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Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2013
Fair Value Disclosures [Abstract]  
Schedule of assets and liabilities measured at fair value on a recurring basis
Assets and liabilities measured at fair value consisted of the following:
September 30, 2013
 
Level 1
 
Level 2
 
Level 3 (a)
 
Reclassification (b)
 
Total
Assets:
 
 
 
 
 
 
 
 
 
Commodity contracts
$
140

 
$
941

 
$
48

 
$
2

 
$
1,131

Interest rate swaps
—

 
1

 
—

 
—

 
1

Nuclear decommissioning trust – equity securities (c)
299

 
172

 
—

 
—

 
471

Nuclear decommissioning trust – debt securities (c)
—

 
266

 
—

 
—

 
266

Total assets
$
439

 
$
1,380

 
$
48

 
$
2

 
$
1,869

Liabilities:
 
 
 
 
 
 
 
 
 
Commodity contracts
$
129

 
$
26

 
$
52

 
$
2

 
$
209

Interest rate swaps
—

 
—

 
1,167

 
—

 
1,167

Total liabilities
$
129

 
$
26

 
$
1,219

 
$
2

 
$
1,376


December 31, 2012
 
Level 1
 
Level 2
 
Level 3 (a)
 
Total
Assets:
 
 
 
 
 
 
 
Commodity contracts
$
180

 
$
1,784

 
$
83

 
$
2,047

Interest rate swaps
—

 
2

 
—

 
2

Nuclear decommissioning trust – equity securities (c)
249

 
144

 
—

 
393

Nuclear decommissioning trust – debt securities (c)
—

 
261

 
—

 
261

Total assets
$
429

 
$
2,191

 
$
83

 
$
2,703

Liabilities:
 
 
 
 
 
 
 
Commodity contracts
$
208

 
$
121

 
$
54

 
$
383

Interest rate swaps
—

 
2,067

 
—

 
2,067

Total liabilities
$
208

 
$
2,188

 
$
54

 
$
2,450


_______________
(a)
See table below for description of Level 3 assets and liabilities.
(b)
Fair values are determined on a contract basis, but certain contracts result in a current asset and a noncurrent liability, or vice versa, as presented in the balance sheet.
(c)
The nuclear decommissioning trust investment is included in the investments line in the balance sheet. See Note 12.
Schedule of fair value of the Level 3 assets and liabilities by major contract type (all related to commodity contracts) and the significant unobservable inputs used in the valuations
September 30, 2013
 
 
Fair Value
 
 
 
 
 
 
Contract Type (a)
 
Assets
 
Liabilities
 
Total
 
Valuation Technique
 
Significant Unobservable Input
 
Range (b)
Electricity purchases and sales
 
$
5

 
$
(2
)
 
$
3

 
Valuation Model
 
Illiquid pricing locations (c)
 
$30 to $45/MWh
 
 
 
 
 
 
 
 
 
 
Hourly price curve shape (d)
 
$20 to $70/MWh
 
 
 
 
 
 
 
 
 
 
 
 
 
Electricity spread options
 
—

 
(19
)
 
(19
)
 
Option Pricing Model
 
Gas to power correlation (e)
 
45% to 100%
 
 
 
 
 
 
 
 
 
 
Power volatility (f)
 
10% to 30%
 
 
 
 
 
 
 
 
 
 
 
 
 
Electricity congestion revenue rights
 
37

 
(5
)
 
32

 
Market Approach (g)
 
Illiquid price differences between settlement points (h)
 
$0.00 to $30.00
 
 
 
 
 
 
 
 
 
 
 
 
 
Coal purchases
 
1

 
(12
)
 
(11
)
 
Market Approach (g)
 
Illiquid price variances between mines (i)
 
$0.00 to $1.00
 
 
 
 
 
 
 
 
 
 
Probability of default (j)
 
0% to 40%
 
 
 
 
 
 
 
 
 
 
Recovery rate (k)
 
0% to 40%
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
—

 
(1,167
)
 
(1,167
)
 
Valuation Model
 
Nonperformance risk adjustment (l)
 
30% to 35%
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
5

 
(14
)
 
(9
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
48

 
$
(1,219
)
 
$
(1,171
)
 
 
 
 
 
 

December 31, 2012
 
 
Fair Value
 
 
 
 
 
 
Contract Type (a)
 
Assets
 
Liabilities
 
Total
 
Valuation Technique
 
Significant Unobservable Input
 
Range (b)
Electricity purchases and sales
 
$
5

 
$
(9
)
 
$
(4
)
 
Valuation Model
 
Illiquid pricing locations (c)
 
$20 to $40/MWh
 
 
 
 
 
 
 
 
 
 
Hourly price curve shape (d)
 
$20 to $50/MWh
 
 
 
 
 
 
 
 
 
 
 
 
 
Electricity spread options
 
34

 
(10
)
 
24

 
Option Pricing Model
 
Gas to power correlation (e)
 
20% to 90%
 
 
 
 
 
 
 
 
 
 
Power volatility (f)
 
20% to 40%
 
 
 
 
 
 
 
 
 
 
 
 
 
Electricity congestion revenue rights
 
41

 
(2
)
 
39

 
Market Approach (g)
 
Illiquid price differences between settlement points (h)
 
$0.00 to $0.50
 
 
 
 
 
 
 
 
 
 
 
 
 
Coal purchases
 
—

 
(32
)
 
(32
)
 
Market Approach (g)
 
Illiquid price variances between mines (i)
 
$0.00 to $1.00
 
 
 
 
 
 
 
 
 
 
Probability of default (j)
 
5% to 40%
 
 
 
 
 
 
 
 
 
 
Recovery rate (k)
 
0% to 40%
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
3

 
(1
)
 
2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
83

 
$
(54
)
 
$
29

 
 
 
 
 
 

____________
(a)
Electricity purchase and sales contracts include wind generation agreements and hedging positions in the ERCOT west region as well as power contracts, the valuations of which include unobservable inputs related to the hourly shaping of the price curve. Electricity spread option contracts consist of physical electricity call options. Electricity congestion revenue rights contracts consist of forward purchase contracts (swaps and options) used to hedge electricity price differences between settlement points within ERCOT. Coal purchase contracts relate to western (Powder River Basin) coal. Interest rate swaps are held by TCEH to hedge exposure to its variable rate debt.
(b)
The range of the inputs may be influenced by factors such as time of day, delivery period, season and location.
(c)
Based on the historical range of forward average monthly ERCOT West Hub prices.
(d)
Based on the historical range of forward average hourly ERCOT North Hub prices.
(e)
Estimate of the historical range based on forward natural gas and on-peak power prices for the ERCOT hubs most relevant to our spread options.
(f)
Based on historical forward price changes.
(g)
While we use the market approach, there is either insufficient market data to consider the valuation liquid or the significance of credit reserves or non-performance risk adjustments results in a Level 3 designation.
(h)
Based on the historical price differences between settlement points in the ERCOT North Hub and the ERCOT West Hub.
(i)
Based on the historical range of price variances between mine locations.
(j)
Estimate of the range of probabilities of default based on past experience and the length of the contract as well as our and counterparties' credit ratings.
(k)
Estimate of the default recovery rate based on historical corporate rates.
(l)
Estimate of nonperformance risk adjustment based on TCEH senior secured bond trading values. See discussion immediately below regarding transfers into Level 3.
Schedule of changes in fair value of the Level 3 assets and liabilities (all related to commodity contracts)
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Net asset balance at beginning of period
$
88

 
$
12

 
$
29

 
$
53

Total unrealized valuation gains (losses)
(24
)
 
12

 
(41
)
 
(5
)
Purchases, issuances and settlements (a):

 

 

 

Purchases
6

 
17

 
66

 
30

Issuances
—

 
(4
)
 
(6
)
 
(15
)
Settlements
(62
)
 
(56
)
 
(45
)
 
(34
)
Transfers into Level 3 (b)
(1,179
)
 
3

 
(1,178
)
 
(42
)
Transfers out of Level 3 (b)
—

 
—

 
4

 
(3
)
Net change (c)
(1,259
)
 
(28
)
 
(1,200
)
 
(69
)
Net liability balance at end of period
$
(1,171
)
 
$
(16
)
 
$
(1,171
)
 
$
(16
)
Unrealized valuation gains (losses) relating to instruments held at end of period
$
254

 
$
15

 
$
280

 
$
(22
)
____________
(a)
Settlements reflect reversals of unrealized mark-to-market valuations previously recognized in net income. Purchases and issuances reflect option premiums paid or received.
(b)
Includes transfers due to changes in the observability of significant inputs. Transfers in and out occur at the end of each quarter, which is when the assessments are performed. All Level 3 transfers during the periods presented are in and out of Level 2.
(c)
Substantially all changes in values of commodity contracts are reported in the income statement in net gain (loss) from commodity hedging and trading activities. Changes in values of interest rate swaps are reported in the income statement in interest expense and related charges. Activity excludes changes in fair value in the month the position settled as well as amounts related to positions entered into and settled in the same month.