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Fair Value of Financial Instruments | 6 Months Ended
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Jun. 30, 2026
Fair Value Disclosures [Abstract] |
Fair Value of Financial Instruments | Fair Value of Financial Instruments Fair Value Accounting under ASC 820 ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: •Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. •Level 2—inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data. •Level 3—unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date. In accordance with ASC 820, the Company determines the level in the fair value hierarchy within which each fair value measurement in its entirety falls, based on the lowest level input that is significant to the fair value measurement. For cash and cash equivalents, restricted cash, accounts receivable — trade, accounts receivable — affiliates, accounts payable — trade, accounts payable — affiliates and accrued expenses and other current liabilities, the carrying amounts approximate fair value because of the short-term maturity of those instruments. The carrying amount and estimated fair value of the Company’s recorded financial instrument not carried at fair market value or that does not approximate fair value is as follows:
| As of June 30, 2026 |  | As of December 31, 2025
| Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
| (In millions)
Long-term debt, including current portion (a) | $ | 9,141 |  |  | $ | 8,787 |  |  | $ | 8,676 |  |  | $ | 8,382 |
(a) Excludes net debt issuance costs, which are recorded as a reduction to long-term debt on the Company’s consolidated balance sheets. The fair value of the Company’s publicly-traded long-term debt is based on quoted market prices and is classified as Level 2 within the fair value hierarchy. The fair value of debt securities, non-publicly traded long-term debt and certain notes receivable of the Company are based on expected future cash flows discounted at market interest rates, or current interest rates for similar instruments with equivalent credit quality and are classified as Level 3 within the fair value hierarchy. The following table presents the level within the fair value hierarchy for long-term debt, including current portion:
| As of June 30, 2026 |  | As of December 31, 2025
| Level 2 |  | Level 3 |  | Level 2 |  | Level 3
| (In millions)
Long-term debt, including current portion | $ | 2,607 |  |  | $ | 6,180 |  |  | $ | 2,032 |  |  | $ | 6,350 |
Recurring Fair Value Measurements The Company records its derivative assets and liabilities at fair market value on its consolidated balance sheets. The following table presents assets and liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis and their level within the fair value hierarchy:
|  |  | As of June 30, 2026 |  | As of December 31, 2025
|  |  | Fair Value (a) |  | Fair Value (a)
(In millions) |  |  | Level 2 (b) |  | Level 3 |  |  |  | Level 2 (b) |  | Level 3 |  |
Derivative assets: |  |  |  |  |  |  |  |  |  |  |  |  |
Energy-related commodity contracts (c) |  |  | $ | — |  |  | $ | 20 |  |  |  |  | $ | 1 |  |  | $ | 13 |  |  |
Interest rate contracts |  |  | 173 |  |  | — |  |  |  |  | 142 |  |  | — |  |  |
Other financial instruments (d) |  |  | — |  |  | 4 |  |  |  |  | — |  |  | 7 |  |  |
Total assets |  |  | $ | 173 |  |  | $ | 24 |  |  |  |  | $ | 143 |  |  | $ | 20 |  |  |
Derivative liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |
Energy-related commodity contracts (e) |  |  | $ | — |  |  | $ | 82 |  |  |  |  | $ | — |  |  | $ | 333 |  |  |
Interest rate contracts |  |  | 11 |  |  | — |  |  |  |  | 27 |  |  | — |  |  |
Total liabilities |  |  | $ | 11 |  |  | $ | 82 |  |  |  |  | $ | 27 |  |  | $ | 333 |  |  |
(a) There were no derivative assets or liabilities classified as Level 1 as of June 30, 2026 and December 31, 2025. (b) The Company’s interest rate swaps are measured at fair value using an income approach, which uses readily observable inputs, such as forward interest rates (e.g., SOFR) and contractual terms to estimate fair value. (c) Includes short-term backbone transportation service contracts classified as Level 2 and heat rate call option commodity contracts classified as Level 3. (d) Includes SREC contract. (e) Includes long-term power commodity contracts and heat rate call option commodity contracts classified as Level 3. As of June 30, 2026 and December 31, 2025, $80 million and $330 million, respectively, related to long-term power commodity contracts, and $2 million and $3 million, respectively, related to heat rate call option commodity contracts. The following table reconciles the beginning and ending balances for instruments that are recognized at fair value in the consolidated financial statements using significant unobservable inputs:
|  | Three months ended June 30, |  | Six months ended June 30,
|  | 2026 |  | 2025 |  | 2026 |  | 2025
(In millions) |  | Fair Value Measurement Using Significant Unobservable Inputs (Level 3) |  | Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
Beginning balance |  | $ | (168) |  |  | $ | (363) |  |  | $ | (313) |  |  | $ | (352) |
Settlements |  | 8 |  |  | 33 |  |  | 11 |  |  | 40 |
Transfers out of Level 3 (a) |  | 96 |  |  | — |  |  | 211 |  |  | — |
Total gains (losses) for the period included in earnings |  | 6 |  |  | (15) |  |  | 33 |  |  | (33) |
Ending balance |  | $ | (58) |  |  | $ | (345) |  |  | $ | (58) |  |  | $ | (345) |
Change in unrealized gains included in earnings for derivatives and other financial instruments held as of June 30, 2026 |  | $ | 6 |  |  |  |  | $ | 33 |  |  |
(a) During 2026, the Company restructured the Mesquite Sky, Langford and Elbow Creek energy-related commodity contracts, resulting in the derecognition of the related derivative liabilities and classification as in-substance financings, as further described in Note 7, Long-term Debt. Derivative and Financial Instruments Fair Value Measurements The Company’s contracts are non-exchange-traded and valued using prices provided by external sources. The Company uses quoted observable forward prices to value its energy-related commodity contracts, which includes long-term power commodity contracts and heat rate call option commodity contracts. To the extent that observable forward prices are not available, the quoted prices reflect the average of the forward prices from the prior year, adjusted for inflation. As of June 30, 2026, contracts valued with prices provided by models and other valuation techniques make up 10% of derivative assets, 88% of derivative liabilities and 100% of other financial instruments. The Company’s significant positions classified as Level 3 relate to physical and financial energy-related contracts, including long-term power commodity contracts and heat rate call option commodity contracts executed in illiquid markets. The significant unobservable inputs used in developing fair value include illiquid power tenors and location pricing, which is derived by extrapolating pricing as a basis to liquid locations. The tenor pricing and basis spread are based on observable market data when available or derived from historic prices and forward market prices from similar observable markets when not available. The following table quantifies the significant unobservable inputs used in developing the fair value of the Company’s Level 3 positions:
| June 30, 2026
| Fair Value |  | Input/Range
| Assets | Liabilities | Valuation Technique | Significant Unobservable Input | Low | High | Weighted Average
| (In millions) |  |  |  |  |
Long-term Power Commodity Contracts | $ | — |  | $ | 80 |  | Discounted Cash Flow | Forward Market Price ($ per MWh) | $ | 31.47 |  | $ | 79.85 |  | $ | 48.47 |
Heat Rate Call Option Commodity Contracts | 20 |  | 2 |  | Option Model | Forward Market Price ($ per MWh) | 2.26 |  | 256.49 |  | 44.08 |
|  | Option Model | Forward Market Price ($ per MMBtu) | 2.15 |  | 9.91 |  | 2.66 |
Other Financial Instruments | 4 |  | — |  | Discounted Cash Flow | Forecast annual generation levels of certain DG solar facilities | 57,935 MWh | 115,869 MWh | 97,214 MWh
The following table provides the impact on the fair value measurements to increases/(decreases) in significant unobservable inputs as of June 30, 2026:
Type | Significant Unobservable Input | Position | Change In Input | Impact on Fair Value Measurement
Energy-Related Commodity Contracts | Forward Market Price Power | Sell | Increase/(Decrease) | Lower/(Higher)
Energy-Related Commodity Contracts | Forward Market Price Gas | Sell | Increase/(Decrease) | Higher/(Lower)
Other Financial Instruments | Forecast Generation Levels | Sell | Increase/(Decrease) | Higher/(Lower)
The fair value of each contract is discounted using a risk-free interest rate. In addition, a credit reserve is applied to reflect credit risk, which is, for interest rate swaps, calculated based on credit default swaps using the bilateral method. For commodities, to the extent that the Net Exposure under a specific master agreement is an asset, the Company uses the counterparty’s default swap rate. If the Net Exposure under a specific master agreement is a liability, the Company uses a proxy of its own default swap rate. For interest rate swaps and commodities, the credit reserve is added to the discounted fair value to reflect the exit price that a market participant would be willing to receive to assume the liabilities or that a market participant would be willing to pay for the assets. As of June 30, 2026, the non-performance reserve was a $2 million gain recorded primarily to total operating revenues in the consolidated statements of operations. It is possible that future market prices could vary from those used in recording assets and liabilities and such variations could be material. Concentration of Credit Risk In addition to the credit risk discussion as disclosed under Item 15 — Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in the Company’s 2025 Form 10-K, the following item is a discussion of the concentration of credit risk for the Company’s financial instruments. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. The Company monitors and manages credit risk through credit policies that include: (i) an established credit approval process; (ii) monitoring of counterparties’ credit limits on an as needed basis; (iii) as applicable, the use of credit mitigation measures such as margin, collateral, prepayment arrangements, or volumetric limits; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty risk by having a diversified portfolio of counterparties. Counterparty credit exposure includes credit risk exposure under certain long-term agreements, including solar and other PPAs. As external sources or observable market quotes are not available to estimate such exposure, the Company estimates the exposure related to these contracts based on various techniques including, but not limited to, internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics. A significant portion of these energy-related commodity contracts are with utilities with strong credit quality and public utility commission or other regulatory support. However, such regulated utility counterparties can be impacted by changes in government regulations or adverse financial conditions, which the Company is unable to predict. Certain subsidiaries of the Company sell the output of their facilities to PG&E, a significant counterparty of the Company, under long-term PPAs, and PG&E’s credit rating is below investment-grade.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (bbb)(1) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 3: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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