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Accounting for Derivative Instruments and Hedging Activities | 3 Months Ended
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Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Accounting for Derivative Instruments and Hedging Activities | Accounting for Derivative Instruments and Hedging Activities This footnote should be read in conjunction with the complete description under Note 5, Accounting for Derivative Instruments and Hedging Activities, to the Company's 2017 Form 10-K. Energy-Related Commodities As of March 31, 2018, NRG had energy-related derivative instruments extending through 2031. The Company marks these derivatives to market through the statement of operations. Interest Rate Swaps NRG is exposed to changes in interest rates through the Company's issuance of variable rate debt. In order to manage the Company's interest rate risk, NRG enters into interest rate swap agreements. As of March 31, 2018, NRG had interest rate derivative instruments on recourse debt extending through 2021, which are not designated as cash flow hedges. The Company had interest rate swaps on non-recourse debt extending through 2041, a portion of which are designated as cash flow hedges. Volumetric Underlying Derivative Transactions The following table summarizes the net notional volume buy/(sell) of NRG's open derivative transactions broken out by category, excluding those derivatives that qualified for the NPNS exception, as of March 31, 2018 and December 31, 2017. Option contracts are reflected using delta volume. Delta volume equals the notional volume of an option adjusted for the probability that the option will be in-the-money at its expiration date.
|  | Total Volume
|  | March 31, 2018 |  | December 31, 2017
Category | Units | (In millions)
Emissions | Short Ton | 2 |  |  | 1 |
Coal | Short Ton | 17 |  |  | 21 |
Natural Gas | MMBtu | (208 | ) |  | (17 | )
Power | MWh | 16 |  |  | 14 |
Capacity | MW/Day | (1 | ) |  | (1 | )
Interest | Dollars | $ | 3,938 |  |  | $ | 3,876 |
Equity | Shares | 1 |  |  | 1 |
The increase in the natural gas position was primarily the result of additional generation hedge positions. Fair Value of Derivative Instruments The following table summarizes the fair value within the derivative instrument valuation on the balance sheets:
| Fair Value
| Derivative Assets |  | Derivative Liabilities
| March 31, 2018 |  | December 31, 2017 |  | March 31, 2018 |  | December 31, 2017
| (In millions)
Derivatives Designated as Cash Flow or Fair Value Hedges: |  |  |  |  |  |  |
Interest rate contracts current | $ | 2 |  |  | $ | 1 |  |  | $ | 2 |  |  | $ | 5 |
Interest rate contracts long-term | 20 |  |  | 11 |  |  | 7 |  |  | 11 |
Total Derivatives Designated as Cash Flow or Fair Value Hedges | 22 |  |  | 12 |  |  | 9 |  |  | 16 |
Derivatives Not Designated as Cash Flow or Fair Value Hedges: |  |  |  |  |  |  |
Interest rate contracts current | 13 |  |  | 9 |  |  | 7 |  |  | 15 |
Interest rate contracts long-term | 57 |  |  | 32 |  |  | 14 |  |  | 28 |
Commodity contracts current | 1,000 |  |  | 616 |  |  | 781 |  |  | 535 |
Commodity contracts long-term | 277 |  |  | 129 |  |  | 243 |  |  | 158 |
Total Derivatives Not Designated as Cash Flow or Fair Value Hedges | 1,347 |  |  | 786 |  |  | 1,045 |  |  | 736 |
Total Derivatives | $ | 1,369 |  |  | $ | 798 |  |  | $ | 1,054 |  |  | $ | 752 |
The Company has elected to present derivative assets and liabilities on the balance sheet on a trade-by-trade basis and does not offset amounts at the counterparty master agreement level. In addition, collateral received or paid on the Company's derivative assets or liabilities are recorded on a separate line item on the balance sheet. The following table summarizes the offsetting of derivatives by counterparty master agreement level and collateral received or paid:
|  | Gross Amounts Not Offset in the Statement of Financial Position
|  | Gross Amounts of Recognized Assets / Liabilities |  | Derivative Instruments |  | Cash Collateral (Held) / Posted |  | Net Amount
As of March 31, 2018 |  | (In millions)
Commodity contracts: |  |  |  |  |  |  |  |
Derivative assets |  | $ | 1,277 |  |  | $ | (835 | ) |  | $ | (201 | ) |  | $ | 241 |
Derivative liabilities |  | (1,024 | ) |  | 835 |  |  | 120 |  |  | (69 | )
Total commodity contracts |  | 253 |  |  | — |  |  | (81 | ) |  | 172 |
Interest rate contracts: |  |  |  |  |  |  |  |
Derivative assets |  | 92 |  |  | (4 | ) |  | — |  |  | 88 |
Derivative liabilities |  | (30 | ) |  | 4 |  |  | — |  |  | (26 | )
Total interest rate contracts |  | 62 |  |  | — |  |  | — |  |  | 62 |
Total derivative instruments |  | $ | 315 |  |  | $ | — |  |  | $ | (81 | ) |  | $ | 234 |
|  | Gross Amounts Not Offset in the Statement of Financial Position
|  | Gross Amounts of Recognized Assets / Liabilities |  | Derivative Instruments |  | Cash Collateral (Held) / Posted |  | Net Amount
As of December 31, 2017 |  | (In millions)
Commodity contracts: |  |  |  |  |  |  |  |
Derivative assets |  | $ | 745 |  |  | $ | (578 | ) |  | $ | (11 | ) |  | $ | 156 |
Derivative liabilities |  | (693 | ) |  | 578 |  |  | 73 |  |  | (42 | )
Total commodity contracts |  | 52 |  |  | — |  |  | 62 |  |  | 114 |
Interest rate contracts: |  |  |  |  |  |  |  |
Derivative assets |  | 53 |  |  | (3 | ) |  | — |  |  | 50 |
Derivative liabilities |  | (59 | ) |  | 3 |  |  | — |  |  | (56 | )
Total interest rate contracts |  | (6 | ) |  | — |  |  | — |  |  | (6 | )
Total derivative instruments |  | $ | 46 |  |  | $ | — |  |  | $ | 62 |  |  | $ | 108 |
Accumulated Other Comprehensive Loss The following table summarizes the effects of ASC 815 on the Company's accumulated OCI balance attributable to cash flow hedge derivatives, net of tax:
| Interest Rate Contracts
| Three months ended March 31,
| 2018 |  | 2017
| (In millions)
Accumulated OCI beginning balance | $ | (54 | ) |  | $ | (66 | )
Reclassified from accumulated OCI to income: |  |  |
Due to realization of previously deferred amounts | 4 |  |  | 3 |
Mark-to-market of cash flow hedge accounting contracts | 19 |  |  | 2 |
Accumulated OCI ending balance, net of $6, and $14 tax | $ | (31 | ) |  | $ | (61 | )
Losses expected to be realized from OCI during the next 12 months, net of $2 tax | $ | (9 | ) |  |  |
Amounts reclassified from accumulated OCI into income are recorded to interest expense for interest rate contracts. The Company's regression analysis for Marsh Landing, Walnut Creek, and Avra Valley interest rate swaps, while positively correlated, no longer contain match terms for cash flow hedge accounting. As a result, the Company voluntarily de-designated the Marsh Landing, Walnut Creek, and Avra Valley cash flow hedges as of April 28, 2017, and will prospectively mark these derivatives to market through the income statement. Impact of Derivative Instruments on the Statements of Operations Unrealized gains and losses associated with changes in the fair value of derivative instruments not accounted for as cash flow hedges are reflected in current period consolidated results of operations. The following table summarizes the pre-tax effects of economic hedges that have not been designated as cash flow hedges and trading activity on the Company's statement of operations. The effect of energy commodity contracts is included within operating revenues and cost of operations and the effect of interest rate contracts is included in interest expense.
| Three months ended March 31,
| 2018 |  | 2017
Unrealized mark-to-market results | (In millions)
Reversal of previously recognized unrealized losses on settled positions related to economic hedges | $ | 2 |  |  | $ | 3 |
Net unrealized gains/(losses) on open positions related to economic hedges | 194 |  |  | (22 | )
Total unrealized mark-to-market gains/(losses) for economic hedging activities | 196 |  |  | (19 | )
Reversal of previously recognized unrealized gains on settled positions related to trading activity | (3 | ) |  | (15 | )
Net unrealized gains on open positions related to trading activity | 11 |  |  | 1 |
Total unrealized mark-to-market gains/(losses) for trading activity | 8 |  |  | (14 | )
Total unrealized gains/(losses) | $ | 204 |  |  | $ | (33 | )
| Three months ended March 31,
| 2018 |  | 2017
| (In millions)
Unrealized (losses)/gains included in operating revenues | $ | (98 | ) |  | $ | 104 |
Unrealized gains/(losses) included in cost of operations | 302 |  |  | (137 | )
Total impact to statement of operations — energy commodities | $ | 204 |  |  | $ | (33 | )
Total impact to statement of operations — interest rate contracts | $ | 48 |  |  | $ | 5 |
The reversals of acquired gain or loss positions were valued based upon the forward prices on the acquisition date. The roll-off amounts were offset by realized gains or losses at the settled prices and are reflected in operating revenue or cost of operations during the same period. For the three months ended March 31, 2018, the $194 million unrealized gain from open economic hedge positions was primarily the result of an increase in value of forward purchases of ERCOT heat rate contracts due to ERCOT heat rate expansion. For the three months ended March 31, 2017, the $22 million unrealized loss from open economic hedge positions was primarily the result of a decrease in value of forward purchases of natural gas, coal, and ERCOT electricity due to decreases in natural gas, coal, and ERCOT electricity prices. Credit Risk Related Contingent Features Certain of the Company's hedging agreements contain provisions that require the Company to post additional collateral if the counterparty determines that there has been deterioration in credit quality, generally termed “adequate assurance” under the agreements, or require the Company to post additional collateral if there were a one notch downgrade in the Company's credit rating. The collateral required for contracts with adequate assurance clauses that are in a net liability position as of March 31, 2018, was $20 million. The collateral required for contracts with credit rating contingent features that are in a net liability position as of March 31, 2018, was $5 million. The Company is also a party to certain marginable agreements under which it has a net liability position, but the counterparty has not called for the collateral due, which was approximately $5 million as of March 31, 2018. See Note 4, Fair Value of Financial Instruments, to this Form 10-Q for discussion regarding concentration of credit risk.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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