1.0.0.3 false Summary of Significant Accounting Policies false 1 $ false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 2 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 0 eme_NotesToFinancialStatementsAbstract eme false na duration string Notes to Financial Statements [Abstract] false false false false false true false false false 1 false false 0 0 false false Notes to Financial Statements [Abstract] false 3 Summary of Significant Accounting Policies 1 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0 <table style="font-size:10pt; font-family:'Times New Roman',times,serif;"> <tr> <td> Note 1. Summary of Significant Accounting Policies        EME is a wholly owned subsidiary of MEHC, which is a wholly owned subsidiary of Edison Mission Group Inc., which is a wholly owned, non-utility subsidiary of Edison International, which is also the parent holding company of SCE. EME is a holding company whose subsidiaries and affiliates are engaged in the business of developing, acquiring, owning or leasing, operating and selling energy and capacity from independent power production facilities. EME also conducts hedging and energy trading activities in competitive power markets. Basis of Presentation        The consolidated financial statements include the accounts of EME and all subsidiaries and partnerships in which EME has a controlling interest and variable interest entities in which EME is deemed the primary beneficiary. EME's investments in unconsolidated affiliates in which a significant, but less than controlling, interest is held and variable interest entities, in which EME is not deemed to be the primary beneficiary, are accounted for by the equity method. For a discussion of EME's variable interest entities, see Note 5Acquisitions and Variable Interest Entities. All significant intercompany transactions and balances have been eliminated in the consolidated financial statements.        Certain prior year reclassifications have been made to conform to the December 31, 2009 consolidated financial statement presentation mostly pertaining to noncontrolling interests, which were immaterial. Except as indicated, amounts reflected in the notes to the consolidated financial statements relate to continuing operations of EME.        The preparation of financial statements in conformity with GAAP requires EME to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.        EME has performed an evaluation of subsequent events through the date the financial statements were issued. Cash and Cash Equivalents        Cash and cash equivalents as of December 31, 2009 and 2008 consisted of the following: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left" width="10"></td> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="73"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="73"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left" colspan="2">(in millions) </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">December 31, 2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">December 31, 2008 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="bottom"> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8"> </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> Cash</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">106</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">31</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="5"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> Money market funds</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">690</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,581</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> U.S. government agency securities</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right"></td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">165</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> Commercial paper</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right"></td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">30</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="5"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times" valign="bottom"> Total cash equivalents</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">690</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,776</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="5"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom" colspan="2"> Total cash and cash equivalents</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">796</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">1,807</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="8"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div>        Cash equivalents, with the exception of money market funds, were stated at amortized cost plus accrued interest. The carrying value of cash equivalents equals the fair value as all investments have maturities of less than three months. For further discussion of money market funds, see Note 2Fair Value Measurements. For a discussion of restricted cash and deposits, see "Restricted Cash and Deposits."        At December 31, 2009 and 2008, EME had classified all marketable debt securities as held-to-maturity. The securities were carried at amortized cost plus accrued interest, which was equal to its fair value. Held-to-maturity securities all mature within one year. Derivative Instruments        Authoritative guidance on derivatives and hedging establishes accounting and reporting standards for derivative instruments (including certain derivative instruments embedded in other contracts). EME is required to record derivatives on its balance sheets as either assets or liabilities measured at fair value unless otherwise exempted from derivative treatment as a normal sale and purchase. All changes in the fair value of derivative instruments are recognized currently in earnings, unless specific hedge criteria are met, which requires that EME formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.        The accounting guidance for cash flow hedges provides that the effective portion of gains or losses on derivative instruments designated and qualifying as cash flow hedges be reported as a component of other comprehensive income and be reclassified into earnings in the same period during which the hedged forecasted transaction affects earnings. The remaining gains or losses on the derivative instruments, if any, must be recognized currently in earnings. Derivative and hedging accounting policies are discussed further in Note 3Derivative Instruments and Risk Management. Deferred Financing Costs        Bank, legal and other direct costs incurred in connection with obtaining financing are deferred and amortized as interest expense using a method that approximates the effective interest rate method over the term of the related debt. Accumulated amortization of these costs at December 31, 2009 and 2008 amounted to $22 million and $20 million, respectively. Amortization of deferred financing costs charged to interest expense was $3 million, $1 million and $3 million in 2009, 2008 and 2007, respectively. Impairment of Investments and Long-Lived Assets        EME evaluates the impairment of its investments in projects and other long-lived assets based on a review of estimated future cash flows expected to be generated whenever events or changes in circumstances indicate that the carrying amount of such investments or assets may not be recoverable. If the carrying amount for an equity method investment exceeds fair value, an impairment loss is recorded if the decline is other than temporary. If the carrying amount of a long-lived asset exceeds the amount of the expected future cash flows, undiscounted and without interest charges, an impairment loss is recognized. Income Taxes        EME is included in the consolidated federal and state income tax returns of Edison International and participates in tax-allocation and payment agreements with other subsidiaries of Edison International. EME calculates its tax provision in accordance with these tax agreements. EME's current tax liability or benefit is determined on a "with and without" basis. This means Edison International computes its combined federal and state tax liabilities including and excluding EME's taxable income or loss and state apportionment factors. This method is similar to a separate company return, except that EME recognizes, without regard to separate company limitations, additional tax liabilities or benefits based on the impact to the combined group including EME's taxable income or losses and state apportionment factors. At December 31, 2009 and 2008, amounts included in receivables from affiliates associated with the tax-allocation agreements totaled $80 million and $4 million, respectively.        EME accounts for deferred income taxes using the asset-and-liability method, wherein deferred tax assets and liabilities are recognized for future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities using enacted income tax rates. Investment and energy tax credits are deferred and amortized over the term of the power purchase agreement of the respective project while production tax credits are recognized when earned. EME's investments in wind-powered electric generation projects qualify for federal production tax credits under Section 45 of the Internal Revenue Code. Such credits are allowable for production during the 10-year period after a qualifying wind energy facility is placed into service. Certain of EME's wind projects also qualify for state tax credits, which are accounted for similarly as federal production tax credits.        Interest expense and penalties associated with income taxes are reflected in provision for income taxes on EME's consolidated statements of income. Income tax accounting policies are discussed further in Note 11Income Taxes. Intangible Assets        Acquired intangible assets with indefinite lives are not amortized; rather they are tested at least annually for impairment or when events or changes in circumstances indicate that the asset might be impaired. Intangible assets are periodically reviewed when impairment indicators are present to assess recoverability from future operations using undiscounted future cash flows. For project development rights, the assets are subject to ongoing impairment analysis, such that if a project is no longer expected, the capitalized costs are written off.        Current intangible assets reflected in prepaid expenses and other on EME's consolidated balance sheet, consist of emission allowances purchased by EME and amounted to $51 million and $88 million at December 31, 2009 and 2008, respectively.        Noncurrent intangible assets reflected in other long-term assets on EME's consolidated balance sheets consist of the following unamortized intangible assets: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="65"></td> <td style="FONT-FAMILY: times" width="18"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="65"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="5">December 31, </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">(in millions) </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="bottom"> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="7"> </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Project development rights</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">10</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">10</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> Option rights</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">17</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">22</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Purchased emission allowances1</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">21</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">41</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="5"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> Total unamortized intangible assets</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">48</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">73</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="7"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div> <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; PADDING-TOP: 0pt; POSITION: relative; TEXT-ALIGN: left"> <dl compact="compact"> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times">1</dt> <dd style="FONT-FAMILY: times">Emission allowances do not have a pre-determined contractual term or expiration date. Emission allowances are stated at weighted average cost. </dd></dl></div>        In 2009 and 2008, project development rights relate to the consolidation of a development stage enterprise. For further discussion, see Note 5Acquisitions and Variable Interest Entities. In 2007, EME recorded option rights pursuant to EME's joint development agreement entered into in December 2007 to develop jointly a portfolio of projects located in Arizona, Nevada and New Mexico. EME paid $24 million during 2007 to acquire an option to purchase specific projects. In 2009, EME recorded a write-down of $3 million reflected in "Gain on buyout of contract, loss on termination of contract, asset write-down and other charges and credits, net" in connection with options unused in 2009 under the joint development agreement. The remaining projects are in development with target completion dates of 2011 and beyond. EME is required to fund ongoing development expenses for each project.        Emission allowances at EME's fossil-fueled facilities decreased in 2009 due to a decline in market prices of purchased emission allowances in 2009, compared to 2008, and usage of existing emission allowances. In 2008, EME also purchased emission allowances related to thermal projects under development. Inventory        Inventory is stated at the lower of weighted average cost or market. Inventory at December 31, 2009 and December 31, 2008 consisted of the following: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="65"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="65"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="5">December 31, </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">(in millions) </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="bottom"> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="7"> </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Coal, fuel oil and other raw materials</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">132</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">131</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> Spare parts, materials and supplies</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">64</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">58</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="5"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Total</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">196</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">189</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="7"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div> New Accounting Guidance Accounting Guidance Adopted in 2009 General Principles        The FASB issued an accounting standard establishing the FASB Accounting Standards Codification (Codification) as the source of authoritative, nongovernmental U.S. GAAP superseding existing FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. Following this action, the FASB will not issue new standards in the form of Statements, FASB Staff Positions or EITF Abstracts. Instead, the FASB will issue Accounting Standards Updates. Two levels of U.S. GAAP will exist: authoritative and non-authoritative. The Codification is not intended to change U.S. GAAP or guidance issued by the U.S. Securities and Exchange Commission. EME adopted the Codification effective July 1, 2009. Subsequent Events        The FASB issued authoritative guidance that sets forth the period subsequent to the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize these events or transactions; and the disclosures that an entity should make. EME adopted this guidance effective April 1, 2009. EME also adopted revised disclosure requirements prescribed by an accounting standards update issued in February 2010. The adoption had no impact on EME's consolidated results of operations, financial position or cash flows. Fair Value Measurements and Disclosures        The FASB issued an accounting standards update that provides additional guidance on how companies should measure liabilities at fair value. While reaffirming the existing definition of fair value, the update reintroduced the concept of entry value into the determination of fair value. Entry value is the amount an entity would receive to enter into an identical liability. Under the new guidance, the fair value of a liability is not adjusted to reflect the impact of contractual restrictions that prevent its transfer. If the quoted price of a liability when traded as an asset includes the effect of a credit enhancement (i.e., a guarantee), this effect should be excluded from the measurement of the liability. EME adopted this guidance effective October 1, 2009. The adoption had no impact on EME's consolidated results of operations, financial position or cash flows.        The FASB issued authoritative guidance affirming the objective of a fair value measurement, which is to identify the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction at the measurement date between market participants ("exit price") under current market conditions. This includes guidance on identifying circumstances that indicate when there is no active market or transactions where the price inputs being used represent distressed or forced sales. If either of these conditions exists, this guidance provides additional direction for estimating fair value and requires disclosure of a change in valuation technique (and the related inputs) resulting from the application of this position and to quantify its effects, if practicable. This guidance also requires disclosures on a more disaggregated basis for investments in debt and equity securities measured at fair value. EME adopted this guidance effective April 1, 2009. The adoption had no impact on EME's consolidated results of operations, financial position or cash flows.        The FASB issued authoritative guidance requiring disclosures about the fair value of all financial instruments, for which it is practicable to estimate that fair value, for interim reporting periods as well as annual statements. EME adopted this guidance effective April 1, 2009. Since this guidance impacted disclosures only, the adoption did not have an impact on EME's consolidated results of operations, financial position or cash flows.        Effective January 1, 2009, EME adopted authoritative guidance on nonrecurring fair value measurements of nonfinancial assets and liabilities. The adoption did not have a material impact on EME's consolidated results of operations, financial position or cash flows. InvestmentsEquity Method and Joint Ventures        The FASB clarified the accounting for certain transactions and impairment considerations involving equity method investments. Effective January 1, 2009, EME adopted this guidance prospectively. The adoption had no impact on EME's consolidated financial statements. Business Combinations        The FASB issued authoritative guidance establishing principles and requirements for how the acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interests in the acquiree at the acquisition date fair value. This guidance determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This guidance applies prospectively to business combinations for which the acquisition date is on or after fiscal years beginning January 1, 2009. The initial adoption had no impact on EME's consolidated results of operations, financial position or cash flows. CompensationRetirement Benefits        The FASB issued authoritative guidance requiring additional postretirement benefit plan asset disclosures by employers about the major categories of assets, the inputs and valuation techniques used to measure fair value, the level within the fair value hierarchy, the effect of using significant unobservable inputs (Level 3) and significant concentrations of risk. EME adopted this guidance effective December 31, 2009. Since this guidance impacted disclosures only, the adoption did not have an impact on EME's consolidated results of operations, financial position or cash flows. Consolidation        The FASB issued authoritative guidance requiring an entity to present noncontrolling interests that reflect the ownership interests in subsidiaries held by parties other than the entity, within the equity section but separate from the entity's equity in the consolidated financial statements. It also requires the amount of consolidated net income attributable to the parent and to the noncontrolling interests to be clearly identified and presented on the face of the consolidated balance sheets and statements of income; changes in ownership interests to be accounted for similarly as equity transactions; and when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary and the gain or loss on the deconsolidation of the subsidiary to be measured at fair value. EME adopted this guidance effective January 1, 2009. In accordance with this guidance, EME reclassified noncontrolling interests of $80 million at December 31, 2008 to a component of equity on EME's consolidated balance sheet. Derivatives and Hedging        The FASB issued authoritative guidance requiring additional disclosures related to derivative instruments, including how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. EME adopted this guidance effective January 1, 2009. Since this guidance impacted disclosures only, the adoption did not have an impact on EME's consolidated results of operations, financial position or cash flows. IntangiblesGoodwill and Other        The FASB issued authoritative guidance amending the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The intent of the guidance is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under business combinations and other GAAP. EME adopted this guidance effective January 1, 2009. The adoption had no impact on EME's consolidated results of operations, financial position or cash flows. Accounting Guidance Not Yet Adopted ConsolidationImprovements to Financial Reporting by Enterprises Involved with Variable Interest Entities        In December 2009, the FASB issued an accounting standards update that changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an ability to direct the activities of the entity that most significantly impact the entity's economic performance and whether the entity had the obligation to absorb losses. This guidance requires a company to provide additional disclosures about its involvement with variable interest entities and any significant changes in risk exposure due to that involvement. EME will adopt this guidance effective January 1, 2010. EME estimates the impact of adopting this guidance to result in the deconsolidation of certain wind assets totaling $253 million and the consolidation of coal assets totaling $99 million at January 1, 2010. Deconsolidation will not result in a gain or loss. Fair Value Measurements and Disclosures        In January 2010, the FASB issued an accounting standards update that provides for new disclosure requirements related to fair value measurements. New requirements include the separate disclosure of significant transfers in and out of Levels 1 and 2 and the reasons for the transfers. In addition, the Level 3 reconciliation of fair value measurements using significant unobservable inputs should include gross rather than net information about purchases, sales, issuances and settlements. The update clarified existing disclosure requirements for the level of disaggregation and inputs and valuations techniques. This guidance is effective January 1, 2010, except for the requirement to provide gross Level 3 activity, which will be effective January 1, 2011. Since the guidance impacts disclosures only, the adoption will have no impact on EME's consolidated results of operations, financial position or cash flows. Planned Major Maintenance        Certain of EME's plant facilities' major pieces of equipment require major maintenance on a periodic basis. These costs are expensed as incurred. Project Development Costs        EME capitalizes direct costs incurred in developing new projects upon attainment of principal activities needed to commence procurement and construction. These costs consist of professional fees, salaries, permits, and other directly related development costs incurred by EME. The capitalized costs are amortized over the life of the projects once operational or charged to expense if management determines the costs to be unrecoverable. Property, Plant and Equipment        Property, plant and equipment, including leasehold improvements and construction in progress, are capitalized at cost and are principally comprised of EME's majority-owned subsidiaries' plants and related facilities. Depreciation and amortization are computed by using the straight-line method over the useful life of the property, plant and equipment and over the shorter of the lease term or estimated useful life for leasehold improvements. Gains and losses from sale of assets are recognized at the time of the transaction.        As part of the acquisition of the fossil-fueled facilities, EME acquired emission allowances under the US EPA's Acid Rain Program. Although the emission allowances granted under this program are freely transferable, EME intends to use substantially all the emission allowances in the normal course of its business to generate electricity. Accordingly, EME has classified emission allowances expected to be used by EME to generate power as part of property, plant and equipment. Acquired emission allowances will be amortized on a straight-line basis.        Useful lives for property, plant and equipment are as follows: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0%; WIDTH: 100%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="left" width="147"></td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="bottom"> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="3"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times">Power plant facilities</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">3 to 30 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times">Leasehold improvements</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">Shorter of life of lease or estimated useful life</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times">Emission allowances</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">25 to 33.75 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times">Equipment, furniture and fixtures</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">3 to 10 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times">Capitalized leased equipment</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">5 years</td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" colspan="3"> </td></tr></table></div> </div>        The remaining estimated useful life or lease term at December 31, 2009 for the Midwest Generation plants with respect to its coal-fired plants is as follows: <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0%; WIDTH: 100%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="12"></td> <td style="FONT-FAMILY: times" align="left" width="147"></td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="bottom"> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="3"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times">Crawford Station</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">15 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times">Fisk Station</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">15 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times">Joliet Unit 6</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">20 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times">Joliet Units 7 and 81</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">21 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times">Powerton Station1</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">24 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times">Waukegan Station</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">15 years</td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times">Will County Station</td> <td style="FONT-FAMILY: times"> </td> <td style="FONT-FAMILY: times">20 years</td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" colspan="3"> </td></tr></table></div> </div> <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 0%; PADDING-TOP: 0pt; POSITION: relative; TEXT-ALIGN: left"> <dl compact="compact"> <dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times">1</dt> <dd style="FONT-FAMILY: times">Represents leased facilities. The leases may be renewed based on criteria outlined in their respective agreements.</dd></dl></div>        Power plant facilities are assigned estimated useful lives based on the anticipated life of the facility. The estimated life of an individual facility could be impacted by decisions related to the installation of environmental remediation equipment. If environmental compliance equipment is not installed, the useful life of the facility may be shortened.        Interest incurred on funds borrowed by EME to finance project construction is capitalized. Capitalization of interest is discontinued when the projects are completed and deemed operational. Such capitalized interest is included in property, plant and equipment.        Capitalized interest is amortized over the depreciation period of the major plant and facilities for the respective project. <div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 20%; WIDTH: 60%; PADDING-TOP: 0pt; POSITION: relative">   <div align="center"> <table cellspacing="0" cellpadding="0" width="100%" border="0"> <tr style="HEIGHT: 0px"> <td style="FONT-FAMILY: times" align="left"></td> <td style="FONT-FAMILY: times" width="18"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="58"></td> <td style="FONT-FAMILY: times" width="18"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="58"></td> <td style="FONT-FAMILY: times" width="18"></td> <td style="FONT-FAMILY: times" align="right" width="7"></td> <td style="FONT-FAMILY: times" width="58"></td> <td style="FONT-FAMILY: times" width="12"></td></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">  </th> <th style="FONT-FAMILY: times"> </th> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="8">Years Ended December 31, </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="bottom"> <th style="FONT-FAMILY: times" align="left">(in millions) </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">2009 </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">2008 </th> <th style="FONT-FAMILY: times"> </th> <th style="FONT-FAMILY: times" align="center" colspan="2">2007 </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="bottom"> <th style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" align="center" colspan="10"> </th> <th style="FONT-FAMILY: times"> </th></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom"> Interest incurred</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">315</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">311</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">297</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="white"> <td style="FONT-FAMILY: times" valign="bottom"> Interest capitalized</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">(19</td> <td style="FONT-FAMILY: times" valign="bottom">)</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">(32</td> <td style="FONT-FAMILY: times" valign="bottom">)</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">(24</td> <td style="FONT-FAMILY: times" valign="bottom">)</td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" align="right" colspan="8"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF"> <td style="FONT-FAMILY: times" valign="bottom">  </td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">296</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">279</td> <td style="FONT-FAMILY: times" valign="bottom"> </td> <td style="FONT-FAMILY: times" valign="bottom" align="right">$</td> <td style="FONT-FAMILY: times" valign="bottom" align="right">273</td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr> <tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top"> <td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="10"> </td> <td style="FONT-FAMILY: times" valign="bottom"> </td></tr></table></div> </div> Rent Expense        Minimum lease payments under operating leases are levelized (total minimum lease payments divided by the number of years of the lease) and recorded as rent expense over the terms of the leases. Lease payments in excess of the minimum are recorded as rent expense in the year incurred. Operating leases primarily consist of long-term leases for the Powerton, Joliet and Homer City power plants. For additional information on these sale-leaseback transactions, see Note 13Commitments and ContingenciesLease Commitments. Restricted Cash and Deposits        Cash balances that are restricted under margining agreements are classified as restricted cash included in current assets, as such amounts change frequently based on forward market prices. Restricted deposits consisted of cash balances that are restricted to pay amounts required for lease payments, debt service or to provide collateral. Included in restricted deposits was $20 million and $30 million at December 31, 2009 and 2008, respectively, related to lease payments and $20 million and $13 million at December 31, 2009 and 2008, respectively, related to debt service or collateral reserves. Revenue Recognition        EME's subsidiaries enter into power and fuel hedging, optimization transactions and energy trading contracts, all subject to market conditions. One of EME's subsidiaries executes these transactions primarily through the use of physical forward commodity purchases and sales and financial commodity swaps and options. With respect to its physical forward contracts, EME's subsidiaries generally act as the principal, take title to the commodities, and assume the risks and rewards of ownership. EME's subsidiaries record settlement of non-trading physical forward contracts on a gross basis. EME nets the cost of purchased power against related third-party sales in markets that use locational marginal pricing, currently PJM. Financial swap and option transactions are settled net and, accordingly, EME's subsidiaries do not take title to the underlying commodity. Therefore, gains and losses from settlement of financial swaps and options are recorded net in operating revenues in the accompanying consolidated income statements. Risks managed include commodity price risk associated with fuel purchases and power sales.        EME records revenue and related costs as electricity is generated or services are provided unless the transaction is accounted for as a derivative and does not qualify for the normal sales and purchases exception.        Revenues under certain long-term power sales contracts are recognized based on the output delivered at the lower of the amount billable or the average rate over the contract term. The excess of the amounts billed over the portion recorded as revenue is reflected in deferred revenues in the consolidated balance sheet.        EME accounts for grant income on the deferred method and, accordingly, will recognize operating revenues related to such income over the estimated useful life of the projects. At December 31, 2009, EME had $92 million in U.S. Treasury grants receivable with respect to Phase II of the Goat Wind and High Lonesome wind projects included in prepaid expenses and other on its consolidated balance sheet. Stock-Based Compensation        Edison International's stock options, performance shares, deferred stock units and, beginning in 2007, restricted stock units have been granted to EME employees under Edison International's long-term incentive compensation programs. Edison International usually does not issue new common stock for equity awards settled. Rather, a third party is used to facilitate the exercise of stock options and the purchase and delivery of outstanding common stock for settlement of option exercises, performance shares, and restricted stock units. Performance shares earned are settled half in cash and half in common stock; however, Edison International has discretion under certain of the awards to pay the half subject to cash settlement in common stock. Deferred stock units granted to management are settled in cash, not stock and represent a liability. Restricted stock units are settled in common stock; however, Edison International will substitute cash awards to the extent necessary to pay tax withholding or any government levies.        EME adopted fair value accounting for stock-based compensation on a prospective basis in 2006. Fair value accounting is applied to any vested award outstanding as of January 1, 2006 and to all awards granted thereafter. Fair value accounting for stock-based compensation results in the recognition of expense for all stock-based compensation awards.        EME recognizes stock-based compensation expense on a straight-line basis over the requisite service period. EME recognizes stock-based compensation expense for awards granted to retirement-eligible participants as follows: for stock-based awards granted prior to January 1, 2006, EME recognized stock-based compensation expense over the explicit requisite service period and accelerated any remaining unrecognized compensation expense when a participant actually retired; for awards granted or modified after January 1, 2006 to participants who are retirement-eligible or will become retirement-eligible prior to the end of the normal requisite service period for the award, stock-based compensation is recognized on a prorated basis over the initial year or over the period between the date of grant and the date the participant first becomes eligible for retirement. </td></tr></table> Note 1. Summary of Significant Accounting Policies        EME is a wholly owned subsidiary of MEHC, which is a wholly false false No definition available. 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