Allegheny Power 2010 Annual Report Download - page 106

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91
Derivatives Not in Hedging Relationships NUG
Contracts Other Total
(In millions)
2010
Unrealized Gain (Loss) Recognized in:
Purchased Power Expense $ - $ (24) $ (24)
Regulatory Assets (1) (181) - (181)
$ (181) $ (24) $ (205)
Realized Gain (Loss) Reclassified to:
Purchased Power Expense $ - $ (118) $ (118)
Regulatory Assets (1) (279) 9 (270)
$ (279) $ (109) $ (388)
2009
Unrealized Gain (Loss) Recognized in:
Purchased Power Expense $ - $ (203) $ (203)
Fuel Expense - (1) (1)
Regulatory Assets (1) (470) - (470)
$ (470) $ (204) $ (674)
Realized Gain (Loss) Reclassified to:
Purchased Power Expense $ - $ 1 $ 1
Fuel Expense - (1) (1)
Regulatory Assets (1) (358) 10 (348)
$ (358) $ 10 $ (348)
(1) The realized gain (loss) is reclassified upon termination of the derivative instrument.
Total unamortized gains included in AOCL associated with commodity derivatives were $8 million ($5 million net of tax)
as of December 31, 2010, as compared to unamortized losses of $15 million ($9 million net of tax) as of December 31,
2009. The net of tax change resulted from a net $1 million loss related to current hedging activity offset by $15 million of
net hedge losses reclassified to earnings during 2010. Based on current estimates, approximately $3 million (net of tax)
of the net deferred losses on derivative instruments in AOCL as of December 31, 2010 are expected to be reclassified to
earnings during the next twelve months as hedged transactions occur. The fair value of these derivative instruments
fluctuates from period to period based on various market factors.
As of December 31, 2010, FES’ net liability position under commodity derivative contracts was $107 million. Under these
commodity derivative contracts, FES posted collateral of $156 million. Certain commodity derivative contracts include
credit risk-related contingent features that would require FES to post additional collateral if the credit rating for its debt
were to fall below investment grade. The aggregate fair value of derivative instruments with credit risk-related contingent
features that were in a liability position on December 31, 2010 was $102 million, for which $91 million in collateral has
been posted. If FES’ credit rating were to fall below investment grade, it would be required to post $24 million of
additional collateral related to commodity derivatives.
7. LEASES
FirstEnergy leases certain generating facilities, office space and other property and equipment under cancelable and
noncancelable leases.
In 1987, OE sold portions of its ownership interests in Perry Unit 1 and Beaver Valley Unit 2 and entered into operating
leases on the portions sold for basic lease terms of approximately 29 years. In that same year, CEI and TE also sold
portions of their ownership interests in Beaver Valley Unit 2 and Bruce Mansfield Units 1, 2 and 3 and entered into similar
operating leases for lease terms of approximately 30 years. During the terms of their respective leases, OE, CEI and TE
are responsible, to the extent of their leasehold interests, for costs associated with the units including construction
expenditures, operation and maintenance expenses, insurance, nuclear fuel, property taxes and decommissioning. They
have the right, at the expiration of the respective basic lease terms, to renew their respective leases. They also have the
right to purchase the facilities at the expiration of the basic lease term or any renewal term at a price equal to the fair
market value of the facilities. The basic rental payments are adjusted when applicable federal tax law changes.