Allegheny Power 2010 Annual Report Download - page 95

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80
Unrealized gains applicable to the decommissioning trusts of FES, OE and TE are recognized in OCI since fluctuations in
fair value will eventually impact earnings. The decommissioning trusts of JCP&L, Met-Ed and Penelec are subject to
regulatory accounting. Net unrealized gains and losses are recorded as regulatory assets or liabilities since the
difference between investments held in trust and the decommissioning liabilities will be recovered from or refunded to
customers.
The investment policy for the nuclear decommissioning trust funds restricts or limits the ability to hold certain types of
assets including private or direct placements, warrants, securities of FirstEnergy, investments in companies owning
nuclear power plants, financial derivatives, preferred stocks, securities convertible into common stock and securities of
the trust fund's custodian or managers and their parents or subsidiaries.
During 2010, 2009 and 2008, FirstEnergy recognized $55 million, $176 million and $63 million of net realized gains
resulting from the sale of securities held in nuclear decommissioning trusts.
Held-To-Maturity Securities
The following table provides the amortized cost basis, unrealized gains and losses, and approximate fair values of
investments in held-to-maturity securities as of December 31, 2010 and 2009:
December 31, 2010 December 31, 2009
Cost Unrealized Unrealized Fair Cost Unrealized Unrealized Fair
Basis Gains Losses Value Basis Gains Losses Value
Debt Securities (In millions)
FirstEnergy $ 476 $ 91 $ - $ 567 $ 544 $ 72 $ - $ 616
OE 190 51 - 241 217 29 - 246
CEI 340 41 - 381 389 43 - 432
Investments in emission allowances, employee benefits and cost and equity method investments totaling $259 million as
of December 31, 2010, and $264 million as of December 31, 2009, are not required to be disclosed and are excluded
from the amounts reported above.
Notes Receivable
The table below provides the approximate fair value and related carrying amounts of notes receivable as of December
31, 2010 and 2009. The fair value of notes receivable represents the present value of the cash inflows based on the yield
to maturity. The yields assumed were based on financial instruments with similar characteristics and terms. The maturity
dates range from 2013 to 2021.
December 31, 2010 December 31, 2009
Carrying Fair Carrying Fair
Value Value Value Value
Notes Receivable (In millions)
FirstEnergy $ 7 $ 8 $ 36 $ 35
FES - - 2 1
TE 104 118 124 141
(C) RECURRING FAIR VALUE MEASUREMENTS
Fair value is the price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between willing market participants on the
measurement date. A fair value hierarchy has been established that prioritizes the inputs used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are as
follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active
markets are those where transactions for the asset or liability occur in sufficient frequency and volume to provide pricing
information on an ongoing basis. FirstEnergy’s Level 1 assets and liabilities primarily consist of exchange-traded
derivatives and equity securities listed on active exchanges that are held in various trusts.