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Risk Management Activities and Derivative Transactions (Tables) | 9 Months Ended
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Jun. 30, 2023
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) (in millions)
|  |  |  |  |  | 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 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
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 |  | $ | 5 |  |  | $ | (40) |  |  | $ | 79 |  |  | $ | (50) |  |
Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2)(1) Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss) to Interest Expense (in millions)
|  | Three Months Ended June 30 |  | Nine Months Ended June 30 |
Derivatives in Cash Flow Hedging Relationship |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
Currency swaps |  | $ | 22 |  |  | $ | (34) |  |  | $ | 65 |  |  | $ | (50) |  |
Note (1) There were no amounts excluded from effectiveness testing for any of the periods presented. Based on forecasted foreign currency exchange rates, TVA expects to reclassify approximately $4 million of gains from Accumulated other comprehensive income (loss) ("AOCI") to Interest expense within the next 12 months to offset amounts anticipated to be recorded in Interest expense related to the forecasted exchange loss 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) (in millions)
|  |  |  |  |  | Three Months Ended June 30 |  | Nine Months Ended June 30 |
Derivative Type |  | Objective of Derivative |  | Accounting for Derivative Instrument |  | 2023 |  | 2022 |  | 2023 |  | 2022 |
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 liabilities and assets, respectively Realized gains and losses are recognized in Interest expense when incurred during the settlement period and are presented in operating cash flow |  | $ | (10) |  |  | $ | (26) |  |  | $ | (36) |  |  | $ | (83) |  |
Commodity derivatives under the FHP |  | To protect against fluctuations in market prices of purchased commodities (price risk) |  | Mark-to-market gains and losses are recorded as regulatory liabilities and assets, respectively Realized gains and losses are recognized in Fuel expense or Purchased power expense as the contracts settle to match the delivery period of the underlying commodity(2) |  | (97) |  |  | 14 |  |  | (256) |  |  | 14 |  |
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 were no related gains (losses) recognized in income for these unrealized gains (losses) for the three and nine months ended June 30, 2023 and for the three and nine months ended June 30, 2022. (2) Of the amount recognized for the three months ended June 30, 2023, $78 million and $19 million were reported in Fuel expense and Purchased power expense, respectively. Of the amount recognized for nine months ended June 30, 2023, $205 million and $51 million were reported in Fuel expense and Purchased power expense, respectively. Amounts recognized in 2022 were solely reported in Fuel expense.
Fair Value of TVA Derivatives |
Fair Values of TVA Derivatives (in millions)
| At June 30, 2023 |  | At September 30, 2022
Derivatives That Receive Hedge Accounting Treatment:
| Balance |  | Balance Sheet Presentation |  | Balance |  | Balance Sheet Presentation
Currency swaps |  |  |  |  |  |  |
£250 million Sterling | $ | (80) |  |  | Accounts payable and accrued liabilities $(5); Other long-term liabilities $(75) |  | $ | (130) |  |  | Accounts payable and accrued liabilities $(7); Other long-term liabilities $(123)
£150 million Sterling | (81) |  |  | Accounts payable and accrued liabilities $(3); Other long-term liabilities $(78) |  | (110) |  |  | Accounts payable and accrued liabilities $(5); Other long-term liabilities $(105)
Derivatives That Do Not Receive Hedge Accounting Treatment:
| Balance |  | Balance Sheet Presentation |  | Balance |  | Balance Sheet Presentation
Interest rate swaps |  |  |  |  |  |  |
$1.0 billion notional | $ | (619) |  |  | Accounts payable and accrued liabilities $(19); Accrued interest $(6); Other long-term liabilities $(594) |  | $ | (672) |  |  | Accounts payable and accrued liabilities $(9); Accrued interest $(33); Other long-term liabilities $(630)
$476 million notional | (218) |  |  | Accounts payable and accrued liabilities $(6); Accrued interest $(1); Other long-term liabilities $(211) |  | (233) |  |  | Accounts payable and accrued liabilities $(3); Accrued interest $(9); Other long-term liabilities $(221)
Commodity contract derivatives | 11 |  |  | Other current assets $21; Other long-term assets $1; Accounts payable and accrued liabilities $(10); Other long-term liabilities $(1) |  | 145 |  |  | Other current assets $118; Other long-term assets $34; Accounts payable and accrued liabilities $(6); Other long-term liabilities $(1)
Commodity derivatives under the FHP | (247) |  |  | Accounts payable and accrued liabilities $(170); Other long-term liabilities $(77) |  | 115 |  |  | Accounts receivable, net $1; Other current assets $54; Other long-term assets $68; Accounts payable and accrued liabilities $(8)
Commodity Contract Derivatives |
Commodity Contract Derivatives
| At June 30, 2023 |  | At September 30, 2022
| Number of Contracts |  | Notional Amount |  | Fair Value (MtM) (in millions) |  | Number of Contracts |  | Notional Amount |  | Fair Value (MtM) (in millions)
Natural gas contract derivatives | 64 |  | 337 million mmBtu |  | $ | 18 |  |  | 44 |  | 296 million mmBtu |  | $ | 145 |
Power purchase agreement with option to settle | 2 |  | 351 thousand MWh |  | $ | (7) |  |  | — |  | — thousand MWh |  | $ | — |
Offsetting Assets and Liabilities | The amounts of TVA's derivative instruments as reported on the Consolidated Balance Sheets are shown in the table below:
Derivative Assets and Liabilities(1) (in millions)
| At June 30, 2023 |  |  |  |  | At September 30, 2022
Assets |  |  |  |  |  |
Commodity contract derivatives | $ | 22 |  |  |  |  |  | $ | 152 |
Commodity derivatives under the FHP(2) | — |  |  |  |  |  | 123 |
Total derivatives subject to master netting or similar arrangement | $ | 22 |  |  |  |  |  | $ | 275 |
Liabilities |  |  |  |  |  |
Currency swaps | $ | 161 |  |  |  |  |  | $ | 240 |
Interest rate swaps(3) | 837 |  |  |  |  |  | 905 |
Commodity contract derivatives | 11 |  |  |  |  |  | 7 |
Commodity derivatives under the FHP(2) | 247 |  |  |  |  |  | 8 |
Total derivatives subject to master netting or similar arrangement | $ | 1,256 |  |  |  |  |  | $ | 1,160 |
Notes (1) Offsetting amounts include counterparty netting of derivative contracts. Except as discussed below, there were no other material offsetting amounts on TVA's Consolidated Balance Sheets at either June 30, 2023, or September 30, 2022. (2) At June 30, 2023, the gross derivative asset and gross derivative liability was $25 million and $272 million, respectively, with offsetting amounts for each totaling $25 million. (3) Letters of credit of $569 million and $704 million were posted as collateral at June 30, 2023, and September 30, 2022, respectively, to partially secure the liability positions of one of the interest rate swaps in accordance with the collateral requirements for this derivative.

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