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106
ThefutureobligationsfortheFTRsacquiredatauctionarereflectedontheConsolidatedBalanceSheetsandhavenotbeen
designatedascashflowhedgeinstruments.FirstEnergyinitiallyrecordstheseFTRsattheauctionpricelesstheobligationdueto
PJM,andsubsequentlyadjuststhecarryingvalueofremainingFTRstotheirestimatedfairvalueattheendofeachaccounting
periodpriortosettlement.ChangesinthefairvalueofFTRsheldbyFESandAESupplyareincludedinotheroperatingexpensesas
unrealizedgainsorlosses.UnrealizedgainsorlossesonFTRsheldbyFirstEnergy’sUtilitiesarerecordedasregulatoryassetsor
liabilities.DirectlyallocatedFTRsareaccountedforundertheaccrualmethodofaccounting,and theireffectsareincludedin
earningsatthetimeofcontractperformance.
FirstEnergyrecordsthefairvalueofderivativeinstrumentsonagrossbasis.Thefollowingtablesummarizesthefairvalueand
classificationofderivativeinstrumentsonFirstEnergy’sConsolidatedBalanceSheets:
DerivativeAssets
DerivativeLiabilities
FairValue
FairValue
December31,
2015
December31,
2014
December31,
2015
December31,
2014
(Inmillions)
(Inmillions)
CurrentAssets
Derivatives
CurrentLiabilities
Derivatives
CommodityContracts
$
150
$
121
CommodityContracts
$
(94
)
$
(154
)
FTRs
7
38
FTRs
(12
)
(13
)
157
159
(106
)
(167
)
NoncurrentLiabilities
AdversePowerContract
Liability
DeferredChargesand
OtherAssetsOther
NUGs(1)
(137
)
(153
)
CommodityContracts
78
51
NoncurrentLiabilities
Other
FTRs
1
1
CommodityContracts
(37
)
(13
)
NUGs(1)
1
2
FTRs
(1
)
(1
)
80
54
(175
)
(167
)
DerivativeAssets
$
237
$
213
DerivativeLiabilities
$
(281
)
$
(334
)
(1)NUGcontractsaresubjecttoregulatoryaccountingtreatmentanddonotimpactearnings.
FirstEnergyentersintocontractswithcounterpartiesthatallowfortheoffsettingofderivativeassetsandderivativeliabilitiesunder
nettingarrangementswiththesamecounterparty.Certainofthesecontractscontainmarginingprovisionsthatrequiretheuseof
collateraltomitigatecreditexposurebetweenFirstEnergyandthesecounterparties.Insituationswherecollateralispledgedto
mitigate exposures related to derivative and nonderivativeinstrumentswith thesamecounterparty,FirstEnergyallocatesthe
collateralbasedonthepercentageofthenetfairvalueofderivativeinstrumentstothetotalfairvalueofthecombinedderivativeand
nonderivative instruments. The following tables summarize the fair value of derivative assets and derivative liabilities on
FirstEnergy’sConsolidatedBalanceSheetsandtheeffectofnettingarrangementsandcollateralonitsfinancialposition:
107
AmountsNotOffsetinConsolidated
BalanceSheet
December31,2015FairValue
Derivative
Instruments
CashCollateral
(Received)/Pledged
NetFair
Value
(Inmillions)
DerivativeAssets
Commoditycontracts $ 228 $ (125) $ — $ 103
FTRs 8 (8) — —
NUGcontracts 1 — — 1
$ 237 $ (133) $ — $ 104
DerivativeLiabilities
Commoditycontracts $ (131) $ 125 $ 3 $ (3)
FTRs(13) 8 5 —
NUGcontracts(137) — — (137)
$ (281) $ 133 $ 8 $ (140)
AmountsNotOffsetinConsolidated
BalanceSheet
December31,2014FairValue
Derivative
Instruments
CashCollateral
(Received)/Pledged
NetFair
Value
(Inmillions)
DerivativeAssets
Commoditycontracts $ 172 $ (126) $ — $ 46
FTRs39(14) —25
NUGcontracts 2 — — 2
$ 213 $ (140) $ — $ 73
DerivativeLiabilities
Commoditycontracts $ (167) $ 126 $ 35 $ (6)
FTRs(14) 14 — —
NUGcontracts(153) — — (153)
$ (334) $ 140 $ 35 $ (159)
ThefollowingtablesummarizesthevolumesassociatedwithFirstEnergy’soutstandingderivativetransactionsasof
December31,2015:
PurchasesSalesNetUnits
(Inmillions)
PowerContracts1649(33) MWH
FTRs29 — 29MWH
NUGs 4 — 4 MWH
NaturalGas83 —83mmBTU