v3.5.0.2
Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Notional Amounts of Outstanding Derivative Positions
As of September 30, 2016 and December 31, 2015, the net forward notional buy (sell) position of our outstanding commodity derivative instruments that did not qualify or were not designated under the normal purchase normal sale exemption and our interest rate hedging instruments were as follows (in millions):
Derivative Instruments
 
Notional Amounts
 
September 30, 2016
 
December 31, 2015
Power (MWh)
 
(49
)
 
(41
)
Natural gas (MMBtu)
 
846

 
996

Environmental credits (Tonnes)
 
17

 
8

Interest rate hedging instruments
 
$
3,791

(1) 
$
1,320


___________
(1)
We entered into interest rate hedging instruments during the second quarter of 2016 to hedge approximately $2.5 billion of variable rate corporate debt for 2017 through 2019 which effectively places a ceiling on LIBOR at rates varying from 1.44% to 1.8125% for hedged interest payments. See Note 4 for a further discussion of our First Lien Term Loans.
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position, Location [Table Text Block]
The following tables present the fair values of our derivative instruments recorded on our Consolidated Condensed Balance Sheets by location and hedge type at September 30, 2016 and December 31, 2015 (in millions):
 
September 30, 2016
  
Commodity
Instruments
 
Interest Rate
Hedging Instruments
 
Total
Derivative
Instruments
Balance Sheet Presentation
 
 
 
 
 
Current derivative assets
$
959

 
$
—

 
$
959

Long-term derivative assets
315

 
8

 
323

Total derivative assets
$
1,274

 
$
8

 
$
1,282

 
 
 
 
 
 
Current derivative liabilities
$
958

 
$
33

 
$
991

Long-term derivative liabilities
388

 
48

 
436

Total derivative liabilities
$
1,346

 
$
81

 
$
1,427

Net derivative assets (liabilities)
$
(72
)
 
$
(73
)
 
$
(145
)

 
December 31, 2015
 
Commodity
Instruments
 
Interest Rate
Hedging Instruments
 
Total
Derivative
Instruments
Balance Sheet Presentation
 
 
 
 
 
Current derivative assets
$
1,698

 
$
—

 
$
1,698

Long-term derivative assets
312

 
1

 
313

Total derivative assets
$
2,010

 
$
1

 
$
2,011

 
 
 
 
 
 
Current derivative liabilities
$
1,697

 
$
37

 
$
1,734

Long-term derivative liabilities
420

 
53

 
473

Total derivative liabilities
$
2,117

 
$
90

 
$
2,207

Net derivative assets (liabilities)
$
(107
)
 
$
(89
)
 
$
(196
)
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value
 
September 30, 2016
 
December 31, 2015
 
Fair Value
of Derivative
Assets
 
Fair Value
of Derivative
Liabilities
 
Fair Value
of Derivative
Assets
 
Fair Value
of Derivative
Liabilities
Derivatives designated as cash flow hedging instruments:
 
 
 
 
 
 
 
Interest rate hedging instruments
$
8

 
$
81

 
$
1

 
$
90

Total derivatives designated as cash flow hedging instruments
$
8

 
$
81

 
$
1

 
$
90

 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Commodity instruments
$
1,274

 
$
1,346

 
$
2,010

 
$
2,117

Total derivatives not designated as hedging instruments
$
1,274

 
$
1,346

 
$
2,010

 
$
2,117

Total derivatives
$
1,282

 
$
1,427

 
$
2,011

 
$
2,207
Derivative Instruments Subject to Master Netting Arrangements [Table Text Block]
The tables below set forth our net exposure to derivative instruments after offsetting amounts subject to a master netting arrangement with the same counterparty at September 30, 2016 and December 31, 2015 (in millions):
 
 
September 30, 2016
 
 
Gross Amounts Not Offset on the Consolidated Condensed Balance Sheets
 
 
Gross Amounts Presented on our Consolidated Condensed Balance Sheets
 
Derivative Asset (Liability) not Offset on the Consolidated Condensed Balance Sheets
 
Margin/Cash (Received) Posted (1)
 
Net Amount
Derivative assets:
 
 
 
 
 
 
 
 
Commodity exchange traded futures and swaps contracts
 
$
1,036

 
$
(988
)
 
$
(48
)
 
$
—

Commodity forward contracts
 
238

 
(128
)
 
(17
)
 
93

Interest rate hedging instruments
 
8

 
—

 
—

 
8

Total derivative assets
 
$
1,282

 
$
(1,116
)
 
$
(65
)
 
$
101

Derivative (liabilities):
 
 
 
 
 
 
 
 
Commodity exchange traded futures and swaps contracts
 
$
(1,004
)
 
$
988

 
$
16

 
$
—

Commodity forward contracts
 
(342
)
 
128

 
—

 
(214
)
Interest rate hedging instruments
 
(81
)
 
—

 
—

 
(81
)
Total derivative (liabilities)
 
$
(1,427
)
 
$
1,116

 
$
16

 
$
(295
)
Net derivative assets (liabilities)
 
$
(145
)
 
$
—

 
$
(49
)
 
$
(194
)
 
 
December 31, 2015
 
 
Gross Amounts Not Offset on the Consolidated Condensed Balance Sheets
 
 
Gross Amounts Presented on our Consolidated Condensed Balance Sheets
 
Derivative Asset (Liability) not Offset on the Consolidated Condensed Balance Sheets
 
Margin/Cash (Received) Posted (1)
 
Net Amount
Derivative assets:
 
 
 
 
 
 
 
 
Commodity exchange traded futures and swaps contracts
 
$
1,736

 
$
(1,602
)
 
$
(134
)
 
$
—

Commodity forward contracts
 
274

 
(202
)
 
(3
)
 
69

Interest rate hedging instruments
 
1

 
—

 
—

 
1

Total derivative assets
 
$
2,011

 
$
(1,804
)
 
$
(137
)
 
$
70

Derivative (liabilities):
 
 
 
 
 
 
 
 
Commodity exchange traded futures and swaps contracts
 
$
(1,604
)
 
$
1,602

 
$
2

 
$
—

Commodity forward contracts
 
(513
)
 
202

 
3

 
(308
)
Interest rate hedging instruments
 
(90
)
 
—

 
—

 
(90
)
Total derivative (liabilities)
 
$
(2,207
)
 
$
1,804

 
$
5

 
$
(398
)
Net derivative assets (liabilities)
 
$
(196
)
 
$
—

 
$
(132
)
 
$
(328
)
____________
(1)
Negative balances represent margin deposits posted with us by our counterparties related to our derivative activities that are subject to a master netting arrangement. Positive balances reflect margin deposits and natural gas and power prepayments posted by us with our counterparties related to our derivative activities that are subject to a master netting arrangement. See Note 7 for a further discussion of our collateral.
Realized Unrealized Gain Loss by Instrument
The following tables detail the components of our total activity for both the net realized gain (loss) and the net mark-to-market gain (loss) recognized from our derivative instruments in earnings and where these components were recorded on our Consolidated Condensed Statements of Operations for the periods indicated (in millions):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Realized gain (loss)(1)(2)
 
 
 
 
 
 
 
Commodity derivative instruments
$
32

 
$
160

 
$
213

 
$
323

Total realized gain (loss)
$
32

 
$
160

 
$
213

 
$
323

 
 
 
 
 
 
 
 
Mark-to-market gain (loss)(3)
 
 
 
 
 
 
 
Commodity derivative instruments
$
109

 
$
(75
)
 
$
(22
)
 
$
(6
)
Interest rate hedging instruments
—

 
1

 
1

 
2

Total mark-to-market gain (loss)
$
109

 
$
(74
)
 
$
(21
)
 
$
(4
)
Total activity, net
$
141

 
$
86

 
$
192

 
$
319

___________
(1)
Does not include the realized value associated with derivative instruments that settle through physical delivery.
(2)
Includes amortization of acquisition date fair value of derivative activity related to the acquisition of Champion Energy.
(3)
In addition to changes in market value on derivatives not designated as hedges, changes in mark-to-market gain (loss) also includes de-designation of interest rate swap cash flow hedges and related reclassification of AOCI into earnings, hedge ineffectiveness and adjustments to reflect changes in credit default risk exposure.
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Realized and mark-to-market gain (loss)
 
 
 
 
 
 
 
Derivatives contracts included in operating revenues(1)(2)
$
308

 
$
189

 
$
240

 
$
423

Derivatives contracts included in fuel and purchased energy expense(1)(2)
(167
)
 
(104
)
 
(49
)
 
(106
)
Interest rate hedging instruments included in interest expense(3)
—

 
1

 
1

 
2

Total activity, net
$
141

 
$
86

 
$
192

 
$
319


___________
(1)
Does not include the realized value associated with derivative instruments that settle through physical delivery.
(2)
Includes amortization of acquisition date fair value of derivative activity related to the acquisition of Champion Energy.
(3)
In addition to changes in market value on derivatives not designated as hedges, changes in mark-to-market gain (loss) also includes de-designation of interest rate swap cash flow hedges and related reclassification of AOCI into earnings, hedge ineffectiveness and adjustments to reflect changes in credit default risk exposure.
Derivatives Designated as Hedges
The following table details the effect of our net derivative instruments that qualified for hedge accounting treatment and are included in OCI and AOCI for the periods indicated (in millions):
 
Three Months Ended September 30,
 
Three Months Ended September 30,
 
Gain (Loss) Recognized in
OCI (Effective Portion)
 
Gain (Loss) Reclassified from
AOCI into Income (Effective Portion)(3)(4)
 
2016
 
2015
 
2016
 
2015
 
Affected Line Item on the Consolidated Condensed Statements of Operations
Interest rate hedging instruments(1)(2)
$
18

 
$
(4
)
 
$
(11
)
 
$
(12
)
 
Interest expense
 
Nine Months Ended September 30,
 
Nine Months Ended September 30,
 
Gain (Loss) Recognized in
OCI (Effective Portion)
 
Gain (Loss) Reclassified from
AOCI into Income (Effective Portion)(3)(4)
 
2016
 
2015
 
2016
 
2015
 
Affected Line Item on the Consolidated Condensed Statements of Operations
Interest rate hedging instruments(1)(2)
$
—

 
$
4

 
$
(33
)
 
$
(36
)
 
Interest expense
____________
(1)
We did not record any material gain (loss) on hedge ineffectiveness related to our interest rate hedging instruments designated as cash flow hedges during the three and nine months ended September 30, 2016 and 2015.
(2)
We recorded an income tax expense of nil for each of the three and nine months ended September 30, 2016 and 2015, in AOCI related to our cash flow hedging activities.
(3)
Cumulative cash flow hedge losses attributable to Calpine, net of tax, remaining in AOCI were $127 million and $127 million at September 30, 2016 and December 31, 2015, respectively. Cumulative cash flow hedge losses attributable to the noncontrolling interest, net of tax, remaining in AOCI were $11 million and $11 million at September 30, 2016 and December 31, 2015, respectively.
(4)
Includes a loss of $1 million for each of the three and nine months ended September 30, 2016, that was reclassified from AOCI to interest expense, where the hedged transactions are no longer expected to occur.