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Risk Management Activities and Derivative Transactions (Tables)
 3 Months Ended
Dec. 31, 2014
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 Gain (Loss) Recognized in OCI
 
 
 
 
 
 
Three Months Ended December 31
 
Derivatives in Cash Flow Hedging Relationship
 
Objective of Hedge Transaction
 
Accounting for Derivative
Hedging Instrument
 
2014
 
2013
 
Currency swaps
 
To protect against changes in cash flows caused by changes in foreign currency exchange rates (exchange rate risk)
 
Unrealized gains and losses are recorded in AOCI and reclassified to interest expense to the extent they are offset by gains and losses on the hedged transaction
 
$
(15
)
 
$
20

 
Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2) 
Amount of Gain (Loss) Reclassified from OCI to Interest Expense
 
 
Three Months Ended December 31
 
Derivatives in Cash Flow Hedging Relationship
 
2014
 
2013
 
Currency swaps
 
$
(38
)
 
$
22

 

Note
There were no ineffective portions or amounts excluded from effectiveness testing for any of the periods presented. Based on forecasted foreign currency exchange rates, TVA expects to reclassify approximately $53 million of losses from AOCI to interest expense within the next twelve months to offset amounts anticipated to be recorded in interest expense related to exchange gain on the debt.
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
December 31(1)
 
Derivative Type
 
Objective of Derivative
 
Accounting for Derivative Instrument
 
2014
 
2013
 
Interest rate swaps
 
To fix short-term debt variable rate to a fixed rate (interest rate risk)
 
Mark-to-market 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. (2)
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
Commodity contract derivatives
 
To protect against fluctuations in market prices of purchased coal or natural gas (price risk)
 
Mark-to-market 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)
 
Mark-to-market 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.
 
(14
)
 
(20
)
 

Notes
(1) 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 months ended December 31, 2014 and 2013.
(2) Generally, TVA maintains a level of outstanding discount notes equal to or greater than the notional amount of the interest rate swaps. However, in September 2014, TVA issued long-term Bonds in anticipation of the maturity of other long-term debt, and used the proceeds to pay down discount notes, which caused the balance of discount notes outstanding at December 31, 2014, to fall below the notional amount of the interest rate swaps. There is no impact on the statements of operations due to the use of regulatory accounting for these items.
Mark-to-Market Values of TVA Derivatives
Mark-to-Market Values of TVA Derivatives
 
At December 31, 2014
 
At September 30, 2014
Derivatives that Receive Hedge Accounting Treatment
 
Balance
 
Balance Sheet Presentation
 
Balance
 
Balance Sheet Presentation
Currency swaps
 
 
 
 
 
 
 
£200 million Sterling
$
(23
)
 
Other long-term liabilities
 
$
(15
)
 
Other long-term liabilities
£250 million Sterling
52

 
Other long-term assets
 
56

 
Other long-term assets
£150 million Sterling
6

 
Other long-term assets
 
8

 
Other long-term assets
 
 
 
 
 
 
 
 
Derivatives that Do Not Receive Hedge Accounting Treatment
 
Balance
 
Balance Sheet Presentation
 
Balance
 
Balance Sheet Presentation
Interest rate swaps
 
 
 
 
 
 
 
$1.0 billion notional
(1,112
)
 
Other long-term liabilities
 
(987
)
 
Other long-term liabilities
$476 million notional
(408
)
 
Other long-term liabilities
 
(349
)
 
Other long-term liabilities
$42 million notional
(12
)
 
Other long-term liabilities
 
(12
)
 
Other long-term liabilities
Commodity contract derivatives
(133
)
 
Other long-term liabilities $(32); Accounts payable and accrued liabilities $(101)
 
(96
)
 
Other current assets $1; Other long-term liabilities $(17); Accounts payable and accrued liabilities $(80)
FTP
 
 
 
 
 
 
 
Derivatives under FTP(1)
(159
)
 
Other current assets $(111); Other long-term liabilities $(13); Accounts payable and accrued liabilities $(35)
 
(103
)
 
Other current assets $(69); Other long-term liabilities $(14); Accounts payable and accrued liabilities $(20)
Note
(1)  Fair values of certain derivatives under the FTP that were in net liability positions totaling $111 million and $69 million at December 31, 2014 and September 30, 2014, respectively, are recorded in TVA's margin cash accounts in Other current assets. These derivatives are transacted with futures commission merchants, and cash deposits have been posted to the margin cash accounts held with each futures commission merchant to offset the net liability positions in full.
Currency Swaps Outstanding
TVA had the following currency swaps outstanding as of December 31, 2014:
Currency Swaps Outstanding
At December 31, 2014
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 December 31, 2014
 
At September 30, 2014
 
Number of Contracts
 
Notional Amount
 
Fair Value (MtM)
 
Number of Contracts
 
Notional Amount
 
Fair Value (MtM)
Coal contract derivatives
17
 
31 million tons
 
$
(107
)
 
24
 
31 million tons
 
$
(86
)
Natural gas contract derivatives
42
 
107 million mmBtu
 
$
(26
)
 
46
 
62 million mmBtu
 
$
(10
)
Derivatives Under Financial Trading Program
Derivatives Under Financial Trading Program
 
At December 31, 2014
 
At September 30, 2014
 
Notional Amount
 
Fair Value (MtM)
(in millions)
 
Notional Amount
 
Fair Value (MtM)
(in millions)
Natural gas (in mmBtu)
 
 
 
 
 
 
 
Swap contracts
88,195,000

 
$
(159
)
 
102,227,500

 
$
(103
)
Natural gas financial positions
88,195,000

 
$
(159
)
 
102,227,500

 
$
(103
)

Note
Fair value amounts presented are based on net commodity position with the counterparty. Notional amounts disclosed represent the net absolute value of contractual amounts.
Financial Trading Program Unrealized Gains (Losses)
Financial Trading Program Unrealized Gains (Losses)
FTP unrealized gains (losses) deferred as regulatory liabilities (assets)
 
At December 31, 2014
 
At September 30, 2014
 
 
 
 
 
Natural gas
 
$
(159
)
 
$
(103
)
Financial Trading Program Realized Gains (Losses)
Financial Trading Program Realized Gains (Losses)
 
 
For the Three Months Ended
December 31
 
Decrease (increase) in fuel expense
 
2014
 
2013
 
 
 
 
 
 
 
Natural gas
 
$
(12
)
 
$
(15
)
 
Fuel oil/crude oil
 
1

 
1

 

Financial Trading Program Realized Gains (Losses)
 
 
For the Three Months Ended
December 31
 
Decrease (increase) in purchased power expense
 
2014
 
2013
 
 
 
 
 
 
 
Natural gas
 
$
(3
)
 
$
(6
)
 
Offsetting of Derivative Assets and Liabilities
The amounts of TVA's derivative instruments as reported in the consolidated balance sheets as of December 31, 2014, and September 30, 2014, are shown in the table below.
 
As of December 31, 2014
 
Gross Amounts of Recognized Assets/Liabilities
 
Gross Amounts Offset in the Balance Sheet (1)
 
Net Amounts of Assets/Liabilities Presented in the Balance Sheet (2)
Assets
 
 
 
 
 
Currency swaps(3)
$
58

 
$
(38
)
 
$
20

Commodity derivatives under FTP
77

 
(77
)
 
—

Total derivatives subject to master netting or similar arrangement
135

 
(115
)
 
20

Total derivatives not subject to master netting or similar arrangement
—

 
—

 
—

 
 
 
 
 
 
Total
$
135

 
$
(115
)
 
$
20

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Currency swap (4)
$
23

 
$
—

 
$
23

Interest rate swaps (4)
1,532

 
—

 
1,532

Commodity derivatives under FTP
236

 
(187
)
 
49

Total derivatives subject to master netting or similar arrangement
1,791

 
(187
)
 
1,604

Total derivatives not subject to master netting or similar arrangement
133

 
—

 
133

 
 
 
 
 
 
Total
$
1,924

 
$
(187
)
 
$
1,737

 
 
 
 
 
 
 
As of September 30, 2014
 
Gross Amounts of Recognized Assets/Liabilities
 
Gross Amounts Offset in the Balance Sheet (1)
 
Net Amounts of Assets/Liabilities Presented in the Balance Sheet (2)
Assets
 
 
 
 
 
Currency swaps
$
64

 
$
(64
)
 
$
—

Commodity derivatives under FTP
51

 
(51
)
 
—

Total derivatives subject to master netting or similar arrangement
115

 
(115
)
 
—

Total derivatives not subject to master netting or similar arrangement
1

 
—

 
1

 
 
 
 
 
 
Total
$
116

 
$
(115
)
 
$
1

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Currency swap (4)
$
15

 
$
—

 
$
15

Interest rate swaps (4)
1,348

 
—

 
1,348

Commodity derivatives under FTP
154

 
(120
)
 
34

Total derivatives subject to master netting or similar arrangement
1,517

 
(120
)
 
1,397

Total derivatives not subject to master netting or similar arrangement
97

 
—

 
97

 
 
 
 
 
 
Total
$
1,614

 
$
(120
)
 
$
1,494

Notes
(1) Amounts primarily include counterparty netting of derivative contracts, margin account deposits for futures commission merchants transactions, and cash collateral received or paid in accordance with the accounting guidance for derivatives and hedging transactions.
(2) There are no derivative contracts subject to a master netting arrangement or similar agreement which are not offset in the balance sheets.
(3) Securities of approximately $15 million were posted to TVA by a counterparty to partially secure the asset positions of two of the currency swaps in accordance with the collateral requirements for these derivatives.
(4) Letters of credit of approximately $1.0 billion were posted as collateral at December 31, 2014 and September 30, 2014, to partially secure the liability positions of one of the currency swaps and one of the interest rate swaps in accordance with the collateral requirements for these derivatives.