Allegheny Power 2015 Annual Report Download - page 118

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
102

(1)NDTfundsholdequityportfolioswhoseperformanceisbenchmarkedagainsttheAlerianMLPIndexortheWellsFargoHybridandPreferred
SecuritiesREITindex.
(2)Primarilyconsistsofshorttermcashinvestments.
(3) Excludes$1millionand$44millionasofDecember31,2015andDecember31,2014,respectively,ofreceivables,payables,taxesandaccrued
incomeassociatedwithfinancialinstrumentsreflectedwithinthefairvaluetable.

RollforwardofLevel3Measurements

ThefollowingtableprovidesareconciliationofchangesinthefairvalueofFTRsheldbyFESandclassifiedasLevel3inthefair
valuehierarchyfortheperiodsendedDecember31,2015andDecember31,2014:

DerivativeAsset
DerivativeLiability
NetAsset/(Liability)
(Inmillions)
January1,2014Balance
$
3
$
(11
)
$
(8
)
Unrealizedgain(loss)
34
(1
)
33
Purchases
15
(16
)
(1
)
Settlements
(25
)
15
(10
)
December31,2014Balance
$
27
$
(13
)
$
14
Unrealizedgain(loss)
2
(5
)
(3
)
Purchases
9
(10
)
(1
)
Settlements
(33
)
17
(16
)
December31,2015Balance
$
5
$
(11
)
$
(6
)

Level3QuantitativeInformation

ThefollowingtableprovidesquantitativeinformationforFTRsheldbyFESthatareclassifiedasLevel3inthefairvaluehierarchyfor
theperiodendedDecember31,2015:

FairValue,Net
(Inmillions)
Valuation
Technique
SignificantInput Range
Weighted
Average
Units
FTRs
$
(6
)
Model RTOauctionclearingprices ($3.90)to$5.70 $0.70

Dollars/MWH

INVESTMENTS

Alltemporarycashinvestmentspurchasedwithaninitialmaturityofthreemonthsorlessarereportedascashequivalentsonthe
ConsolidatedBalanceSheetsatcost,whichapproximatestheirfairmarketvalue.Investmentsotherthancashandcashequivalents
includeheldtomaturitysecuritiesandAFSsecurities.

Attheendofeachreportingperiod,FirstEnergyevaluatesitsinvestmentsforOTTI.InvestmentsclassifiedasAFSsecuritiesare
evaluatedtodeterminewhetheradeclineinfairvaluebelowthecostbasisisotherthantemporary.FirstEnergyfirstconsidersits
intentandabilitytoholdanequitysecurityuntilrecoveryandthenconsiders,amongotherfactors,thedurationandtheextentto
whichthesecurity'sfairvaluehasbeenlessthanitscostandtheneartermfinancialprospectsofthesecurityissuerwhenevaluating
aninvestmentforimpairment.Fordebtsecurities,FirstEnergyconsidersitsintenttoholdthesecurities,thelikelihoodthatitwillbe
requiredtosellthesecuritiesbeforerecoveryofitscostbasisandthelikelihoodofrecoveryofthesecurities'entireamortizedcost
basis.Ifthedeclineinfairvalueisdeterminedtobeotherthantemporary,thecostbasisofthesecuritiesiswrittendowntofairvalue.

UnrealizedgainsandlossesonAFSsecuritiesarerecognizedinAOCI.However,unrealizedlossesheldintheNDTsofFES,OEand
TEarerecognizedinearningssincethetrustarrangements,astheyarecurrentlydefined,donotmeettherequiredabilityandintent
toholdcriteriainconsiderationofOTTI.TheNDTsofJCP&L,MEandPNaresubjecttoregulatoryaccountingwithunrealizedgains
andlossesoffsetinnetregulatoryassets.

TheinvestmentpolicyfortheNDTfundsrestrictsorlimitsthetrusts'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,
securitiesconvertibleintocommonstockandsecuritiesofthetrustfunds'custodianormanagersandtheirparentsorsubsidiaries.



103
AFSSecurities

FirstEnergyholdsdebtandequitysecuritieswithinitsNDT,nuclearfueldisposalandNUGtrusts.Thesetrustinvestmentsare
consideredAFSsecurities,recognizedatfairmarketvalue.FirstEnergyhasnosecuritiesheldfortradingpurposes.

Thefollowingtablesummarizestheamortizedcostbasis,unrealizedgains(therewerenounrealizedlosses)andfairvaluesof
investmentsheldinNDT,nuclearfueldisposalandNUGtrustsasofDecember31,2015andDecember31,2014:

December31,2015(1)December31,2014(2)
Cost
Basis
Unrealized
GainsFairValue
Cost
Basis
Unrealized
GainsFairValue
(Inmillions)
Debtsecurities
FirstEnergy $ 1,778 $ 16 $ 1,794 $ 1,724 $ 27 $ 1,751
FES801 9 81078813801
Equitysecurities
FirstEnergy $ 542 $ 34 $ 576 $ 533 $ 58 $ 591
FES3542437832931360

(1)Excludesshorttermcashinvestments:FEConsolidated$157millionFES$139million.
(2)Excludesshorttermcashinvestments:FEConsolidated$241millionFES$204million.

ProceedsfromthesaleofinvestmentsinAFSsecurities,realizedgainsandlossesonthosesales,OTTIandinterestanddividend
incomeforthethreeyearsendedDecember31,2015,2014and2013wereasfollows:

December31,2015
Sale
Proceeds
Realized
Gains
Realized
LossesOTTI
Interestand
DividendIncome
(Inmillions)
FirstEnergy $ 1,534 $ 209 $ (191) $ (102) $ 101
FES733158(134) (90) 57
December31,2014
Sale
Proceeds
Realized
Gains
Realized
LossesOTTI
Interestand
DividendIncome
(Inmillions)
FirstEnergy $ 2,133 $ 146 $ (75) $ (37) $ 96
FES1,163113(54) (33) 56
December31,2013
Sale
Proceeds
Realized
Gains
Realized
LossesOTTI
Interestand
DividendIncome
(Inmillions)
FirstEnergy $ 2,047 $ 92 $ (46) $ (90) $ 101
FES94070(21) (79) 60

HeldToMaturitySecurities

Thefollowingtableprovidestheamortizedcostbasis,unrealizedgains(therewerenounrealizedlosses)andapproximatefairvalues
ofinvestmentsinheldtomaturitysecuritiesasofDecember31,2015andDecember31,2014:

December31,2015December31,2014
Cost
Basis
Unrealized
GainsFairValue
Cost
Basis
Unrealized
GainsFairValue
(Inmillions)
DebtSecurities
FirstEnergy $ 6 $ 2 $ 8 $ 13 $ 4 $ 17
