v3.26.1
Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
We use derivative instruments to manage commodity price risk and interest rate risk related to ongoing business operations.
Authoritative guidance requires that derivative instruments be recognized as either assets or liabilities at fair value, with changes in fair value of the derivative recognized in earnings immediately. Other accounting treatments, including NPNS, are available through special election and designation, provided they meet specific, restrictive criteria both at the time of designation and on an ongoing basis. All derivative instruments, excluding NPNS, are recorded at fair value through earnings. For all NPNS derivative instruments, accounts receivable or accounts payable are recorded when derivatives settle, and revenue or expense is recognized in earnings as the underlying physical commodity is delivered.
Authoritative guidance about offsetting assets and liabilities requires the fair value of derivative instruments to be shown in the Combined Notes to Consolidated Financial Statements on a gross basis, even when the derivative instruments are subject to legally enforceable master netting agreements and qualify for net presentation in the Consolidated Balance Sheets. A master netting agreement is an agreement between two counterparties that may have derivative and non-derivative contracts with each other providing for the net settlement of all referenced contracts via one payment stream, which takes place as the contracts deliver, when collateral is requested or in the event of default. In the tables below, which present fair value balances, our energy-related economic hedges are shown gross. The impact of the netting of fair value balances with the same counterparty that are subject to legally enforceable master netting agreements, as well as netting of cash collateral, including margin on exchange positions, is aggregated in the collateral and netting columns.
Our use of cash collateral is generally unrestricted unless we were downgraded below investment grade. As our senior unsecured debt rating is currently rated at BBB+ and Baa1 by S&P and Moody's, respectively, it would take a three-notch downgrade by S&P or Moody's for our rating to go below investment grade.
Commodity Price Risk
We employ established policies and procedures to manage our risks associated with market fluctuations in commodity prices by entering into physical and financial derivative contracts, including swaps, futures, forwards, options, and short-term and long-term commitments to purchase and sell energy and energy-related products. We believe these instruments, which are either determined to be non-derivative or classified as economic hedges, mitigate exposure to fluctuations in commodity prices.
In general, increases and decreases in forward market prices have a positive and negative impact, respectively, on owned and contracted generation positions that have not been hedged. Beginning in 2024, our existing nuclear fleet is eligible for a nuclear PTC, an important tool in managing commodity price risk for each nuclear unit not already receiving state support. The nuclear PTC provides increasing levels of support as unit revenues decline below levels established in the IRA and is further adjusted for inflation annually through the duration of the program based on the GDP price deflator for the preceding calendar year. See Note 6 — Government Assistance for additional information.
In locations and periods where our load serving activities do not naturally offset existing generation portfolio risk, remaining commodity price exposure is managed through portfolio hedging activities. Portfolio hedging activities are generally concentrated in the prompt three years, when customer demand and market liquidity enable effective price risk mitigation. During this prompt three-year period, we seek to mitigate the price risk associated with our load serving contracts, non-nuclear generation, and any residual price risk for our nuclear generation that the nuclear PTC and state programs may not fully mitigate. We also enter into transactions that further optimize the economic benefits of our overall portfolio.
To the extent the amount of energy we produce or procure differs from the amount of energy we have contracted to sell, we are exposed to market fluctuations in the prices of electricity, natural gas, and other commodities. We use a variety of derivative and non-derivative instruments to manage the commodity price risk of our electric generation facilities, including power and gas sales, fuel and power purchases, natural gas transportation and pipeline capacity agreements, and other energy-related products marketed and purchased. To manage these risks, we may enter into fixed-price derivative or non-derivative contracts to hedge the variability in future cash flows from expected sales of power and gas and purchases of power and fuel. The objectives for executing such hedges include fixing the price for a portion of anticipated future electricity sales at a level that provides an acceptable return. We are also exposed to differences between the locational settlement prices of certain economic hedges and the hedged generating units. This price difference is actively managed through other instruments which include derivative congestion products, whose changes in fair value are recognized in earnings each period, and auction revenue rights, which are accounted for on an accrual basis.
The following tables provide a summary of the commodity derivative fair value balances recorded as of March 31, 2026 and December 31, 2025:
March 31, 2026
Economic Hedges
Collateral(a)
Netting(a)
Total
Derivative assets (current)$13,711 $453 $(12,436)$1,728 
Derivative assets (noncurrent)8,352 306 (6,573)2,085 
Total derivative assets22,063 759 (19,009)3,813 
Derivative liabilities (current)(13,807)564 12,436 (807)
Derivative liabilities (noncurrent)(7,446)360 6,573 (513)
Total derivative liabilities(21,253)924 19,009 (1,320)
Total derivative net assets (liabilities) $810 $1,683 $— $2,493 
December 31, 2025
Derivative assets (current)$7,349 $375 $(6,791)$933 
Derivative assets (noncurrent)5,030 272 (4,853)449 
Total derivative assets12,379 647 (11,644)1,382 
Derivative liabilities (current)(7,642)386 6,791 (465)
Derivative liabilities (noncurrent)(5,585)319 4,853 (413)
Total derivative liabilities(13,227)705 11,644 (878)
Total derivative net assets (liabilities)$(848)$1,352 $— $504 
_________
(a)We net all available amounts allowed in our Consolidated Balance Sheets in accordance with authoritative guidance for derivatives. These amounts include unrealized derivative transactions with the same counterparty under legally enforceable master netting agreements and cash collateral.
The following table summarizes the net buy/(sell) notional position of commodity derivative transactions, excluding our NPNS derivatives that are not recorded at fair value, as of March 31, 2026 and December 31, 2025:
Total Net Position (In Millions)
Commodity Type
March 31, 2026December 31, 2025
Unit of Measure
Electricity(a)
(638)(260)
MWh
Natural Gas(a)
1,57633
MMBtu
Emissions
(28)(35)
Short Ton
_________
(a)The increase of net notional position at March 31, 2026 compared to December 31, 2025 is primarily driven by derivatives acquired from Calpine. See Note 2 — Mergers, Acquisitions, and Dispositions for additional information.
Economic Hedges (Commodity Price Risk)
For the three months ended March 31, 2026 and 2025, we recognized the following net pre-tax commodity unrealized gains (losses), which are also included in the Net fair value changes related to derivatives line in the Consolidated Statements of Cash Flows.
Three Months Ended March 31,
Income Statement Location20262025
Operating revenues$1,311 $(287)
Purchased power and fuel(252)(37)
Total$1,059 $(324)
Interest Rate Risk
We utilize interest rate swaps to manage our interest rate exposure, which are treated as economic hedges. The notional amounts for interest rate swaps were approximately $4.6 billion and $1.4 billion as of March 31, 2026 and December 31, 2025, respectively.
The derivative assets and liabilities as of March 31, 2026 and December 31, 2025 and the gains and losses associated with management of interest rate risk for the three months ended March 31, 2026 and 2025 were not material. The gains and losses associated with management of interest rate risk are included in the Net fair value changes related to derivatives line in the Consolidated Statements of Cash Flows.
Credit Risk
We would be exposed to credit-related losses in the event of non-performance by counterparties on executed derivative instruments. The credit exposure of derivative contracts, before collateral, is represented by the fair value of contracts as of the reporting date.
For commodity derivatives, we enter into enabling agreements that allow for payment netting with our counterparties, which reduces our exposure to counterparty risk by providing for the offset of amounts payable to the counterparty against amounts receivable from the counterparty. Typically, each enabling agreement is for a specific commodity and, with respect to each individual counterparty, netting is limited to transactions involving that specific commodity product, except where master netting agreements exist with a counterparty that allows for cross product netting. In addition to right of offset language in the enabling agreement, our credit department establishes credit limits, margining thresholds and collateral requirements for each counterparty, which are defined in the derivative contracts. Counterparty credit limits are based on an internal credit review process that considers a variety of factors, including the results of a scoring model, leverage, liquidity, profitability, credit ratings by credit rating agencies, and other risk management criteria. To the extent that a counterparty’s margining thresholds are exceeded, the counterparty is required to post collateral with us, as specified in each enabling agreement. Our credit department monitors current and forward credit exposure to counterparties and their affiliates, both on an individual and an aggregate basis.
The following tables provide information on the credit exposure for derivative instruments, inclusive of payables and receivables, net of collateral and instruments that are subject to master netting agreements, as of March 31, 2026. The amounts in the tables below exclude credit risk exposure from individual retail counterparties, NPNS contracts, forward values on non-derivative contracts and exposure through RTOs, ISOs, as well as commodity exchanges. The tables further delineate that exposure by credit rating of the counterparties and provide guidance on the concentration of credit risk to individual counterparties.
Rating as of March 31, 2026
Total Exposure Before Credit Collateral
Credit Collateral(a)
Net Exposure
Number of Counterparties Greater than 10% of Net Exposure
Net Exposure of Counterparties Greater than 10% of Net Exposure
Investment grade$1,979 $41 $1,938 1 $457 
Non-investment grade86 18 68 — — 
No external ratings
Internally rated — investment grade151 5 146 — — 
Internally rated — non-investment grade319 58 261 — — 
Total$2,535 $122 $2,413 1 $457 
__________
(a)As of March 31, 2026, credit collateral held from counterparties where we had credit exposure included $36 million of cash and $86 million of letters of credit.
Net Credit Exposure by Type of CounterpartyAs of March 31, 2026
Investor-owned utilities, marketers, power producers$1,218 
Financial Institutions599 
Energy cooperatives and municipalities223 
Other373 
Total$2,413 
Credit-Risk-Related Contingent Features
As part of the normal course of business, we routinely enter into physically and financially settled contracts for the purchase and sale of capacity, electricity, fuels, emissions allowances, and other energy-related products. Certain of our derivative instruments contain provisions that require us to post collateral. We also enter into commodity transactions on exchanges where the exchanges act as the counterparty to each trade. Transactions on the exchanges must adhere to comprehensive collateral and margining requirements. This collateral may be posted in the form of cash or credit support with thresholds contingent upon our credit ratings from S&P and Moody's. The collateral and credit support requirements vary by contract and by counterparty. These credit-risk-related contingent features stipulate that if we were to be downgraded or lose our investment grade credit ratings (based on our senior unsecured debt rating), we would be required to provide additional collateral. This incremental collateral requirement allows for the offsetting of derivative instruments that are assets with the same counterparty, where the contractual right of offset exists under applicable master netting agreements. In the absence of expressly agreed-to provisions that specify the collateral that must be provided, collateral requested will be a function of the facts and circumstances of the situation at the time of the demand. In such cases, we believe an amount of several months of future payments (e.g., capacity payments) rather than a calculation of fair value is a reasonable estimate for the contingent collateral obligation, which has been factored into the disclosure below.
The aggregate fair value of all derivative instruments with credit-risk-related contingent features in a liability position that are not fully collateralized (excluding transactions on the exchanges that are fully collateralized) is detailed in the table below:
Credit-Risk-Related Contingent FeaturesMarch 31, 2026December 31, 2025
Gross fair value of derivative contracts containing this feature
$(2,321)$(1,307)
Offsetting fair value of derivative contracts under master netting arrangements
1,192 554 
Net fair value of derivative contracts containing this feature$(1,129)$(753)
As of March 31, 2026 and December 31, 2025, we posted or held the following amounts of cash collateral and letters of credit on derivative contracts with external counterparties, after giving consideration to offsetting derivative and non-derivative positions under master netting agreements.
March 31, 2026December 31, 2025
Cash collateral posted
$1,904 $1,399 
Letters of credit posted
1,303 718 
Cash collateral held
221 47 
Letters of credit held
157 115 
Additional collateral required in the event of a credit downgrade below investment grade (at BB+/Ba1)(a)(b)(c)
2,972 2,670 
__________
(a)Certain of our contracts contain provisions that allow a counterparty to request additional collateral when there has been a subjective determination that our credit quality has deteriorated, generally termed “adequate assurance”. Due to the subjective nature of these provisions, we estimate the amount of collateral that we may ultimately be required to post in relation to the maximum exposure with the counterparty.
(b)The downgrade collateral is inclusive of all contracts in a liability position regardless of accounting treatment and excludes any contracts with individual retail counterparties.
(c)A loss of investment grade credit rating would require a three-notch downgrade from current levels of BBB+ and Baa1 at S&P and Moody's, respectively.
We routinely enter into supply forward contracts with certain utilities with one-sided collateral postings only from us. If market prices fall below the benchmark price levels in these contracts, the utilities are not required to post collateral. However, when market prices rise above the benchmark price levels, we are required to post collateral once certain unsecured credit limits are exceeded.