Allegheny Power 2015 Annual Report Download - page 119

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102
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(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
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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.
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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
