Fair Value Measurements Fair Value Measurements - (Tables)

12 Months Ended

Sep. 30, 2016

The measurement of fair value results in classification into a hierarchy by the inputs used to determine the fair value as follows:



Level 1	—	Unadjusted quoted prices in active markets accessible by the reporting entity for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing.
Level 2	—	Pricing inputs other than quoted market prices included in Level 1 that are based on observable market data and that are directly or indirectly observable for substantially the full term of the asset or liability. These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are not active, adjusted quoted market prices, inputs from observable data such as interest rate and yield curves, volatilities and default rates observable at commonly quoted intervals, and inputs derived from observable market data by correlation or other means.
Level 3	—	Pricing inputs that are unobservable, or less observable, from objective sources. Unobservable inputs are only to be used to the extent observable inputs are not available. These inputs maintain the concept of an exit price from the perspective of a market participant and should reflect assumptions of other market participants. An entity should consider all market participant assumptions that are available without unreasonable cost and effort. These are given the lowest priority and are generally used in internally developed methodologies to generate management's best estimate of the fair value when no observable market data is available.

Unrealized Investment Gains (Losses)

TVA recorded unrealized gains and losses related to its trading securities held as of the end of each period as follows:



	Unrealized Investment Gains (Losses) At September 30
	Financial Statement Presentation	2016		2015

SERP	Other income (expense)	$	2	$	(4	)
LTDCP	Other income (expense)	1		(2		)
NDT	Regulatory asset	89		(47		)
ART	Regulatory asset	29		(17		)

Fair Value Measurements



Fair Value Measurements At September 30, 2016
Assets	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Investments
Equity securities	$	196	$	—	$	—	$	196
Government debt securities	88		36		—		124
Corporate debt securities	—		393		—		393
Mortgage and asset-backed securities	—		50		—		50
Institutional mutual funds	92		—		—		92
Forward debt securities contracts	—		15		—		15
Private equity funds measured at net asset value⁽¹⁾	—		—		—		132
Private real estate funds measured at net asset value⁽¹⁾	—		—		—		113
Commingled funds measured at net asset value⁽¹⁾	—		—		—		1,142
Total investments	376		494		—		2,257
Currency swap(s)⁽²⁾	—		—		—		—
Commodity contract derivatives	—		5		4		9
Commodity derivatives under FTP⁽²⁾
Swap contracts	—		—		—		—

Total	$	376	$	499	$	4	$	2,266

Liabilities	Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total

Currency swap(s)⁽²⁾	$	—	$	162	$	—	$	162
Interest rate swaps	—		1,938		—		1,938
Commodity contract derivatives	—		3		131		134
Commodity derivatives under FTP⁽²⁾
Swap contracts	—		9		—		9

Total	$	—	$	2,112	$	131	$	2,243

Notes

(1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheets.

(2) 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 counterparty or FCM. Deposits are made to TVA's margin cash accounts held with each FCM to offset any net liability positions in full for derivatives that are transacted with FCMs. TVA records currency swaps net of cash collateral received from or paid to the counterparty, to the extent such amount is not recorded in Accounts payable and accrued liabilities. See Note 14 — Offsetting of Derivative Assets and Liabilities.



Fair Value Measurements At September 30, 2015
Assets	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total

Investments
Equity securities	$	166	$	—		$	—	$	166
Government debt securities	203		31			—		234
Corporate debt securities	—		225			—		225
Mortgage and asset-backed securities	—		53			—		53
Institutional mutual funds	91		—			—		91
Forward debt securities contracts	—		(59		)	—		(59		)
Private equity funds measured at net asset value⁽¹⁾	—		—			—		125
Private real estate funds measured at net asset value⁽¹⁾	—		—			—		115
Commingled funds measured at net asset value⁽¹⁾	—		—			—		1,061
Total investments	460		250			—		2,011
Currency swap(s)⁽²⁾	—		25			—		25
Commodity contract derivatives	—		1			—		1
Commodity derivatives under FTP⁽²⁾
Swap contracts	—		—			—		—

Total	$	460	$	276		$	—	$	2,037

Liabilities	Quoted Prices in Active Markets for Identical Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total

Currency swap(s)⁽²⁾	$	—	$	47		$	—	$	47
Interest rate swaps	—		1,627			—		1,627
Commodity contract derivatives	—		—			98		98
Commodity derivatives under FTP⁽²⁾
Swap contracts	—		27			—		27

Total	$	—	$	1,701		$	98	$	1,799

Notes

(2) 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 counterparty or FCM. Deposits are made to TVA's margin cash accounts held with each FCM to offset any net liability positions in full for derivatives that are transacted with FCMs. TVA records currency swaps net of any cash collateral received from or paid to the counterparty, to the extent such amount is not recorded in Accounts payable and accrued liabilities. See Note 14 — Offsetting of Derivative Assets and Liabilities.

Fair Value Measurements Using Significant Unobservable Inputs

The following table presents a reconciliation of all commodity contract derivatives measured at fair value on a recurring basis using significant unobservable inputs (Level 3):



Fair Value Measurements Using Significant Unobservable Inputs
	Commodity Contract Derivatives
Balance at October 1, 2014	$	(85	)
Purchases	—
Issuances	—
Sales	—
Settlements	—
Net unrealized gains (losses) deferred as regulatory assets and liabilities	(13		)
Balance at September 30, 2015	(98		)

Purchases	—
Issuances	—
Sales	—
Settlements	—
Net unrealized gains (losses) deferred as regulatory assets and liabilities	(29		)
Balance at September 30, 2016	$	(127	)

Quantitative Information about Level 3 Fair Value Measurements

The following table presents quantitative information related to the significant unobservable inputs used in the measurement of fair value of TVA's assets and liabilities classified as Level 3 in the fair value hierarchy:



Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at September 30 2016		Valuation Technique(s)	Unobservable Inputs	Range

Assets
Commodity contract derivatives	$	4	Pricing model	Coal supply and demand	0.7 - 0.8 billion tons/year
				Long-term market prices	$11.80 - $85.02/ton

Liabilities
Commodity contract derivatives	$	131	Pricing model	Coal supply and demand	0.7 - 0.8 billion tons/year
				Long-term market prices	$11.80 - $85.02/ton



Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at September 30 2015		Valuation Technique(s)	Unobservable Inputs	Range

Assets
Commodity contract derivatives	$	—	Pricing model	Coal supply and demand	0.8 - 1.0 billion tons/year
				Long-term market prices	$10.64 - $103.41/ton

Liabilities
Commodity contract derivatives	$	98	Pricing model	Coal supply and demand	0.8 - 1.0 billion tons/year
				Long-term market prices	$10.64 - $103.41/ton

Estimated Values of Financial Instruments Not Recorded at Fair Value

The estimated values of TVA's financial instruments not recorded at fair value at September 30, 2016, and September 30, 2015, were as follows:



Estimated Values of Financial Instruments Not Recorded at Fair Value
		At September 30, 2016				At September 30, 2015
	Valuation Classification	Carrying Amount		Fair Value		Carrying Amount		Fair Value
EnergyRight^®receivables (including current portion)	Level 2	$	141	$	144	$	156	$	162

Loans and other long-term receivables, net (including current portion)	Level 2	$	141	$	130	$	129	$	117

EnergyRight^®purchase obligation (including current portion)	Level 2	$	163	$	183	$	185	$	208

Unfunded loan commitments	Level 2	$	—	$	17	$	—	$	9

Membership interests of variable interest entity subject to mandatory redemption (including current portion)	Level 2	$	35	$	46	$	37	$	47

Long-term outstanding power bonds (including current maturities), net	Level 2	$	22,456	$	28,620	$	22,649	$	25,468

Long-term debt of variable interest entities (including current maturities), net	Level 2	$	1,234	$	1,468	$	1,266	$	1,407

Long-term notes payable (including current maturities)	Level 2	$	75	$	75	$	—	$	—