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Derivative Instruments and Hedging Activities (Tables)
 3 Months Ended
Mar. 31, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Notional Volumes of Derivative Instruments for Electric Utility Segment
The following table summarizes the notional volumes of derivatives used for hedging activities:
 
 
Economic Hedges
Commodity
Unit of Measure
March 31,
2012
 
December 31,
2011
Electricity options, swaps and forwards
GWh
28,611
 
30,881
Natural gas options, swaps and forwards
Bcf
258
 
300
Congestion revenue rights
GWh
150,896
 
166,163
Tolling arrangements
GWh
103,491
 
104,154
Fair Value of Derivative Instruments of Electric Utility Segment
The following table summarizes the gross and net fair values of commodity derivative instruments at March 31, 2012:
 
 
Derivative Assets
 
Derivative Liabilities1
 
 
(in millions)
 
Short-Term
 
Long-Term
 
Subtotal
 
Short-Term
 
Long-Term
 
Subtotal
 
Net
Liability
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic hedges
 
$
65

 
$
72

 
$
137

 
$
338

 
$
1,153

 
$
1,491

 
$
1,354

Netting and collateral
 
(14
)
 
(7
)
 
(21
)
 
(84
)
 
(18
)
 
(102
)
 
(81
)
Total
 
$
51

 
$
65

 
$
116

 
$
254

 
$
1,135

 
$
1,389

 
$
1,273

1 
Includes the fair value of derivatives with SCE's consolidated affiliates; however, in Edison International’s consolidated financial statements, the fair value of such derivatives is eliminated.
The following table summarizes the gross and net fair values of commodity derivative instruments at December 31, 2011:
 
 
Derivative Assets
 
Derivative Liabilities
 
 
(in millions)
 
Short-Term
 
Long-Term
 
Subtotal
 
Short-Term
 
Long-Term
 
Subtotal
 
Net
Liability
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic hedges
 
$
86

 
$
85

 
$
171

 
$
303

 
$
856

 
$
1,159

 
$
988

Netting and collateral
 
(21
)
 
(15
)
 
(36
)
 
(37
)
 
(51
)
 
(88
)
 
(52
)
Total
 
$
65

 
$
70

 
$
135

 
$
266

 
$
805

 
$
1,071

 
$
936
Summarization of Economic Hedging Activities of Electric Utility
The following table summarizes the components of economic hedging activity:
 
Three months ended March 31,
(in millions)
2012
 
2011
Realized losses
$
(55
)
 
$
(39
)
Unrealized losses
(361
)
 
(96
)
Notional Volumes of Derivative Instruments for Competitive Power Generation Segment
The following table summarizes the notional volumes of derivatives used for hedging and trading activities:
March 31, 2012
 
 
 
 
 
 
 
 
Hedging Activities
 
 
 
Commodity
 
Instrument
 
Classification
 
Unit of
Measure
 
Cash Flow
Hedges
 
Economic
Hedges
 
Trading
Activities
 
Electricity
 
Forwards/Futures
 
Sales, net
 
GWh
 
5,850

1
102

3
—

  
Electricity
 
Forwards/Futures
 
Purchases, net
 
GWh
 
—

 
—

 
2,425

  
Electricity
 
Capacity
 
Sales, net
 
MW-Day
(in thousands)
 
58

2
—

  
—

 
Electricity
 
Capacity
 
Purchases, net
 
MW-Day
(in thousands)
 
—

 
—

  
161

2
Electricity
 
Congestion
 
Purchases, net
 
GWh
 
—

  
1,079

4
165,365

4
Natural gas
 
Forwards/Futures
 
Purchases, net
 
bcf
 
—

  
—

  
12.0

  
Fuel oil
 
Forwards/Futures
 
Purchases, net
 
barrels
 
—

  
360,000

  
—

  
At March 31, 2012, EMG had interest rate contracts with notional values totaling $681 million that converted floating rate LIBOR-based debt to fixed rates ranging from 0.79% to 4.29%. These contracts expire May 2013 through March 2026. In addition, at March 31, 2012, EME had forward starting interest rate contracts with notional values totaling $502 million that will convert floating rate LIBOR-based debt to fixed rates ranging from 3.5429% to 4.0025%. These contracts have effective dates beginning June 2013 through December 2021 and expire May 2023 through December 2029.
In April 2012 pursuant to the agreements for financing of its interests in the Broken Bow and Crofton Bluffs wind projects, EME's subsidiaries entered into forward starting interest rate swap agreements with notional value totaling $139 million that converted floating rate LIBOR based debt to fixed rates ranging from 0.7825% to 2.96%. These contracts have effective dates beginning December 2012 through December 2013 and expire December 2013 through December 2027.
December 31, 2011
 
 
 
 
 
 
 
 
Hedging Activities
  
 
  
Commodity
 
Instrument
 
Classification
 
Unit of
Measure
 
Cash Flow
Hedges
  
Economic
Hedges
  
Trading
Activities
  
Electricity
 
Forwards/Futures
 
Sales, net
 
GWh
 
8,320

1
425

3
—

  
Electricity
 
Forwards/Futures
 
Purchases, net
 
GWh
 
—

 
—

 
2,926

  
Electricity
 
Capacity
 
Sales, net
 
MW-Day
(in thousands)
 
89

2
—

  
—

 
Electricity
 
Capacity
 
Purchases, net
 
MW-Day
(in thousands)
 
—

 
—

  
184

2
Electricity
 
Congestion
 
Purchases, net
 
GWh
 
—

  
2,528

4
230,798

4
Natural gas
 
Forwards/Futures
 
Sales, net
 
bcf
 
—

  
—

  
0.2

  
Fuel oil
 
Forwards/Futures
 
Purchases, net
 
barrels
 
—

  
240,000

  
—

  
1 
EMG's hedge products include forward and futures contracts that qualify for hedge accounting.
2 
EMG's 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.
3 
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.
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.
Fair Value of Derivative Instruments of Competitive Power Generation Segment
The following table summarizes the fair value of derivative instruments reflected on EMG's consolidated balance sheets:
March 31, 2012
 
Derivative Assets
 
Derivative Liabilities
 
 
(in millions)
Short-term
 
Long-term
 
Subtotal
 
Short-term
 
Long-term
 
Subtotal
 
Net Assets (Liabilities)
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$
51

 
$
2

 
$
53

 
$
1

 
$
3

 
$
4

 
$
49

Interest rate contracts
—

 
—

 
—

 
—

 
78

 
78

 
(78
)
Economic hedges
57

 
3

 
60

 
47

 
2

 
49

 
11

Trading activities
408

 
180

 
588

 
360

 
117

 
477

 
111

 
516

 
185

 
701

 
408

 
200

 
608

 
93

Netting and collateral received1
(477
)
 
(133
)
 
(610
)
 
(407
)
 
(121
)
 
(528
)
 
(82
)
Total
$
39

 
$
52

 
$
91

 
$
1

 
$
79

 
$
80

 
$
11

December 31, 2011
 
Derivative Assets
 
Derivative Liabilities
 
 
(in millions)
Short-term
 
Long-term
 
Subtotal
 
Short-term
 
Long-term
 
Subtotal
 
Net Assets (Liabilities)
Non-trading activities
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$
41

 
$
1

 
$
42

 
$
2

 
$
3

 
$
5

 
$
37

Interest rate contracts
—

 
—

 
—

 
—

 
90

 
90

 
(90
)
Economic hedges
31

 
1

 
32

 
26

 
1

 
27

 
5

Trading activities
276

 
142

 
418

 
232

 
79

 
311

 
107

 
348

 
144

 
492

 
260

 
173

 
433

 
59

Netting and collateral received1
(308
)
 
(85
)
 
(393
)
 
(259
)
 
(83
)
 
(342
)
 
(51
)
Total
$
40

 
$
59

 
$
99

 
$
1

 
$
90

 
$
91

 
$
8

1 
Netting of derivative receivables and derivative payables and the related cash collateral received and paid is permitted when a legally enforceable master netting agreement exists with a derivative counterparty.
Activity of Accumulated Other Comprehensive Income for Competitive Power Generation Segment
The following table provides the cash flow hedge activity as part of accumulated other comprehensive loss:
 
Cash Flow Hedge Activity1
 
 
 
Three Months Ended March 31,
 
 
 
2012
 
2011
 
 
(in millions)
Commodity Contracts
 
Interest Rate Contracts
 
Commodity Contracts
 
Interest Rate Contracts
 
Income Statement
Location
Beginning of period derivative gains (losses)
$
35

 
$
(90
)
 
$
43

 
$
(16
)
 
 
Effective portion of changes in fair value
30

 
12

 
8

 
2

 
 
Reclassification to earnings
(19
)
 
—

 
(16
)
 
—

 
Competitive power generation revenue
End of period derivative gains (losses)
$
46

 
$
(78
)
 
$
35

 
$
(14
)
 
 
1 
Unrealized derivative gains (losses) are before income taxes. The after-tax amounts recorded in accumulated other comprehensive loss at March 31, 2012 and 2011 for commodity and interest rate contracts were $27 million and $(47) million, and $21 million and $(9) million, respectively.
Effect of Realized and Unrealized Gains (Losses) from Derivative Instruments on Competitive Power Generation Segment
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:
 
 
Three Months Ended March 31,
(in millions)
Income Statement Location
2012
 
2011
Economic hedges
Competitive power generation revenue
$
11

 
$
6

 
Fuel
5

 
6

Trading activities
Competitive power generation revenue
20

 
16
Summary of Margin and Collateral Deposits Provided to and Received from Counterparties
The following table summarizes margin and collateral deposits provided to and received from counterparties:
(in millions)
March 31,
2012
 
December 31,
2011
Collateral provided to counterparties:
 
 
 
Offset against derivative liabilities
$
83

 
$
53

Reflected in margin and collateral deposits
96

 
58

Collateral received from counterparties:
 
 
 
Offset against derivative assets
84

 
53