ASC 815 requires the Company to recognize all derivative instruments on the balance sheet as either assets or liabilities and to measure them at fair value each reporting period unless they qualify for a NPNS exception. The Company may elect to designate certain derivatives as cash flow hedges, if certain conditions are met, and defer the change in fair value of the derivatives to accumulated OCI, until the hedged transactions occur and are recognized in earnings.

For derivatives that are not designated as cash flow hedges or do not qualify for hedge accounting treatment, the changes in the fair value will be immediately recognized in earnings. Certain derivative instruments may qualify for the NPNS exception and are therefore exempt from fair value accounting treatment. ASC 815 applies to NRG's energy related commodity contracts, interest rate swaps, and equity contracts.

As the Company engages principally in the trading and marketing of its generation assets and retail businesses, some of NRG's commercial activities qualify for NPNS accounting. Most of the retail load contracts either qualify for the NPNS exception or fail to meet the criteria for a derivative and the majority of the retail supply and fuels supply contracts are recorded under mark-to-market accounting. All of NRG's hedging and trading activities are subject to limits within the Company's Risk Management Policy.

To manage the commodity price risk associated with the Company's competitive supply activities and the price risk associated with wholesale power sales from the Company's electric generation facilities and retail power sales from NRG's retail businesses, NRG enters into a variety of derivative and non-derivative hedging instruments, utilizing the following:

•Extendable swaps, which include a combination of swaps and options executed simultaneously for different periods. This combination of instruments allows NRG to sell out-year volatility through call options in exchange for natural gas swaps with fixed prices in excess of the market price for natural gas at that time. The above-market swap combined with its later-year call option are priced in aggregate at market at the trade's inception; and

NRG's trading and hedging activities are subject to limits within the Company's Risk Management Policy. These contracts are recognized on the balance sheet at fair value and changes in the fair value of these derivative financial instruments are recognized in earnings.

•Forward and financial contracts for the purchase/sale of electricity and related products economically hedging NRG's generation assets' forecasted output or NRG's retail load obligations through 2034;

Also, as of December 31, 2019, NRG had other energy-related contracts that did not meet the definition of a derivative instrument or qualified for the NPNS exception and were therefore exempt from fair value accounting treatment as follows:

NRG was 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 entered into interest rate swap agreements. As of December 31, 2019, NRG had no interest rate derivative instruments as a result of the early termination of such contracts in connection with the repayment of the 2023 Term Loan Facility during the second quarter of 2019. See Note 13, Debt and Finance Leases, for further discussion.

The following table summarizes the net notional volume buy/(sell) of NRG's open derivative transactions broken out by commodity, excluding those derivatives that qualified for the NPNS exception as of December 31, 2019 and 2018. 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.


(In millions)		Total Volume
Commodity	Units	December 31, 2019		December 31, 2018
Emissions	Short Ton	3		(2)
Renewables Energy Certificates	Certificates	1		1
Coal	Short Ton	10		13
Natural Gas	MMBtu	(181)		(330)
Oil	Barrels	—		1
Power	MWh	38		1
Capacity	MW/Day	(1)		(1)
Interest	Dollars	$	—	$	1,000

The decrease in the natural gas position was primarily the result of additional retail hedge positions and settlement of generation hedges. The increase in the power position was primarily the result of additional retail hedge positions and the settlement of generation hedges. The decrease in the interest position was the result of the early settlement of the interest rate swaps.


	Fair Value
	Derivative Assets						Derivative Liabilities
(In millions)	December 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018






Derivatives Not Designated as Cash Flow or Fair Value Hedges:
Interest rate contracts current	$	—	$	17	$	—	$	—
Interest rate contracts long-term	—		22		—		—
Commodity contracts current	860		747		781		673
Commodity contracts long-term	310		295		322		304

Total Derivatives Not Designated as Cash Flow or Fair Value Hedges	$	1,170	$	1,081	$	1,103	$	977

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 derivatives by counterparty master agreement level and collateral received or paid:


	Gross Amounts Not Offset in the Statement of Financial Position
(In millions)	Gross Amounts of Recognized Assets/Liabilities		Derivative Instruments		Cash Collateral (Held)/Posted		Net Amount
As of December 31, 2019
Commodity contracts:
Derivative assets	$	1,170	$	(909)	$	(7)	$	254
Derivative liabilities	(1,103)		909		73		(121)
Total commodity contracts	$	67	$	—	$	66	$	133


	Gross Amounts Not Offset in the Statement of Financial Position
(In millions)	Gross Amounts of Recognized Assets/Liabilities		Derivative Instruments		Cash Collateral (Held)/Posted		Net Amount
As of December 31, 2018
Commodity contracts:
Derivative assets	$	1,042	$	(778)	$	(31)	$	233
Derivative liabilities	(977)		778		114		(85)
Total commodity contracts	65		—		83		148
Interest rate contracts:
Derivative assets	39		—		—		39

Total interest rate contracts	39		—		—		39
Total derivative instruments	$	104	$	—	$	83	$	187

The following table summarizes the effects on NRG's accumulated OCI balance attributable to cash flow hedge derivatives, net of tax, for the years 2018 and 2017. As of December 31, 2019, NRG had no interest rate derivative instruments as a result of the early termination of such contracts in connection with the repayment of the 2023 Term Loan Facility, as further discussed in Note 13, Debt and Finance Leases.


	Interest Rate Contracts
(In millions)	2018		2017
Accumulated OCI beginning balance	$	(54)	$	(66)
Reclassified from accumulated OCI to income:
Due to realization of previously deferred amounts	8		12
Mark-to-market of cash flow hedge accounting contracts	21		—
Sale of NRG Yield and Renewables	$	25	$	—
Accumulated OCI ending balance	$	—	$	(54)

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 commodity hedges is included within operating revenues and cost of operations and the effect of interest rate hedges is included in interest expense.


	Year Ended December 31,
(In millions)	2019		2018		2017
Unrealized mark-to-market results
Reversal of previously recognized unrealized (gains)/losses on settled positions related to economic hedges	$	(68)	$	(73)	$	47
Reversal of acquired loss/(gain) positions related to economic hedges	6		(10)		—
Net unrealized gains on open positions related to economic hedges	42		97		159
Total unrealized mark-to-market (losses)/gains for economic hedging activities	(20)		14		206
Reversal of previously recognized unrealized (gains) on settled positions related to trading activity	(11)		(12)		(25)

Net unrealized gains on open positions related to trading activity	31		29		14
Total unrealized mark-to-market gains/(losses) for trading activity	20		17		(11)
Total unrealized gains	$	—	$	31	$	195


	Year Ended December 31,
(In millions)	2019		2018		2017
Unrealized gains/(losses) included in operating revenues	$	53	$	(113)	$	241
Unrealized (losses)/gains included in cost of operations	(53)		144		(46)
Total impact to statement of operations — energy commodities	$	—	$	31	$	195
Total impact to statement of operations — interest rate contracts	$	(38)	$	—	$	4

The reversal of gain or loss positions acquired as part of acquisitions were valued based upon the forward prices on the acquisition dates. The roll-off amounts were offset by realized gains or losses at the settled prices and are reflected in revenue or cost of operations during the same period.

For the year ended December 31, 2019, 2018 and 2017 the $42 million, $97 million, and $159 million gains from economic hedge positions were primarily the result of an increase in the value of forward purchases of ERCOT heat rate contracts due to ERCOT heat rate expansion.

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 that have adequate assurance clauses that are in net liability positions as of December 31, 2019 was $14 million. The collateral required for contracts with credit rating contingent features that are in a net liability position as of December 31, 2019 was $24 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 $3 million as of December 31, 2019.