Risk Management Activities and Derivative Transactions (Tables)

9 Months Ended

Jun. 30, 2016

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 June 30					Nine Months Ended June 30
Derivatives in Cash Flow Hedging Relationship	Objective of Hedge Transaction	Accounting for Derivative Hedging Instrument	2016			2015		2016			2015
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	$	(90	)	$	62	$	(144	)	$	(12	)



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					Nine Months Ended June 30
Derivatives in Cash Flow Hedging Relationship	2016			2015		2016			2015
Currency swaps	$	(63	)	$	53	$	(109	)	$	(31	)

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 $35 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 June 30⁽¹⁾						Nine Months Ended June 30⁽¹⁾
Derivative Type	Objective of Derivative	Accounting for Derivative Instrument	2016			2015			2016			2015
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. Realized gains and losses are recognized in interest expense when payments are made or received on the swap settlement dates.	$	(27	)	$	(28	)	$	(82	)	$	(85	)

Commodity derivatives under financial trading program	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.	(22		)	(30		)	(78		)	(69		)

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 and nine months ended June 30, 2016 and 2015.

Fair Value of TVA Derivatives



Fair Values of TVA Derivatives
	At June 30, 2016				At September 30, 2015
Derivatives That Receive Hedge Accounting Treatment	Balance			Balance Sheet Presentation	Balance			Balance Sheet Presentation
Currency swaps
£200 million Sterling	$	(79	)	Other long-term liabilities	$	(41	)	Other long-term liabilities
£250 million Sterling	(44		)	Other long-term liabilities	25			Other long-term assets
£150 million Sterling	(44		)	Other long-term liabilities	(6		)	Other long-term liabilities

	At June 30, 2016				At September 30, 2015
Derivatives That Do Not Receive Hedge Accounting Treatment	Balance			Balance Sheet Presentation	Balance			Balance Sheet Presentation
Interest rate swaps
$1.0 billion notional	(1,369		)	Other long-term liabilities	(1,177		)	Other long-term liabilities
$476 million notional	(531		)	Other long-term liabilities	(438		)	Other long-term liabilities
$42 million notional	(12		)	Other long-term liabilities	(12		)	Other long-term liabilities
Commodity contract derivatives	(177		)	Other current assets $8; Other long-term assets $4; Other long-term liabilities $(72); Accounts payable and accrued liabilities $(117)	(97		)	Other long-term assets $1; Other long-term liabilities $(17); Accounts payable and accrued liabilities $(81)
FTP
Derivatives under FTP⁽¹⁾	(52		)	Other current assets $(41); Other long-term liabilities $(4); Accounts payable and accrued liabilities $(7)	(116		)	Other current assets $(89); Other long-term liabilities $(10); Accounts payable and accrued liabilities $(17)

Note

(1) Fair values of certain derivatives under the FTP that were in net liability positions totaling $41 million and $89 million at June 30, 2016 and September 30, 2015, 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 June 30, 2016:



Currency Swaps Outstanding At June 30, 2016
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, 2016					At September 30, 2015
	Number of Contracts	Notional Amount	Fair Value (MtM)			Number of Contracts	Notional Amount	Fair Value (MtM)
Coal contract derivatives	17	22 million tons	$	(183	)	14	19 million tons	$	(98	)
Natural gas contract derivatives	33	154 million mmBtu	$	6		33	134 million mmBtu	$	1

Derivatives Under Financial Trading Program



Derivatives Under Financial Trading Program
	At June 30, 2016				At September 30, 2015
	Notional Amount	Fair Value (MtM) (in millions)			Notional Amount	Fair Value (MtM) (in millions)
Natural gas (in mmBtu)
Swap contracts	27,642,500	$	(52	)	51,495,000	$	(116	)

Note

Fair value amounts presented are based on the net commodity position with the counterparty. Notional amounts disclosed represent the net value of contractual amounts.

Financial Trading Program 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 tables below:



Financial Trading Program Unrealized Gains (Losses)
	At June 30, 2016			At September 30, 2015
FTP unrealized gains (losses) deferred as regulatory liabilities (assets)
Natural gas	$	(52	)	$	(116	)

Financial Trading Program Realized Gains (Losses)



Financial Trading Program Realized Gains (Losses)
	Three Months Ended June 30						Nine Months Ended June 30
	2016			2015			2016			2015
Decrease (increase) in fuel expense
Natural gas	$	(18	)	$	(24	)	$	(62	)	$	(56	)
Fuel oil/crude oil	—			—			—			1



Financial Trading Program Realized Gains (Losses)
	Three Months Ended June 30						Nine Months Ended June 30
	2016			2015			2016			2015
Decrease (increase) in purchased power expense
Natural gas	$	(4	)	$	(6	)	$	(16	)	$	(14	)

Derivative Assets and Liabilities

The amounts of TVA's derivative instruments as reported in the consolidated balance sheets as of June 30, 2016, and September 30, 2015, are shown in the table below:



Derivative Assets and Liabilities
	As of June 30, 2016
	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 swap(s)⁽³⁾	$	—	$	—		$	—
Commodity derivatives under FTP	14		(14		)	—
Total derivatives subject to master netting or similar arrangement	14		(14		)	—
Total derivatives not subject to master netting or similar arrangement	12		—			12

Total	$	26	$	(14	)	$	12

Liabilities
Currency swap(s) ⁽³⁾	$	167	$	—		$	167
Interest rate swaps ⁽³⁾	1,912		—			1,912
Commodity derivatives under FTP	66		(55		)	11
Total derivatives subject to master netting or similar arrangement	2,145		(55		)	2,090
Total derivatives not subject to master netting or similar arrangement	189		—			189

Total	$	2,334	$	(55	)	$	2,279

	As of September 30, 2015
	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 swap(s)⁽³⁾	$	25	$	—		$	25
Commodity derivatives under FTP	49		(49		)	—
Total derivatives subject to master netting or similar arrangement	74		(49		)	25
Total derivatives not subject to master netting or similar arrangement	1		—			1

Total	$	75	$	(49	)	$	26

Liabilities
Currency swap(s) ⁽³⁾	$	47	$	—		$	47
Interest rate swaps ⁽³⁾	1,627		—			1,627
Commodity derivatives under FTP	165		(138		)	27
Total derivatives subject to master netting or similar arrangement	1,839		(138		)	1,701
Total derivatives not subject to master netting or similar arrangement	98		—			98

Total	$	1,937	$	(138	)	$	1,799

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 that are not offset in the consolidated balance sheets.

(3) Letters of credit of approximately $1.2 billion and $1.1 billion were posted as collateral at June 30, 2016, and September 30, 2015, respectively, 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. At June 30, 2016, TVA held no cash collateral in excess of collateral requirements. At September 30, 2015, TVA held $15 million of cash collateral in excess of collateral requirements. Cash collateral held in excess of collateral requirements is recorded in Restricted cash and investments with a corresponding obligation of the same amount recorded in Accounts payable and accrued liabilities.