XML 42 R21.htm IDEA: XBRL DOCUMENT
v3.22.0.1

Fair Value Measurements | 3 Months Ended
--- | ---
Dec. 31, 2021
Fair Value Disclosures [Abstract] |
Fair Value Measurements | Fair Value Measurements Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the asset or liability's principal market, or in the absence of a principal market, the most advantageous market for the asset or liability in an orderly transaction between market participants. TVA uses market or observable inputs as the preferred source of values, followed by assumptions based on hypothetical transactions in the absence of market inputs. Valuation Techniques 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.
A financial instrument's level within the fair value hierarchy (where Level 1 is the highest and Level 3 is the lowest) is based on the lowest level of input significant to the fair value measurement. The following sections describe the valuation methodologies TVA uses to measure different financial instruments at fair value. Except for gains and losses on SERP and DCP assets, all changes in fair value of these assets and liabilities have been recorded as changes in regulatory assets, regulatory liabilities, or AOCI on TVA's Consolidated Balance Sheets and Consolidated Statements of Comprehensive Income (Loss). Except for gains and losses on SERP and DCP assets, there has been no impact to the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows related to these fair value measurements. Investment Funds At December 31, 2021, Investment funds were comprised of $4.3 billion of equity securities and debt securities classified as trading measured at fair value. Equity and trading debt securities are held in the NDT, ART, SERP, and DCP. The NDT holds funds for the ultimate decommissioning of TVA's nuclear power plants. The ART holds funds primarily for the costs related to the future closure and retirement of TVA's other long-lived assets. The balances in the NDT and ART were $3.0 billion and $1.2 billion, respectively, at December 31, 2021. TVA established a SERP to provide benefits to selected employees of TVA which are comparable to those provided by competing organizations. The DCP is designed to provide participants with the ability to defer compensation to future periods. The NDT, ART, SERP, and DCP funds are invested in portfolios of securities generally designed to achieve a return in line with overall equity and debt market performance. The NDT, ART, SERP, and DCP are composed of multiple types of investments and are managed by external institutional investment managers. Most U.S. and international equities, U.S. Treasury inflation-protected securities, real estate investment trust securities, and cash securities and certain derivative instruments are measured based on quoted exchange prices in active markets and are classified as Level 1 valuations. Fixed-income investments, high-yield fixed-income investments, currencies, and most derivative instruments are non-exchange traded and are classified as Level 2 valuations. These measurements are based on market and income approaches with observable market inputs. Private equity limited partnerships, private real asset investments, and private credit investments may include holdings of investments in private real estate, venture capital, buyout, mezzanine or subordinated debt, restructuring or distressed debt, and special situations through funds managed by third-party investment managers. These investments generally involve a three-to-four-year period where the investor contributes capital, followed by a period of distribution, typically over several years. The investment period is generally, at a minimum, 10 years or longer. The NDT had unfunded commitments related to private equity limited partnerships of $205 million, private real assets of $102 million, and private credit of $54 million at December 31, 2021. The ART had unfunded commitments related to limited partnerships in private equity of $116 million, private real assets of $71 million, and private credit of $29 million at December 31, 2021. These investments have no redemption or limited redemption options and may also impose restrictions on the NDT's and ART's ability to liquidate their investments. There are no readily available quoted exchange prices for these investments. The fair value of these investments is based on information provided by the investment managers. These investments are valued on a quarterly basis. TVA's private equity limited partnerships, private real asset investments, and private credit investments are valued at net asset values ("NAV") as a practical expedient for fair value. TVA classifies its interest in these types of investments as investments measured at NAV in the fair value hierarchy. Commingled funds represent investment funds comprising multiple individual financial instruments. The commingled funds held by the NDT, ART, SERP, and DCP consist of either a single class of securities, such as equity, debt, or foreign currency securities, or multiple classes of securities. All underlying positions in these commingled funds are either exchange traded or measured using observable inputs for similar instruments. The fair value of commingled funds is based on NAV per fund share (the unit of account), derived from the prices of the underlying securities in the funds. These commingled funds can be redeemed at the measurement date NAV and are classified as Commingled funds measured at NAV in the fair value hierarchy. Realized and unrealized gains and losses on equity and trading debt securities are recognized in current earnings and are based on average cost. The gains and losses of the NDT and ART are subsequently reclassified to a regulatory asset or liability account in accordance with TVA's regulatory accounting policy. See Note 1 — Summary of Significant Accounting Policies — Cost-Based Regulation and Note 8 — Regulatory Assets and Liabilities. TVA recorded unrealized gains and losses related to its equity and trading debt securities held during each period as follows:
Unrealized Investment Gains (Losses) (in millions)
|  |  |  | Three Months Ended December 31 |  |  |
Fund |  | Financial Statement Presentation |  | 2021 |  | 2020 |  |  |  |  |
NDT |  | Regulatory asset |  | $ | 119 |  |  | $ | 230 |  |  |  |  |  |
ART |  | Regulatory asset |  | 30 |  |  | 92 |  |  |  |  |  |
SERP |  | Other income (expense) |  | 2 |  |  | 4 |  |  |  |  |  |
DCP |  | Other income (expense) |  | — |  |  | 1 |  |  |  |  |  |
Currency and Interest Rate Swap Derivatives See Note 14 — Risk Management Activities and Derivative Transactions — Cash Flow Hedging Strategy for Currency Swaps and Derivatives Not Receiving Hedge Accounting Treatment for a discussion of the nature, purpose, and contingent features of TVA's currency swaps and interest rate swaps. These swaps are classified as Level 2 valuations and are valued based on income approaches using observable market inputs for similar instruments. Commodity Contract Derivatives See Note 14 — Risk Management Activities and Derivative Transactions — Derivatives Not Receiving Hedge Accounting Treatment. Most of these contracts are valued based on market approaches which utilize short-term and mid-term market-quoted prices from an external industry brokerage service. Nonperformance Risk The assessment of nonperformance risk, which includes credit risk, considers changes in current market conditions, readily available information on nonperformance risk, letters of credit, collateral, other arrangements available, and the nature of master netting arrangements. TVA is a counterparty to currency swaps, interest rate swaps, commodity contracts, and other derivatives which subject TVA to nonperformance risk. Nonperformance risk on the majority of investments and certain exchange-traded instruments held by TVA is incorporated into the exit price that is derived from quoted market data that is used to mark the investment to market. Nonperformance risk for most of TVA's derivative instruments is an adjustment to the initial asset/liability fair value. TVA adjusts for nonperformance risk, both of TVA (for liabilities) and the counterparty (for assets), by applying credit valuation adjustments ("CVAs"). TVA determines an appropriate CVA for each applicable financial instrument based on the term of the instrument and TVA's or the counterparty's credit rating as obtained from Moody's. For companies that do not have an observable credit rating, TVA uses internal analysis to assign a comparable rating to the counterparty. TVA discounts each financial instrument using the historical default rate (as reported by Moody's for CY 1984 to CY 2020) for companies with a similar credit rating over a time period consistent with the remaining term of the contract. The application of CVAs resulted in less than a $1 million decrease in the fair value of assets and a $1 million decrease in the fair value of liabilities at December 31, 2021. Fair Value Measurements The following tables set forth by level, within the fair value hierarchy, TVA's financial assets and liabilities that were measured at fair value on a recurring basis at December 31, 2021, and September 30, 2021. Financial assets and liabilities have been classified in their entirety based on the lowest level of input that is significant to the fair value measurement. TVA's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the determination of the fair value of the assets and liabilities and their classification in the fair value hierarchy levels.
Fair Value Measurements At December 31, 2021 (in millions)
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Assets |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |
Equity securities | $ | 719 |  |  | $ | — |  |  | $ | — |  |  | $ | 719 |
Government debt securities(1) | 577 |  |  | 21 |  |  | — |  |  | 598 |
Corporate debt securities(2) | — |  |  | 377 |  |  | — |  |  | 377 |
Mortgage and asset-backed securities | — |  |  | 77 |  |  | — |  |  | 77 |
Institutional mutual funds | 233 |  |  | — |  |  | — |  |  | 233 |
Forward debt securities contracts | — |  |  | (2) |  |  | — |  |  | (2) |
Private equity funds measured at net asset value(3) | — |  |  | — |  |  | — |  |  | 448 |
Private real asset funds measured at net asset value(3) | — |  |  | — |  |  | — |  |  | 308 |
Private credit measured at net asset value(3) | — |  |  | — |  |  | — |  |  | 80 |
Commingled funds measured at net asset value(3) | — |  |  | — |  |  | — |  |  | 1,476 |
Total investments | 1,529 |  |  | 473 |  |  | — |  |  | 4,314 |
Commodity contract derivatives | — |  |  | 111 |  |  | — |  |  | 111 |
Total | $ | 1,529 |  |  | $ | 584 |  |  | $ | — |  |  | $ | 4,425 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Liabilities |  |  |  |  |  |  |
Currency swaps(4) | $ | — |  |  | $ | 78 |  |  | $ | — |  |  | $ | 78 |
Interest rate swaps | — |  |  | 1,622 |  |  | — |  |  | 1,622 |
Commodity contract derivatives | — |  |  | 6 |  |  | — |  |  | 6 |
Total | $ | — |  |  | $ | 1,706 |  |  | $ | — |  |  | $ | 1,706 |
Notes (1) Includes government-sponsored entities, including $577 million of U.S. Treasury securities within Level 1 of the fair value hierarchy. (2) Includes both U.S. and foreign debt. (3) 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 on the Consolidated Balance Sheets. (4) 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 — Risk Management Activities and Derivative Transactions — Offsetting of Derivative Assets and Liabilities.
Fair Value Measurements At September 30, 2021 (in millions)
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Assets |  |  |  |  |  |  |
Investments |  |  |  |  |  |  |
Equity securities | $ | 634 |  |  | $ | — |  |  | $ | — |  |  | $ | 634 |
Government debt securities(1) | 573 |  |  | 24 |  |  | — |  |  | 597 |
Corporate debt securities(2) | — |  |  | 411 |  |  | — |  |  | 411 |
Mortgage and asset-backed securities | — |  |  | 63 |  |  | — |  |  | 63 |
Institutional mutual funds | 225 |  |  | — |  |  | — |  |  | 225 |
Forward debt securities contracts | — |  |  | 2 |  |  | — |  |  | 2 |
Private equity funds measured at net asset value(3) | — |  |  | — |  |  | — |  |  | 357 |
Private real asset funds measured at net asset value(3) | — |  |  | — |  |  | — |  |  | 272 |
Private credit measured at net asset value(3) | — |  |  | — |  |  | — |  |  | 71 |
Commingled funds measured at net asset value(3) | — |  |  | — |  |  | — |  |  | 1,421 |
Total investments | 1,432 |  |  | 500 |  |  | — |  |  | 4,053 |
Commodity contract derivatives | — |  |  | 250 |  |  | — |  |  | 250 |
Total | $ | 1,432 |  |  | $ | 750 |  |  | $ | — |  |  | $ | 4,303 |
| Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total
Liabilities |  |  |  |  |  |  |
Currency swaps(4) | $ | — |  |  | $ | 83 |  |  | $ | — |  |  | $ | 83 |
Interest rate swaps | — |  |  | 1,639 |  |  | — |  |  | 1,639 |
Commodity contract derivatives | — |  |  | 3 |  |  | — |  |  | 3 |
Total | $ | — |  |  | $ | 1,725 |  |  | $ | — |  |  | $ | 1,725 |
Notes (1) Includes government-sponsored entities, including $573 million of U.S. Treasury securities within Level 1 of the fair value hierarchy. (2) Includes both U.S. and foreign debt. (3) 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 on the Consolidated Balance Sheets. (4) 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 — Risk Management Activities and Derivative Transactions — Offsetting of Derivative Assets and Liabilities. Other Financial Instruments Not Recorded at Fair Value TVA uses the methods and assumptions described below to estimate the fair value of each significant class of financial instruments. The fair value of the financial instruments held at December 31, 2021, and September 30, 2021, may not be representative of the actual gains or losses that will be recorded when these instruments mature or are called or presented for early redemption. The estimated values of TVA's financial instruments not recorded at fair value at December 31, 2021, and September 30, 2021, were as follows:
Estimated Values of Financial Instruments Not Recorded at Fair Value (in millions)
|  |  | At December 31, 2021 |  | At September 30, 2021
| Valuation Classification |  | Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
EnergyRight® receivables, net (including current portion) | Level 2 |  | $ | 69 |  |  | $ | 69 |  |  | $ | 72 |  |  | $ | 71 |
Loans and other long-term receivables, net (including current portion) | Level 2 |  | 104 |  |  | 99 |  |  | 99 |  |  | 94 |
EnergyRight® financing obligations (including current portion) | Level 2 |  | 80 |  |  | 89 |  |  | 82 |  |  | 92 |
Unfunded loan commitments | Level 2 |  | — |  |  | 3 |  |  | — |  |  | 3 |
Membership interests of VIEs subject to mandatory redemption (including current portion) | Level 2 |  | 23 |  |  | 30 |  |  | 23 |  |  | 30 |
Long-term outstanding power bonds, net (including current maturities) | Level 2 |  | 18,489 |  |  | 24,223 |  |  | 18,485 |  |  | 24,309 |
Long-term debt of VIEs, net (including current maturities) | Level 2 |  | 1,049 |  |  | 1,292 |  |  | 1,049 |  |  | 1,307 |
The carrying value of Cash and cash equivalents, Restricted cash and cash equivalents, Accounts receivable, net, and Short-term debt, net approximate their fair values. The fair value for loans and other long-term receivables is estimated by determining the present value of future cash flows using a discount rate equal to lending rates for similar loans made to borrowers with similar credit ratings and for similar remaining maturities, where applicable. The fair value of long-term debt and membership interests of VIEs subject to mandatory redemption is estimated by determining the present value of future cash flows using current market rates for similar obligations, giving effect to credit ratings and remaining maturities.

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=123874694&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration