Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions (Tables)

12 Months Ended

Sep. 30, 2018

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 Accumulated Other Comprehensive Income (Loss) For the years ended September 30
Derivatives in Cash Flow Hedging Relationship	Objective of Hedge Transaction	Accounting for Derivative Hedging Instrument	2018		2017
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	$	10	$	59



Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2)⁽¹⁾ Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income to Interest Expense For the years ended September 30
Derivatives in Cash Flow Hedging Relationship	2018			2017
Currency swaps	$	(26	)	$	26

Note

(1) 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 $28 million of gains from AOCI to interest expense within the next 12 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⁽¹⁾ For the years ended September 30

Derivative Type	Objective of Derivative	Accounting for Derivative Instrument	2018			2017
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 incurred during the settlement period	$	(89	)	$	(101	)

Commodity derivatives under 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	(8		)	(36		)

Note

(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 years ended September 30, 2018 and 2017.



Fair Values of TVA Derivatives At September 30
	2018				2017
Derivatives That Receive Hedge Accounting Treatment:
	Balance			Balance Sheet Presentation	Balance			Balance Sheet Presentation
Currency swaps
£200 million Sterling	$	(67	)	Accounts payable and accrued liabilities $(5); Other long-term liabilities $(62)	$	(67	)	Accounts payable and accrued liabilities $(5); Other long-term liabilities $(62)
£250 million Sterling	(12		)	Accounts payable and accrued liabilities $(5); Other long-term liabilities $(7)	(15		)	Accounts payable and accrued liabilities $(4); Other long-term liabilities $(11)
£150 million Sterling	(15		)	Accounts payable and accrued liabilities $(3); Other long-term liabilities $(12)	(21		)	Accounts payable and accrued liabilities $(2); Other long-term liabilities $(19)

Derivatives That Do Not Receive Hedge Accounting Treatment:
	Balance			Balance Sheet Presentation	Balance			Balance Sheet Presentation
Interest rate swaps
$1.0 billion notional	$	(878	)	Accounts payable and accrued liabilities $(56); Other long-term liabilities $(822)	$	(1,093	)	Accounts payable and accrued liabilities $(66); Other long-term liabilities $(1,027)
$476 million notional	(317		)	Accounts payable and accrued liabilities $(20); Other long-term liabilities $(297)	(410		)	Accounts payable and accrued liabilities $(25); Other long-term liabilities $(385)
$42 million notional	(4		)	Accounts payable and accrued liabilities $(1); Other long-term liabilities $(3)	(8		)	Accounts payable and accrued liabilities $(2); Other long-term liabilities $(6)
Commodity contract derivatives	60			Other current assets $41; Other long-term assets $31; Other long-term liabilities $(8); Accounts payable and accrued liabilities $(4)	(60		)	Other current assets $8; Other long-term assets $2; Other long-term liabilities $(9); Accounts payable and accrued liabilities $(61)
FTP
Derivatives under FTP⁽¹⁾	—			N/A	(5		)	Other current assets $(4); Accounts payable and accrued liabilities $(1)

Fair Values of TVA Derivatives



Fair Values of TVA Derivatives At September 30
	2018				2017
Derivatives That Receive Hedge Accounting Treatment:
	Balance			Balance Sheet Presentation	Balance			Balance Sheet Presentation
Currency swaps
£200 million Sterling	$	(67	)	Accounts payable and accrued liabilities $(5); Other long-term liabilities $(62)	$	(67	)	Accounts payable and accrued liabilities $(5); Other long-term liabilities $(62)
£250 million Sterling	(12		)	Accounts payable and accrued liabilities $(5); Other long-term liabilities $(7)	(15		)	Accounts payable and accrued liabilities $(4); Other long-term liabilities $(11)
£150 million Sterling	(15		)	Accounts payable and accrued liabilities $(3); Other long-term liabilities $(12)	(21		)	Accounts payable and accrued liabilities $(2); Other long-term liabilities $(19)

Derivatives That Do Not Receive Hedge Accounting Treatment:
	Balance			Balance Sheet Presentation	Balance			Balance Sheet Presentation
Interest rate swaps
$1.0 billion notional	$	(878	)	Accounts payable and accrued liabilities $(56); Other long-term liabilities $(822)	$	(1,093	)	Accounts payable and accrued liabilities $(66); Other long-term liabilities $(1,027)
$476 million notional	(317		)	Accounts payable and accrued liabilities $(20); Other long-term liabilities $(297)	(410		)	Accounts payable and accrued liabilities $(25); Other long-term liabilities $(385)
$42 million notional	(4		)	Accounts payable and accrued liabilities $(1); Other long-term liabilities $(3)	(8		)	Accounts payable and accrued liabilities $(2); Other long-term liabilities $(6)
Commodity contract derivatives	60			Other current assets $41; Other long-term assets $31; Other long-term liabilities $(8); Accounts payable and accrued liabilities $(4)	(60		)	Other current assets $8; Other long-term assets $2; Other long-term liabilities $(9); Accounts payable and accrued liabilities $(61)
FTP
Derivatives under FTP⁽¹⁾	—			N/A	(5		)	Other current assets $(4); Accounts payable and accrued liabilities $(1)

Note

(1) Fair values of certain derivatives under the FTP that were in net liability positions totaling $4 million at September 30, 2017, were recorded in TVA's margin cash accounts in Other current assets. These derivatives were transacted with futures commission merchants, and cash deposits were posted to the margin cash accounts held with each futures commission merchant to offset the net liability positions in full. At September 30, 2018, TVA had no derivatives under the FTP in net liability positions.

Currency Swaps Outstanding

TVA had the following currency swaps outstanding at September 30, 2018:



Currency Swaps Outstanding At September 30, 2018
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 September 30
	2018				2017
	Number of Contracts	Notional Amount	Fair Value (MtM)		Number of Contracts	Notional Amount	Fair Value (MtM)
Coal contract derivatives	13	20 million tons	$	58	20	17 million tons	$	(67	)
Natural gas contract derivatives	61	359 million mmBtu	$	2	53	271 million mmBtu	$	7

Derivatives Under Financial Trading Program



Derivatives under Financial Trading Program⁽¹⁾ At September 30
	2018			2017
	Notional Amount (in mmBtu)	Fair Value (MtM) (in millions)		Notional Amount (in mmBtu)	Fair Value (MtM) (in millions)
Natural gas
Swap contracts	—	$	—	2,800,000	$	(5	)

Note

(1) 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 September 30

FTP unrealized gains (losses) deferred as regulatory liabilities (assets)	2018		2017
Natural gas	$	—	$	(5	)

Financial Trading Program Realized Gains (Losses)



Financial Trading Program Realized Gains (Losses) At September 30
Decrease (increase) in fuel expense	2018			2017
Natural gas	$	(6	)	$	(29	)



Decrease (increase) in purchased power expense
Natural gas	$	(2	)	$	(7	)

Offsetting Assets and Liabilities

The amounts of TVA's derivative instruments as reported in the consolidated balance sheets as of September 30, 2018 and 2017, are shown in the table below.



Derivative Assets and Liabilities
	At September 30, 2018
	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
Commodity derivatives not subject to master netting or similar arrangement	$	72	$	—		$	72

Liabilities
Currency swaps⁽³⁾	$	94	$	—		$	94
Interest rate swaps⁽³⁾	1,199		—			1,199
Total derivatives subject to master netting or similar arrangement	1,293		—			1,293
Commodity derivatives not subject to master netting or similar arrangement	12		—			12
Total liabilities	$	1,305	$	—		$	1,305

	At September 30, 2017
	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
Commodity derivatives not subject to master netting or similar arrangement	10		—			10

Liabilities
Currency swaps⁽³⁾	$	103	$	—		$	103
Interest rate swaps⁽³⁾	1,511		—			1,511
Commodity derivatives under FTP	5		(4		)	1
Total derivatives subject to master netting or similar arrangement	1,619		(4		)	1,615
Commodity derivatives not subject to master netting or similar arrangement	70		—			70
Total liabilities	$	1,689	$	(4	)	$	1,685

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 consolidated balance sheets.

(3) Letters of credit of approximately $921 million and $1.2 billion were posted as collateral at September 30, 2018 and 2017, 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.