Derivative Instruments and Hedging Activities

9 Months Ended

Sep. 30, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

This footnote should be read in conjunction with the complete description under Item 15 — Note 7, Accounting for Derivative Instruments and Hedging Activities, to the consolidated financial statements included in the Company's 2019 Form 10-K.

Interest Rate Swaps

The Company enters into interest rate swap agreements in order to hedge the variability of expected future cash interest payments. As of September 30, 2020, the Company had interest rate derivative instruments on non-recourse debt extending through 2043, a portion of which were designated as cash flow hedges. Under the interest rate swap agreements, the Company pays a fixed rate and the counterparties to the agreements pay a variable interest rate.

Energy-Related Commodities

As of September 30, 2020, the Company had energy-related derivative instruments extending through 2029. At September 30, 2020, these contracts were not designated as cash flow or fair value hedges.

Volumetric Underlying Derivative Transactions

The following table summarizes the net notional volume buy of the Company's open derivative transactions broken out by type:


		Total Volume
		September 30, 2020		December 31, 2019
Commodity	Units	(In millions)
Natural Gas	MMBtu	1		2
Power	MWh	(2)		(2)
Interest	Dollars	$	1,769	$	1,788

Fair Value of Derivative Instruments

The following table summarizes the fair value within the derivative instrument valuation on the balance sheet:


		Fair Value
	Derivative Liabilities
			September 30, 2020		December 31, 2019
		(In millions)
Derivatives Designated as Cash Flow Hedges:
Interest rate contracts current			$	7	$	3
Interest rate contracts long-term			14		11
Total Derivatives Designated as Cash Flow Hedges			21		14
Derivatives Not Designated as Cash Flow Hedges:
Interest rate contracts current			29		13
Interest rate contracts long-term			119		56

Commodity contracts long-term			17		9
Total Derivatives Not Designated as Cash Flow Hedges			165		78
Total Derivatives			$	186	$	92

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. As of September 30, 2020 and December 31, 2019, there was no outstanding collateral paid or received. The following tables summarize the offsetting of derivatives by the counterparty master agreement level as of September 30, 2020 and December 31, 2019:


As of September 30, 2020	Gross Amounts of Recognized Assets/Liabilities		Derivative Instruments		Net Amount
Commodity contracts:	(In millions)

Derivative liabilities	$	(17)	$	—	$	(17)
Total commodity contracts	(17)		—		(17)
Interest rate contracts:

Derivative liabilities	(169)		—		(169)
Total interest rate contracts	(169)		—		(169)
Total derivative instruments	$	(186)	$	—	$	(186)


As of December 31, 2019	Gross Amounts of Recognized Assets/Liabilities		Derivative Instruments		Net Amount
Commodity contracts:	(In millions)

Derivative liabilities	$	(9)	$	(1)	$	(10)
Total commodity contracts	(9)		(1)		(10)
Interest rate contracts:

Derivative liabilities	(83)		1		(82)
Total interest rate contracts	(83)		1		(82)
Total derivative instruments	$	(92)	$	—	$	(92)

Accumulated Other Comprehensive Loss

The following table summarizes the effects on the Company’s accumulated OCL balance attributable to interest rate swaps designated as cash flow hedge derivatives, net of tax:


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(In millions)
Accumulated OCL beginning balance	$	(39)	$	(35)	$	(31)	$	(38)
Reclassified from accumulated OCL to income due to realization of previously deferred amounts	2		(2)		5		15
Mark-to-market of cash flow hedge accounting contracts	6		1		(5)		(13)
Accumulated OCL ending balance, net of income tax benefit of $6, $6, $6 and $6, respectively	(31)		(36)		(31)		(36)
Accumulated OCL attributable to noncontrolling interests	(16)		(19)		(16)		(19)
Accumulated OCL attributable to Clearway Energy, Inc.	$	(15)	$	(17)	$	(15)	$	(17)
Losses expected to be realized from OCL during the next 12 months, net of income tax benefit of $4	$	(9)			$	(9)

Impact of Derivative Instruments on the Statements of Operations

Gains and losses related to the Company's derivatives are recorded in the consolidated statements of operations as follows:


	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
	(In millions)
Interest Rate Contracts (Interest Expense)	$	39	$	(28)	$	(53)	$	(82)
Mark-to-market economic hedging activities (a)	—		—		(8)		—

(a) Relates to long-term power hedge at Elbow Creek Wind Project LLC, or Elbow Creek.

A portion of the Company’s derivative commodity contracts relates to its Thermal Business for the purchase of fuel commodities based on the forecasted usage of the thermal district energy centers. Realized gains and losses on these contracts are reflected in the fuel costs that are permitted to be billed to customers through the related customer contracts or tariffs and, accordingly, no gains or losses are reflected in the consolidated statements of operations for these contracts.

See Note 5, Fair Value of Financial Instruments, for a discussion regarding concentration of credit risk.