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Commodity and Other Derivative Contractual Assets and Liabilities | 12 Months Ended
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Dec. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Commodity and Other Derivative Contractual Assets and Liabilities | COMMODITY AND OTHER DERIVATIVE CONTRACTUAL ASSETS AND LIABILITIES We transact in derivative instruments, such as options, swaps, futures and forward contracts, to manage our exposure to commodity price and interest rate volatility. Although we do engage in economic hedging activities to manage our exposure related to commodity price fluctuations through the use of financial and physical derivative contracts, we have no derivative positions accounted for as cash flow or fair value hedges as of December 31, 2023 and 2022. All changes in the fair values of our derivative contracts are recognized as gains or losses in the earnings of the periods in which they occur. See Note 16 for a discussion of the fair value of derivatives. Commodity Hedging and Trading Activity We utilize natural gas and electricity derivatives to reduce exposure to changes in electricity prices primarily to hedge future revenues from electricity sales from our generation assets and to hedge future purchased power costs for our retail operations. We also utilize short-term electricity, natural gas, coal and emissions derivative instruments for fuel hedging and other purposes. Counterparties to these transactions include energy companies, financial institutions, electric utilities, independent power producers, fuel oil and natural gas producers, local distribution companies and energy marketing companies. Unrealized gains and losses arising from changes in the fair value of derivative instruments as well as realized gains and losses upon settlement of the instruments are reported in our consolidated statements of operations in operating revenues and fuel, purchased power costs and delivery fees. Interest Rate Swaps Interest rate swap agreements are used to reduce exposure to interest rate changes by converting floating-rate interest rates to fixed rates, thereby hedging future interest costs and related cash flows. Unrealized gains and losses arising from changes in the fair value of the swaps as well as realized gains and losses upon settlement of the swaps are reported in our consolidated statements of operations in interest expense and related charges. See Note 12 for details on our interest rate swaps outstanding as of December 31, 2023. Financial Statement Effects of Derivatives Substantially all derivative contractual assets and liabilities are accounted for under mark-to-market accounting consistent with accounting standards related to derivative instruments and hedging activities. The following tables provide detail of derivative contractual assets and liabilities as reported in our consolidated balance sheets at December 31, 2023 and 2022. Derivative asset and liability totals represent the net value of the contract, while the balance sheet totals represent the gross value of the contract.
| December 31, 2023
| Derivative Assets |  | Derivative Liabilities |  |
| Commodity Contracts |  | Interest Rate Swaps |  | Commodity Contracts |  | Interest Rate Swaps |  | Total
Current assets | $ | 3,585 |  |  | $ | 53 |  |  | $ | 7 |  |  | $ | — |  |  | $ | 3,645 |
Noncurrent assets | 565 |  |  | 11 |  |  | 1 |  |  | — |  |  | 577 |
Current liabilities | (1) |  |  | — |  |  | (5,233) |  |  | (24) |  |  | (5,258) |
Noncurrent liabilities | (5) |  |  | — |  |  | (1,659) |  |  | (24) |  |  | (1,688) |
Net assets (liabilities) | $ | 4,144 |  |  | $ | 64 |  |  | $ | (6,884) |  |  | $ | (48) |  |  | $ | (2,724) |
| December 31, 2022
| Derivative Assets |  | Derivative Liabilities |  |
| Commodity Contracts |  | Interest Rate Swaps |  | Commodity Contracts |  | Interest Rate Swaps |  | Total
Current assets | $ | 4,442 |  |  | $ | 92 |  |  | $ | 4 |  |  | $ | — |  |  | $ | 4,538 |
Noncurrent assets | 656 |  |  | 43 |  |  | 3 |  |  | — |  |  | 702 |
Current liabilities | (1) |  |  | — |  |  | (6,562) |  |  | (47) |  |  | (6,610) |
Noncurrent liabilities | (5) |  |  | — |  |  | (1,685) |  |  | (36) |  |  | (1,726) |
Net assets (liabilities) | $ | 5,092 |  |  | $ | 135 |  |  | $ | (8,240) |  |  | $ | (83) |  |  | $ | (3,096) |
The following table presents the pre-tax effect of derivative gains (losses) on net income, including realized and unrealized effects. Amount represents changes in fair value of positions in the derivative portfolio during the period, as realized amounts related to positions settled are assumed to equal reversals of previously recorded unrealized amounts.
| Year Ended December 31,
Derivative (consolidated statements of operations presentation) | 2023 |  | 2022 |  | 2021
Commodity contracts (Operating revenues) (a) | $ | (758) |  |  | $ | (4,103) |  |  | $ | (1,196) |
Commodity contracts (Fuel, purchased power costs and delivery fees) (b) | (395) |  |  | 375 |  |  | 732 |
Interest rate swaps (Interest expense and related charges) (c) | 42 |  |  | 234 |  |  | 81 |
Net gain (loss) | $ | (1,111) |  |  | $ | (3,494) |  |  | $ | (383) |
____________ (a)For the year ended December 31, 2023, includes unrealized net gains from mark-to-market valuations of commodity positions of $714 million. For the years ended December 31, 2022 and 2021, includes unrealized net losses from mark-to-market valuations of commodity positions of $2.163 billion and $1.191 billion, respectively. (b)For the years ended December 31, 2023 and 2022, includes unrealized net losses from mark-to-market valuations of commodity positions of $224 million and $347 million, respectively. For the year ended December 31, 2021, includes unrealized net gains from mark-to-market valuations of commodity positions of $432 million. (c)For the year ended December 31, 2023, includes unrealized net losses on mark-to-market valuations of interest rate swaps of $36 million. For the years ended December 31, 2022 and 2021, includes unrealized gains on mark-to-market valuations of interest rate swaps of $250 million and $134 million, respectively. Balance Sheet Presentation of Derivatives We elect to report derivative assets and liabilities in our consolidated balance sheets on a gross basis without taking into consideration netting arrangements we have with counterparties to those derivatives. We maintain standardized master netting agreements with certain counterparties that allow for the right to offset assets and liabilities and collateral in order to reduce credit exposure between us and the counterparty. These agreements contain specific language related to margin requirements, monthly settlement netting, cross-commodity netting and early termination netting, which is negotiated with the contract counterparty. Generally, margin deposits that contractually offset these derivative instruments are reported separately in our consolidated balance sheets, with the exception of certain margin amounts related to changes in fair value on CME transactions that are legally characterized as settlement of forward exposure rather than collateral. Margin deposits received from counterparties are primarily used for working capital or other general corporate purposes. The following tables reconcile our derivative assets and liabilities on a contract basis to net amounts after taking into consideration netting arrangements with counterparties and financial collateral:
|  | December 31, 2023 |  | December 31, 2022
|  | Derivative Assets and Liabilities |  | Offsetting Instruments (a) |  | Cash Collateral (Received) Pledged (b) |  | Net Amounts |  | Derivative Assets and Liabilities |  | Offsetting Instruments (a) |  | Cash Collateral (Received) Pledged (b) |  | Net Amounts
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | $ | 4,144 |  |  | $ | (3,519) |  |  | $ | (26) |  |  | $ | 599 |  |  | $ | 5,092 |  |  | $ | (4,480) |  |  | $ | (20) |  |  | $ | 592 |
Interest rate swaps |  | 64 |  |  | (28) |  |  | — |  |  | 36 |  |  | 135 |  |  | (64) |  |  | — |  |  | 71 |
Total derivative assets |  | 4,208 |  |  | (3,547) |  |  | (26) |  |  | 635 |  |  | 5,227 |  |  | (4,544) |  |  | (20) |  |  | 663 |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | (6,884) |  |  | 3,519 |  |  | 970 |  |  | (2,395) |  |  | (8,240) |  |  | 4,480 |  |  | 1,675 |  |  | (2,085) |
Interest rate swaps |  | (48) |  |  | 28 |  |  | — |  |  | (20) |  |  | (83) |  |  | 64 |  |  | — |  |  | (19) |
Total derivative liabilities |  | (6,932) |  |  | 3,547 |  |  | 970 |  |  | (2,415) |  |  | (8,323) |  |  | 4,544 |  |  | 1,675 |  |  | (2,104) |
Net amounts |  | $ | (2,724) |  |  | $ | — |  |  | $ | 944 |  |  | $ | (1,780) |  |  | $ | (3,096) |  |  | $ | — |  |  | $ | 1,655 |  |  | $ | (1,441) |
____________ (a)Amounts presented exclude trade accounts receivable and payable related to settled financial instruments. (b)Represents cash amounts received or pledged pursuant to a master netting arrangement, including fair value-based margin requirements, and, to a lesser extent, initial margin requirements. Derivative Volumes The following table presents the gross notional amounts of derivative volumes by commodity, excluding those derivatives that qualified for the NPNS or other scope exceptions permitted by ASC 815, Derivatives and Hedging as of December 31, 2023 and 2022:
|  | December 31, 2023 |  | December 31, 2022 |  |
Derivative type |  | Notional Volume |  | Unit of Measure
Natural gas (a) |  | 5,335 |  |  | 6,007 |  |  | Million MMBtu
Electricity |  | 800,001 |  |  | 754,762 |  |  | GWh
Financial transmission rights (b) |  | 250,895 |  |  | 225,845 |  |  | GWh
Coal |  | 35 |  |  | 48 |  |  | Million U.S. tons
Fuel oil |  | 3 |  |  | 105 |  |  | Million gallons
Emissions |  | 24 |  |  | 40 |  |  | Million U.S. tons
Renewable energy certificates |  | 29 |  |  | 31 |  |  | Million certificates
Interest rate swaps – variable/fixed (c) |  | $ | 5,225 |  |  | $ | 6,720 |  |  | Million U.S. dollars
Interest rate swaps - fixed/variable (c) |  | $ | 1,300 |  |  | $ | 2,120 |  |  | Million U.S. dollars
____________ (a)Represents gross notional forward sales, purchases and options transactions, locational basis swaps and other natural gas transactions. (b)Represents gross forward purchases associated with instruments used to hedge electricity price differences between settlement points within regions. (c)Includes notional amounts of interest rate swaps with maturity dates through December 2030. Credit Risk-Related Contingent Features of Derivatives Our derivative contracts may contain certain credit risk-related contingent features that could trigger liquidity requirements in the form of cash collateral, letters of credit or some other form of credit enhancement. Certain of these agreements require the posting of collateral if our credit rating is downgraded by one or more credit rating agencies or include cross-default contractual provisions that could result in the settlement of such contracts if there was a failure under other financing arrangements related to payment terms or other covenants. The following table presents the commodity derivative liabilities subject to credit risk-related contingent features that are not fully collateralized:
| December 31,
| 2023 |  | 2022
Fair value of derivative contract liabilities (a) | $ | (1,890) |  |  | $ | (1,934) |
Offsetting fair value under netting arrangements (b) | 692 |  |  | 899 |
Cash collateral and letters of credit | 854 |  |  | 253 |
Liquidity exposure | $ | (344) |  |  | $ | (782) |
____________ (a)Excludes fair value of contracts that contain contingent features that do not provide specific amounts to be posted if features are triggered, including provisions that generally provide the right to request additional collateral (material adverse change, performance assurance and other clauses). (b)Amounts include the offsetting fair value of in-the-money derivative contracts and net accounts receivable under master netting arrangements. Concentrations of Credit Risk Related to Derivatives We have concentrations of credit risk with the counterparties to our derivative contracts. As of December 31, 2023, total credit risk exposure to all counterparties related to derivative contracts totaled $4.681 billion (including associated accounts receivable). The net exposure to those counterparties totaled $727 million at December 31, 2023 after taking into effect netting arrangements, setoff provisions and collateral, with the largest net exposure totaling $235 million. As of December 31, 2023, the credit risk exposure to the banking and financial sector represented 80% of the total credit risk exposure and 28% of the net exposure. Exposure to banking and financial sector counterparties is considered to be within an acceptable level of risk tolerance because all of this exposure is with counterparties with investment grade credit ratings. However, this concentration increases the risk that a default by any of these counterparties would have a material effect on our financial condition, results of operations and liquidity. The transactions with these counterparties contain certain provisions that would require the counterparties to post collateral in the event of a material downgrade in their credit rating. We maintain credit risk policies with regard to our counterparties to minimize overall credit risk. These policies authorize specific risk mitigation tools including, but not limited to, use of standardized master agreements that allow for netting of positive and negative exposures associated with a single counterparty. Credit enhancements such as parent guarantees, letters of credit, surety bonds, liens on assets and margin deposits are also utilized. Prospective material changes in the payment history or financial condition of a counterparty or downgrade of its credit quality result in the reassessment of the credit limit with that counterparty. The process can result in the subsequent reduction of the credit limit or a request for additional financial assurances. An event of default by one or more counterparties could subsequently result in termination-related settlement payments that reduce available liquidity if amounts are owed to the counterparties related to the derivative contracts or delays in receipts of expected settlements if the counterparties owe amounts to us.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
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