v3.19.3
Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Notional Amounts of Outstanding Derivative Positions
As of September 30, 2019 and December 31, 2018, 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:
Derivative Instruments
 
Notional Amounts
 
 
 
September 30, 2019
 
December 31, 2018
 
Unit of Measure
Power
 
(161
)
 
(161
)
 
Million MWh
Natural gas
 
1,030

 
1,045

 
Million MMBtu
Environmental credits
 
20

 
13

 
Million Tonnes
Interest rate hedging instruments
 
$
4.9

 
$
4.5

 
Billion U.S. dollars
Derivative Instruments Subject to Master Netting Arrangements [Table Text Block]
The following tables present the fair values of our derivative instruments and our net exposure after offsetting amounts subject to a master netting arrangement with the same counterparty to our derivative instruments recorded on our Consolidated Condensed Balance Sheets by location and hedge type at September 30, 2019 and December 31, 2018 (in millions):
 
 
September 30, 2019
 
 
Gross Amounts of Assets and (Liabilities)
 
Gross Amounts Offset on the Consolidated Condensed Balance Sheets
 
Net Amount Presented on the Consolidated Condensed Balance Sheets(1)
Derivative assets:
 
 
 
 
 
 
Commodity exchange traded derivatives contracts
 
$
492

 
$
(492
)
 
$
—

Commodity forward contracts
 
333

 
(190
)
 
143

Interest rate hedging instruments
 
3

 
(2
)
 
1

Total current derivative assets(2)
 
$
828

 
$
(684
)
 
$
144

Commodity exchange traded derivatives contracts
 
187

 
(187
)
 
—

Commodity forward contracts
 
328

 
(88
)
 
240

Interest rate hedging instruments
 
3

 
—

 
3

Total long-term derivative assets(2)
 
$
518

 
$
(275
)
 
$
243

Total derivative assets
 
$
1,346

 
$
(959
)
 
$
387

 
 
 
 
 
 
 
Derivative (liabilities):
 
 
 
 
 
 
Commodity exchange traded derivatives contracts
 
$
(571
)
 
$
571

 
$
—

Commodity forward contracts
 
(383
)
 
195

 
(188
)
Interest rate hedging instruments
 
(12
)
 
2

 
(10
)
Total current derivative (liabilities)(2)
 
$
(966
)
 
$
768

 
$
(198
)
Commodity exchange traded derivatives contracts
 
(196
)
 
196

 
—

Commodity forward contracts
 
(143
)
 
85

 
(58
)
Interest rate hedging instruments
 
(26
)
 
—

 
(26
)
Total long-term derivative (liabilities)(2)
 
$
(365
)
 
$
281

 
$
(84
)
Total derivative liabilities
 
$
(1,331
)
 
$
1,049

 
$
(282
)
Net derivative assets (liabilities)
 
$
15

 
$
90

 
$
105

 
 
December 31, 2018
 
 
Gross Amounts of Assets and (Liabilities)
 
Gross Amounts Offset on the Consolidated Condensed Balance Sheets
 
Net Amount Presented on the Consolidated Condensed Balance Sheets(1)
Derivative assets:
 
 
 
 
 
 
Commodity exchange traded derivatives contracts
 
$
820

 
$
(820
)
 
$
—

Commodity forward contracts
 
341

 
(229
)
 
112

Interest rate hedging instruments
 
30

 
—

 
30

Total current derivative assets(3)
 
$
1,191

 
$
(1,049
)
 
$
142

Commodity exchange traded derivatives contracts
 
113

 
(113
)
 
—

Commodity forward contracts
 
209

 
(59
)
 
150

Interest rate hedging instruments
 
10

 
—

 
10

Total long-term derivative assets(3)
 
$
332

 
$
(172
)
 
$
160

Total derivative assets
 
$
1,523

 
$
(1,221
)
 
$
302

 
 
 
 
 
 
 
Derivative (liabilities):
 
 
 
 
 
 
Commodity exchange traded derivatives contracts
 
$
(764
)
 
$
764

 
$
—

Commodity forward contracts
 
(576
)
 
277

 
(299
)
Interest rate hedging instruments
 
(4
)
 
—

 
(4
)
Total current derivative (liabilities)(3)
 
$
(1,344
)
 
$
1,041

 
$
(303
)
Commodity exchange traded derivatives contracts
 
(168
)
 
168

 
—

Commodity forward contracts
 
(193
)
 
59

 
(134
)
Interest rate hedging instruments
 
(6
)
 
—

 
(6
)
Total long-term derivative (liabilities)(3)
 
$
(367
)
 
$
227

 
$
(140
)
Total derivative liabilities
 
$
(1,711
)
 
$
1,268

 
$
(443
)
Net derivative assets (liabilities)
 
$
(188
)
 
$
47

 
$
(141
)
____________
(1)
At September 30, 2019 and December 31, 2018, we had $116 million and $244 million, respectively, of collateral under master netting arrangements that were not offset against our derivative instruments on the Consolidated Condensed Balance Sheets primarily related to initial margin requirements.
(2)
At September 30, 2019, current and long-term derivative assets are shown net of collateral of $(7) million and $(6) million, respectively, and current and long-term derivative liabilities are shown net of collateral of $92 million and $11 million, respectively.
(3)
At December 31, 2018, current and long-term derivative assets are shown net of collateral of $(58) million and $(8) million, respectively, and current and long-term derivative liabilities are shown net of collateral of $49 million and $64 million, respectively.
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value
 
September 30, 2019
 
December 31, 2018
 
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
$
4

 
$
34

 
$
40

 
$
10

Total derivatives designated as cash flow hedging instruments
$
4

 
$
34

 
$
40

 
$
10

 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
Commodity instruments
$
383

 
$
246

 
$
262

 
$
433

Interest rate hedging instruments
—

 
2

 
—

 
—

Total derivatives not designated as hedging instruments
$
383

 
$
248

 
$
262

 
$
433

Total derivatives
$
387

 
$
282

 
$
302

 
$
443
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,
 
2019
 
2018
 
2019
 
2018
Realized gain (loss)(1)(2)
 
 
 
 
 
 
 
Commodity derivative instruments
$
92

 
$
45

 
$
261

 
$
111

Total realized gain (loss)
$
92


$
45


$
261

 
$
111

 
 
 
 
 
 
 
 
Mark-to-market gain (loss)(3)
 
 
 
 
 
 
 
Commodity derivative instruments
$
67

 
$
106

 
$
300

 
$
(77
)
Interest rate hedging instruments
(1
)
 
1

 
(3
)
 
4

Total mark-to-market gain (loss)
$
66


$
107


$
297

 
$
(73
)
Total activity, net
$
158


$
152


$
558

 
$
38


___________
(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 financial derivative activity related to the acquisition of Champion Energy and Calpine Solutions.
(3)
In addition to changes in market value on derivatives not designated as hedges, changes in mark-to-market gain (loss) also includes 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,
 
2019
 
2018
 
2019
 
2018
Realized and mark-to-market gain (loss)(1)
 
 
 
 
 
 
 
Derivatives contracts included in operating revenues(2)(3)
$
213

 
$
34

 
$
791

 
$
(142
)
Derivatives contracts included in fuel and purchased energy expense(2)(3)
(54
)
 
117

 
(230
)
 
176

Interest rate hedging instruments included in interest expense
(1
)
 
1

 
(3
)
 
4

Total activity, net
$
158


$
152


$
558

 
$
38


___________
(1)
In addition to changes in market value on derivatives not designated as hedges, changes in mark-to-market gain (loss) also includes adjustments to reflect changes in credit default risk exposure.
(2)
Does not include the realized value associated with derivative instruments that settle through physical delivery.
(3)
Includes amortization of acquisition date fair value of financial derivative activity related to the acquisition of Champion Energy and Calpine Solutions.
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
 
Gain (Loss) Reclassified from AOCI into Income(3)(4)
 
2019
 
2018
 
2019
 
2018
 
Affected Line Item on the Consolidated Condensed Statements of Operations
Interest rate hedging instruments(1)(2)
$
(3
)
 
$
13

 
$
(2
)
 
$
—

 
Interest expense
Interest rate hedging instruments(1)(2)
1

 
—

 
(1
)
 
—

 
Depreciation and amortization expense
Total
$
(2
)
 
$
13

 
$
(3
)
 
$
—

 
 
 
Nine Months Ended September 30,
 
Nine Months Ended September 30,
 
Gain (Loss) Recognized in OCI
 
Gain (Loss) Reclassified from AOCI into Income(3)(4)
 
2019
 
2018
 
2019
 
2018
 
Affected Line Item on the Consolidated Condensed Statements of Operations
Interest rate hedging instruments(1)(2)
$
(60
)
 
$
82

 
$
3

 
$
(6
)
 
Interest expense
Interest rate hedging instruments(1)(2)
1

 
1

 
(1
)
 
(1
)
 
Depreciation and amortization expense
Total
$
(59
)
 
$
83

 
$
2

 
$
(7
)
 
 
____________
(1)
We recorded nil and $1 million in gains on hedge ineffectiveness related to our interest rate hedging instruments designated as cash flow hedges during the three and nine months ended September 30, 2018. Upon the adoption of Accounting Standards Update 2017-12 on January 1, 2019, hedge ineffectiveness is no longer separately measured and recorded in earnings.
(2)
We recorded an income tax benefit of $1 million for each of the three months ended September 30, 2019 and 2018, respectively, and income tax benefit of $2 million and income tax expense of $3 million for the nine months ended September 30, 2019 and 2018, respectively, 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 $90 million and $34 million at September 30, 2019 and December 31, 2018, respectively. Cumulative cash flow hedge losses attributable to the noncontrolling interest, net of tax, remaining in AOCI were $4 million and $3 million at September 30, 2019 and December 31, 2018, respectively.
(4)
Includes losses (gains) of nil that were reclassified from AOCI to interest expense for the three months ended September 30, 2019 and 2018, and losses of $2 million and nil that were reclassified from AOCI to interest expense for the nine months ended September 30, 2019 and 2018, respectively, where the hedged transactions became probable of not occurring.