain contracts that provide for the purchase or sale of a physical commodity that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business.

Cash Flow Hedging

Commodity Cash Flow Hedges

We have designated fixed-price forward contracts as cash-flow hedges of forecasted purchases and sales of energy, fuel, and other related commodities for the years 2011 through 2017. We had net unrealized pre-tax losses on these cash-flow hedges recorded in "Accumulated other comprehensive loss" of $406.8 million at September 30, 2011 and $388.0 million at December 31, 2010.

        We expect to reclassify $224.7 million of net pre-tax losses on cash-flow hedges from "Accumulated other comprehensive loss" into earnings during the next twelve months based on market prices at September 30, 2011. However, the actual amount reclassified into earnings could vary from the amounts recorded at September 30, 2011, due to future changes in market prices.

        When we determine that a forecasted transaction originally designated as a hedged item has become probable of not occurring, we immediately reclassify net unrealized gains or losses associated with those hedges from "Accumulated other comprehensive loss" to earnings. We recognized in earnings the following pre-tax amounts on such contracts:

	Quarter Ended September 30,					Nine Months Ended September 30,
	2011			2010		2011			2010
	(In millions)
Pre-tax gains (losses)	$	(3.4	)	$	—	$	(3.7	)	$	(0.3	)

Interest Rate Swaps Designated as Cash Flow Hedges

Accumulated other comprehensive loss includes net unrealized pre-tax gains on interest rate cash-flow hedges of prior debt issuances totaling $8.9 million at September 30, 2011 and $10.1 million at December 31, 2010. We expect to reclassify $0.1 million of pre-tax net gains on these cash-flow hedges from "Accumulated other comprehensive loss" into "Interest expense" during the next twelve months. We had no hedge ineffectiveness on these swaps.

        During the third quarter of 2011, a subsidiary of Constellation Energy entered into forward-starting interest rate swap contracts to manage a portion of our interest rate exposure for anticipated long-term borrowings to finance our solar projects. The swaps have contract amounts that total $30.6 million with an average interest rate of 3.6% and expire in 2027. At September 30, 2011, the fair value of these swap contracts was an unrealized pre-tax loss of $3.3 million.

Fair Value Hedging

We elect fair value hedge accounting for a limited portion of our derivative contracts including certain interest rate swaps and certain forward contracts and swaps associated with natural gas fuel in storage. The objectives for electing fair value hedge accounting in these situations are to manage our exposure to changes in the fair value of our assets and liabilities, to optimize the mix of our fixed and floating-rate debt, and to hedge the value of our natural gas in storage.

Interest Rate Swaps Designated as Fair Value Hedges

At December 31, 2010, we had interest rate swaps qualifying as fair value hedges relating to $400 million of our fixed-rate debt maturing in 2012 and 2015. The fair value of these hedges was an unrealized gain of $35.7 million at December 31, 2010.

        At September 30, 2011, we have interest rate swaps qualifying as fair value hedges relating to $550 million of our fixed-rate debt maturing in 2015, and converted this notional amount of debt to floating-rate. The fair value of these hedges was an unrealized gain of $47.0 million at September 30, 2011.

        We recorded the fair value of these hedges as an increase in our "Derivative assets" and an increase in our "Long-term debt."

Hedge Ineffectiveness

For all categories of derivative instruments designated in hedging relationships, we recorded in earnings the following pre-tax gains (losses) related to hedge ineffectiveness:

	Quarter Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(In millions)
Cash-flow hedges	$	(76.8	)	$	(21.8	)	$	(99.6	)	$	(46.1	)
Fair value hedges		0.6			—			(1.2	)		—
Total	$	(76.2	)	$	(21.8	)	$	(100.8	)	$	(46.1	)

        The ineffectiveness in the table above excludes pre-tax gains of $1.6 million and $2.7 million related to the change in our fair value hedges excluded from hedge ineffectiveness for the quarter and nine months ended September 30, 2011, respectively. We did not recognize any gain or loss related to the change in our fair value hedges excluded from hedge ineffectiveness during the quarter and nine months ended September 30, 2010.

Mark-to-Market

During February 2011, we entered into interest rate swaps through 2015 related to $150 million of our fixed rate debt maturing in 2020, and converted this notional amount of debt to floating rate over the related time frame. However, these interest rate swaps do not qualify as fair value hedges and will be marked to market through earnings.

Quantitative Information About Derivatives and Hedging Activities

Balance Sheet Tables

We present our derivative assets and liabilities in our Consolidated Balance Sheets on a net basis, including cash collateral, whenever we have a legally enforceable master netting agreement with a counterparty to a derivative contract. We use master netting agreements whenever possible to manage and substantially reduce our potential counterparty credit risk. The net presentation in our Consolidated Balance Sheets reflects our actual credit exposure after giving effect to the beneficial effects of these agreements and cash collateral, and our credit risk is reduced further by other forms of collateral.

        The following tables provide information about the risks we manage using derivatives. These tables only include derivatives and do not reflect the price risks we are hedging that arise from physical assets or nonderivative accrual contracts within our Generation and NewEnergy businesses.

        We present this information by disaggregating our net derivative assets and liabilities into gross components on a contract-by-contract basis before giving effect to the risk-reducing benefits of master netting arrangements and collateral. As a result, we must present each individual contract as an "asset value" if it is in the money or a "liability value" if it is out of the money, regardless of whether the individual contracts offset market or credit risks of other contracts in full or in part. Therefore, the gross amounts in these tables do not reflect our actual economic or credit risk associated with derivatives. This gross presentation is intended only to show separately the various derivative contract types we use, such as commodities, interest rate, and foreign exchange.

        The contracts in the tables below are segregated between derivatives designated for hedge accounting and those not designated for hedge accounting. Derivatives not designated in hedging relationships include our NewEnergy retail operations, economic hedges of accrual activities, and risk management and trading activities. We use the end of period accounting designation to determine the classification for each derivative position.

As of September 30, 2011		Derivatives Designated as Hedging Instruments for Accounting Purposes					Derivatives Not Designated As Hedging Instruments for Accounting Purposes					All Derivatives Combined
Contract type		Asset Values3		Liability Values4			Asset Values3		Liability Values4			Asset Values3			Liability Values4
		(In millions)
	Power contracts	$	617.0	$	(683.7	)	$	4,028.3	$	(4,322.5	)	$	4,645.3		$	(5,006.2	)
	Gas contracts		1,270.0		(1,302.8	)		3,547.1		(3,594.8	)		4,817.1			(4,897.6	)
	Coal contracts		28.4		(22.3	)		109.0		(96.8	)		137.4			(119.1	)
	Other commodity contracts1		—		—			538.9		(529.2	)		538.9			(529.2	)
	Interest rate contracts		47.0		(3.3	)		57.7		(51.9	)		104.7			(55.2	)
	Foreign exchange contracts		—		—			14.4		(5.5	)		14.4			(5.5	)
	Equity contracts		—		—			0.4		—			0.4			—
Total gross fair values		$	1,962.4	$	(2,012.1	)	$	8,295.8	$	(8,600.7	)	$	10,258.2		$	(10,612.8	)
	Netting arrangements5												(9,883.4	)		9,883.4
	Cash collateral												(81.4	)		1.9
Net fair values												$	293.4		$	(727.5	)
Net fair value by balance sheet line item:
Accounts receivable2												$	(198.6	)
Derivative assets—current													233.8
Derivative assets—noncurrent													258.2
Derivative liabilities—current																(487.8	)
Derivative liabilities—noncurrent																(239.7	)
Total Derivatives												$	293.4		$	(727.5	)

1 Other commodity contracts include oil, freight, emission allowances, renewable energy credits, and weather contracts.

2 Represents the unrealized fair value of exchange traded derivatives, exclusive of cash margin posted.

3 Represents in-the-money contracts without regard to potentially offsetting out-of-the-money contracts under master netting agreements.

4 Represents out-of-the-money contracts without regard to potentially offsetting in-the-money contracts under master netting agreements.

5 Represents the effect of legally enforceable master netting agreements.

As of December 31, 2010		Derivatives Designated as Hedging Instruments for Accounting Purposes					Derivatives Not Designated As Hedging Instruments for Accounting Purposes					All Derivatives Combined
Contract type		Asset Values3		Liability Values4			Asset Values3		Liability Values4			Asset Values3			Liability Values4
		(In millions)
	Power contracts	$	1,167.9	$	(1,362.8	)	$	6,795.0	$	(7,166.5	)	$	7,962.9		$	(8,529.3	)
	Gas contracts		1,902.3		(1,832.8	)		3,390.1		(3,155.3	)		5,292.4			(4,988.1	)
	Coal contracts		97.0		(48.6	)		266.0		(259.7	)		363.0			(308.3	)
	Other commodity contracts1		—		—			61.4		(61.6	)		61.4			(61.6	)
	Interest rate contracts		35.7		—			34.4		(35.7	)		70.1			(35.7	)
	Foreign exchange contracts		—		—			11.0		(8.4	)		11.0			(8.4	)
Total gross fair values		$	3,202.9	$	(3,244.2	)	$	10,557.9	$	(10,687.2	)	$	13,760.8		$	(13,931.4	)
	Netting arrangements5												(12,955.5	)		12,955.5
	Cash collateral												(28.4	)		0.6
Net fair values												$	776.9		$	(975.3	)
Net fair value by balance sheet line item:
Accounts receivable2												$	(16.4	)
Derivative assets—current													534.4
Derivative assets—noncurrent													258.9
Derivative liabilities—current																(622.3	)
Derivative liabilities—noncurrent																(353.0	)
Total Derivatives												$	776.9		$	(975.3	)

1 Other commodity contracts include oil, freight, emission allowances, and weather contracts.

2 Represents the unrealized fair value of exchange traded derivatives, exclusive of cash margin posted.

3 Represents in-the-money contracts without regard to potentially offsetting out-of-the-money contracts under master netting agreements.

4 Represents out-of-the-money contracts without regard to potentially offsetting in-the-money contracts under master netting agreements.

5 Represents the effect of legally enforceable master netting agreements.

Gain and (Loss) Tables

The tables below summarize derivative gains and losses segregated into the following categories:

• -

  cash flow hedges,

  -

  fair value hedges, and

  -

  mark-to-market derivatives.

        The tables only include this information for derivatives and do not reflect the related gains or losses that arise from generation and generation-related assets, nonderivative accrual contracts, or NPNS contracts within our Generation and NewEnergy businesses, other than fair value hedges, for which we separately show the gain or loss on the hedged asset or liability. As a result, these tables only reflect the impact of derivatives themselves and therefore do not necessarily include all of the income statement impacts of the transactions for which derivatives are used to manage risk. For a more complete discussion of how derivatives affect our financial performance, see our accounting policy for Revenues, Fuel and Purchased Energy Expenses, and Derivatives and Hedging Activities in Note 1 of our 2010 Annual Report on Form 10-K.

        The following tables present gains and losses on derivatives designated as cash flow hedges.

Cash Flow Hedges		Quarter Ended September 30,
		Gain (Loss) Recorded in AOCI							Gain (Loss) Reclassified from AOCI into Earnings						Ineffectiveness Gain (Loss) Recorded in Earnings
Contract type:		2011			2010			Statement of Income (Loss) Line Item	2011			2010			2011			2010
		(In millions)
Hedges of forecasted sales:								Nonregulated revenues
	Power contracts	$	25.0		$	92.1			$	(7.7	)	$	(72.5	)	$	0.6		$	14.3
	Gas contracts		(2.9	)		(20.2	)			48.0			19.4			4.4			(0.2	)
Total gains (losses)		$	22.1		$	71.9		Total included in nonregulated revenues	$	40.3		$	(53.1	)	$	5.0		$	14.1
Hedges of forecasted purchases:								Fuel and purchased energy expense
	Power contracts	$	(16.9	)	$	(211.6	)		$	(63.5	)	$	(195.3	)	$	(13.6	)	$	(16.3	)
	Gas contracts		(110.8	)		(119.7	)			(4.3	)		41.1			(69.7	)		(20.0	)
	Coal contracts		(4.3	)		20.8				11.6			(9.1	)		1.5			0.4
Total (losses) gains		$	(132.0	)	$	(310.5	)	Total included in fuel and purchased energy expense	$	(56.2	)	$	(163.3	)	$	(81.8	)	$	(35.9	)
Hedges of interest rates:								Interest expense
	Interest rate contracts		3.3			—				—			0.1			—			—
Total gains		$	3.3		$	—		Total included in interest expense	$	—		$	0.1		$	—		$	—
Grand total (losses) gains		$	(106.6	)	$	(238.6	)		$	(15.9	)	$	(216.3	)	$	(76.8	)	$	(21.8	)

Cash Flow Hedges								Nine Months Ended September 30,
		Gain (Loss) Recorded in AOCI							Gain (Loss) Reclassified from AOCI into Earnings						Ineffectiveness Gain (Loss) Recorded in Earnings
Contract type:		2011			2010			Statement of Income (Loss) Line Item	2011			2010			2011			2010
		(In millions)
Hedges of forecasted sales:								Nonregulated revenues
	Power contracts	$	(30.8	)	$	213.8			$	2.2		$	(132.7	)	$	58.1		$	15.6
	Gas contracts		58.2			(53.3	)			128.5			55.8			(44.7	)		(4.2	)
	Other commodity contracts1		—			—				—			(0.7	)		—			—
Total gains (losses)		$	27.4		$	160.5		Total included in nonregulated revenues	$	130.7		$	(77.6	)	$	13.4		$	11.4
Hedges of forecasted purchases:								Fuel and purchased energy expense
	Power contracts	$	(14.3	)	$	(503.2	)		$	(297.0	)	$	(730.0	)	$	(32.7	)	$	(29.0	)
	Gas contracts		(180.0	)		(195.9	)			(10.5	)		164.2			(82.6	)		(33.1	)
	Coal contracts		(7.7	)		42.6				21.0			(36.9	)		2.3			4.4
	Other commodity contracts2		—			(0.2	)			—			(0.3	)		—			0.2
Total losses		$	(202.0	)	$	(656.7	)	Total included in fuel and purchased energy expense	$	(286.5	)	$	(603.0	)	$	(113.0	)	$	(57.5	)
Hedges of interest rates:								Interest expense
	Interest rate contracts		3.3			—				1.1			4.2			—			—
Total gains		$	3.3		$	—		Total included in interest expense	$	1.1		$	4.2		$	—		$	—
Grand total (losses) gains		$	(171.3	)	$	(496.2	)		$	(154.7	)	$	(676.4	)	$	(99.6	)	$	(46.1	)

1 Other commodity sale contracts include oil and freight contracts.

2 Other commodity purchase contracts include freight and emission allowances.

        The following table presents gains and losses on derivatives designated as fair value hedges and, separately, the gains and losses on the hedged item.

Fair Value Hedges		Quarter Ended September 30,										Nine Months Ended September 30,
		Amount of Gain (Loss) Recognized in Income on Derivative				Amount of Gain (Loss) Recognized in Income on Hedged Item						Amount of Gain (Loss) Recognized in Income on Derivative				Amount of Gain (Loss) Recognized in Income on Hedged Item
	Statement of Income (Loss) Line Item
Contract type:		2011		2010		2011			2010			2011		2010		2011			2010
		(In millions)
Gas contracts	Nonregulated revenues	$	6.6	$	—	$	(6.2	)	$	—		$	7.4	$	—	$	(6.2	)	$	—
Interest rate contracts	Interest expense		15.8		14.2		(14.0	)		(14.1	)		32.2		31.6		(31.5	)		(29.3	)
Total gains (losses)		$	22.4	$	14.2	$	(20.2	)	$	(14.1	)	$	39.6	$	31.6	$	(37.7	)	$	(29.3	)

        The following table presents gains and losses on mark-to-market derivatives.

Mark-to-Market Derivatives			Quarter Ended September 30,						Nine Months Ended September 30,
			Amount of Gain (Loss) Recorded in Income on Derivative						Amount of Gain (Loss) Recorded in Income on Derivative
		Statement of Income (Loss) Line Item
Contract type:			2011			2010			2011			2010
			(In millions)
Commodity contracts:
	Power contracts	Nonregulated revenues	$	23.2		$	(2.5	)	$	63.3		$	(27.3	)
	Gas contracts	Nonregulated revenues		(57.9	)		(12.8	)		(39.8	)		17.9
	Coal contracts	Nonregulated revenues		(6.7	)		1.7			(7.4	)		9.4
	Other commodity contracts1	Nonregulated revenues		3.2			(8.9	)		(6.1	)		(7.8	)
Interest rate contracts		Nonregulated revenues		0.9			(1.9	)		0.3			(3.6	)
Interest rate contracts		Interest expense		2.5			—			5.8			—
Foreign exchange contracts		Nonregulated revenues		9.5			1.1			2.7			(1.0	)
Equity contracts		Nonregulated revenues		(0.3	)		—			(0.3	)		—
Total gains (losses)			$	(25.6	)	$	(23.3	)	$	18.5		$	(12.4	)

1 Other commodity contracts include oil, freight, weather, renewable energy credits, and emission allowances.

Volume of Derivative Activity

The volume of our derivatives activity is directly related to the fundamental nature and scope of our business and the risks we manage. We own or control electric generating facilities, which exposes us to both power and fuel price risk; we serve electric and gas wholesale and retail customers within our NewEnergy business, which exposes us to electricity and natural gas price risk; and we provide risk management services and engage in trading activities, which can expose us to a variety of commodity price risks. In order to manage the risks associated with these activities, we are required to be an active participant in the energy markets, and we routinely employ derivative instruments to conduct our business.

        Derivative instruments provide an efficient and effective way to conduct our business and to manage the associated risks. As such, we use derivatives in the following ways:

• -

  We manage our generating resources and NewEnergy business based upon established policies and limits, and we use derivatives to establish a portion of our hedges and to adjust the level of our hedges from time to time.

  -

  We engage in trading activities which enable us to execute hedging transactions in a cost-effective manner. We manage those activities based upon various risk measures, including position limits, economic value at risk (EVaR) and value at risk (VaR), and we use derivatives to establish and maintain those activities within the prescribed limits.

  -

  We also use derivatives to execute, control, and reduce the overall level of our trading positions and risk as well as to manage a portion of our interest rate risk associated with debt and our foreign currency risk from non-dollar denominated transactions.

        The following tables present information designed to provide insight into the overall volume of our derivatives usage. However, the volumes presented in these tables should only be used as an indication of the extent of our derivatives usage and the risks they are intended to manage and are subject to a number of limitations as follows:

• -

  The volume information is not a complete representation of our market price risk because it only includes derivative contracts. Accordingly, these tables do not present a complete picture of our overall net economic exposure, and should not be interpreted as an indication of open or unhedged commodity positions, because the use of derivatives is only one of the means by which we engage in and manage the risks of our business.

• -

  The tables also do not include volumes of commodities under nonderivative contracts that we use to serve customers or manage our risks. Our actual net economic exposure from our generating facilities and NewEnergy activities is reduced by derivatives, and the exposure from our trading activities is managed and controlled through the risk measures discussed above. Therefore, the information in the tables below is only an indication of that portion of our business that we manage through derivatives and serves primarily to identify the extent of our derivatives activities and the types of risks that they are intended to manage.

  -

  We have computed the derivative volumes for commodities by aggregating the absolute value of net positions within commodities for each year. This provides an indication of the level of derivatives activity, but it does not indicate either the direction of our position (long or short), or the overall size of our position. We believe this presentation gives an appropriate indication of the level of derivatives activity without unnecessarily revealing the size and direction of our derivatives positions. The disclosure of such information could limit the effectiveness and profitability of our business activities.

  -

  The volume information for commodity derivatives represents the "delta equivalent" quantity of those contracts rather than the gross notional amount. We believe that the delta equivalent quantity is the most relevant measure of the volume associated with these commodity derivatives. The delta-equivalent quantity represents a risk-adjusted notional quantity for each contract that takes into account the probability that an option will be exercised. For interest rate contracts and foreign currency contracts we have presented the notional amounts of such contracts in the tables below.

        The following tables present the volume of our derivative activities as of September 30, 2011 and December 31, 2010 shown by contractual settlement year.

Quantities1 Under Derivative Contracts									As of September 30, 2011
Contract Type (Unit)	2011		2012		2013		2014		2015		Thereafter		Total
	(In millions)
Power (MWH)		10.0		20.3		13.6		1.6		2.6		1.4		49.5
Gas (mmBTU)		76.4		227.2		56.1		61.8		40.4		0.9		462.8
Coal (Tons)		1.2		0.1		1.1		—		—		—		2.4
Oil (BBL)		—		0.1		0.1		0.1		—		—		0.3
Emission Allowances (Tons)		0.9		0.1		0.1		—		—		—		1.1
Renewable Energy Credits (Number of credits)		0.2		0.3		0.3		0.3		0.3		0.4		1.8
Equity contracts (Number of shares)		—		0.3		0.2		0.2		—		—		0.7
Interest Rate Contracts	$	153.9	$	1,044.3	$	638.2	$	225.0	$	1,250.0	$	450.6	$	3,762.0
Foreign Exchange Rate Contracts	$	6.2	$	48.7	$	8.8	$	16.8	$	15.5	$	—	$	96.0

Quantities1 Under Derivative Contracts									As of December 31, 2010
Contract Type (Unit)	2011		2012		2013		2014		2015		Thereafter		Total
	(In millions)
Power (MWH)		21.2		—		3.8		4.2		2.3		0.2		31.7
Gas (mmBTU)		175.3		90.1		80.2		64.7		24.1		—		434.4
Coal (Tons)		4.4		2.5		0.1		—		—		—		7.0
Oil (BBL)		0.2		0.1		0.1		—		—		—		0.4
Emission Allowances (Tons)		1.5		—		—		—		—		—		1.5
Renewable Energy Credits (Number of credits)		0.4		0.3		0.3		0.3		0.3		0.7		2.3
Interest Rate Contracts	$	639.4	$	490.7	$	941.8	$	405.0	$	460.0	$	175.0	$	3,111.9
Foreign Exchange Rate Contracts	$	48.7	$	8.7	$	16.8	$	16.8	$	15.5	$	—	$	106.5

1 Amounts in the tables are only intended to provide an indication of the level of derivatives activity and should not be interpreted as a measure of any derivative position or overall economic exposure to market risk. Quantities are expressed as "delta equivalents" on an absolute value basis by contract type by year. Additionally, quantities relate only to derivatives and do not include potentially offsetting quantities associated with physical assets and nonderivative accrual contracts.

Credit-Risk Related Contingent Features

Certain of our derivative instruments contain provisions that would require additional collateral upon a credit-related event such as an adequate assurance provision or a credit rating decrease in the senior unsecured debt of Constellation Energy. The amount of collateral we could be required to post would be determined by the fair value of contracts containing such provisions that represent a net liability, after offset for the fair value of any asset contracts with the same counterparty under master netting agreements and any other collateral already posted. This collateral amount is a component of, and is not in addition to, the total collateral we could be required to post for all contracts upon a credit rating decrease.

        The following tables present information related to credit-risk related contingent features of our derivatives at September 30, 2011 and December 31, 2010.

Credit-Risk Related Contingent Feature							As of September 30, 2011
Gross Fair Value of Derivative Contracts Containing This Feature1		Offsetting Fair Value of In-the-Money Contracts Under Master Netting Agreements2			Net Fair Value of Derivative Contracts Containing This Feature3		Amount of Posted Collateral4		Contingent Collateral Obligation5
(In billions)
$	2.7	$	(2.1	)	$	0.6	$	0.4	$	0.1

Credit-Risk Related Contingent Feature							As of December 31, 2010
Gross Fair Value of Derivative Contracts Containing This Feature1		Offsetting Fair Value of In-the-Money Contracts Under Master Netting Agreements2			Net Fair Value of Derivative Contracts Containing This Feature3		Amount of Posted Collateral4		Contingent Collateral Obligation5
(In billions)
$	4.6	$	(3.7	)	$	0.9	$	0.7	$	0.1

1 Amount represents the gross fair value of out-of-the-money derivative contracts containing credit-risk-related contingent features that are not fully collateralized by posted cash collateral on an individual, contract-by-contract basis ignoring the effects of master netting agreements.

2 Amount represents the offsetting fair value of in-the-money derivative contracts under legally-enforceable master netting agreements with the same counterparty, which reduces the amount of any liability for which we potentially could be required to post collateral.

3 Amount represents the net fair value of out-of-the-money derivative contracts containing credit-risk- related contingent features after considering the mitigating effects of offsetting positions under master netting arrangements and reflects the actual net liability upon which any potential contingent collateral obligations would be based.

4 Amount includes cash collateral posted of $1.9 million and letters of credit of $367.9 million at September 30, 2011 and cash collateral posted of $0.6 million and letters of credit of $656.9 million at December 31, 2010.

5 Amounts represent the additional collateral that we could be required to post with counterparties, including both cash collateral and letters of credit, in the event of a credit downgrade to below investment grade after giving consideration to offsetting derivative and non-derivative positions under master netting agreements.

Concentrations of Credit Risk

We discuss our concentrations of credit risk, including derivative-related positions, in Note 1 to our 2010 Annual Report on Form 10-K. As of September 30, 2011, we had credit exposure to one counterparty, a large power cooperative, equal to 16% of our total credit exposure.