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Risk Management Activities and Derivative Transactions (Tables)
 9 Months Ended
Jun. 30, 2012
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Summary of Derivative Instruments That Receive Hedge Accounting Treatment

The following tables summarize the accounting treatment that certain of TVA's financial derivative transactions receive.
Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 1) 
 
 
 
 
 
 
Amount of Mark-to-Market(1) 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)(2)
Three Months Ended
June 30
 
Amount of Mark-to-Market
Gain (Loss) Recognized in Other Comprehensive Income (Loss)
Nine Months Ended
June 30
Derivatives in Cash Flow Hedging Relationship
 
Objective of Hedge Transaction
 
Accounting for Derivative
Hedging Instrument
 
2012
 
2011
 
2012
 
2011
Currency swaps
 
To protect against changes in cash flows caused by changes in foreign currency exchange rates (exchange rate risk)
 
Cumulative unrealized gains and losses are recorded in OCI and reclassified to interest expense to the extent they are offset by cumulative gains and losses on the hedged transaction
 
$
(36
)
 
$
(12
)
 
$
27

 
$
51


Notes
(1) Mark-to-Market ("MtM")
(2) Other Comprehensive Income (Loss) ("OCI")

Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2) 
 
 
Amount of Gain (Loss) Reclassified from
OCI to Interest Expense
Three Months Ended
June 30
 
Amount of Gain (Loss) Reclassified from
OCI to Interest Expense
Nine Months Ended
June 30
Derivatives in Cash Flow
Hedging Relationship
 
2012
 
2011
 
2012
 
2011
Currency swaps
 
$
18

 
$
(1
)
 
$
(7
)
 
$
(21
)

Note
There were no ineffective portions or amounts excluded from effectiveness testing for any of the periods presented.
Summary of Derivative Instruments That Do Not Receive Hedge Accounting Treatment
Summary of Derivative Instruments That Do Not Receive Hedge Accounting Treatment





 
Amount of Gain
(Loss) Recognized in Income on Derivatives
Three Months Ended
June 30
 
Amount of Gain
(Loss) Recognized in Income on Derivatives
Nine Months Ended
June 30
Derivative Type
 
Objective of Derivative
 
Accounting for Derivative Instrument
 
2012
 
2011
 
2012
 
2011
Swaption
 
To protect against decreases in value of the embedded call (interest rate risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities until settlement, at which time the gains/losses are recognized in gain/loss on derivative contracts.
 
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
To fix short-term debt variable rate to a fixed rate (interest rate risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities until settlement, at which time the gains/losses are recognized in gain/loss on derivative contracts.
 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity contract derivatives
 
To protect against fluctuations in market prices of purchased coal or natural gas  (price risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities. Realized gains and losses due to contract settlements are recognized in fuel expense as incurred.

 
—

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
under financial trading program ("FTP")
 
To protect against fluctuations in market prices of purchased commodities (price risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities. Realized gains and losses are recognized in fuel expense or purchased power expense when the related commodity is used in production.
 
(104
)
 
(29
)
 
(248
)
 
(106
)

Note
All of TVA's derivative instruments that do not receive hedge accounting treatment have unrealized gains (losses) that would otherwise be recognized in income but
instead are deferred as regulatory assets and liabilities. As such, there was no related gain (loss) recognized in income for these unrealized gains (losses) for the
three and nine months ended June 30, 2012, and 2011.
Mark-to-Market Value of TVA Derivatives
Mark-to-Market Values of TVA Derivatives
 
At June 30, 2012
 
At September 30, 2011
Derivatives that Receive Hedge Accounting Treatment:
 
Balance
 
Balance Sheet Presentation
 
Balance
 
Balance Sheet Presentation
Currency swaps:
 
 
 
 
 
 
 
£200 million Sterling
$
(40
)
 
Other long-term liabilities
 
$
(44
)
 
Other long-term liabilities
£250 million Sterling
(11
)
 
Other long-term liabilities
 
(24
)
 
Other long-term liabilities
£150 million Sterling
(53
)
 
Other long-term liabilities
 
(63
)
 
Other long-term liabilities
 
 
 
 
 
 
 
 
Derivatives that Do Not Receive Hedge Accounting Treatment:
 
Balance
 
Balance Sheet Presentation
 
Balance
 
Balance Sheet Presentation
 
Swaption:
 
 
 
 
 
 
 
$1.0 billion notional
$
—

 
N/A
 
$
(1,077
)
 
Other long-term liabilities
Interest rate swaps:
 
 
 
 
 
 
 
$1.0 billion notional
(1,258
)
 
Other long-term liabilities
 
—

 
N/A
$476 million notional
(465
)
 
Other long-term liabilities
 
(446
)
 
Other long-term liabilities
$42 million notional
(18
)
 
Other long-term liabilities
 
(17
)
 
Other long-term liabilities
Commodity contract derivatives
(331
)
 
Other long-term assets $111; Other current assets $10; Other long-term  liabilities $(236); Accounts payable and accrued liabilities $(216)
 
239

 
Other long-term assets $285; Other current assets $150; Other long-term  liabilities $(119); Accounts payable and accrued liabilities $(77)
Derivatives under FTP:
 
 
 
 
 
 
 
Margin cash account(1)
79

 
Other current assets
 
34

 
Other current assets
Derivatives under FTP(2)
(391
)
 
Current regulatory assets $(186); Regulatory assets $(210); Current regulatory liabilities $3; Regulatory liabilities $2
 
(234
)
 
Current regulatory assets $(135); Regulatory assets $(102); Current regulatory liabilities $3

Notes
(1)  In accordance with certain credit terms, TVA uses leverage to trade financial instruments under the FTP.  Therefore, the margin cash account balance does not represent 100 percent of the net market value of the derivative positions outstanding as shown in the Derivatives Under Financial Trading Program table. This balance also includes the $26 million deposited with MF Global Inc. In July 2012, TVA recovered an additional $1 million of this balance from the trustee. See Counterparty Credit Risk for details.
(2)  The June 30, 2012, and September 30, 2011 balances in the Derivatives Under Financial Trading Program table show all open derivative positions in the FTP. 
Currency Swaps Outstanding
TVA had the following currency swaps outstanding as of June 30, 2012:

Currency Swaps Outstanding
At June 30, 2012
Effective Date of Currency Swap Contract
 
Associated TVA Bond Issues Currency Exposure
 
Expiration Date of Swap
 
Overall Effective
Cost to TVA
1999
 
£200 million
 
2021
 
5.81%
2001
 
£250 million
 
2032
 
6.59%
2003
 
£150 million
 
2043
 
4.96%
Commodity Contract Derivatives

Commodity Contract Derivatives 
 
At June 30, 2012
 
At September 30, 2011
 
Number of Contracts
 
Notional Amount
 
Fair Value (MtM)
 
Number of Contracts
 
Notional Amount
 
Fair Value (MtM)
Coal contract derivatives
18
 
53 million tons
 
$(331)
 
38
 
66 million tons
 
$239
Natural gas contract derivatives
24
 
75 million mmBtu
 
$—
 
13
 
5 million mmBtu
 
$—
Derivatives Under Financial Trading Program
Derivatives Under Financial Trading Program
 
At June 30, 2012
 
At September 30, 2011
 
Notional Amount
 
Fair Value (MtM)
(in millions)
 
Notional Amount
 
Fair Value (MtM)
(in millions)
Natural gas (in mmBtu)
 
 
 
 
 
 
 
Futures contracts
—

 
$
—

 
1,300,000

 
$
(4
)
Swap contracts
333,110,500

 
(387
)
 
232,295,000

 
(223
)
Option contracts
—

 
(1
)
 
—

 
(1
)
Natural gas financial positions
333,110,500

 
$
(388
)
 
233,595,000

 
$
(228
)
 
 
 
 
 
 
 
 
Fuel oil/crude oil (in barrels)
 
 
 

 
 

 
 

Futures contracts
—

 
$
—

 
—

 
$
—

Swap contracts
1,118,000

 
(2
)
 
1,591,000

 
(7
)
Option contracts
—

 
—

 
90,000

 
—

Fuel oil/crude oil financial positions
1,118,000

 
$
(2
)
 
1,681,000

 
$
(7
)
 
 
 
 
 
 
 
 
Coal (in tons)
 

 
 

 
 

 
 

Futures contracts
—

 
$
—

 
—

 
$
—

Swap contracts
—

 
(1
)
 
120,000

 
1

Option contracts
—

 
—

 
—

 
—

Coal financial positions
—

 
$
(1
)
 
120,000

 
$
1


Note
Due to the right of setoff and method of settlement, TVA elects to record commodity derivatives under the FTP based on its net commodity position with the broker or other counterparty.  Notional amounts disclosed represent the net absolute value of contractual amounts.
FTP Unrealized Gains (Losses)
TVA experienced the following unrealized and realized gains and losses related to the FTP at the dates and during the periods, as applicable, set forth in the table below:

FTP Unrealized Gains (Losses)
 
 
 
 
 
FTP unrealized gains (losses) deferred as regulatory liabilities (assets)
 
At June 30, 2012
 
At September 30, 2011
 
 
 
 
 
Natural gas
 
$
(388
)
 
$
(228
)
Fuel oil/crude oil
 
(2
)
 
(7
)
Coal
 
(1
)
 
1
FTP Realized Gains (Losses)
FTP Realized Gains (Losses)
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended June 30
 
For the Nine Months Ended June 30
Decrease (increase) in fuel expense
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 
Natural gas
 
$
(53
)
 
$
—

 
$
(69
)
 
$
—

Fuel oil/crude oil
 
1

 
7

 
9

 
11

Coal
 
—

 
—

 
1

 
1


FTP Realized Gains (Losses)
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended June 30
 
For the Nine Months Ended June 30
Decrease (increase) in purchased power expense
 
2012
 
2011
 
2012
 
2011
 
 
 
 
 
 
 
 
 
Natural gas
 
$
(53
)
 
$
35

 
$
(189
)
 
$
102