TENNESSEE VALLEY AUTHORITY, 10-K filed on 11/18/2013
Annual Report
DEI Document (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Document Information [Line Items]
 
Entity Registrant Name
Tennessee Valley Authority 
Entity Central Index Key
0001376986 
Current Fiscal Year End Date
--09-30 
Entity Filer Category
Non-accelerated Filer 
Document Type
10-K 
Document Period End Date
Sep. 30, 2013 
Document Fiscal Year Focus
2013 
Document Fiscal Period Focus
FY 
Amendment Flag
false 
Entity Common Stock, Shares Outstanding
0 
Entity Well-known Seasoned Issuer
No 
Entity Voluntary Filers
No 
Entity Current Reporting Status
Yes 
Entity Public Float
$ 0 
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Operating revenues
 
 
 
Sales of electricity
$ 10,829 
$ 11,086 
$ 11,723 
Other revenue
127 
134 
118 
Total operating revenues
10,956 
11,220 
11,841 
Operating expenses
 
 
 
Fuel
2,820 
2,680 
2,926 
Purchased power
1,027 
1,189 
1,427 
Operating and maintenance
3,428 
3,510 
3,617 
Depreciation and amortization
1,680 
1,919 
1,772 
Tax equivalents
548 
622 
662 
Total operating expenses
9,503 
9,920 
10,404 
Operating income
1,453 
1,300 
1,437 
Other income (expense), net
44 
33 
30 
Interest expense
 
 
 
Interest expense
1,394 
1,444 
1,431 
Allowance for funds used during construction and nuclear fuel expenditures
(168)
(171)
(126)
Net interest expense
1,226 
1,273 
1,305 
Net income (loss)
$ 271 
$ 60 
$ 162 
CONSOLIDATED BALANCE SHEETS (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Current assets
 
 
Cash and cash equivalents
$ 1,602 
$ 868 
Restricted cash and investments
33 
11 
Accounts receivable, net
1,567 
1,666 
Inventories, net
1,091 
1,097 
Regulatory assets
561 
774 
Other current assets
52 
90 
Total current assets
4,906 
4,506 
Property, plant, and equipment
 
 
Completed plant
47,073 
45,917 
Less accumulated depreciation
(23,157)
(22,169)
Net completed plant
23,916 
23,748 
Construction in progress
4,704 
4,768 
Nuclear fuel
1,256 
1,176 
Capital leases
47 
35 
Total property, plant, and equipment, net
29,923 
29,727 
Investment funds
1,701 
1,465 
Regulatory and other long-term assets
 
 
Regulatory assets
9,131 
11,127 
Other long-term assets
445 
509 
Total regulatory and other long-term assets
9,576 
11,636 
Total assets
46,106 
47,334 
Current liabilities
 
 
Accounts payable and accrued liabilities
1,627 
1,922 
Environmental cleanup costs - Kingston ash spill
102 
126 
Accrued interest
378 
376 
Current portion of leaseback obligations
69 
443 
Current portion of energy prepayment obligations
100 
102 
Regulatory liabilities
212 
191 
Short-term debt, net
2,432 
1,507 
Current maturities of power bonds
32 
2,308 
Current maturities of long-term debt of variable interest entities
30 
13 
Total current liabilities
4,982 
6,988 
Other liabilities
 
 
Post-retirement and post-employment benefit obligations
5,348 
6,279 
Asset retirement obligations
3,472 
3,289 
Other long-term liabilities
1,861 
2,680 
Leaseback obligations
692 
760 
Energy prepayment obligations
410 
510 
Environmental cleanup costs - Kingston ash spill
67 
143 
Regulatory liabilities
1 
109 
Total other liabilities
11,851 
13,770 
Long-term debt, net
 
 
Long-term power bonds, net
22,315 
20,269 
Long-term debt of variable interest entities
1,311 
981 
Total long-term debt, net
23,626 1
21,250 
Total liabilities
40,459 
42,008 
Commitments and contingencies (Note 20)
   
   
Proprietary capital
 
 
Power program appropriation investment
268 
288 
Power program retained earnings
4,767 
4,492 
Total power program proprietary capital
5,035 
4,780 
Nonpower programs appropriation investment, net
609 
620 
Accumulated other comprehensive income (loss)
3 
(74)
Total proprietary capital
5,647 
5,326 
Total liabilities and proprietary capital
$ 46,106 
$ 47,334 
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Cash flows from operating activities
 
 
 
Net income (loss)
$ 271 
$ 60 
$ 162 
Adjustments to reconcile net income (loss) to net cash provided by operating activities
 
 
 
Depreciation and amortization (including amortization of debt issuance costs and premiums/discounts)
1,723 
1,947 
1,792 
Amortization of nuclear fuel cost
268 
264 
225 
Non-cash retirement benefit expense
622 
607 
465 
Prepayment credits applied to revenue
(102)
(105)
(105)
Fuel cost adjustment deferral
97 
(61)
69 
Fuel cost tax equivalents
2 
47 
135 
Environmental cleanup costs - Kingston ash spill - non cash
72 
73 
76 
Changes in current assets and liabilities
 
 
 
Accounts receivable, net
114 
89 
(62)
Inventories and other, net
27 
(131)
(71)
Accounts payable and accrued liabilities
(296)
60 
60 
Accrued interest
1 
(26)
(4)
Regulatory assets costs
(21)
(14)
(21)
Pension contributions
(6)
(8)
(274)
Environmental cleanup costs - Kingston ash spill, net
(52)
(103)
(108)
Other, net
(123)
(125)
98 
Net cash provided by operating activities
2,597 
2,574 
2,437 
Cash flows from investing activities
 
 
 
Construction expenditures
(2,051)
(2,119)
(2,417)
Combustion turbine asset acquisition
0 
0 
(436)
Nuclear fuel expenditures
(287)
(361)
(216)
Change in restricted cash and investments
0 
0 
(11)
Purchases of investments, net
(48)
(48)
(56)
Loans and other receivables
 
 
 
Advances
(6)
(2)
(21)
Repayments
9 
10 
11 
Other, net
(2)
7 
4 
Net cash used in investing activities
(2,385)
(2,513)
(3,142)
Cash flows from financing activities
 
 
 
Issues of power bonds
2,122 
1,126 
1,587 
Issues of variable interest entities
360 
1,000 
0 
Redemptions and repurchases of power bonds
(2,358)
(2,717)
(1,021)
Payments on debt of variable interest entities
(13)
(6)
0 
Short-term debt issues (redemptions), net
924 
1,024 
455 
Payments on leases and leasebacks
(446)
(84)
(118)
Proceeds from call monetization
0 
60 
0 
Financing costs, net
(20)
(75)
(8)
Payments to U.S. Treasury
(27)
(27)
(27)
Other, net
(20)
(1)
16 
Net cash provided by financing activities
522 
300 
884 
Net change in cash and cash equivalents
734 
361 
179 
Cash and cash equivalents at beginning of the year
868 
507 
328 
Cash and cash equivalents at end of the year
$ 1,602 
$ 868 
$ 507 
CONSOLIDATED STATEMENTS OF CHANGES IN PROPRIETARY CAPITAL (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Balance at beginning of year
$ 5,326 
$ 5,229 
$ 5,137 
Net income (loss)
271 
60 
162 
Total other comprehensive income (loss)
77 
64 
(43)
Return on power program appropriation investment
(7)
(7)
(7)
Return of power program appropriation investment
(20)
(20)
(20)
Balance at end of year
5,647 
5,326 
5,229 
Power Program Appropriation Investment
 
 
 
Balance at beginning of year
288 
308 
328 
Net income (loss)
0 
0 
0 
Total other comprehensive income (loss)
0 
0 
0 
Return on power program appropriation investment
0 
0 
0 
Return of power program appropriation investment
(20)
(20)
(20)
Balance at end of year
268 
288 
308 
Power Program Retained Earnings
 
 
 
Balance at beginning of year
4,492 
4,429 
4,264 
Net income (loss)
282 
70 
172 
Total other comprehensive income (loss)
0 
0 
0 
Return on power program appropriation investment
(7)
(7)
(7)
Return of power program appropriation investment
0 
0 
0 
Balance at end of year
4,767 
4,492 
4,429 
Nonpower Programs Appropriation Investment, Net
 
 
 
Balance at beginning of year
620 
630 
640 
Net income (loss)
(11)
(10)
(10)
Total other comprehensive income (loss)
0 
0 
0 
Return on power program appropriation investment
0 
0 
0 
Return of power program appropriation investment
0 
0 
0 
Balance at end of year
609 
620 
630 
Accumulated Other Comprehensive Income (Loss) Net Gains (Losses) on Cash Flow Hedges
 
 
 
Balance at beginning of year
(74)
(138)
(95)
Net income (loss)
0 
0 
0 
Total other comprehensive income (loss)
77 
64 
(43)
Return on power program appropriation investment
0 
0 
0 
Return of power program appropriation investment
0 
0 
0 
Balance at end of year
$ 3 
$ (74)
$ (138)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Statement (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Statement of Comprehensive Income [Abstract]
 
 
 
Net income (loss)
$ 271 
$ 60 
$ 162 
Net unrealized gain (loss) on cash flow hedges
78 
99 
(50)
Reclassification to earnings from cash flow hedges
(1)
(35)
7 
Total other comprehensive income (loss)
77 
64 
(43)
Total comprehensive income (loss)
$ 348 
$ 124 
$ 119 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

General

The Tennessee Valley Authority ("TVA") is a corporate agency and instrumentality of the United States that was created in 1933 by legislation enacted by the United States ("U.S.") Congress in response to a request by President Franklin D. Roosevelt.  TVA was created to, among other things, improve navigation on the Tennessee River, reduce the damage from destructive flood waters within the Tennessee River system and downstream on the lower Ohio and Mississippi Rivers, further the economic development of TVA's service area in the southeastern United States, and sell the electricity generated at the facilities TVA operates.

Today, TVA operates the nation's largest public power system and supplies power in most of Tennessee, northern Alabama, northeastern Mississippi, and southwestern Kentucky and in portions of northern Georgia, western North Carolina, and southwestern Virginia to a population of over nine million people.

TVA also manages the Tennessee River, its tributaries, and certain shorelines to provide, among other things, year-round navigation, flood damage reduction, and affordable and reliable electricity. Consistent with these primary purposes, TVA also manages the river system and public lands to provide recreational opportunities, adequate water supply, improved water quality, cultural and natural resource protection, and economic development.

The power program has historically been separate and distinct from the stewardship programs.  It is required to be self-supporting from power revenues and proceeds from power financings, such as proceeds from the issuance of bonds, notes, or other evidences of indebtedness ("Bonds").  Although TVA does not currently receive congressional appropriations, it is required to make annual payments to the U.S. Treasury in repayment of and as a return on the government's appropriation investment in TVA's power facilities (the "Power Program Appropriation Investment").  In the 1998 Energy and Water Development Appropriations Act, Congress directed TVA to fund essential stewardship activities related to its management of the Tennessee River system and nonpower or stewardship properties with power revenues in the event that there were insufficient appropriations or other available funds to pay for such activities in any fiscal year.  Congress has not provided any appropriations to TVA to fund such activities since 1999.  Consequently, during 2000, TVA began paying for essential stewardship activities primarily with power revenues, with the remainder funded with user fees and other forms of revenues derived in connection with those activities.  The activities related to stewardship properties do not meet the criteria of an operating segment under accounting principles generally accepted in the United States of America ("GAAP").  Accordingly, these assets and properties are included as part of the power program, TVA's only operating segment.

Power rates are established by the TVA Board of Directors ("TVA Board") as authorized by the Tennessee Valley Authority Act of 1933, as amended, 16 U.S.C. §§ 831-831ee (as amended, the “TVA Act”).  The TVA Act requires TVA to charge rates for power that will produce gross revenues sufficient to provide funds for operation, maintenance, and administration of its power system; payments to states and counties in lieu of taxes ("tax equivalents"); debt service on outstanding indebtedness; payments to the U.S. Treasury in repayment of and as a return on the Power Program Appropriation Investment; and such additional margin as the TVA Board may consider desirable for investment in power system assets, retirement of outstanding Bonds in advance of maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA's power business.  In setting TVA's rates, the TVA Board is charged by the TVA Act to have due regard for the primary objectives of the TVA Act, including the objective that power shall be sold at rates as low as are feasible.  Rates set by the TVA Board are not subject to review or approval by any state or other federal regulatory body.

Fiscal Year

TVA's fiscal year ends September 30.  Years (2013, 2012, etc.) refer to TVA's fiscal years unless they are preceded by “CY,” in which case the references are to calendar years.

Cost-Based Regulation

Since the TVA Board is authorized by the TVA Act to set rates for power sold to its customers, TVA is self-regulated.  Additionally, TVA's regulated rates are designed to recover its costs.  In view of demand for electricity and the level of competition, TVA believes that rates, set at levels that will recover TVA's costs, can be charged and collected.  As a result of these factors, TVA records certain assets and liabilities that result from the regulated ratemaking process that would not be recorded under GAAP for non-regulated entities.  Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates.  Regulatory liabilities generally represent obligations to make refunds to customers for previous collections for costs that are not likely to be incurred or deferral of gains that will be credited to customers in future periods.  TVA assesses whether the regulatory assets are probable of future recovery by considering factors such as applicable regulatory changes, potential legislation, and changes in technology.  Based on these assessments, TVA believes the existing regulatory assets are probable of recovery.  This determination reflects the current regulatory and political environment and is subject to change in the future.  If future recovery of regulatory assets ceases to be probable, or any of the other factors described above cease to be applicable, TVA would no longer be considered to be a regulated entity and would be required to write off these costs.  Most regulatory asset write offs would be required to be recognized in earnings in the period in which future recovery ceases to be probable.

Basis of Presentation

The accompanying consolidated financial statements, which have been prepared in accordance with GAAP, include the accounts of TVA and variable interest entities of which TVA is determined to be the primary beneficiary. See Note 8. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements requires TVA to estimate the effects of various matters that are inherently uncertain as of the date of the consolidated financial statements.  Although the consolidated financial statements are prepared in conformity with GAAP, TVA is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses reported during the reporting period.  Each of these estimates varies in regard to the level of judgment involved and its potential impact on TVA's financial results.  Estimates are considered critical either when a different estimate could have reasonably been used, or where changes in the estimate are reasonably likely to occur from period to period, and such use or change would materially impact TVA's financial condition, results of operations, or cash flows.

Reclassifications

Certain reclassifications have been made to the 2012 and 2011 Statements of Cash Flows in the Cash flows from operating activities section as $(14) million and $(21) million previously reported as Other, net for the years ended September 30, 2012 and 2011, respectively, were reclassified as Regulatory assets and $42 million for the year ended September 30, 2011, previously reported as Nuclear refueling outage amortization cost was reclassified as Other, net. Additionally, a reclassification has been made to the 2011 Statement of Cash Flows in the Cash flows from financing activities section as $5 million previously reported as Proceeds from leasebacks was reclassified as Other, net.


Cash and Cash Equivalents

Cash includes cash on hand and non-interest bearing cash and deposit accounts. All highly liquid investments with original maturities of three months or less are considered cash equivalents.

Restricted Cash and Investments

Restricted cash reflects amounts related to collateral posted with TVA by a swap counterparty.
    
Allowance for Uncollectible Accounts

The allowance for uncollectible accounts reflects TVA's estimate of probable losses inherent in its accounts and loans receivable balances.  TVA determines the allowance based on known accounts, historical experience, and other currently available information including events such as customer bankruptcy and/or a customer failing to fulfill payment arrangements after 90 days.  It also reflects TVA's corporate credit department's assessment of the financial condition of customers and the credit quality of the receivables.

The allowance for uncollectible accounts was $1 million and $7 million at September 30, 2013, and 2012, respectively, for accounts receivable.  Additionally, loans receivable of $73 million and $76 million at September 30, 2013, and 2012, respectively, are included in Other long-term assets and reported net of allowances for uncollectible accounts of $10 million and $12 million at September 30, 2013, and 2012, respectively.

Revenues

Revenues from power sales are recorded as electricity is delivered to customers. In addition to power sales invoiced and recorded during the month, TVA accrues estimated unbilled revenues for power sales provided to six customers whose billing date occurs prior to the end of the month.  Exchange power sales are presented in the accompanying consolidated statements of operations as a component of Sales of electricity. Exchange power sales are sales of excess power after meeting TVA native load and directly served requirements.  (Native load refers to the customers on whose behalf a company, by statute, franchise, regulatory requirement, or contract, has undertaken an obligation to serve.) 

From time to time TVA transfers fiber optic capacity on TVA’s network to telecommunications service carriers and TVA local power company customers of TVA ("LPCs").  These transactions are structured as indefeasible rights of use ("IRUs"), which are the exclusive right to use a specified amount of fiber optic capacity for a specified term.  TVA accounts for the consideration received on transfers of fiber optic capacity for cash and on all of the other elements deliverable under an IRU as revenue ratably over the term of the agreement.  TVA does not recognize revenue on any contemporaneous exchanges of its fiber optic capacity for an IRU of fiber optic capacity of the counterparty to the exchange.

TVA engages in a wide array of arrangements in addition to power sales.  TVA records revenue when it is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price or fee is fixed or determinable; and collectability is reasonably assured. Revenues from activities related to TVA’s overall mission are recorded as other operating revenue versus those that are not related to the overall mission, which are recorded in Other income (expense), net.

Inventories

Certain Fuel, Materials, and Supplies.  Coal, oil, limestone, tire-based fuel inventories, and materials and supplies inventories are valued using an average unit cost method.  A new average cost is computed after each inventory purchase transaction, and inventory issuances are priced at the latest moving weighted average unit cost. Natural gas inventories are valued using an average cost method, and a new average cost is computed monthly.

Allowance for Inventory Obsolescence.  TVA reviews material and supplies inventories by category and usage on a periodic basis.  Each category is assigned a probability of becoming obsolete based on the type of material and historical usage data.  Based on the estimated value of the inventory, TVA adjusts its allowance for inventory obsolescence.

Emission Allowances.  TVA has emission allowances for sulfur dioxide ("SO2") and nitrogen oxides ("NOx") which are accounted for as inventory.  The average cost of allowances used each month is charged to operating expense based on tons of SO2 and NOx emitted during the respective compliance periods.  Allowances granted to TVA by the Environmental Protection Agency ("EPA") are recorded at zero cost.

Property, Plant, and Equipment, and Depreciation

Property, Plant, and Equipment. Additions to plant are recorded at cost, which includes direct and indirect costs and an allowance for funds used during construction ("AFUDC").  The cost of current repairs and minor replacements is charged to operating expense.  Nuclear fuel inventories, which are included in Property, plant, and equipment, are valued using the average cost method for raw materials and the specific identification method for nuclear fuel in a reactor.  Amortization of nuclear fuel in a reactor is calculated on a units-of-production basis and is included in fuel expense.

Depreciation. TVA accounts for depreciation of its properties using the composite depreciation convention of accounting.  Accordingly, the original cost of property retired, less salvage value, is charged to accumulated depreciation. Except as described below, depreciation is generally computed on a straight-line basis over the estimated service lives of the various classes of assets. Depreciation expense for the years ended September 30, 2013, 2012, and 2011 was $1.4 billion, $1.7 billion, and $1.4 billion, respectively. Depreciation expense expressed as a percentage of the average annual depreciable completed plant was 3.12 percent for 2013, 3.78 percent for 2012, and 3.21 percent for 2011.  Average depreciation rates by asset class are as follows:
Property, Plant, and Equipment Depreciation Rates
At September 30
(percent)
 
2013
 
2012
 
2011
Asset Class
 
Nuclear
2.86

 
2.71

 
2.58

Coal-Fired
3.47

 
5.65

 
3.80

Hydroelectric
1.30

 
1.35

 
1.43

Gas and oil-fired
3.21

 
3.67

 
3.70

Transmission
2.76

 
2.99

 
3.39

Other
8.14

 
8.10

 
7.39



In April 2011, TVA entered into two substantively similar agreements, one with the EPA and the other with Alabama, Kentucky, North Carolina, Tennessee, and three environmental advocacy groups (collectively, the "Environmental Agreements”).  See Note 20 — Legal Proceedings — Environmental Agreements.  Under the Environmental Agreements, TVA committed, among other things, to retire, on a phased schedule, 18 coal-fired units. 

Consistent with the Environmental Agreements, Units 1 and 2 at John Sevier Fossil Plant ("John Sevier") were retired on December 31, 2012 and Units 3 and 5 at Widows Creek Fossil Plant ("Widows Creek") were retired on July 31, 2013.  In addition on December 31, 2012, John Sevier Units 3 and 4 were idled, and on October 1, 2013, Colbert Fossil Plant ("Colbert") Unit 5 and Johnsonville Fossil Plant ("Johnsonville") Units 5, 6, 9, and 10 were idled. 

Depreciation rates are adjusted to reflect current assumptions so that the units will be fully depreciated by the applicable idle dates.  As a result of TVA's decision to idle or retire units, TVA recognized $49 million and $308 million in accelerated depreciation expense related to the units during the years ended September 30, 2013, and 2012, respectively.

On November 14, 2013, the TVA Board of Directors (the "TVA Board") approved the retirement of Colbert Units 1-5 no later than June 30, 2016 and the retirement of Widows Creek Unit 8. Additionally, the TVA Board approved the retirement of Paradise Fossil Plant ("Paradise") Units 1 and 2 upon the completion of a natural gas-fired plant at the Paradise location.

Capital Lease Agreements.  Property, plant, and equipment also includes assets recorded under capital lease agreements. These primarily consist of power production facilities, water treatment assets, and land of $42 million and power production facilities of $24 million at September 30, 2013 and 2012, respectively, and fuel fabrication and blending facilities of $5 million and $11 million at September 30, 2013 and 2012, respectively.

 Allowance for Funds Used During Construction.  AFUDC capitalized during the year ended September 30, 2013, was $168 million, of which $23 million is reflected in the consolidated balance sheets as a regulatory asset, as compared to $171 million capitalized during the year ended September 30, 2012.  TVA capitalizes interest as AFUDC, based on the average interest rate of TVA’s outstanding debt.  The allowance is applicable to construction in progress related to projects with (1) an expected total project cost of $1.0 billion or more, and (2) an estimated construction period of at least three years in duration. During 2012 and 2011, TVA also included certain nuclear fuel inventories in the calculation of the allowance. During 2012, the TVA Board approved a change in the AFUDC methodology which removed the inclusion of nuclear fuel from the AFUDC calculation effective October 1, 2012. The accumulated balance of costs, which is used to calculate AFUDC, averaged approximately $3.1 billion for the year ended September 30, 2013. Subsequent to August 31, 2013, the accumulated balance of costs for Bellefonte Nuclear Plant ("Bellefonte") were removed from this calculation.

Software Costs.  TVA capitalizes certain costs incurred in connection with developing or obtaining internal-use software. Capitalized software costs are included in Property, plant, and equipment on the consolidated balance sheets and are amortized primarily over five years.  At September 30, 2013 and 2012, unamortized computer software costs totaled $5 million and $26 million, respectively.  Amortization expense related to capitalized computer software costs was $31 million for each of 2013, 2012, and 2011.  Software costs that do not meet capitalization criteria are expensed as incurred.

Impairment of Assets.  TVA evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.  For long-lived assets, TVA bases its evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, and other external market conditions or factors that may be present.  If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, TVA determines whether an impairment has occurred based on an estimate of undiscounted cash flows attributable to the asset as compared with the carrying value of the asset.  If an impairment has occurred, the amount of the impairment recognized is measured as the excess of the asset’s carrying value over its fair value.  Additionally, TVA regularly evaluates construction projects.  If the project is canceled or deemed to have no future economic benefit, the project is written off as an asset impairment.

Decommissioning Costs

TVA recognizes legal obligations associated with the future retirement of certain tangible long-lived assets.  These obligations relate to fossil fuel-fired generating plants, nuclear generating plants, hydroelectric generating plants/dams, transmission structures, and other property-related assets.  These other property-related assets include, but are not limited to, easements and coal rights.  Activities involved with retiring these assets could include decontamination and demolition of structures, removal and disposal of wastes, and site reclamation.  Revisions to the estimates of asset retirement obligations ("AROs") are made whenever factors indicate that the timing or amounts of estimated cash flows have changed.  Any accretion or depreciation expense related to these liabilities and assets is charged to a regulatory asset.  See Note 7 — Nuclear Decommissioning Costs and Non-Nuclear Decommissioning Costs.

Blended Low-Enriched Uranium Program

Under the blended low-enriched uranium ("BLEU") program, TVA, the Department of Energy ("DOE"), and certain nuclear fuel contractors have entered into agreements providing for the DOE's surplus of enriched uranium to be blended with other uranium down to a level that allows the blended uranium to be fabricated into fuel that can be used in nuclear power plants.   This blended nuclear fuel was first loaded in a Browns Ferry Nuclear Plant ("Browns Ferry") reactor in 2005 and is expected to continue to be used to reload the Browns Ferry reactors through at least 2016. BLEU fuel was loaded into Sequoyah Nuclear Plant ("Sequoyah") Unit 2 three times but is not expected to be used in the Sequoyah reactors in the future.

Under the terms of an interagency agreement between TVA and the DOE, in exchange for supplying highly enriched uranium materials to the appropriate third-party fuel processors for processing into usable BLEU fuel for TVA, the DOE participates to a degree in the savings generated by TVA’s use of this blended nuclear fuel.  Over the life of the program, TVA projects that the DOE’s share of savings generated by TVA’s use of this blended nuclear fuel could result in payments to the DOE of as much as $175 million.  TVA accrues an obligation with each BLEU reload batch related to the portion of the ultimate future payments estimated to be attributable to the BLEU fuel currently in use.  During 2009, the DOE and TVA agreed that this obligation will be offset by amounts that the DOE expects to owe TVA in the future for certain decommissioning costs that TVA will pay on the DOE’s behalf.  Accordingly, TVA will remit the BLEU fuel savings amounts to the DOE, only after those future decommissioning costs have been offset against TVA’s obligation to the DOE. At September 30, 2013, TVA had paid out approximately $106 million for this program and the obligation recorded was $6 million.

The third-party fuel processors own the conversion and processing facilities and will retain title to all land, property, plant, and equipment used in the BLEU fuel program.  However, the fuel fabrication contract qualifies as a capital lease, and TVA has recognized a capital lease asset and corresponding lease obligation related to amounts paid or payable to the processor.

Investment Funds

Investment funds consist primarily of trust funds designated to fund nuclear decommissioning requirements (see Note 20 — Contingencies — Decommissioning Costs), non-nuclear AROs (see Note 7 — Non-Nuclear Decommissioning Costs), and the Supplemental Executive Retirement Plan ("SERP") (see Note 19 — Overview of Plans and Benefits — Supplemental Executive Retirement Plan).  Nuclear decommissioning funds and SERP funds are invested in portfolios of securities generally designed to achieve a return in line with overall equity market performance, while asset retirement funds are invested in portfolios of securities generally designed to achieve a return in line with overall equity and debt market performance. The nuclear decommissioning funds, asset retirement funds, and SERP funds are all classified as trading.

Energy Prepayment Obligations and Discounts on Sales

During 2002, TVA introduced an energy prepayment program, the discounted energy units ("DEU") program.  Under this program, TVA LPCs could purchase DEUs generally in $1 million increments, and each DEU entitles the purchaser to a $.025/kilowatt-hour discount on a specified quantity of firm power over a period of years (5, 10, 15, or 20) for each kilowatt-hour in the prepaid block.  The remainder of the price of the kilowatt-hours delivered to the LPC is due upon billing.  TVA’s DEU program allowed LPCs to use cash on hand to prepay TVA for some of their power needs, providing funding to TVA and a savings to LPCs in the form of a discount on future purchases.  The LPC receives a discount on a specified volume of firm energy purchased.  The supplement to the power contract specifies the discount rate (2.5 cents per kilowatt-hour), the monthly block of kilowatt-hours to which the discount applies, the number of years (term), and contingencies upon contract termination.

TVA has not offered the DEU program since the end of 2004.  Total sales for the program since inception have been approximately $55 million.  TVA is accounting for the prepayment proceeds as unearned revenue and is reporting the obligations to deliver power as Energy prepayment obligations and Current portion of energy prepayment obligations on the September 30, 2013 and 2012 Consolidated Balance Sheets.

TVA recognizes revenue as electricity is delivered to LPCs, based on the ratio of units of kilowatt-hours delivered to total units of kilowatt-hours under contract.  At September 30, 2013, approximately $54 million had been applied against power billings on a cumulative basis during the life of the program, of which approximately $2 million was recognized as noncash revenue during 2013.  Approximately $5 million was applied against power billings during each of 2012 and 2011.

In 2004, TVA and its largest customer, Memphis Light, Gas and Water Division ("MLGW"), entered into an energy prepayment agreement under which MLGW prepaid TVA $1.5 billion for the future costs of electricity to be delivered by TVA to MLGW over a period of 180 months.  TVA accounted for the prepayment as unearned revenue and is reporting the obligation to deliver power under this arrangement as Energy prepayment obligations and Current portion of energy prepayment obligations on the September 30, 2013 and 2012 Consolidated Balance Sheets.  TVA expects to recognize approximately $100 million of noncash revenue in each year of the arrangement as electricity is delivered to MLGW based on the ratio of units of kilowatt-hours delivered to total units of kilowatt-hours under contract.  At September 30, 2013, $990 million had been recognized as noncash revenue on a cumulative basis during the life of the agreement, $100 million of which was recognized as noncash revenue during each of 2013, 2012, and 2011.

Discounts, which are recorded as a reduction to electricity sales, for both programs amounted to $47 million for each of the years ended September 30, 2013, 2012, and 2011.

Insurance

Although TVA uses private companies to administer its healthcare plans for eligible active and retired employees not covered by Medicare, TVA does not purchase health insurance.  Third-party actuarial specialists assist TVA in determining certain liabilities for self-insured claims.  TVA recovers the costs of claims through power rates and through adjustments to the participants’ contributions to their benefit plans.  These liabilities are included in Other liabilities on the balance sheets.

The Federal Employees' Compensation Act ("FECA") governs liability to employees for service-connected injuries.  TVA purchases excess workers' compensation insurance above a self-insured retention.

TVA purchases nuclear liability insurance, nuclear property, decommissioning, and decontamination insurance, and nuclear accidental outage insurance.  See Note 20 — Contingencies — Nuclear Insurance.

TVA purchases excess liability insurance for aviation, auto, marine, and general liability exposures.  TVA purchases property insurance for certain conventional (non-nuclear) assets.  

The insurance policies are subject to the terms and conditions of the specific policy.  Each of the insurance policies purchased contains deductibles or self-insured retentions.  TVA recovers the costs of losses through power rates.

In May 2013, TVA discontinued its directors and officers insurance program after determining that TVA's internal indemnification policies and procedures provided sufficient protection to TVA's directors and officers.

Research and Development Costs

Research and development costs are expensed when incurred.  TVA’s research programs include those related to transmission technologies, emerging technologies (clean energy, renewables, distributed resources, and energy efficiency), technologies related to generation (fossil fuel, nuclear, and hydroelectric), and environmental technologies.

Tax Equivalents

The TVA Act requires TVA to make payments to states and counties in which TVA conducts its power operations and in which TVA has acquired power properties previously subject to state and local taxation.  The total amount of these payments is five percent of gross revenues from sales of power during the preceding year, excluding sales or deliveries to other federal agencies and off-system sales with other utilities, with a provision for minimum payments under certain circumstances. TVA calculates tax equivalent expense by subtracting the prior year fuel cost-related tax equivalent regulatory asset or liability from the payments made to the states and counties and then adds back the current year fuel cost-related tax equivalent regulatory asset or liability. Fuel cost-related tax equivalent expense is recognized in the same accounting period in which the fuel cost-related revenue is recognized.

Maintenance Costs

TVA records maintenance costs and repairs related to its property, plant, and equipment in the statements of operations as they are incurred except for the recording of certain regulatory assets.  

Prior to 2010, TVA deferred nuclear outage costs that were incurred during the operating cycle subsequent to the refueling outage.  These costs are incurred in the process of performing a nuclear fuel reload outage, and the benefits of these costs are realized during the subsequent 18 to 24 months when the nuclear fuel is burned during its operating cycle in producing electricity.  The TVA Board historically included in rates the amortization of these deferred nuclear outage costs during the operating cycle subsequent to the refueling outage.

Beginning in 2010, TVA implemented a new policy to expense any future outage costs as incurred consistent with a rate-making change approved by the TVA Board.  However, TVA continued to amortize the related existing regulatory asset and included such amounts in rates.  These amounts became fully amortized in 2011.
Impact of New Accounting Standards and Interpretations
Impact of New Accounting Standards and Interpretations
Impact of New Accounting Standards and Interpretations

In June 2011, the Financial Accounting Standards Board ("FASB") issued guidance that requires adjustments to the presentation of TVA's financial information.  The guidance eliminated the option to report comprehensive income and its components in the statement of changes in proprietary capital. The guidance required the presentation of net income and other comprehensive income in either one continuous statement or in two separate but consecutive statements. TVA chose the two statement approach. These changes became effective for TVA on October 1, 2012. The adoption of this guidance did not have an impact on TVA's financial condition, results of operations, or cash flows.

The following accounting standards have been issued, but as of September 30, 2013, were not effective and had not been adopted by TVA.

Balance Sheet. In December 2011, FASB issued guidance that requires additional disclosures relating to the rights of offset or other netting arrangements of assets and liabilities that are presented on a net or gross basis in the consolidated balance sheets. The guidance applies to derivative and other financial instruments and requires the disclosure of the gross amounts subject to offset, actual amounts offset in accordance with GAAP, and the related net exposure. These changes became effective for TVA on October 1, 2013, and are applied on a retrospective basis. This guidance relates solely to enhanced disclosures in the notes to the consolidated financial statements and does not have an impact on TVA's financial condition, results of operations, or cash flows.

Comprehensive Income. In February 2013, FASB issued guidance that requires public reporting companies under the Securities Act of 1933 to present information about reclassification adjustments from accumulated other comprehensive income in their annual and interim financial statements in a single location. The guidance requires that companies present the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. This information may be disclosed either in a single note or parenthetically on the face of the financial statements. If a component is not required to be reclassified to net income in its entirety, companies must cross reference to the related footnote for additional information. These changes became effective for TVA on October 1, 2013, and are applied on a prospective basis. TVA has chosen to disclose the required information in a single note. This guidance relates solely to enhanced disclosures and does not have an impact on TVA's financial condition, results of operations, or cash flows.
Accounts Receivable, Net
Accounts Receivable, Net
Accounts Receivable, Net

Accounts receivable primarily consist of amounts due from customers for power sales.  The table below summarizes the types and amounts of TVA’s accounts receivable:

Accounts Receivable, Net 
At September 30
 
2013
 
2012
Power receivables
$
1,495

 
$
1,585

Other receivables
73

 
88

Allowance for uncollectible accounts
(1
)
 
(7
)
Accounts receivable, net
$
1,567

 
$
1,666

Inventories, Net
Inventories, Net
Inventories, Net

The table below summarizes the types and amounts of TVA’s inventories:

Inventories, Net 
At September 30
 
2013
 
2012
Materials and supplies inventory
$
620

 
$
605

Fuel inventory
494

 
508

Emission allowance inventory
14

 
12

Allowance for inventory obsolescence
(37
)
 
(28
)
Inventories, net
$
1,091

 
$
1,097

Net Completed Plant
Net Completed Plant
Net Completed Plant

Net completed plant consisted of the following:
Net Completed Plant
At September 30
 
2013
 
2012
 
Cost
 
Accumulated Depreciation
 
 
Net
 
Cost
 
Accumulated Depreciation
 
Net
Coal-fired
$
13,847

 
$
8,429

 
$
5,418

 
$
13,726

 
$
7,962

 
$
5,764

Gas and oil-fired
3,386

 
1,008

 
2,378

 
3,334

 
916

 
2,418

Nuclear
18,725

 
9,103

 
9,622

 
18,042

 
8,791

 
9,251

Transmission
6,300

 
2,562

 
3,738

 
6,075

 
2,427

 
3,648

Hydroelectric
2,392

 
892

 
1,500

 
2,278

 
869

 
1,409

Other electrical plant
1,452

 
792

 
660

 
1,490

 
842

 
648

Subtotal
46,102

 
22,786

 
23,316

 
44,945

 
21,807

 
23,138

 
 
 
 
 
 
 
 
 
 
 
 
Multipurpose dams
928

 
356

 
572

 
928

 
347

 
581

Other stewardship
43

 
15

 
28

 
44

 
15

 
29

Subtotal
971

 
371

 
600

 
972

 
362

 
610

 
 
 
 
 
 
 
 
 
 
 
 
Total
$
47,073

 
$
23,157

 
$
23,916

 
$
45,917

 
$
22,169

 
$
23,748

Other Long-Term Assets
Other Long-Term Assets
Other Long-Term Assets

The table below summarizes the types and amounts of TVA’s other long-term assets:

Other Long-Term Assets 
At September 30
 
2013
 
2012
EnergyRight® receivables
$
117

 
$
115

Unamortized debt issue cost of power bonds
75

 
70

Loans and other long-term receivables, net
73

 
76

Coal contract derivative assets
1

 
107

Prepaid capacity payments
62

 
59

Currency swap assets
28

 
21

Other
89

 
61

Total other long-term assets
$
445

 
$
509



TVA guarantees repayment on certain loans receivable from customers of TVA's LPCs in association with the EnergyRight® Solutions program.  TVA sells the loans receivable to a third-party bank and has agreed with the bank to purchase any loan receivable that has been in default for 180 days or more or that TVA has determined is uncollectible. The transaction is accounted for as a financing arrangement. The loans receivable, and the financing obligation, are shown in Other long-term assets and Other long-term liabilities, respectively, on TVA's consolidated balance sheets.  The current portion of the loans receivable and the associated financing obligation are shown in Current assets and Current liabilities, respectively, on TVA's consolidated balance sheets.  At September 30, 2013, and 2012, the carrying amount of the loans receivable, net of discount, was approximately $150 million. The carrying amount of the financing obligation was approximately $186 million and $185 million at September 30, 2013 and 2012, respectively. See Note 10.
Regulatory Assets and Liabilities
Regulatory Assets and Liabilities
Regulatory Assets and Liabilities

Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates.  Regulatory liabilities generally represent obligations to make refunds to customers for previous collections for costs that are not likely to be incurred or deferral of gains that will be credited to customers in future periods.  Components of regulatory assets and regulatory liabilities are summarized in the table below. 
Regulatory Assets and Liabilities 
At September 30
 
2013
 
2012
Current regulatory assets
 
 
 
Unrealized losses on commodity derivatives
$
183

 
$
310

Deferred nuclear generating units
237

 
237

Environmental agreements
73

 
87

Fuel cost adjustment receivable
—

 
68

Environmental cleanup costs – Kingston ash spill
68

 
72

Total current regulatory assets
561

 
774

Non-current regulatory assets
 

 
 

Deferred pension costs and other post-retirement benefits costs
4,076

 
5,517

Unrealized losses on interest rate derivatives
808

 
1,332

Nuclear decommissioning costs
893

 
914

Environmental cleanup costs - Kingston ash spill
681

 
797

Construction costs
—

 
619

Non-nuclear decommissioning costs
571

 
550

Deferred nuclear generating units
1,438

 
473

Unrealized losses on commodity derivatives
139

 
335

Environmental agreements
189

 
237

Other non-current regulatory assets
336

 
353

Total non-current regulatory assets
9,131

 
11,127

Total regulatory assets
$
9,692

 
$
11,901

 
 
 
 
Current regulatory liabilities
 

 
 

Fuel cost adjustment tax equivalents
$
176

 
$
173

Fuel cost adjustment liability
29

 
—

Unrealized gains on commodity derivatives
7

 
18

Total current regulatory liabilities
212

 
191

 Non-current regulatory liabilities
 

 
 

Unrealized gains on commodity derivatives
1

 
109

Total non-current regulatory liabilities
1

 
109

Total regulatory liabilities
$
213

 
$
300



Unrealized Gains (Losses) on Commodity Derivatives.  Unrealized gains (losses) on coal purchase contracts, included as part of unrealized losses on commodity derivatives, relate to the mark-to-market ("MtM") valuation of coal purchase contracts that contain options to purchase additional or lesser quantities.  These contracts qualify as derivative contracts but do not qualify for cash flow hedge accounting treatment.  As a result, TVA recognizes the changes in the market value of these derivative contracts as a regulatory liability or asset.  This treatment reflects TVA’s ability and intent to recover the cost of these commodity contracts on a settlement basis for ratemaking purposes through the fuel cost adjustment. TVA has historically recognized the actual cost of fuel received under these contracts in fuel expense at the time the fuel is used to generate electricity.  These contracts expire at various times through 2018.  Unrealized gains and losses on contracts with a maturity of less than one year are included as a current regulatory asset or liability on TVA's consolidated balance sheets.  See Note 14.

Deferred gains and losses relating to TVA’s Financial Trading Program ("FTP") represent net unrealized gains and losses on swaps, futures, options, and combinations of these instruments and are also included as part of unrealized losses on commodity derivatives.  The program is used to reduce TVA’s economic risk exposure associated with electricity generation, purchases, and sales.  TVA defers all FTP MtM unrealized gains or losses as regulatory liabilities or assets, respectively, and records realized gains or losses in fuel and purchased power expense to match the delivery period of the underlying commodity product.  Net unrealized losses at September 30, 2013, and September 30, 2012, were approximately $166 million and $228 million, respectively.  This accounting treatment reflects TVA’s ability and intent to recover the cost of these commodity contracts in future periods through the fuel rate.  The current regulatory asset/liability for net unrealized gains and losses, included as part of the commodity derivatives, represents deferred gains and losses from contracts with a maturity of less than one year.

Deferred Nuclear Generating Units and Construction Costs.  In July 2005, the TVA Board approved the amortization, and inclusion into rates, of TVA’s $3.9 billion investment in the two deferred nuclear generating units at Bellefonte over a 10-year recovery period beginning in 2006.  In August 2011, the TVA Board approved the completion of Bellefonte Unit 1. Approximately $619 million of the remaining balance in the deferred nuclear generating units regulatory asset at that date did not continue to be amortized into rates, but was to be included in the Bellefonte plant asset balance at completion. This amount had been segregated into a separate non-current regulatory asset account titled Construction costs. TVA is evaluating the completion of Bellefonte Unit 1. In the interim, work at the site has been slowed to better allocate resources on nearer-term priorities as both budget and staffing levels for the project have been reduced in the 2014 budget. TVA believes that the resulting budgeting and staffing levels should be sufficient to preserve Bellefonte for potential future development. TVA plans to utilize its integrated resource planning process to help determine how Bellefonte best supports TVA's overall efforts to continue to meet customer demand with low-cost, reliable power. In November 2013, in accordance with the regulated operations property, plant and equipment accounting guidance, the TVA Board approved the treatment of all amounts currently included in Construction in progress related to Bellefonte as a regulatory asset. Additionally, the Board approved combining the amounts related to Bellefonte previously included in Construction in progress, the $619 million in Regulatory asset-Construction costs and the remaining amounts included in Regulatory asset-Deferred nuclear generating units into a single regulatory asset titled Deferred nuclear generating units totaling $1.7 billion at September 30, 2013. Such amounts have been classified as a Regulatory asset in the September 30, 2013 balance sheet. The Board approved the recovery of this asset in future rates at an amount of $237 million per year until fully recovered. The amount to be amortized over the next year is included as a current regulatory asset on TVA's consolidated balance sheets.

Environmental Agreements.  In conjunction with the Federal Facilities Compliance Agreement with the EPA and the agreement with Alabama, Kentucky, North Carolina, Tennessee, the Sierra Club, National Parks Conservation Association, and Our Children’s Earth Foundation (collectively, the “Environmental Agreements”) (see Note 20 — Legal Proceedings — Environmental Agreements), TVA recorded certain liabilities totaling $360 million ($290 million investment in energy efficiency projects, demand response projects, renewable energy projects, and other TVA projects; $60 million to be provided to Alabama, Kentucky, North Carolina, and Tennessee to fund environmental projects with preference for projects in the Tennessee River watershed, and $10 million in civil penalties). The TVA Board determined that these costs would be collected in customer rates in the future and, accordingly, the amounts were deferred as a regulatory asset. Through the end of 2013, $52 million has been paid with respect to energy efficiency projects, $36 million has been paid to Alabama, Kentucky, North Carolina, and Tennessee, and $10 million has been paid with respect to civil penalties. The remaining amounts will be charged to expense and recovered in rates over future periods as payments are made.

Environmental Cleanup Costs – Kingston Ash Spill.  In August 2009, TVA began using regulatory accounting treatment to defer all actual costs incurred and expected future costs related to the Kingston Fossil Plant ("Kingston") ash spill.  The TVA Board approved a plan to amortize these costs over 15 years beginning October 1, 2009.  At September 30, 2009, TVA’s remediation cost estimate of $933 million was deferred as a regulatory asset.  During 2010, the estimate was revised and increased by $192 million to a total estimate of $1.1 billion.  The additional amount will be amortized over the remaining term.  Amounts included as a current regulatory asset on TVA's consolidated balance sheets represent the amount to be amortized in the next 12 months.  Any future revisions to the estimate will be amortized as a change in estimate over the remaining term.

Fuel Cost Adjustment Receivable.  The fuel cost adjustment provides a mechanism to alter rates monthly to reflect changing fuel and purchased power costs, including realized gains and losses relating to transactions under TVA’s FTP.  There is typically a lag between the occurrence of a change in fuel and purchased power costs and the reflection of the change in rates.  Balances in the fuel cost adjustment regulatory accounts represent over-collected or under-collected revenues that offset fuel and purchased power costs and are recovered or refunded in fuel rates.

Deferred Pension Costs and Other Post-retirement Benefit Costs.  TVA measures its benefit obligations related to pension and other post-retirement benefit ("OPEB") costs at each year-end balance sheet date.  TVA recognizes the funded status of the plans on TVA's consolidated balance sheets which in an unregulated environment would result in a corresponding offset to accumulated other comprehensive income ("AOCI").  “Incurred cost” is a cost arising from cash paid out or an obligation to pay for an acquired asset or service, and a loss from any cause that has been sustained and for which payment has been or must be made.  In the cases of pension and OPEB costs, the unfunded obligation represents a projected liability to the employee for services rendered, and thus it meets the definition of an incurred cost.  Therefore, amounts that otherwise would be charged to AOCI for these costs are recorded as a regulatory asset since TVA has historically recovered pension and OPEB expense in rates.  Through historical and current year expense included in ratemaking, the TVA Board has demonstrated the ability and intent to include pension and OPEB costs in allowable costs and in rates for ratemaking purposes.  As a result, it is probable that future revenue will result from inclusion of the pension and OPEB regulatory assets in allowable costs for ratemaking purposes.

These regulatory assets are classified as long-term, which is consistent with the pension and post-retirement liabilities, and not amortized to the consolidated statements of operations over a specified recovery period.  They are adjusted either upward or downward each year in conjunction with the adjustments to the unfunded pension liability, as calculated by the actuaries. Ultimately this regulatory asset will be recognized in the consolidated statements of operations in the form of pension expense as the actuarial liability is eliminated in future periods. These costs are included in other non-current regulatory assets. See Note 19 — Obligations and Funded Status.

Unrealized Losses on Interest Rate Derivatives.  TVA uses regulatory accounting treatment to defer the MtM unrealized gains and losses on certain interest rate derivative contracts to reflect that the gain or loss is included in the ratemaking formula when these contracts actually settle.  The unrealized losses on these interest rate derivatives are recorded on TVA’s consolidated balance sheets as non-current regulatory assets and the related realized gains or losses, if any, are recorded in TVA’s consolidated statements of operations.

Nuclear Decommissioning Costs.  Nuclear decommissioning costs include: (1) certain deferred charges related to the future closure and decommissioning of TVA’s nuclear generating units under the Nuclear Regulatory Commission ("NRC") requirements, (2) recognition of changes in the liability, (3) recognition of changes in the value of TVA's Nuclear Decommissioning Trust ("NDT"), and (4) certain other deferred charges under the accounting rules for AROs.  These future costs will be funded through a combination of the NDT, future earnings on the NDT, and, if necessary, additional TVA cash contributions to the NDT and future earnings thereon.  See Note 1 — Investment Funds.  There is not a specified recovery period; therefore, the regulatory asset is classified as long-term consistent with the NDT investments and ARO liability.

Non-Nuclear Decommissioning Costs.  TVA has established an Asset Retirement Trust ("ART") to more effectively segregate, manage, and invest funds to help meet future AROs.  The funds from the ART may be used, among other things, to pay the costs of retiring non-nuclear long-lived assets.  The costs of retiring non-nuclear long-lived assets represent the net deferred costs related to the future closure and retirement of TVA's non-nuclear long-lived assets under various legal requirements.  These future costs can be funded through a combination of investment funds already set aside in the ART, future earnings on those investment funds, and future cash contributions to the ART and future earnings thereon.  There is not a specified recovery period; therefore, the regulatory asset is classified as long-term, consistent with the ART investments and ARO liability.

Other Non-Current Regulatory Assets. Other non-current regulatory assets consist of the following:

Debt Reacquisition Costs.  Reacquisition expenses, call premiums, and other related costs, such as unamortized debt issue costs associated with redeemed Bond issues, are deferred and amortized (accreted) on a straight-line basis over the weighted average life of TVA’s debt portfolio.

Nuclear Training Costs.  As a result of refurbishing and restarting Browns Ferry Unit 1 in 2007 and the construction and startup of Watts Bar Nuclear Plant ("Watts Bar") Unit 2, nuclear training costs associated with these units have been deferred as a regulatory asset and will be amortized over a cost recovery period equivalent to the expected useful life of the operating nuclear units.

Retirement Removal Costs.  Retirement removal costs that are not legally required are capitalized into fixed assets to be depreciated consistent with the lives in the depreciation study. See Note 1 — Property, Plant, and Equipment, and Depreciation — Depreciation. The TVA Board has consistently set rates to cover the depreciation of these assets; therefore, these assets are probable of future recovery.

Fuel Cost Adjustment Tax Equivalents.  The fuel cost adjustment includes a provision related to the current funding of the future payments TVA will make.  As TVA records the fuel cost adjustment, the percent of the calculation that relates to a future asset or liability for tax equivalent payments is recorded as a current regulatory asset or liability and paid in the following year.
Variable Interest Entities
Variable Interest Entities
Variable Interest Entities

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of owning a controlling financial interest. The analysis to determine whether an entity is a VIE considers factors such as contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity, the extent of an entity's activities that either involve or are conducted on behalf of an investor with disproportionate voting rights, and the relationship of voting power to the amount of equity invested in an entity. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The determination of the primary beneficiary requires continual reassessment.

When TVA determines that it has a variable interest in a variable interest entity, a qualitative evaluation is performed to assess which interest holders have the power to direct the activities that most significantly impact the economic performance of the entity and have the obligation to absorb losses or receive benefits that could be significant to the entity. The evaluation considers the purpose and design of the business, the risks that the business was designed to create and pass along to other entities, the activities of the business that can be directed and which party can direct them, and the expected relative impact of those activities on the economic performance of the business through its life. TVA has the power to direct the activities of an entity when it has the ability to make key operating and financing decisions, including, but not limited to, capital investment and the issuance of debt.

Southaven

On August 6, 2013, TVA and the United States of America entered into an asset purchase agreement for the reacquisition by TVA (as agent for the United States of America with respect to real property) of a 90 percent undivided interest in the Southaven Combined Cycle Combustion Turbine Facility ("Southaven CCF") and related real property located in Southaven, Mississippi (the “Asset Purchase Agreement”) from Seven States Power Corporation ("Seven States"), through its subsidiary, Seven States Southaven, LLC ("SSSL"). Seven States was formed by LPCs that distribute TVA power. Seven States originally purchased the 90 percent interest in the Southaven CCF and the related real property from TVA in 2008 and leased the interest back to TVA. TVA continued to operate the Southaven CCF. See Note 13 for further discussion regarding the purchase arrangement.

As a condition to the closing of the Asset Purchase Agreement, on August 9, 2013, TVA entered into a lease financing arrangement with Southaven Combined Cycle Generation, LLC ("SCCG") in which TVA agreed to lease the Southaven CCF to SCCG for a term of approximately 31 years (the “Southaven Head Lease”) in exchange for a one-time rental payment of $400 million to TVA. Also on August 9, 2013, SCCG leased the Southaven CCF back to TVA for a term of approximately 20 years (the “Southaven Facility Lease”) in exchange for scheduled amortizing, semi-annual lease payments commencing on February 15, 2014 and ending on August 15, 2033. Throughout the term of the Southaven Facility Lease, TVA is responsible for the operation and maintenance (and improvement to the extent required by applicable law) of the Southaven CCF and takes all power generated by the facility. The Southaven Head Lease will terminate upon expiration of the Southaven Facility Lease so long as all payments under the Southaven Facility Lease have been made and there is no significant event of default for which SCCG has exercised remedies to dispossess TVA of the Southaven CCF. Upon expiration of the Southaven Head Lease and Southaven Facility Lease, TVA will own the Southaven CCF at no additional cost to TVA.

SCCG, a newly formed special single-purpose entity, was established to finance the Southaven CCF through a $360 million secured notes issuance (the “SCCG notes”) and the issuance of $40 million of membership interests. See Note 12 —Secured Debt of VIEs. The membership interests were purchased by Southaven Holdco, LLC ("SHLLC"), also a newly-formed special single-purpose entity, established to acquire and hold the membership interests of SCCG. They were purchased by SHLLC with proceeds from the issuance of $40 million of secured notes (the “SHLLC notes”) and are subject to mandatory redemption pursuant to scheduled amortizing, semi-annual payments due each August 15 and February 15, with a final payment due on August 15, 2033. See Note 10 — Membership Interests of VIE Subject to Mandatory Redemption. The payment dates for the mandatorily redeemable membership interests are the same as those of the SHLLC notes, the SCCG notes, and the lease payments under the Southaven Facility Lease.

The sale of the SCCG notes, the membership interests in SCCG, and the SHLLC notes closed on August 9, 2013. The SCCG notes are secured by TVA’s lease payments. The SHLLC notes are secured by SHLLC’s investment in, and amounts receivable from, SCCG. TVA’s lease payments, under the terms of the Southaven Facility Lease, are equal to the sum of (i) SCCG’s semi-annual debt service payments, (ii) SHLLC’s semi-annual debt service payments, and (iii) scheduled pre-determined payments to be made to SSSL on each lease payment date by SHLLC as agreed in the Asset Purchase Agreement and SHLLC's formation documents (the "Seven States Return"). In addition to the lease payments, TVA pays the administrative and miscellaneous expenses incurred by SCCG and SHLLC. Certain agreements related to this transaction contain default and acceleration provisions.

TVA participated in the design, business conduct, and financial support of SCCG and has determined that it has a direct variable interest in SCCG resulting from risk associated with the value of the Southaven CCF at the end of the lease term. Based on its analysis, TVA has determined that it is the primary beneficiary of SCCG and, as such, is required to account for SCCG on a consolidated basis.

John Sevier

On January 17, 2012, TVA entered into a $1.0 billion construction management agreement and lease financing arrangement with John Sevier Combined Cycle Generation LLC ("JSCCG") for the completion and lease by TVA of the John Sevier Combined Cycle Facility ("John Sevier CCF"). JSCCG is a special single-purpose limited liability company formed in January 2012 to finance the John Sevier CCF through a $900 million secured note issuance (the “JSCCG notes”) and the issuance of $100 million of membership interests subject to mandatory redemption.  The membership interests were purchased by John Sevier Holdco LLC ("Holdco").  Holdco is a special single-purpose entity, also formed in January 2012, established to acquire and hold the membership interests in JSCCG.  A non-controlling interest in Holdco is held by a third party through nominal membership interests, to which none of the income, expenses, and cash flows is allocated. 
 
The membership interests held by Holdco in JSCCG were purchased with proceeds from the issuance of $100 million of secured notes (the “Holdco notes") and are subject to mandatory redemption pursuant to scheduled amortizing, semi-annual payments due each January 15 and July 15, with a final payment due on January 15, 2042. The payment dates for the mandatorily redeemable membership interests are the same as those of the Holdco notes. The sale of the JSCCG notes, the membership interests in JSCCG, and the Holdco notes closed on January 17, 2012. The JSCCG notes are secured by TVA’s lease payments, and the Holdco notes are secured by Holdco's investment in, and amounts receivable from, JSCCG. TVA’s lease payments to JSCCG are equal to and payable on the same dates as JSCCG’s and Holdco’s semi-annual debt service payments. In addition to the lease payments, TVA pays administrative and miscellaneous expenses incurred by JSCCG and Holdco. Certain agreements related to this transaction contain default and acceleration provisions.

Due to its participation in the design, business conduct, and credit and financial support of JSCCG and Holdco, TVA has determined that it has a variable interest in each of these entities. Based on its analysis, TVA has concluded that it is the primary beneficiary of JSCCG and Holdco and, as such, is required to account for the VIEs on a consolidated basis. Holdco’s membership interests in JSCCG are eliminated in consolidation.

The financial statement items attributable to carrying amounts and classifications of JSCCG and Holdco as of September 30, 2013 and 2012, and SCCG as of September 30, 2013, as reflected in the Consolidated Balance Sheets are as follows:

Summary of Impact of VIEs on Consolidated Balance Sheets
 
At September 30, 2013
 
At September 30, 2012
Current liabilities
 
 
 

Accrued interest
$
12

 
$
10

Current portion of membership interests of VIE subject to mandatory redemption
2

 
—

Current maturities of long-term debt of VIE
30

 
13

Total current liabilities
44

 
23

Other liabilities
 
 
 
Membership interests of VIE subject to mandatory redemption
38

 
—

Total other liabilities
38

 
—

Long-term debt, net
 
 
 
Long-term debt of VIE
1,311

 
981

Total long-term debt, net
1,311

 
981

Total liabilities
$
1,393

 
$
1,004



Interest expense of $50 million and $34 million related to debt of variable interest entities and membership interests of variable interest entity subject to mandatory redemption is included in the Consolidated Statements of Operations for the years ended September 30, 2013 and 2012, respectively.

Creditors of the VIEs do not have any recourse to the general credit of TVA. TVA does not have any obligations to provide financial support to the VIEs other than as prescribed in the terms of the agreements related to these transactions.
Kingston Fossil Plant Ash Spill
Kingston Fossil Plant Ash Spill
Kingston Fossil Plant Ash Spill

The Event

In December 2008, one of the dredge cells at the Kingston Fossil Plant ("Kingston") failed, and approximately five million cubic yards of water and coal fly ash flowed out of the cell. TVA is continuing cleanup and recovery efforts in conjunction with federal and state agencies.  TVA completed the removal of time-critical ash from the river during the third quarter of 2010, and removal of the remaining ash is considered to be non-time-critical.  In November 2012, the EPA and the Tennessee Department of Environment and Conservation ("TDEC") approved a plan to allow the Emory River's natural processes to remediate the remaining ash in the river, and to conduct a long-term monitoring program. TVA estimates that the physical cleanup work (final removal) will be completed in the spring of 2015.  A final assessment, issuance of a completion report, and approval by the State of Tennessee and the EPA are expected to occur by the third quarter of 2015.  

Claims and Litigation

See Note 20 — Legal Proceedings — Legal Proceedings Related to the Kingston Ash Spill and — Civil Penalty and Natural Resource Damages for the Kingston Ash Spill.

Financial Impact

Because of the uncertainty at this time of the final costs to complete the work prescribed by the ash disposal plan, a range of reasonable estimates has been developed by cost category.  Known amounts, most likely scenarios, or the low end of the range for each category have been accumulated and evaluated to determine the total estimate.  The range of costs varies from approximately $1.1 billion to approximately $1.2 billion.

TVA recorded an estimate of $1.1 billion for the cost of cleanup related to this event.  In August 2009, TVA began using regulatory accounting treatment to defer all actual costs already incurred and expected future costs related to the ash spill.  The cost is being charged to expense as it is collected in rates over 15 years, beginning October 1, 2009.  As the estimate changes, additional costs may be deferred and charged to expense prospectively as they are collected in future rates.

As work continues to progress and more information is available, TVA will review its estimates and revise them as appropriate.  TVA has accrued a portion of the estimated cost in current liabilities, with the remaining portion shown as a long-term liability on TVA's consolidated balance sheets.  Amounts spent since the event through September 30, 2013, totaled $956 million.  The remaining estimated liability at September 30, 2013, was $169 million.

TVA has not included the following categories of costs in the above estimate since it has been determined that these costs are currently either not probable or not reasonably estimable: penalties (other than the penalties set out in a June 2010 TDEC order), regulatory directives, natural resources damages (other than payments required under a memorandum of agreement with TDEC and the U.S. Fish and Wildlife Service establishing a process and a method for resolving the natural resource damages claim), future lawsuits, future claims, long-term environmental impact costs, final long-term disposition of the ash processing area, and costs associated with new laws and regulations.  There are certain other costs that will be incurred that have not been included in the estimate as they are appropriately accounted for in other areas of the consolidated financial statements.  Associated capital asset purchases are recorded in property, plant, and equipment.  Ash handling and disposition costs from current plant operations are recorded in operating expenses.  A portion of the dredge cell closure costs are also excluded from the estimate, as they are included in the non-nuclear ARO liability.

Insurance

TVA had property and excess liability insurance programs in place at the time of the Kingston ash spill.  TVA pursued claims under both the property and excess liability programs and has settled all of its property insurance claims and some of its excess liability insurance claims.  TVA has received insurance proceeds of $92 million.  In April 2012, TVA initiated arbitration proceedings against the remaining excess liability insurance companies in accordance with the policies’ dispute resolution provisions. TVA is seeking recovery of certain costs incurred in the cleanup project, including the costs of removing ash from property or waters owned by the State of Tennessee, and related expenses. Any amounts received related to insurance settlements are being recorded as reductions to the regulatory asset and will reduce amounts collected in future rates.
Other Long-Term Liabilities
Other Long-Term Liabilities
Other Long-Term Liabilities

Other long-term liabilities consist primarily of liabilities related to certain derivative agreements as well as liabilities under agreements related to compliance with certain environmental regulations (see Note 20 — Legal Proceedings — Environmental Agreements). The table below summarizes the types and amounts of Other long-term liabilities:

Other Long-Term Liabilities
At September 30
 
2013
 
2012
Interest rate swap liabilities
$
1,199

 
$
1,723

Environmental agreements liability
190

 
237

EnergyRight® financing obligation
149

 
148

Membership interests of VIE subject to mandatory redemption
38

 
—

Coal contract derivative liabilities
35

 
205

Commodity swap derivative liabilities
36

 
59

Currency swap liabilities
15

 
54

Other
199

 
254

Total other long-term liabilities
$
1,861

 
$
2,680



EnergyRight® Purchase Obligation. TVA guarantees repayment on certain loans receivable from customers of TVA's LPCs in association with the EnergyRight® Solutions program.  TVA sells the loans receivable to a third-party bank and has agreed with the bank to purchase any loan receivable that has been in default for 180 days or more or that TVA has determined is uncollectible. The transaction is accounted for as a financing arrangement. As of September 30, 2013 and September 30, 2012, the carrying amount of the financing obligation was approximately $186 million and $185 million, respectively. As of September 30, 2013 and 2012, $37 million of this was current and included in Accounts payable and accrued liabilities. See Note 6.

Membership Interests of VIE Subject to Mandatory Redemption. On August 9, 2013, SCCG issued 100 percent of its membership interests to SHLLC for a total of $40 million. The membership interests in SCCG are mandatorily redeemable pursuant to a schedule of payments that indicates the amount of each payment and the corresponding dates on which each payment is due. The schedule requires SCCG to make semi-annual payments to SHLLC sufficient to provide returns on, as well as returns of, capital until the investment has been repaid in full, including a $4 million balloon payment as part of the final disbursement which is due on August 15, 2033. The return on capital includes the Seven States Return. These payments provide a return on investment to SHLLC of 7.0 percent, which is reflected as interest expense in the consolidated statements of operations. As of September 30, 2013, the carrying amount of the Membership interests of VIE subject to mandatory redemption was $40 million. As of September 30, 2013, $2 million of this was current and included in Accounts payable and accrued liabilities.

In the event that TVA were to choose to exercise an early buy out feature of the Southaven Facility Lease, in part or in whole, TVA must pay to SCCG amounts sufficient for SCCG to repay or partially repay on a pro rata basis the membership interests held by SHLLC, including any outstanding investment amount plus accrued but unpaid return. TVA also has the right, at any time and without any early redemption of the other portions of the Southaven Facility Lease payments due to SCCG, to fully repay SHLLC's investment, upon which repayment SHLLC will transfer the membership interests to a designee of TVA.
Asset Retirement Obligations
Asset Retirement Obligations
Asset Retirement Obligations

During the year ended September 30, 2013, TVA's total ARO liability increased $199 million. The increase in the liability resulted from accretion and a change in estimate. These items were partially offset by ash area settlement projects that were conducted during the year ended September 30, 2013. The nuclear and non-nuclear accretion expenses were deferred as regulatory assets, and $40 million of the related regulatory assets was amortized into expense as this amount was collected in rates. The change in estimate is a result of TVA's biennial update to its nuclear ARO in order to adjust for changes in expected labor factors, burial rates, and fuel expenses, among other factors. This review resulted in a $66 million increase to the nuclear ARO.
Reconciliation of Asset Retirement Obligation Liability

 
 
 
 
 
 
 
 
 
Nuclear
 
Non-Nuclear
 
Total
 
Balance at September 30, 2011
$
2,091

 
$
1,047

 
$
3,138

 
 
 
 
 
 
 
 
Settlements (ash storage areas)
—

 
(22
)
 
(22
)
 
Accretion (recorded as regulatory asset)
117

 
55

 
172

 
Additional obligations
—

 
2

 
2

 
Change in estimate
—

 
(1
)
 
(1
)
 
 
 
 
 
 
 
 
Balance at September 30, 2012
$
2,208

 
$
1,081

 
$
3,289

 
 
 
 
 
 
 
 
Settlements (ash storage areas)
—

 
(37
)
 
(37
)
 
Accretion (recorded as regulatory asset)
125

 
45

 
170

 
Additional obligations
—

 
—

 
—

 
Change in estimate
66

 
—

 
66

 
 
 
 
 
 
 
 
Balance at September 30, 2013
$
2,399

 
$
1,089

 
$
3,488

*


Note
* The current portion of ARO in the amount of $16 million is included in Accounts payable and accrued liabilities.
Debt and Other Obligations
Debt and Other Obligations
.  Debt and Other Obligations

General

The TVA Act authorizes TVA to issue Bonds in an amount not to exceed $30.0 billion at any time.  At September 30, 2013, TVA had only two types of Bonds outstanding: power bonds and discount notes.  Power bonds have maturities between one and 50 years, and discount notes have maturities of less than one year.  Power bonds and discount notes are both issued pursuant to section 15d of the TVA Act and pursuant to the Basic Tennessee Valley Authority Power Bond Resolution adopted by the TVA Board on October 6, 1960, as amended on September 28, 1976, October 17, 1989, and March 25, 1992 (the "Basic Resolution").  TVA Bonds are not obligations of the United States, and the United States does not guarantee the payments of principal or interest on Bonds.

Power bonds and discount notes rank on parity and have first priority of payment out of net power proceeds, which are defined as the remainder of TVA’s gross power revenues after deducting the costs of operating, maintaining, and administering its power properties, and tax equivalent payments, but before deducting depreciation accruals or other charges representing the amortization of capital expenditures, plus the net proceeds from the sale or other disposition of any power facility or interest therein.

TVA considers its scheduled rent payments under its leaseback transactions, as well as its scheduled payments under its lease financing arrangements involving John Sevier CCF and Southaven CCF, as costs of operating, maintaining, and administering its power properties; however, such treatment is not free from doubt. Costs of operating, maintaining, and administering TVA's power properties have priority over TVA’s payments on the Bonds.  Once net power proceeds have been applied to payments on power bonds and discount notes as well as any other Bonds that TVA may issue in the future that rank on parity with or subordinate to power bonds and discount notes, Section 2.3 of the Basic Resolution provides that the remaining net power proceeds shall be used only for minimum payments into the U.S. Treasury required by the TVA Act in repayment of, and as a return on, the Power Program Appropriation Investment, investment in power assets, additional reductions of TVA’s capital obligations, and other lawful purposes related to TVA’s power program.

The TVA Act and the Basic Resolution each contain two bond tests: the rate test and the bondholder protection test.  Under the rate test, TVA must charge rates for power which will produce gross revenues sufficient to provide funds for, among other things, debt service on outstanding Bonds.  As of September 30, 2013, TVA was in compliance with the rate test. See Note 1 — General.  Under the bondholder protection test, TVA must, in successive five-year periods, use an amount of net power proceeds at least equal to the sum of (1) the depreciation accruals and other charges representing the amortization of capital expenditures and (2) the net proceeds from any disposition of power facilities for either the reduction of its capital obligations (including Bonds and the Power Program Appropriation Investment) or investment in power assets.

TVA met the bondholder protection test for the five-year period ended September 30, 2010, and must next meet the bondholder protection test for the five-year period ending September 30, 2015.

Secured Debt of VIEs

On August 9, 2013, SCCG issued secured notes totaling $360 million that bear interest at a rate of 3.846 percent. The SCCG notes require amortizing semi-annual payments on each February 15 and August 15, and mature on August 15, 2033. Also on August 9, 2013, SCCG issued $40 million of membership interests subject to mandatory redemption. The proceeds from the secured notes issuance and the issuance of the membership interests was paid to TVA in accordance with the terms of the Southaven Head Lease. See Note 8 — Southaven. TVA used the proceeds from the transaction primarily to fund the acquisition of the Southaven CCF from SSSL.

On January 17, 2012, JSCCG issued secured notes totaling $900 million in aggregate principal amount that bear interest at a rate of 4.626 percent. Also on January 17, 2012, Holdco issued secured notes totaling $100 million that bear interest at a rate of 7.1 percent. The JSCCG notes and the Holdco notes require amortizing semi-annual payments on each January 15 and July 15, and mature on January 15, 2042. The Holdco notes require a $10 million balloon payment upon maturity.

Approximately $970 million of the proceeds from the secured notes issuances was paid to TVA in accordance with the terms of the Head Lease and CMA. See Note 8. JSCCG deposited approximately $30 million with a lease indenture trustee to fund the payments due on July 15, 2012, in connection with the JSCCG notes and Holdco's membership interests in JSCCG. TVA used the proceeds from the transaction to meet its requirements under the TVA Act.

Secured debt of VIEs, including current maturities, outstanding at September 30, 2013 and 2012 totaled approximately $1.3 billion and $994 million, respectively.

Short-Term Debt

The weighted average rates applicable to short-term debt outstanding at September 30, 2013, 2012, and 2011, were 0.04 percent, 0.09 percent, and 0.00 percent, respectively.  During 2013, 2012, and 2011, the maximum outstanding balances of TVA short-term borrowings held by the public were $3.4 billion, $3.2 billion, and $1.4 billion, respectively.  For these same years, the average amounts (and weighted average interest rates) of TVA short-term borrowings were approximately $1.9 billion (0.08 percent), $1.1 billion (0.08 percent), and $363 million (0.14 percent), respectively.

Put and Call Options

Bond issues of $848 million held by the public are redeemable in whole or in part, at TVA’s option, on call dates ranging from the present to 2020 and at call prices of 100 percent of the principal amount.  Twenty-three Bond issues totaling $708 million, with maturity dates ranging from 2025 to 2043, include a “survivor’s option,” which allows for right of redemption upon the death of a beneficial owner in certain specified circumstances.  There is no accounting difference between a “survivor’s option” put and a “regular” put on any TVA put Bond. These Bonds are classified as long-term as of September 30, 2013 and 2012.

Additionally, TVA has two issues of Putable Automatic Rate Reset Securities ("PARRS") outstanding.  After a fixed-rate period of five years, the coupon rate on the PARRS may automatically be reset downward under certain market conditions on an annual basis.  The coupon rate reset on the PARRS is based on a calculation.  For both series of PARRS, the coupon rate will reset downward on the reset date if the rate calculated is below the then-current coupon rate on the Bond.  The calculation dates, potential reset dates, and terms of the calculation are different for each series.  The coupon rate on the 1998 Series D PARRS may be reset on June 1 (annually) if the sum of the five-day average of the 30-Year Constant Maturity Treasury ("CMT") rate for the week ending the last Friday in April, plus 94 basis points, is below the then-current coupon rate.  The coupon rate on the 1999 Series A PARRS may be reset on May 1 (annually) if the sum of the five-day average of the 30-Year CMT rate for the week ending the last Friday in March, plus 84 basis points, is below the then-current coupon rate.  The coupon rates may only be reset downward, but investors may request to redeem their Bonds at par value in conjunction with a coupon rate reset for a limited period of time prior to the reset dates under certain circumstances.

The coupon rate for the 1998 Series D PARRS, which mature in June 2028, has been reset six times, from an initial rate of 6.75 percent to the current rate of 3.830 percent.  In connection with these resets, $251 million of the Bonds have been redeemed, so that $324 million of the Bonds were outstanding at September 30, 2013.  The coupon rate for the 1999 Series A PARRS, which mature in May 2029, has been reset five times, from an initial rate of 6.50 percent to the current rate of 3.955 percent.  In connection with these resets, $255 million of the Bonds have been redeemed, so that $270 million of the Bonds were outstanding at September 30, 2013.

Due to the contingent nature of the put option on the PARRS, TVA determines whether the PARRS should be classified as long-term debt or current maturities of long-term debt by calculating the expected reset rate for the bonds on the calculation dates, described above, which occur in the third quarter of TVA's fiscal year.  If the reset rate is less than the then-current coupon rate on the PARRS, the PARRS are included in current maturities.  Otherwise, the PARRS are included in long-term debt.  At September 30, 2013, TVA has not determined that it is probable that the reset rate will be less than than the current coupon rate on the PARRS on the calculation dates; therefore, the par amount outstanding for each series of PARRS was classified as long-term debt.

Debt Securities Activity

The table below summarizes the long-term debt securities activity for the period from October 1, 2011, to September 30, 2013.
Debt Securities Activity
For the year ended September 30
 
 
2013
 
2012
Issues
 
 
 
 
Debt of variable interest entities
 
$
360

 
$
1,000

electronotes®
 
152

 
135

2012 Series A(1)
 
—

 
1,000

2012 Series B(2)
 
1,000

 
—

2013 Series A(3)
 
1,000

 
—

Discount on debt issues
 
(30
)
 
(9
)
Total
 
$
2,482

 
$
2,126

 
 
 
 
 
Redemptions/Maturities(4)
 
 
 
 
Debt of variable interest entities
 
$
13

 
$
6

electronotes®
 
50

 
189

1992 Series D
 
—

 
1,000

1998 Series C
 
1,359

 
—

1998 Series D
 
2

 
5

1999 Series A
 
1

 
2

2000 Series F
 
—

 
29

2002 Series A
 
—

 
1,486

2003 Series C
 
940

 
—

2009 Series A
 
4

 
4

2009 Series B
 
2

 
2

Total
 
$
2,371

 
$
2,723


Notes
(1) The 2012 Series A bonds were issued at 99.12 percent of par.
(2) The 2012 Series B bonds were issued at 97.49 percent of par.
(3) The 2013 Series A bonds were issued at 99.52 percent of par.
(4) All redemptions were at 100 percent of par.

Debt Outstanding

Total debt outstanding at September 30, 2013, and 2012, consisted of the following:
 
Short-Term Debt
At September 30
 
CUSIP or Other Identifier
 
 
Maturity
 
 Call/(Put) Date
 
 
Coupon Rate
 
2013 Par
 
2012 Par
Short-term debt, net
 
 
 
 
 
 
 
$
2,432

 
$
1,507

Current maturities of long-term debt of variable interest entities
 
 
 
 
 
 
 
30

 
13

Current maturities of power bonds
 
 
 
 
 
 
 
 
 
 
880591EE8
 
5/15/2014
 

 
2.250%
 
3

 
3

880591EF5
 
6/15/2014
 
 
 
3.770%
 
26

 
3

880591CW0
 
3/15/2013
 
 
 
6.000%
 
—

 
1,359

880591DW9
 
8/1/2013
 
 
 
4.750%
 
—

 
940

88059TEL1
 
5/15/2014
 
 
 
2.650%
 
3

 
3

Total current maturities of power bonds
 
 
 
 
 
 
 
32

 
2,308

Total current debt outstanding, net
 
 
 
 
 
 
 
$
2,494

 
$
3,828


Long-Term Debt(1)
At September 30
 
CUSIP or Other Identifier
 
 
Maturity
 
Coupon
Rate
 
Call Date
 
2013 Par
 
2012 Par
 
Stock Exchange Listings
electronotes®(2)
 
05/15/2020 -
02/15/2043
 
2.375 - 4.875%
 
4/15/2013 -
02/15/2018
 
$
723

 
$
622

 
None
880591DY5
 
6/15/2015
 
4.375%
 
 
 
1,000

 
1,000

 
New York, Luxembourg
880591EE8(3)
 
11/15/2015
 
2.250%
 
 
 
4

 
8

 
None
880591DS8
 
12/15/2016
 
4.875%
 

 
524

 
524

 
New York
880591EA6
 
7/18/2017
 
5.500%
 
 
 
1,000

 
1,000

 
New York, Luxembourg
880591CU4
 
12/15/2017
 
6.250%
 
 
 
650

 
650

 
New York
880591EC2
 
4/1/2018
 
4.500%
 
 
 
1,000

 
1,000

 
New York, Luxembourg
880591EQ1
 
10/15/2018
 
1.750%
 
 
 
1,000

 
—

 
New York
880591EL2
 
2/15/2021
 
3.875%
 
 
 
1,500

 
1,500

 
New York
880591DC3
 
6/7/2021
 
5.805%
(4 
) 
 
 
324

 
324

 
New York, Luxembourg
880591EN8
 
8/15/2022
 
1.875%
 
 
 
1,000

 
1,000

 
New York
880591CJ9
 
11/1/2025
 
6.750%
 
 
 
1,350

 
1,350

 
New York, Hong Kong, Luxembourg, Singapore
880591300(5)
 
6/1/2028
 
4.060%
 
 
 
324

 
326

 
New York
880591409(5)
 
5/1/2029
 
4.150%
 
 
 
270

 
271

 
New York
880591DM1
 
5/1/2030
 
7.125%
 
 
 
1,000

 
1,000

 
New York, Luxembourg
880591DP4
 
6/7/2032
 
6.587%
(4 
) 
  
 
405

 
404

 
New York, Luxembourg
880591DV1
 
7/15/2033
 
4.700%
 
 
 
472

 
472

 
New York, Luxembourg
880591EF5(3)
 
6/15/2034
 
3.770%
 
 
 
414

 
440

 
None
880591DX7
 
6/15/2035
 
4.650%
 
 
 
436

 
436

 
New York
880591CK6
 
4/1/2036
 
5.980%
 
 
 
121

 
121

 
New York
880591CS9
 
4/1/2036
 
5.880%
 
 
 
1,500

 
1,500

 
New York
880591CP5
 
1/15/2038
 
6.150%
 
 
 
1,000

 
1,000

 
New York
880591ED0
 
6/15/2038
 
5.500%
 
 
 
500

 
500

 
New York
880591EH1
 
9/15/2039
 
5.250%
 
 
 
2,000

 
2,000

 
New York
880591EP3
 
12/15/2042
 
3.500%
 
 
 
1,000

 
—

 
New York
880591DU3
 
6/7/2043
 
4.962%
(4 
) 
  
 
243

 
242

 
New York, Luxembourg
880591CF7
 
7/15/2045
 
6.235%
 
7/15/2020
 
140

 
140

 
New York
880591EB4
 
1/15/2048
 
4.875%
 
 
 
500

 
500

 
New York, Luxembourg
880591DZ2
 
4/1/2056
 
5.375%
 
 
 
1,000

 
1,000

 
New York
880591EJ7
 
9/15/2060
 
4.625%
 
 
 
1,000

 
1,000

 
New York
Subtotal
 
 
 
 
 
 
 
22,400

 
20,330

 
 
Unamortized discounts, premiums, and other
 
 
 
 
 
 
 
(85
)
 
(61
)
 
 
Total long-term outstanding power bonds, net
 
 
 
 
 
 
 
22,315

 
20,269

 
 
Long-term debt of variable interest entities
 
 
 
 
 
 
 
1,311

 
981

 
 
Total long-term debt, net
 
 
 
 
 
 
 
$
23,626

 
$
21,250

 
 

Notes
(1)  Includes net exchange losses from currency transactions of $43 million at September 30, 2013 and $41 million at September 30, 2012.
(2)  Includes one electronotes® issue with partial maturities of principal for each required annual payment.
(3)  These Bonds include partial maturities of principal for each required annual payment.
(4)  The coupon rate represents TVA’s effective interest rate.
(5)  TVA PARRS, CUSIP numbers 880591300 and 880591409, may be redeemed under certain conditions.  See Put and Call Options.

Maturities Due in the Year Ending September 30
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Long-term power bonds and long-term debt of variable interest entities including current maturities(1)
$
62

 
$
1,064

 
$
65

 
$
1,590

 
$
1,718

 
$
19,231

 
$23,730

Note
(1) Does not include noncash items of foreign currency exchange loss of $43 million and net discount on sale of Bonds of $85 million.

Credit Facility Agreements

TVA and the U.S. Treasury, pursuant to the TVA Act, have entered into a memorandum of understanding under which the U.S. Treasury provides TVA with a $150 million credit facility. This credit facility was renewed for fiscal year 2014 with a maturity date of September 30, 2014. Access to this credit facility or other similar financing arrangements with the U.S. Treasury has been available to TVA since the 1960s. TVA plans to use the U.S. Treasury credit facility as a secondary source of liquidity. The interest rate on any borrowing under this facility is based on the average rate on outstanding marketable obligations of the United States with maturities from date of issue of one year or less. There were no outstanding borrowings under the facility at September 30, 2013, The availability of this credit facility may be impacted by how the U.S. government addresses the situation of approaching its debt limit.

TVA also has funding available in the form of three long-term revolving credit facilities totaling $2.5 billion. One $1.0 billion credit facility matures on June 25, 2017, another $1.0 billion credit facility matures on December 13, 2017, and the $0.5 billion credit facility matures on April 5, 2018. The interest rate on any borrowing under these facilities varies based on market factors and the rating of TVA's senior unsecured long-term non-credit-enhanced debt. TVA is required to pay an unused facility fee on the portion of the total $2.5 billion that TVA has not borrowed or committed under letters of credit. This fee, along with letter of credit fees, may fluctuate depending on the rating of TVA's senior unsecured long-term non-credit-enhanced debt. At September 30, 2013, and September 30, 2012, there were $0.8 billion and $1.1 billion, respectively, of letters of credit outstanding under the facilities, and there were no borrowings outstanding. See Note 14 — Other Derivative Instruments — Collateral.
Leaseback Obligations
Leaseback Obligations
Leaseback Obligations

Lease/Leasebacks

Prior to 2004, TVA received approximately $945 million in proceeds by entering into leaseback transactions for 24 new peaking combustion turbine units ("CTs"). TVA also received approximately $389 million in proceeds by entering into a leaseback transaction for qualified technological equipment and software ("QTE") in 2003. Due to TVA's continuing involvement in the operation and maintenance of the leased units and equipment and its control over the distribution of power produced by the combustion turbine facilities during the leaseback term, TVA accounted for the lease proceeds as financing obligations. At September 30, 2013, and September 30, 2012, the outstanding leaseback obligations related to CTs and QTE were $761 million and $825 million, respectively.

In 2008, TVA acquired the Southaven CCF pursuant to an agreement under which Seven States had an option to purchase a 90 percent undivided interest in the facility, which option Seven States subsequently exercised through its subsidiary, SSSL. SSSL financed the purchase of its undivided interest in the facility with funds received from a credit agreement with a third-party lender. SSSL leased its undivided interest in the facility back to TVA, and TVA continued to operate the facility. TVA accounted for the leaseback obligation under the financing method.

On August 6, 2013, TVA and the United States of America entered into the Asset Purchase Agreement involving the Southaven CCF, underlying real property, and related assets, whereby TVA (as agent for the United States of America with respect to real property) re-acquired the undivided 90 percent interest in the facility from SSSL. In exchange for SSSL’s undivided interest in the facility, TVA paid the recorded amount of the buy-back obligation as of the date of closing of approximately $364 million. SSSL used these proceeds to repay the amounts outstanding under its credit agreement. The credit agreement was closed upon repayment.

Also, as a condition to the closing of the Asset Purchase Agreement, TVA was required to enter into the Southaven Head Lease and Southaven Facility Lease through which SSSL will receive semi-annual payments over 20 years each February 15 and August 15, beginning February 15, 2014, with the final payment due on August 15, 2033. These payments, totaling approximately $9 million, will be funded by TVA as part of the lease payments to SCCG that will be paid to SHLLC. The payments to be made to SSSL are included in a schedule to SHLLC's formation documents. SSSL has no equity or debt investment in, and has made no contribution to, SHLLC. TVA entered into the Southaven Head Lease and the Southaven Facility Lease on August 9, 2013. See Note 8 and Note 10 — Membership Interests of VIE Subject to Mandatory Redemption.

Lease Ratings Downgrade

On November 29, 2011, one credit rating agency downgraded its ratings on various long-term leases backed by obligations of TVA from AA+ to AA-, and set the outlook on the ratings to stable.  The downgrades include leaseback obligations related to CTs and QTE.  According to the rating agency, the downgrade reflects the application of new criteria to the leases, rather than any TVA action, event, or change in business conditions.  While the downgrades do not change TVA's obligations under the leases, they may affect the cost to TVA of similar future financings.
Risk Management Activities and Derivative Transactions
Risk Management Activities and Derivative Transactions
Risk Management Activities and Derivative Transactions

TVA is exposed to various market risks.  These market risks include risks related to commodity prices, investment prices, interest rates, currency exchange rates, inflation, and counterparty credit and performance risks.  To help manage certain of these risks, TVA has entered into various derivative transactions: principally, commodity option contracts, forward contracts, swaps, swaptions, futures, and options on futures.  Other than certain derivative instruments in investment funds, it is TVA's policy to enter into these derivative transactions solely for hedging purposes and not for speculative purposes.

Overview of Accounting Treatment

TVA recognizes certain of its derivative instruments as either assets or liabilities on its consolidated balance sheets at fair value.  The accounting for changes in the fair value of these instruments depends on (1) whether TVA uses regulatory accounting to defer the derivative gains and losses, (2) whether the derivative instrument has been designated and qualifies for hedge accounting treatment, and (3) if so, the type of hedge relationship (for example, cash flow hedge).

The following tables summarize the accounting treatment that certain of TVA's financial derivative transactions receive.
Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 1) 
 
 
 
 
 
 
Amount of Mark-to-Market(1) 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)(2)
Years Ended September 30
Derivatives in Cash Flow Hedging Relationship
 
Objective of Hedge Transaction
 
Accounting for Derivative
Hedging Instrument
 
2013
 
2012
Currency swaps
 
To protect against changes in cash flows caused by changes in foreign currency exchange rates (exchange rate risk)
 
Cumulative unrealized gains and losses are recorded in OCI and reclassified to interest expense to the extent they are offset by cumulative gains and losses on the hedged transaction
 
$
78

 
$
99


Notes
(1) Mark-to-market ("MtM")
(2) Other comprehensive income (loss) ("OCI")

Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2) 
 
 
Amount of Gain (Loss) Reclassified from
OCI to Interest Expense
Years Ended September 30
Derivatives in Cash Flow Hedging Relationship
 
2013
 
2012
Currency swaps
 
$
(1
)
 
$
(35
)

Note
There were no ineffective portions or amounts excluded from effectiveness testing for any of the periods presented.
Summary of Derivative Instruments That Do Not Receive Hedge Accounting Treatment





 
Amount of Gain
(Loss) Recognized in Income on Derivatives
Years Ended September 30
Derivative Type
 
Objective of Derivative
 
Accounting for Derivative Instrument
 
2013
 
2012
Interest rate swaps
 
To fix short-term debt variable rate to a fixed rate (interest rate risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities until settlement, at which time the gains/losses are recognized in gain/loss on derivative contracts.
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
Commodity contract derivatives
 
To protect against fluctuations in market prices of purchased coal or natural gas  (price risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities. Realized gains and losses due to contract settlements are recognized in fuel expense as incurred.

 
(11
)
 
(22
)
 
 
 
 
 
 
 
 
 
Commodity derivatives
under FTP
 
To protect against fluctuations in market prices of purchased commodities (price risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities. Realized gains and losses are recognized in fuel expense or purchased power expense when the related commodity is used in production.
 
(126
)
 
(342
)


Note
All of TVA's derivative instruments that do not receive hedge accounting treatment have unrealized gains (losses) that would otherwise be recognized in income but
instead are deferred as regulatory assets and liabilities. As such, there was no related gain (loss) recognized in income for these unrealized gains (losses) for the
years ended 2013 and 2012.
Mark-to-Market Values of TVA Derivatives
At September 30
 
2013
 
2012
Derivatives that Receive Hedge Accounting Treatment:
 
Balance
 
Balance Sheet Presentation
 
Balance
 
Balance Sheet Presentation
Currency swaps
 
 
 
 
 
 
 
£200 million Sterling
$
(15
)
 
Other long-term liabilities
 
$
(23
)
 
Other long-term liabilities
£250 million Sterling
51

 
Other long-term assets
 
21

 
Other long-term assets
£150 million Sterling
10

 
Other long-term assets
 
(31
)
 
Other long-term liabilities
 
 
 
 
 
 
 
 
Derivatives that Do Not Receive Hedge Accounting Treatment:
 
Balance
 
Balance Sheet Presentation
 
Balance
 
Balance Sheet Presentation
Interest rate swaps
 
 
 
 
 
 
 
$1.0 billion notional
(886
)
 
Other long-term liabilities
 
(1,247
)
 
Other long-term liabilities
$476 million notional
(300
)
 
Other long-term liabilities
 
(458
)
 
Other long-term liabilities
$42 million notional
(13
)
 
Other long-term liabilities
 
(18
)
 
Other long-term liabilities
Commodity contract derivatives
(141
)
 
Other long-term assets $1; Other current assets $2; Other long-term liabilities $(35); Accounts payable and accrued liabilities $(109)
 
(267
)
 
Other long-term assets $107; Other current assets $12; Other long-term liabilities $(205); Accounts payable and accrued liabilities $(181)
FTP
 
 
 
 
 
 
 
Margin cash account(1)
11

 
Other current assets
 
43

 
Other current assets
Derivatives under FTP(2)
(166
)
 
Other current assets $(97); Other long-term liabilities $(36); Accounts payable and accrued liabilities $(33)
 
(228
)
 
Other long-term assets $2; Other current assets $(104); Other long-term liabilities $(59); Accounts payable and accrued liabilities $(67)

Notes
(1)  In accordance with certain credit terms, TVA uses leverage to trade financial instruments under the FTP.  Therefore, the margin cash account balance does not represent 100 percent of the net market value of the derivative positions outstanding as shown in the Derivatives Under Financial Trading Program table.
(2)  The September 30, 2013, and September 30, 2012 balances in the Derivatives Under Financial Trading Program table show all open derivative positions in the FTP. 

Cash Flow Hedging Strategy for Currency Swaps

To protect against exchange rate risk related to three British pound sterling denominated Bond transactions, TVA entered into foreign currency hedges at the time the Bond transactions occurred.  TVA had the following currency swaps outstanding at September 30, 2013:

Currency Swaps Outstanding
At September 30, 2013
Effective Date of Currency Swap Contract
 
Associated TVA Bond Issues Currency Exposure
 
Expiration Date of Swap
 
Overall Effective
Cost to TVA
1999
 
£200 million
 
2021
 
5.81%
2001
 
£250 million
 
2032
 
6.59%
2003
 
£150 million
 
2043
 
4.96%


When the dollar strengthens against the British pound sterling, the transaction gain on the Bond liability is offset by a currency exchange loss on the swap contract.  Conversely, when the dollar weakens against the British pound sterling, the transaction loss on the Bond liability is offset by an exchange gain on the swap contract.  All such exchange gains or losses on the Bond liability are included in Long-term debt, net.  The offsetting exchange losses or gains on the swap contracts are recognized in Accumulated other comprehensive income (loss).  If any gain (loss) were to be incurred as a result of the early termination of the foreign currency swap contract, the resulting income (expense) would be amortized over the remaining life of the associated Bond as a component of Interest expense.
    
Derivatives Not Receiving Hedge Accounting Treatment

Interest Rate Derivatives.  TVA uses regulatory accounting treatment to defer the MtM gains and losses on its interest rate swaps. The net deferred unrealized gains and losses are classified as regulatory assets or liabilities on TVA's consolidated balance sheets and are included in the ratemaking formula when the transactions settle. The values of these derivatives are included in Other long-term assets or Other long-term liabilities on the consolidated balance sheets, and realized gains and losses, if any, are included in TVA's consolidated statements of operations.

For the years ended 2013 and 2012, the changes in market value of the interest rate derivatives resulted in deferred unrealized gains (losses) of $524 million and $(168) million, respectively.  There were no realized gains or losses for the years ended 2013 and 2012.

Commodity Derivatives. TVA enters into certain derivative contracts for coal and natural gas that require physical delivery of the contracted quantity of the commodity. TVA marks to market all such contracts. At September 30, 2013, and September 30, 2012, TVA's coal contract derivatives had net market values of $(140) million and $(267) million, respectively, which TVA deferred as regulatory assets or liabilities on a gross basis.  At September 30, 2013, TVA's coal contract derivatives had terms of up to five years.

The total market value of natural gas derivative contracts was $(1) million at September 30, 2013, and was less than $(1) million at September 30, 2012. At September 30, 2013, natural gas derivative contracts had terms of up to two years.

Commodity Contract Derivatives 
At September 30
 
2013
 
2012
 
Number of Contracts
 
Notional Amount
 
Fair Value (MtM)
 
Number of Contracts
 
Notional Amount
 
Fair Value (MtM)
Coal contract derivatives
19
 
43 million tons
 
$
(140
)
 
23
 
46 million tons
 
$
(267
)
Natural gas contract derivatives
13
 
39 million mmBtu
 
$
(1
)
 
25
 
51 million mmBtu
 
$
—



Derivatives Under FTP. TVA has a FTP under which it may purchase and sell futures, swaps, options, and combinations of these instruments (as long as they are standard in the industry) to hedge TVA’s exposure to (1) the price of natural gas, fuel oil, electricity, coal, emission allowances, nuclear fuel, and other commodities included in TVA’s fuel cost adjustment calculation, (2) the price of construction materials, and (3) contracts for goods priced in or indexed to foreign currencies. The combined transaction limit for the fuel cost adjustment and construction material transactions is $130 million (based on one-day value at risk). In addition, the maximum hedge volume for the construction material transactions is 75 percent of the underlying net notional volume of the material that TVA anticipates using in approved TVA projects, and the market value of all outstanding hedging transactions involving construction materials is limited to $100 million at the execution of any new transaction. The portfolio value at risk limit for the foreign currency transactions is $5 million and is separate and distinct from the $130 million transaction limit discussed above. TVA's policy prohibits trading financial instruments under the FTP for speculative purposes.

At September 30, 2013 and 2012, the risks hedged under the FTP were the economic risks associated with the prices of natural gas, fuel oil, and crude oil. At September 30, 2013 and 2012, TVA had no outstanding coal contract derivatives under the FTP. There were no futures contracts or options contracts outstanding under the FTP at September 30, 2013, and swap contracts under the FTP had remaining terms of five years or less.
Derivatives Under Financial Trading Program
 
At September 30, 2013
 
At September 30, 2012
 
Notional Amount
 
Fair Value (MtM)
(in millions)
 
Notional Amount
 
Fair Value (MtM)
(in millions)
Natural gas (in mmBtu)
 
 
 
 
 
 
 
Futures contracts
—

 
$
—

 
—

 
$
—

Swap contracts
152,922,500

 
(169
)
 
294,462,500

 
(232
)
Option contracts
—

 
—

 
—

 
—

Natural gas financial positions
152,922,500

 
$
(169
)
 
294,462,500

 
$
(232
)
 
 
 
 
 
 
 
 
Fuel oil/crude oil (in barrels)
 
 
 

 
 

 
 

Futures contracts
—

 
$
—

 
—

 
$
—

Swap contracts
1,205,000

 
3

 
1,390,000

 
4

Option contracts
—

 
—

 
—

 
—

Fuel oil/crude oil financial positions
1,205,000

 
$
3

 
1,390,000

 
$
4

 
 
 
 
 
 
 
 

Note
Due to the right of setoff and method of settlement, TVA elects to record commodity derivatives under the FTP based on its net commodity position with the broker or other counterparty.  Notional amounts disclosed represent the net absolute value of contractual amounts.

TVA defers all FTP unrealized gains (losses) as regulatory liabilities (assets) and records realized gains or losses to match the delivery period of the underlying commodity contract. In addition to the open commodity derivatives disclosed above, TVA had closed derivative contracts with market values of $(8) million at September 30, 2013, and $(21) million at September 30, 2012. TVA experienced the following unrealized and realized gains and losses related to the FTP at the dates and during the periods, as applicable, set forth in the tables below:

Financial Trading Program Unrealized Gains (Losses)
At September 30
 
 
 
 
 
FTP unrealized gains (losses) deferred as regulatory liabilities (assets)
 
2013
 
2012
 
 
 
 
 
Natural gas
 
$
(169
)
 
$
(232
)
Fuel oil/crude oil
 
3

 
4

Coal
 
—

 
—




Financial Trading Program Realized Gains (Losses)
Years Ended September 30
 
 
 
 
 
Decrease (increase) in fuel expense
 
2013
 
2012
 
 
 
 
 
Natural gas
 
$
(78
)
 
$
(116
)
Fuel oil/crude oil
 
4

 
10

Coal
 
(1
)
 
—


Financial Trading Program Realized Gains (Losses)
Years Ended September 30
 
 
 
 
 
Decrease (increase) in purchased power expense
 
2013
 
2012
 
 
 
 
 
Natural gas
 
$
(51
)
 
$
(236
)


Other Derivative Instruments

Investment Fund Derivatives.  Investment funds consist primarily of funds held in the NDT, ART, and SERP.  All securities in the trusts are classified as trading.  See Note 15 — Investments for a discussion of the trusts' objectives and the types of investments included in the various trusts.  These trusts may invest in derivative instruments which may include swaps, futures, options, forwards, and other instruments.  At September 30, 2013, and September 30, 2012, the fair value of derivative instruments in these trusts was not material to TVA's consolidated financial statements.

Collateral.  TVA's interest rate swaps and its currency swaps contain contract provisions that require a party to post collateral (in a form such as cash or a letter of credit) when the party's liability balance under the agreement exceeds a certain threshold.  At September 30, 2013, the aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a liability position was $1.2 billion.  TVA's collateral obligations at September 30, 2013, under these arrangements, was $0.8 billion, for which TVA had posted $0.8 billion in letters of credit.  These letters of credit reduce the available balance under the related credit facilities.  TVA's assessment of the risk of its nonperformance includes a reduction in its exposure under the contract as a result of this posted collateral.

For all of its derivative instruments with credit-risk related contingent features:
    
•
If TVA remains a majority-owned U.S. government entity but Standard & Poor's ("S&P") or Moody's Investors Service ("Moody's") downgrades TVA's credit rating to AA or Aa2, respectively, TVA's collateral obligations would likely increase by $22 million; and

•
If TVA ceases to be majority-owned by the U.S. government, TVA's credit rating would likely be downgraded and TVA would be required to post additional collateral.

Counterparty Credit Risk

Credit risk is the exposure to economic loss that would occur as a result of a counterparty's nonperformance of its contractual obligations.  Where exposed to counterparty credit risk, TVA analyzes the counterparty's financial condition prior to entering into an agreement, establishes credit limits, monitors the appropriateness of those limits, as well as any changes in the creditworthiness of the counterparty on an ongoing basis, and employs credit mitigation measures, such as collateral or prepayment arrangements and master purchase and sale agreements, to mitigate credit risk.

Credit of Customers.  The majority of TVA's counterparty credit risk is associated with trade accounts receivable from delivered power sales to LPCs, all located in the Tennessee Valley region.  To a lesser extent, TVA is exposed to credit risk from directly served industries and federal agencies, and from exchange power arrangements with a small number of investor-owned regional utilities, related to either delivered power or the replacement of open positions of longer-term purchased power or fuel agreements.  TVA had concentrations of accounts receivable from three customers that represented 27 percent of total outstanding accounts receivable at September 30, 2013, and 26 percent of total outstanding accounts receivable at September 30, 2012. Power sales to TVA's largest directly served industrial customer represented three percent and five percent of TVA's total operating revenues for the years ended September 30, 2013 and 2012, respectively.  TVA has determined that this customer has the equivalent of a non-investment grade credit rating. As a result of its credit ratings, this customer has provided credit assurance to TVA under the terms of its power contract. On May 24, 2013, the customer announced the cessation of enrichment activities at one of its sites. TVA and the customer subsequently completed agreements to extend power sales to facilitate the cessation of enrichment activities and to support non-enrichment activities at the site at a greatly reduced level. These sales may continue to be extended.

Credit of Derivative Counterparties.  TVA has entered into derivative contracts for hedging purposes, and TVA's NDT fund and qualified defined benefit pension plan have entered into derivative contracts for investment purposes.  If a counterparty to one of TVA's hedging transactions defaults, TVA might incur substantial costs in connection with entering into a replacement hedging transaction.  If a counterparty to the derivative contracts into which the NDT fund and the pension plan have entered for investment purposes defaults, the value of the investment could decline significantly or perhaps become worthless.  TVA has concentrations of credit risk from the banking and coal industries because multiple companies in these industries serve as counterparties to TVA in various derivative transactions.  At September 30, 2013, all of TVA's currency swaps, interest rate swaps, and commodity derivatives under the FTP were with counterparties whose Moody's credit rating was Baa1 or higher.  At September 30, 2013, all of TVA's coal contract derivatives were with counterparties whose Moody's credit rating, or TVA's internal analysis when such information was unavailable, was B3 or higher. See Derivatives Not Receiving Hedge Accounting Treatment.

TVA currently utilizes two active futures commission merchants ("FCMs") to clear commodity contracts, including futures, options, and similar financial derivatives. These transactions are executed under the FTP by the FCMs on exchanges on behalf of TVA. TVA maintains margin cash accounts with the FCMs. See notes to the Mark-to-Market Values of TVA Derivatives table.

Credit of Suppliers.  If one of TVA's fuel or purchased power suppliers fails to perform under the terms of its contract with TVA, TVA might lose the money that it paid to the supplier under the contract and have to purchase replacement fuel or power on the spot market, perhaps at a significantly higher price than TVA was entitled to pay under the contract.  In addition, TVA might not be able to acquire replacement fuel or power in a timely manner and thus might be unable to satisfy its own obligations to deliver power.  To help ensure a reliable supply of coal, TVA had coal contracts with multiple suppliers at September 30, 2013.  The contracted supply of coal is sourced from multiple geographic regions of the United States and is to be delivered via various transportation methods (for example, barge, rail, and truck).  TVA purchases the majority of its natural gas requirements from a variety of suppliers under short-term contracts.

TVA has a power purchase agreement that expires on March 31, 2032, with a supplier of electricity for 440 megawatts ("MW") of summer net capability from a lignite-fired generating plant.  TVA has determined that the supplier has the equivalent of a non-investment grade credit rating.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements

Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the asset or liability's principal market, or in the absence of a principal market, the most advantageous market for the asset or liability in an orderly transaction between market participants. TVA uses market or observable inputs as the preferred source of values, followed by assumptions based on hypothetical transactions in the absence of market inputs.

Valuation Techniques

The measurement of fair value results in classification into a hierarchy by the inputs used to determine the fair value as follows:
Level 1
—
 
 
Unadjusted quoted prices in active markets accessible by the reporting entity for identical assets or liabilities.  Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing.
Level 2
 
—
 
 
Pricing inputs other than quoted market prices included in Level 1 that are based on observable market data and that are directly or indirectly observable for substantially the full term of the asset or liability.  These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are not active, adjusted quoted market prices, inputs from observable data such as interest rate and yield curves, volatilities and default rates observable at commonly quoted intervals, and inputs derived from observable market data by correlation or other means.
Level 3
—
 
 
Pricing inputs that are unobservable, or less observable, from objective sources.  Unobservable inputs are only to be used to the extent observable inputs are not available.  These inputs maintain the concept of an exit price from the perspective of a market participant and should reflect assumptions of other market participants.  An entity should consider all market participant assumptions that are available without unreasonable cost and effort.  These are given the lowest priority and are generally used in internally developed methodologies to generate management's best estimate of the fair value when no observable market data is available.


A financial instrument's level within the fair value hierarchy (where Level 3 is the lowest and Level 1 is the highest) is based on the lowest level of input significant to the fair value measurement.

The following sections describe the valuation methodologies TVA uses to measure different financial instruments at fair value. Except for gains and losses on SERP assets, all changes in fair value of these assets and liabilities have been reflected in regulatory assets, regulatory liabilities, or accumulated other comprehensive income (loss) on TVA's consolidated balance sheets, and consolidated statements of comprehensive income (loss). Except for gains and losses on SERP assets, there has been no impact to TVA's consolidated statements of operations or its consolidated statements of cash flows related to these fair value measurements.

Investments Funds

At September 30, 2013, Investment funds were composed of $1.7 billion of securities classified as trading and measured at fair value and $1 million of equity investments not required to be measured at fair value. Trading securities are held in the NDT, ART, and SERP. The NDT holds funds for the ultimate decommissioning of TVA's nuclear power plants. The ART holds funds for the costs related to the future closure and retirement of TVA's long-lived assets. TVA established a SERP for certain executives in critical positions to provide supplemental pension benefits tied to compensation that exceeds limits set by Internal Revenue Service ("IRS") rules applicable to the qualified defined benefit pension plan. The NDT, ART, and SERP are invested in securities generally designed to achieve a return in line with overall equity market performance.

The NDT, ART, and SERP are composed of multiple types of investments and are managed by external institutional managers. Most U.S. and international equities, Treasury Inflation-Protected Securities, real estate investment trust securities, cash securities, and certain derivative instruments are measured based on quoted exchange prices in active markets and are classified as Level 1 valuations. Fixed-income investments, high-yield fixed-income investments, currencies, and most derivative instruments are non-exchange traded and are classified as Level 2 valuations. These measurements are based on market and income approaches with observable market inputs.

Private partnership investments may include holdings of investments in private real estate, venture capital, buyout, mezzanine or subordinated debt, restructuring or distressed debt, and special situations through funds managed by third-party investment managers.  Investments in private partnerships generally involve a three-to-four-year period where the investor contributes capital.  This is followed by a period of distribution, typically over several years.  The investment period is generally, at a minimum, ten years or longer.  The NDT had unfunded commitments related to private partnerships of $149 million at September 30, 2013.  These investments have no redemption or limited redemption options and may also have imposed restrictions on the NDT’s ability to liquidate its investments.  There are no readily available quoted exchange prices for these investments.  The fair value of the investments is based on TVA’s ownership percentage of the fair value of the underlying investments as provided by the investment managers.  These investments are typically valued on a quarterly basis.  TVA’s private partnership investments are valued at net asset values ("NAV") as a practical expedient for fair value.  TVA classifies its interest in these types of investments as Level 3 within the fair value hierarchy. 

Commingled funds represent investment funds comprising multiple individual financial instruments. The commingled funds held by the NDT, ART, and SERP consist of either a single class of securities, such as equity, debt, or foreign currency securities, or multiple classes of securities. All underlying positions in these commingled funds are either exchange traded (Level 1) or measured using observable inputs for similar instruments (Level 2). The fair value of commingled funds is based on NAV per fund share (the unit of account), derived from the prices of the underlying securities in the funds. These commingled funds can be redeemed at the measurement date NAV and are classified as Level 2 valuations.

Realized and unrealized gains and losses on trading securities are recognized in current earnings and are based on average cost. The gains and losses of the NDT and ART are subsequently reclassified to a regulatory liability or asset account in accordance with TVA's regulatory accounting policy. See Note 1 — Cost-Based Regulation. TVA recorded unrealized gains and losses related to its trading securities held as of the end of each period as follows:

 
Unrealized Investment Gains (Losses)
At September 30
 
Financial Statement Presentation
 
2013
 
2012
 
 
 
 
 
 
SERP
Other income (expense)
 
$
2

 
$
4

NDT
Regulatory asset
 
48

 
121

ART
Regulatory asset
 
33

 
27



Currency and Interest Rate Derivatives

See Note 14 — Cash Flow Hedging Strategy for Currency Swaps and Derivatives Not Receiving Hedge Accounting Treatment for a discussion of the nature, purpose, and contingent features of TVA's currency and interest rate swaps. These swaps are classified as Level 2 valuations and are valued based on income approaches using observable market inputs for similar instruments.
Commodity Contract Derivatives and Commodity Derivatives Under FTP

Commodity Contract Derivatives. Most of these contracts are valued based on market approaches which utilize short- and mid-term market-quoted prices from an external industry brokerage service. A small number of these contracts are valued based on a pricing model using long-term price estimates from TVA's coal price forecast. To value the volume option component of applicable coal contracts, TVA uses a Black-Scholes pricing model which includes inputs from the forecast, contract-specific terms, and other market inputs. These contracts are classified as Level 3 valuations.

Commodity Derivatives Under FTP. These contracts are valued based on market approaches which utilize Chicago Mercantile Exchange ("CME") quoted prices and other observable inputs. Futures and options contracts settled on the CME are classified as Level 1 valuations. Swap contracts are valued using a pricing model based on CME inputs and are subject to nonperformance risk outside of the exit price. These contracts are classified as Level 2 valuations.

See Note 14 — Derivatives Not Receiving Hedge Accounting Treatment — Commodity Derivatives and Derivatives Under FTP for a discussion of the nature and purpose of coal contracts and derivatives under TVA's FTP.

Nonperformance Risk

The assessment of nonperformance risk, which includes credit risk, considers changes in current market conditions, readily available information on nonperformance risk, letters of credit, collateral, other arrangements available, and the nature of master netting arrangements. TVA is a counterparty to currency swaps, interest rate swaps, commodity contracts, and other derivatives which subject TVA to nonperformance risk. Nonperformance risk on the majority of investments and certain exchange-traded instruments held by TVA is incorporated into the exit price that is derived from quoted market data that is used to mark the investment to market.

Nonperformance risk for most of TVA's derivative instruments is an adjustment to the initial asset/liability fair value. TVA adjusts for nonperformance risk, both for TVA (for liabilities) and the counterparty (for assets), by applying credit valuation adjustments ("CVAs"). TVA determines an appropriate CVA for each applicable financial instrument based on the term of the instrument and TVA's or the counterparty's credit rating as obtained from Moody's. For companies that do not have an observable credit rating, TVA uses internal analysis to assign a comparable rating to the company. TVA discounts each financial instrument using the historical default rate (as reported by Moody's for CY 1983 to CY 2011) for companies with a similar credit rating over a time period consistent with the remaining term of the contract. The application of CVAs resulted in a $6 million decrease in the fair value of assets and a $1 million decrease in the fair value of liabilities at September 30, 2013.

The following tables set forth by level, within the fair value hierarchy, TVA's financial assets and liabilities that were measured at fair value on a recurring basis at September 30, 2013, and September 30, 2012. Financial assets and liabilities have been classified in their entirety based on the lowest level of input that is significant to the fair value measurement. TVA's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the determination of the fair value of the assets and liabilities and their classification in the fair value hierarchy levels.

Fair Value Measurements
At September 30, 2013

Assets
Quoted Prices in Active
 Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting(1)
 
Total
 
 
 
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
 
 
Equity securities
$
151

 
$
—

 
$
—

 
$
—

 
$
151

Debt securities
 

 
 

 
 

 
 

 
 

U.S. government corporations and
agencies
38

 
67

 
—

 
—

 
105

Corporate debt securities
—

 
255

 
—

 
—

 
255

Residential mortgage-backed securities
—

 
25

 
—

 
—

 
25

Commercial mortgage-backed securities
—

 
7

 
—

 
—

 
7

Collateralized debt obligations
—

 
10

 
—

 
—

 
10

Private partnerships
—

 
—

 
159

 
—

 
159

Commingled funds(2)
 

 
 

 
 

 
 

 

Equity security commingled funds
—

 
741

 
—

 
—

 
741

Debt security commingled funds
—

 
248

 
—

 
—

 
248

Total investments
189

 
1,353

 
159

 
—

 
1,701

Currency swaps
—

 
61

 
—

 
—

 
61

Commodity contract derivatives
—

 
—

 
3

 
—

 
3

Commodity derivatives under FTP
 

 
 

 
 

 
 

 
 

Swap contracts
—

 
101

 
—

 
(97
)
 
4

Total commodity derivatives under FTP
—

 
101

 
—

 
(97
)
 
4

 
 
 
 
 
 
 
 
 
 
Total
$
189

 
$
1,515

 
$
162

 
$
(97
)
 
$
1,769

 
 
 
 
 
 
 
 
 
 
Liabilities
Quoted Prices in Active Markets for Identical Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting(1)
 
Total
 
 
 
 
 
 
 
 
 
 
Currency swaps
$
—

 
$
15

 
$
—

 
$
—

 
$
15

Interest rate swaps
—

 
1,199

 
—

 
—

 
1,199

Commodity contract derivatives
—

 
1

 
143

 
—

 
144

Commodity derivatives under FTP
 

 
 

 
 

 
 

 
 

Swap contracts
—

 
267

 
—

 
(97
)
 
170

Total commodity derivatives under FTP
—

 
267

 
—

 
(97
)
 
170

 
 
 
 
 
 
 
 
 
 
Total
$
—

 
$
1,482

 
$
143

 
$
(97
)
 
$
1,528


Notes
(1)  Due to the right of setoff and method of settlement, TVA elects to record commodity derivatives under the FTP based on its net commodity position with the counterparty or broker.
(2) Commingled funds represent investment funds comprising multiple individual financial instruments and are classified in the table based on their existing investment portfolio as of the measurement date.  Commingled funds primarily composed of one class of security are classified in that category. 
Fair Value Measurements
At September 30, 2012
Assets
Quoted Prices in Active
 Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting(1)
 
Total
 
 
 
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
 
 
Equity securities
$
173

 
$
—

 
$
—

 
$
—

 
$
173

Debt securities
 

 
 

 
 

 
 

 
 

U.S. government corporations and
agencies
59

 
103

 
—

 
—

 
162

Corporate debt securities
—

 
197

 
—

 
—

 
197

Residential mortgage-backed securities
—

 
20

 
—

 
—

 
20

Commercial mortgage-backed securities
—

 
6

 
—

 
—

 
6

Collateralized debt obligations
—

 
12

 
—

 
—

 
12

Private partnerships
—

 
—

 
53

 
—

 
53

Commingled funds(2)
 

 
 

 
 

 
 

 


Equity security commingled funds
—

 
657

 
—

 
—

 
657

Debt security commingled funds
—

 
182

 
—

 
—

 
182

Total investments
232

 
1,177

 
53

 
—

 
1,462

Currency swaps
—

 
21

 
—

 
—

 
21

Commodity contract derivatives
—

 
—

 
119

 
—

 
119

Commodity derivatives under FTP
 

 
 

 
 

 
 

 
 

Swap contracts
—

 
123

 
—

 
(115
)
 
8

Total commodity derivatives under FTP
—

 
123

 
—

 
(115
)
 
8

 
 
 
 
 
 
 
 
 
 
Total
$
232

 
$
1,321

 
$
172

 
$
(115
)
 
$
1,610

 
 
 
 
 
 
 
 
 
 
Liabilities
Quoted Prices in Active Markets for Identical Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting(1)
 
Total
 
 
 
 
 
 
 
 
 
 
Currency swaps
$
—

 
$
54

 
$
—

 
$
—

 
$
54

Interest rate swaps
—

 
1,723

 
—

 
—

 
1,723

Commodity contract derivatives
—

 
—

 
386

 
—

 
386

Commodity derivatives under FTP
 
 
 
 
 
 
 
 
 

Swap contracts
—

 
351

 
—

 
(115
)
 
236

Total commodity derivatives under FTP
—

 
351

 
—

 
(115
)
 
236

 
 
 
 
 
 
 
 
 
 
Total
$
—

 
$
2,128

 
$
386

 
$
(115
)
 
$
2,399


Notes
(1)  Due to the right of setoff and method of settlement, TVA elects to record commodity derivatives under the FTP based on its net commodity position with the counterparty or broker.
(2) Commingled funds represent investment funds comprising multiple individual financial instruments and are classified in the table based on their existing investment portfolio as of the measurement date.  Commingled funds primarily composed of one class of security are classified in that category. 

TVA uses internal and external valuation specialists for the calculation of its fair value measurements classified as Level 3. Analytical testing is performed on the change in fair value measurements each period to ensure the valuation is reasonable based on changes in general market assumptions. Significant changes to the estimated data used for unobservable inputs, in isolation or combination, may result in significant variations to the fair value measurement reported.

The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Fair Value Measurements Using Significant Unobservable Inputs
For the Year Ended September 30
 
Private
Partnerships
 
Commodity Contract Derivatives
 
Interest Rate
Swaption
Balance at October 1, 2011
$
22

 
$
239

 
$
(1,077
)
Purchases
27

 
—

 
—

Issuances
—

 
—

 
—

Sales
—

 
—

 
—

Settlements(1)
—

 
—

 
1,077

Net unrealized gains (losses) deferred as regulatory assets and liabilities
4

 
(506
)
 
—

Balance at September 30, 2012
53

 
(267
)
 
—

 
 
 
 
 
 
Purchases
101

 
—

 
—

Issuances
—

 
—

 
—

Sales
(4
)
 
—

 
—

Settlements
—

 
—

 
—

Net unrealized gains (losses) deferred as regulatory assets and liabilities
9

 
127

 
—

Balance at September 30, 2013
$
159

 
$
(140
)
 
$
—


Note
(1) The interest rate swaption was converted to an interest rate swap in April 2012.

There were no realized gains or losses related to the instruments measured at fair value using significant unobservable inputs during the year ended September 30, 2013. All unrealized gains and losses related to these instruments have been reflected as increases or decreases in regulatory assets and liabilities. See Note 7.

The following table presents quantitative information related to the significant unobservable inputs used in the measurement of fair value of TVA's assets and liabilities classified as Level 3 in the fair value hierarchy:

Quantitative Information about Level 3 Fair Value Measurements 
 
 
Fair Value at September 30 2013
 
Valuation Technique(s)
 
Unobservable Inputs
 
Range
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
Commodity contract derivatives
$
3

 
Discounted cash flow
 
Credit risk
 
21
%
* 
 
 
 
 
 
 
 
 
 
 
 
 
Pricing model
 
Coal supply and demand
 
0.9 - 1.0 billion tons/year

 
 
 
 
 
 
Long-term market prices
 
$10.25 - $85.25/ton

 
Liabilities
 
 
 
 
 
 
 
 
Commodity contract derivatives
$
143

 
Pricing model
 
Coal supply and demand
 
0.9 - 1.0 billion tons/year

 
 
 
 
 
 
Long-term market prices
 
$10.25 - $85.25/ton

 
* Applies to only one contract.
Other Financial Instruments Not Recorded at Fair Value
         
TVA uses the methods and assumptions described below to estimate the fair value of each significant class of financial instrument. The fair market value of the financial instruments held at September 30, 2013, and September 30, 2012, may not be representative of the actual gains or losses that will be recorded when these instruments mature or are called or presented for early redemption. The estimated values of TVA's financial instruments not recorded at fair value at September 30, 2013, and September 30, 2012, were as follows:

Estimated Values of Financial Instruments Not Recorded at Fair Value
At September 30
 
 
 
2013
 
2012
 
Valuation Classification
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
EnergyRight® receivables (including current portion)
Level 2
 
$
150

 
$
150

 
$
150

 
$
150

 
 
 
 
 
 
 
 
 
 
Loans and other long-term receivables, net
Level 2
 
$
73

 
$
67

 
$
76

 
$
70

 
 
 
 
 
 
 
 
 
 
EnergyRight® purchase obligation (including current portion)
Level 2
 
$
186

 
$
210

 
$
185

 
$
209

 
 
 
 
 
 
 
 
 
 
Membership interests of variable interest entity subject to mandatory redemption (including current portion)
Level 2
 
$
40

 
$
50

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
Long-term outstanding power bonds (including current maturities), net
Level 2
 
$
22,347

 
$
24,603

 
$
22,577

 
$
28,041

 
 
 
 
 
 
 
 
 
 
Long-term debt of variable interest entities (including current maturities)
Level 2
 
$
1,341

 
$
1,386

 
$
994

 
$
1,116



Due to the short-term maturity of Cash and cash equivalents, Restricted cash and investments, and Short-term debt, net (each considered a Level 1 valuation classification), the carrying amounts of these instruments approximate their fair values.

The fair value for loans and other long-term receivables is estimated by determining the present value of future cash flows using a discount rate equal to lending rates for similar loans made to borrowers with similar credit ratings and for similar remaining maturities, where applicable.

The fair value of long-term debt traded in the public market is determined by multiplying the par value of the debt by the indicative market price at the balance sheet date. The fair value of other long-term debt and membership interests of variable interest entity subject to mandatory redemption is estimated by determining the present value of future cash flows using current market rates for similar obligations, giving effect to credit ratings and remaining maturities.
Proprietary Capital
Proprietary Capital
Proprietary Capital

Appropriation Investment

TVA’s power program and stewardship (nonpower) programs were originally funded primarily by appropriations from Congress.  In 1959, Congress passed an amendment to the TVA Act that required TVA’s power program to be self-financing from power revenues and proceeds from power program financings.  While TVA’s power program did not directly receive appropriated funds after it became self-financing, TVA continued to receive appropriations for certain multipurpose and other nonpower mission-related activities as well as for its stewardship activities.  TVA has not received any appropriations from Congress for any activities since 1999, and since that time, TVA has funded stewardship program activities primarily with power revenues.

The 1959 amendment to the TVA Act also required TVA, beginning in 1961, to make annual payments to the U.S. Treasury from net power proceeds as a repayment of and as a return on the Power Program Appropriation Investment until an additional $1.0 billion of the Power Program Appropriation Investment has been repaid.  Of this $1.0 billion amount, $10 million remained unpaid at September 30, 2013.  Once the $1.0 billion has been repaid, the TVA Act requires TVA to continue making payments to the U.S. Treasury as a return on the remaining Power Program Appropriation Investment.  The remaining Power Program Appropriation Investment will be $258 million if TVA receives no additional appropriations from Congress for its power program.

The table below summarizes TVA's activities related to appropriated funds.
Summary of Proprietary Capital Activity
At or for the Years Ended September 30
 
2013
 
2012
Appropriation Investment
Power Program
 
Nonpower
 Programs
 
Power Program
 
Nonpower
 Programs
Balance at beginning of year
$
288

 
$
4,351

 
$
308

 
$
4,351

Return of power program appropriation investment
(20
)
 
—

 
(20
)
 
—

Balance at end of year
268

 
4,351

 
288

 
4,351

Retained Earnings
 

 
 

 
 

 
 

Balance at beginning of year
4,492

 
(3,731
)
 
4,429

 
(3,721
)
Net income (expense) for year
282

 
(11
)
 
70

 
(10
)
Return on power program appropriation investment
(7
)
 
—

 
(7
)
 
—

Balance at end of year
4,767

 
(3,742
)
 
4,492

 
(3,731
)
Net proprietary capital at September 30
$
5,035

 
$
609

 
$
4,780

 
$
620



Payments to the U.S. Treasury

TVA paid $20 million each year for 2013, 2012, and 2011 as a repayment of the Power Program Appropriation Investment.  In addition, TVA paid the U.S. Treasury $7 million in 2013, $7 million in 2012, and $7 million in 2011 as a return on the Power Program Appropriation Investment.  The amount of the return on the Power Program Appropriation Investment is based on the Power Program Appropriation Investment balance at the beginning of that year and the computed average interest rate payable by the U.S. Treasury on its total marketable public obligations at the same date.  The interest rates payable by TVA on the Power Program Appropriation Investment were 2.10 percent, 2.33 percent, and 2.40 percent for 2013, 2012, and 2011, respectively.

Accumulated Other Comprehensive Income (Loss)

The items included in Accumulated other comprehensive income (loss) consist of market valuation adjustments for certain derivative instruments.  See Note 14.

TVA records exchange rate gains and losses on debt in net income and marks its currency swap assets and liabilities to market through other comprehensive income.  TVA had unrealized gains of $78 million and $99 million in 2013 and 2012, respectively, on the mark-to-market of currency swaps. TVA then reclassifies an amount out of accumulated other comprehensive income into net income, offsetting the gain/loss from recording the exchange gain/loss on the debt.  The amounts reclassified from other comprehensive income into net income resulted in increases to net income of $1 million and $35 million in 2013 and 2012, respectively, and a decrease to net income of $7 million in 2011.  These reclassifications, coupled with the recording of the exchange gain/loss on the debt, did not have an impact on net income in 2013, 2012, and 2011.  Based on forecasted foreign currency exchange rates, TVA expects to reclassify approximately $53 million of losses from accumulated other comprehensive income to interest expense within the next twelve months to offset amounts anticipated to be recorded in interest expense related to exchange gain on the debt.
Other Income (Expense), Net
Other Income (Expense), Net
Other Income (Expense), Net

Income and expenses not related to TVA’s operating activities are summarized in the following table:
Other Income (Expense), Net
For the years ended September 30
 
 
 
 
 
 
 
2013
 
2012
 
2011
Interest income
$
23

 
$
21

 
$
8

External services
18

 
7

 
19

Gains (losses) on investments
4

 
5

 
1

Miscellaneous
(1
)
 
—

 
2

Total other income (expense), net
$
44

 
$
33

 
$
30

Supplemental Cash Flow Information
Supplemental Cash Flow Information
Supplemental Cash Flow Information

Interest paid was $1.3 billion, $1.4 billion, and $1.4 billion in 2013, 2012, and 2011, respectively. These amounts differ from interest expense due to the timing of payments and interest capitalized of $168 million in 2013, $171 million in 2012, and $126 million in 2011 as a part of major capital expenditures. 

Construction in progress and Nuclear Fuel expenditures included in Accounts payable and accrued liabilities at September 30, 2013, 2012, and 2011 were $270 million, $204 million, and $307 million, respectively, and are excluded from the Statements of Consolidated Cash Flows for the years ending 2013, 2012, and 2011 as non-cash investing activities.  In November 2013, in accordance with the regulated operations property, plant and equipment accounting guidance, the TVA Board approved the treatment of all amounts currently included in Construction in progress related to Bellefonte as a regulatory asset. Bellefonte amounts included in Construction expenditures for 2013, 2012, and 2011 were $162 million, $212 million, and $199 million.

Cash flows from futures contracts, forward contracts, option contracts, and swap contracts that are accounted for as hedges are classified in the same category as the item being hedged or on a basis consistent with the nature of the instrument.
Benefit Plans
Benefit Plans
Benefit Plans

TVA sponsors a qualified defined benefit pension plan that covers most of its full-time employees, a qualified defined contribution plan that covers most of its full-time employees, two unfunded post-retirement health care plans that provide for non-vested contributions toward the cost of eligible retirees' medical coverage, other postemployment benefits such as workers' compensation, and the SERP.

Overview of Plans and Benefits

Defined Benefit Pension Plan.  TVA sponsors a qualified defined benefit pension plan for most of its full-time annual employees that provides two benefit structures: the Original Benefit Structure and the Cash Balance Benefit Structure. Eligible employees initially hired on or after January 1, 1996, must participate in the Cash Balance Benefit Structure. A summary of the benefits provided by each structure is as follows:

•
Original Benefit Structure.  The pension benefit for a member participating in the Original Benefit Structure is based on the member’s creditable service, the member’s average monthly salary for the highest three consecutive years of base pay, and a pension factor based on the member’s age and years of service, less a Social Security offset.

•
Cash Balance Benefit Structure.  The pension benefit for a member participating in the Cash Balance Benefit Structure is based on credits accumulated in the member’s account and the member’s age.  A member’s account receives pay credits equal to six percent of his or her straight-time earnings.  The account also receives interest credits at a rate set at the beginning of each calendar year equal to the change in the Consumer Price Index for All Urban Consumers ("CPI-U") plus three percent, with the provision that the rate may not be less than six percent or more than ten percent.  The interest crediting rate was six percent for calendar years 2013 and 2012.

There are two investment funds within the defined benefit pension plan: the Fixed Benefit Fund and the Variable Fund.  TVA's plan contributions are deposited in the Fixed Benefit Fund.  Eligible employees are allowed to make voluntary contributions to either the Variable Fund, the Fixed Fund within the Fixed Benefit Fund, or both.  Employee contributions are limited to $10,000 per year per eligible employee. The pension plan pays interest at the lesser of six percent or the actuarial assumed rate of return less 0.5 percent to employees in the Fixed Fund.  Employee contributions in the Fixed Fund were credited an annual rate of interest of six percent during 2013 and 2012, resulting in credit amounts of $36 million and $38 million, respectively.  Employee contributions to the Variable Fund are invested in an S&P 500 Stock Index Fund. 

The defined benefit pension plan is administered by a separate legal entity, Tennessee Valley Authority Retirement System ("TVARS"), which is governed by its own board of directors (the "TVARS Board").  Upon notification by the TVARS Board of the minimum required and recommended contributions, TVA determines the level of contribution to make to TVARS for the upcoming fiscal year.

In 2009, changes were made to the cost of living adjustment ("COLA") provisions of the defined benefit pension plan. The eligibility for the COLA became age 60 for employees who retire on or after January 1, 2010. In addition, the COLA was subject to caps for calendar years 2010 to 2013. As a result, the COLA for eligible retirees for the four years beginning January 1, 2010 were as follows:

•For CY 2010, the COLA was zero.
•For CY 2011, the COLA was 1.15 percent.
•For CY 2012, the COLA was zero.
•For CY 2013, the COLA was 2.3 percent.
    
In CY 2014, the COLA benefit of CPI-U, capped at 5.0 percent, is to be restored.

Members of both the Original Benefit Structure and the Cash Balance Benefit Structure can also become eligible for a supplemental pension benefit based on age and years of service at retirement, which is designed to help offset the cost of retiree medical insurance.

Defined Contribution Plan. TVARS also administers a qualified defined contribution 401(k) plan to which TVA makes matching contributions of 25 cents on the dollar (up to 1.5 percent of annual pay) for members participating in the Original Benefit Structure and 75 cents on the dollar (up to 4.5 percent of annual pay) for members participating in the Cash Balance Benefit Structure. TVA made matching contributions of approximately $34 million to the plan during 2013, $34 million during 2012, and $31 million during 2011.

Supplemental Executive Retirement Plan. TVA has established a SERP for certain executives in critical positions to provide supplemental pension benefits tied to compensation that exceeds limits imposed by IRS rules applicable to the qualified defined benefit pension plan.  TVA has historically funded the annual calculated expense.

Other Post-Retirement Benefits.  TVA sponsors two unfunded post-retirement benefit plans that provide for non-vested contributions toward the cost of certain eligible retirees’ medical coverage.  The first plan covers only certain retirees and surviving dependents who do not qualify for TVARS benefits, including the supplemental pension benefit.  The second plan is designed to place a limit on the out-of-pocket amount certain eligible retirees pay for medical coverage and provides a credit based on years of TVA service and monthly base pension amount, reduced by any TVARS supplemental pension benefits or any TVA contribution from the first plan, described above.

Other Post-Employment Benefits.  TVA employees injured in work-related incidents are covered by the workers’ compensation program for federal employees administered through the Department of Labor by the Office of Workers’ Compensation Programs in accordance with the provisions of FECA.  FECA provides compensation and medical benefits to federal employees for permanent and temporary disability due to employment-related injury or disease.

Accounting Mechanisms

Regulatory Accounting.  TVA has classified all amounts related to unrecognized prior service costs, net actuarial gains or losses, and the funded status as regulatory assets as such amounts are probable of collection in future rates.

Cost Method. TVA uses the projected unit credit cost method to determine the service cost and the projected benefit obligation for retirement, termination, and ancillary benefits.  Under this method, a “projected accrued benefit” is calculated at the beginning of the year and at the end of the year for each benefit that may be payable in the future.  The “projected accrued benefit” is based on the plan’s accrual formula and upon service at the beginning or end of the year, but it uses final average compensation, social security benefits, and other relevant factors projected to the age at which the employee is assumed to leave active service.  The projected benefit obligation is the actuarial present value of the “projected accrued benefits” at the beginning of the year for employed participants and is the actuarial present value of all benefits for other participants.  The service cost is the actuarial present value of the difference between the “projected accrued benefits” at the beginning and end of the year.

Amortization of Net Gain or Loss.  TVA utilizes the corridor approach for gain/loss amortization.  Differences between actuarial assumptions and actual plan results are deferred and amortized into periodic cost only when the accumulated differences exceed 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets.  If necessary, the excess is amortized over the average remaining service period of active employees.

Asset Method.  TVA recognizes the impact of asset performance on pension expense over a three-year phase-in period through a “market-related” value of assets calculation.  Since the “market-related” value of assets recognizes investment gains and losses over a three-year period, the future value of assets will be impacted as previously deferred gains or losses are recognized.  The “market-related” value is used in calculating expected return on plan assets and net gain or loss for pension cost determination.

Obligations and Funded Status

The changes in plan obligations, assets, and funded status for the years ended September 30, 2013 and 2012, were as follows:
Obligations and Funded Status
For the year ended September 30
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2013
 
2012
Change in benefit obligation
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
11,995

 
$
11,255

 
$
811

 
$
800

Service cost
154

 
139

 
24

 
19

Interest cost
468

 
490

 
31

 
35

Plan participants’ contributions
29

 
30

 
79

 
80

Amendments
4

 
3

 
—

 
—

Actuarial loss (gain)
(549
)
 
686

 
(163
)
 
(2
)
Net transfers from variable fund/401(k) plan
4

 
7

 
—

 
—

Expenses paid
(6
)
 
(5
)
 
—

 
—

Benefits paid
(628
)
 
(610
)
 
(126
)
 
(121
)
Benefit obligation at end of year
11,471

 
11,995

 
656

 
811

 
 
 
 
 
 
 
 
Change in plan assets
 

 
 

 
 

 
 

Fair value of net plan assets at beginning of year
7,029

 
6,546

 
—

 
—

Actual return on plan assets
787

 
1,053

 
—

 
—

Plan participants’ contributions
29

 
30

 
79

 
80

Net transfers from variable fund/401(k) plan
4

 
7

 
—

 
—

Employer contributions
6

 
8

 
47

 
41

Expenses paid
(6
)
 
(5
)
 
—

 
—

Benefits paid
(628
)
 
(610
)
 
(126
)
 
(121
)
Fair value of net plan assets at end of year
7,221

 
7,029

 
—

 
—

 
 
 
 
 
 
 
 
Funded status
$
(4,250
)
 
$
(4,966
)
 
$
(656
)
 
$
(811
)


The pension actuarial gain above for 2013 primarily reflects the impact of the increase in the discount rate from 4.00 percent to 5.00 percent, which decreased the liability by approximately $1.4 billion.  The actuarial gain is offset by the impact of including certain retiree benefits in the pension obligation which were not considered in prior periods, which increased the 2013 liability by $705 million. The pension actuarial loss for 2012 primarily reflects the impact of the reduction in the discount rate from 4.50 percent to 4.00 percent, which increased the liability by approximately $683 million.

The other post-retirement actuarial gain for 2013 primarily reflects the impact of the increase in the discount rate from 4.00 percent to 5.05 percent, which decreased the liability by $93 million. Additional gains were due to demographic experience related to per capita costs, contributions, participation rates, and changes in plan provisions, which decreased the liability by $43 million. Changes in the adjustment of the impact of the excise tax assumption decreased the liability by $33 million. These decreases in the post-retirement liability were slightly offset by the change in the COLA and mortality assumptions.

The other post-retirement actuarial gain for 2012 is primarily due to demographic experience related to per capita costs,
contributions, and a slight reduction in the participation rate from 90 percent to 85 percent. These gains were offset by the
increase in the health care cost trend rate from 8.00 percent to 8.50 percent and the reduction of the discount rate from 4.50 percent to 4.00 percent, which increased the post-retirement obligation by $46 million and $49 million, respectively. The
accumulated post-retirement benefit obligation increased by $11 million from 2011 to 2012.

Amounts related to these benefit plans recognized on TVA's consolidated balance sheets consist of regulatory assets that have not been recognized as components of net periodic benefit cost at September 30, 2013 and 2012, and the funded status of TVA’s benefit plans, which are included in Accounts payable and accrued liabilities and Post-retirement and post-employment benefit obligations:
Amounts Recognized on TVA's Consolidated Balance Sheets
At September 30
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2013
 
2012
Regulatory assets
$
3,910

 
$
5,168

 
$
166

 
$
349

Accounts payable and accrued liabilities
(5
)
 
(5
)
 
(39
)
 
(37
)
Pension and post-retirement benefit obligations(1)
(4,245
)
 
(4,961
)
 
(617
)
 
(774
)

Note
(1) Table above excludes $486 million and $544 million of post-employment benefit costs that are recorded in Post-retirement and post-employment benefit obligations on the Consolidated Balance Sheets at September 30, 2013 and 2012, respectively.

Unrecognized amounts included in regulatory assets yet to be recognized as components of accrued benefit cost at September 30 consisted of:
Postretirement Benefit Costs Deferred as
Regulatory Assets
At September 30
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2013
 
2012
Unrecognized prior service cost (credit)
$
(203
)
 
$
(229
)
 
$
(45
)
 
$
(51
)
Unrecognized net loss
4,113

 
5,397

 
211

 
400

Total regulatory assets
$
3,910

 
$
5,168

 
$
166

 
$
349



The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan at September 30, 2013, and 2012, were as follows:
Projected Benefit Obligations and Accumulated Benefit Obligations in Excess of Plan Assets
At September 30
 
2013
 
2012
Projected benefit obligation
$
11,471

 
$
11,955

Accumulated benefit obligation
11,216

 
11,680

Fair value of net plan assets
7,221

 
7,029



The components of net periodic benefit cost and other amounts recognized as changes in regulatory assets for the years ended September 30, 2013, and 2012, were as follows:

Components of Net Periodic Benefit Cost
For the years ended September 30
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Service cost
$
154

 
$
139

 
$
120

 
$
24

 
$
19

 
$
13

Interest cost
468

 
490

 
502

 
31

 
35

 
32

Expected return on plan assets
(428
)
 
(437
)
 
(488
)
 
—

 
—

 
—

Amortization of prior service cost
(22
)
 
(23
)
 
(23
)
 
(6
)
 
(6
)
 
(6
)
Recognized net actuarial loss
377

 
361

 
282

 
25

 
29

 
22

Net periodic benefit cost as actuarially determined
549

 
530

 
393

 
74

 
77

 
61

Amount charged (capitalized) due to actions of regulator
—

 
—

 
11

 
—

 
—

 
—

Total net periodic benefit cost recognized
$
549

 
$
530

 
$
404

 
$
74

 
$
77

 
$
61


The amounts in the regulatory asset that are expected to be recognized as components of net periodic benefit cost during the next fiscal year are as follows:
Expected Amortization of Regulatory Assets in 2014
At September 30, 2013
 
Pension Benefits
 
Other Post-Retirement
Benefits
 
Total
Prior service cost (credit)
$
(21
)
 
$
(6
)
 
$
(27
)
Net actuarial loss
278

 
11

 
289



Plan Assumptions

TVA’s reported costs of providing the plan benefits are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various assumptions, the most significant of which are noted below.
Actuarial Assumptions
At September 30
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2013
 
2012
Assumptions utilized to determine benefit obligations at September 30
 
 
 
 
 
 
 
Discount rate
5.00
%
 
4.00
%
 
5.05
%
 
4.00
%
Rate of compensation increase
5.72
%
 
4.44
%
 
N/A

 
N/A

Initial health care cost trend rate
N/A

 
N/A

 
8.00
%
 
8.50
%
Ultimate health care cost trend rate
N/A

 
N/A

 
5.00
%
 
5.00
%
Ultimate trend rate is reached in year beginning
N/A

 
N/A

 
2019

 
2019

 
 
 
 
 
 
 
 
Assumptions utilized to determine net periodic benefit cost for the years ended September 30
 

 
 

 
 

 
 

Discount rate
4.00
%
 
4.50
%
 
4.00
%
 
4.50
%
Expected return on plan assets
7.25
%
 
7.25
%
 
N/A

 
N/A

Rate of compensation increase
4.44
%
 
4.43
%
 
N/A

 
N/A

Initial health care cost trend rate
N/A

 
N/A

 
8.50
%
 
8.00
%
Ultimate health care cost trend rate
N/A

 
N/A

 
5.00
%
 
5.00
%
Ultimate trend rate is reached in year beginning
N/A

 
N/A

 
2019

 
2017



Discount Rate.  In selecting the assumed discount rate, TVA reviews market yields on high-quality corporate debt and long-term obligations of the U.S. Treasury and endeavors to match, through the use of a hypothetical bond portfolio, instrument maturities with the maturities of its pension obligations in accordance with the prevailing accounting standards. The selected bond portfolio is derived from a universe of high quality corporate bonds of Aa-rated quality or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plan's projected benefit payments discounted at this rate with the market value of the bonds selected. Based on recent market trends, TVA increased its discount rate used to determine the pension benefit obligation and other post-retirement obligation from 4.00 percent at the end of 2012 for both obligations to 5.00 percent and 5.05 percent, respectively, at the end of 2013. TVA had decreased its discount rate from 4.50 percent at the end of 2011 to 4.00 percent at the end of 2012 for both pension and other post-retirement obligations. The discount rate assumptions used to determine the obligations at year-end are used to determine the net periodic benefit costs for the following year.

Rate of Return.  In determining its expected long-term rate of return on pension plan assets, TVA uses a process that incorporates actual historical asset class returns and an assessment of expected future performance and takes into consideration external actuarial advice and asset class factors.  Changes in the expected return rates are generally based on annual studies performed by third party professional investment consultants.  Based on the results from annual studies for 2013, 2012, and 2011, TVA adjusted the expected return on plan assets rate used to develop the net periodic pension benefit cost for 2013, 2012, and 2011 to 7.25 percent, 7.25 percent, and 7.50 percent, respectively.  Asset allocations are periodically updated using the pension plan asset/liability studies, and are part of the determination of the estimates of long-term rates of return.  The expected rate of return had been reduced in 2011 based upon the annual study performed and a change of investment allocation policies.  Investment allocation changes in 2010 shifted a portion of equities to fixed income, and in September 2011, the TVARS Board approved a long-term investment plan which contains a dynamic de-risking strategy that allocates investments to assets that better match the liability, such as long duration fixed-income securities over time as funding status targets are met. In September 2013, the TVARS Board approved a new initial asset allocation policy that includes additional asset class diversification and maintains the long-term expected return of 7.25 percent (see Plan Investments below).  The actual rate of return for the years ended September 30, 2013 and 2012 were 11.69 percent and 16.81 percent, respectively.

Compensation Increases.  Assumptions related to compensation increases are based on the results obtained from an actual company experience study performed during the most recent five years for plan participants.  TVA obtained an updated study in 2013 and determined that future compensation would likely increase at rates between 3.50 percent and 13.00 percent per year, depending upon the employee's age. Based upon the current active participants, the average assumed compensation increase used to determine benefit obligations for 2013 and 2012 was 5.72 percent and 4.44 percent, respectively.

Mortality.  Mortality assumptions are based on the results obtained from a recent actual company experience study performed which included retirees as well as other plan participants.  TVA obtained an updated study in 2013, determining an improvement in TVA's mortality experience. Accordingly, TVA adjusted the projection period for the RP-2000 Mortality Tables for males and females projected to 2022 using scale AA at September 30, 2013. At September 30, 2012 and 2011, the projection period for the RP 2000 Mortality Tables for males and females was projected to 2013 using scale AA.

Health Care Cost Trends. TVA reviews actual recent cost trends and projected future trends in establishing health care cost trend rates. As of September 30, 2013 and 2012, the medical care trend rates used to determine the post-retirement benefit obligations were 8.00 percent and 8.50 percent, respectively.  TVA increased the rate in 2012 based upon exhibited annual increases in costs per covered life due primarily to changes in inflation, utilization, and recent healthcare regulations.  The rate is assumed to gradually decrease each successive year until it reaches a 5.00 percent annual increase in health care costs in the year beginning October 1, 2019, and beyond. The assumed health care cost trend rate used to determine the post-retirement net periodic benefit cost was 8.50 percent for 2013, 8.00 percent for 2012, and 8.00 percent for 2011.

Cost of Living Adjustment.  COLAs are an increase in the benefits for eligible retirees to help maintain the purchasing power of benefits as consumer prices increase. Eligible retirees may receive a COLA in January following any year in which the 12-month average CPI-U exceeded by as much as one percent the 12-month average of the CPI-U for the preceding year on the base pension portion of the monthly pension benefit. The minimum COLA is one percent and the maximum is five percent. The COLA was temporarily reduced for a four-year period beginning January 1, 2010 for current retirees, and the eligibility for the COLA was changed to age 60 from attained age 55 for employees retiring on or after January 1, 2010. The COLA assumption has been 2.50 percent since 2009; however, due to the Federal Reserve System’s long-term monetary policy and the market-based measure of inflation expectations that inflation will remain below two percent into 2015, TVA adjusted the COLA assumption at September 30, 2013 to 1.6 percent with an assumed gradual increase each successive year until it reaches 2.5 percent in 2019.

Sensitivity of Costs to Changes in Assumptions.  The following chart reflects the sensitivity of pension cost to changes in certain actuarial assumptions:
Sensitivity to Certain Changes in Pension Assumptions
At September 30, 2013
 
 
Actuarial Assumption
 
Change in Assumption
 
Impact on 2013 Pension Cost
 
Impact on 2013 Projected Benefit Obligation
 
 
 
Discount rate
 
(0.25
)
 
$
20

 
$
335

Rate of return on plan assets
 
(0.25
)
 
15

 
N/A



Each fluctuation above assumes that the other components of the calculation are held constant and excludes any impact for unamortized actuarial gains or losses.

The following chart reflects the sensitivity of post-retirement benefit cost to changes in the health care trend rate:
Sensitivity to Changes in Assumed Health Care Cost Trend Rates
At September 30, 2013
 
1% Increase
 
1% Decrease
Effect on total of service and interest cost components for the year
$
8

 
$
(8
)
Effect on end-of-year accumulated post-retirement benefit obligation
87

 
(89
)


Each fluctuation above assumes that the other components of the calculation are held constant and excludes any impact for unamortized actuarial gains or losses.

Plan Investments

The qualified defined benefit pension plan (the "Plan"), which includes the Original Benefit Structure and the Cash Balance Benefit Structure, is the only plan that includes qualified plan assets. TVARS has a long-term investment plan which contains a dynamic de-risking strategy that allocates investments to assets that better match the liability, such as long duration fixed income securities, over time as funding status targets are met. In September 2013, the TVARS Board approved a new initial asset allocation policy. The approved investment allocation policy has targets of 47 percent equity including U.S., non-U.S., private, and low volatility global public equity investments, 28 percent fixed income securities, 15 percent public real assets including Treasury Inflation-Protected Securities ("TIPS"), commodities, and Master Limited Partnerships ("MLPs"), and 10 percent private real assets. The qualified pension plan assets are invested across global public equity, private equity, cash, core fixed income, long-term core fixed income, investment grade credit, high yield fixed income, global TIPS, MLPs, and private real assets. The TVARS asset allocation policy includes permissible deviations from these target allocations. The TVARS Board can take action, as appropriate, to rebalance the system’s assets consistent with the asset allocation policy. At September 30, 2013 and 2012, the asset holdings of the system included the following:

Asset Holdings of TVARS
At September 30
 
 
 
 
Plan Assets at September 30
Asset Category
 
Target Allocation
 
2013
 
2012
Global equity
 
32
%
 
48
%
 
47
%
Private equity
 
10
%
 
6
%
 
6
%
Low volatility global public equity
 
5
%
 
—
%
 
—
%
Cash
 
2
%
 
2
%
 
1
%
Core fixed income
 
5
%
 
5
%
 
8
%
Long-term core fixed income
 
5
%
 
4
%
 
4
%
Investment grade credit
 
6
%
 
6
%
 
9
%
International emerging markets fixed income
 
5
%
 
—
%
 
—
%
High yield fixed income
 
5
%
 
10
%
 
10
%
Global TIPS
 
5
%
 
7
%
 
9
%
Private real assets
 
10
%
 
7
%
 
6
%
Commodities
 
5
%
 
—
%
 
—
%
MLPs
 
5
%
 
5
%
 
—
%
 
 
 
 
 
 
 
Total
 
100
%
 
100
%
 
100
%

Fair Value Measurements

The following table provides the fair value measurement amounts for assets held by TVARS at September 30, 2013:

TVA Retirement System
At September 30, 2013
 
Total(1) (2)
 
Quoted Prices in Active Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Equity securities
$
1,689

 
$
1,686

 
$
—

 
$
3

 
 
 
 
 
 
 
 
Preferred securities
22

 
17

 
—

 
5

 
 
 
 
 
 
 
 
Debt securities
 
 
 

 
 

 
 

Corporate debt securities
1,352

 
—

 
1,334

 
18

Residential mortgage-backed securities
355

 
—

 
352

 
3

Debt securities issued by U.S. Treasury and other U.S. government agencies
113

 
113

 
—

 
—

Debt securities issued by foreign governments
31

 
—

 
30

 
1

Asset-backed securities
120

 
—

 
110

 
10

Debt securities issued by state/local governments
36

 
—

 
36

 
—

Commercial mortgage-backed securities
21

 
—

 
18

 
3

 
 
 
 
 
 
 
 
Commingled Funds
 

 
 

 
 

 
 

Equity
1,182

 
—

 
1,182

 
—

Debt
786

 
—

 
786

 
—

Blended
263

 
—

 
263

 
—

Institutional mutual funds
26

 
26

 
—

 
—

Cash equivalents and other short-term investments
395

 
1

 
394

 
—

Private equity funds
528

 
—

 
—

 
528

Private real estate funds
382

 
—

 
297

 
85

Treasury bills, U.S. Government notes, and securities held as futures and other derivative collateral
39

 
8

 
31

 
—

Securities lending commingled funds
3

 
—

 
3

 
—

 
 
 
 
 
 
 
 
Derivatives
 

 
 

 
 

 
 

Foreign currency forward receivable
594

 
—

 
594

 
—

Purchased options
6

 
—

 
6

 
—

Interest rate swaps
4

 
—

 
4

 
—

Futures
4

 
4

 
—

 
 
 
 
 
 
 
 
 
 
Total Assets
$
7,951

 
$
1,855

 
$
5,440

 
$
656

Liabilities
 

 
 

 
 

 
 

Derivatives
 

 
 

 
 

 
 

Foreign currency forward payable
$
594

 
$
—

 
$
594

 
$
—

Credit default swaps
1

 
—

 
1

 
—

Written option obligations
1

 
—

 
1

 
—

 
 
 
 
 
 
 
 
Total Liabilities
$
596

 
$
—

 
$
596

 
$
—


Notes
(1) Excludes approximately $131 million in net payables associated with security purchases and sales and various other payables.
(2) Excludes a $3 million payable for collateral on loaned securities in connection with TVARS’s participation in securities lending programs.

The following table provides the fair value measurement amounts for assets held by TVARS at September 30, 2012:

TVA Retirement System
At September 30, 2012
 
Total(1) (2)
 
Quoted Prices in Active Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Equity securities
$
1,294

 
$
1,293

 
$
—

 
$
1

 
 
 
 
 
 
 
 
Preferred securities
26

 
18

 
3

 
5

 
 
 
 
 
 
 
 
Debt securities
 
 
 

 
 

 
 

Corporate debt securities
1,601

 
—

 
1,589

 
12

Residential mortgage-backed securities
390

 
—

 
386

 
4

Debt securities issued by U.S. Treasury and other U.S. government agencies
184

 
182

 
2

 
—

Debt securities issued by foreign governments
46

 
—

 
43

 
3

Asset-backed securities
109

 
—

 
95

 
14

Debt securities issued by state/local governments
46

 
—

 
41

 
5

Commercial mortgage-backed securities
28

 
—

 
28

 
—

 
 
 
 
 
 
 
 
Commingled Funds
 

 
 

 
 

 
 

Equity
1,129

 
—

 
1,129

 
—

Debt
802

 
—

 
802

 
—

Blended
275

 
—

 
275

 
—

Institutional mutual funds
32

 
32

 
—

 
—

Cash equivalents and other short-term investments
311

 
—

 
311

 
—

Private equity funds
519

 
—

 
—

 
519

Private real estate funds
340

 
—

 
270

 
70

Treasury bills, U.S. Government notes, and securities held as futures and other derivative collateral
37

 
5

 
32

 
—

Securities lending commingled funds
3

 
—

 
3

 
—

 
 
 
 
 
 
 
 
Derivatives
 

 
 

 
 

 
 

Foreign currency forward receivable
487

 
—

 
487

 
—

Purchased options
7

 
—

 
7

 
—

 
 
 
 
 
 
 
 
Total Assets
$
7,666

 
$
1,530

 
$
5,503

 
$
633

Liabilities
 

 
 

 
 

 
 

Derivatives
 

 
 

 
 

 
 

Foreign currency forward payable
$
488

 
$
—

 
$
488

 
$
—

Futures
3

 
3

 
—

 
—

Credit default swaps
1

 
—

 
1

 
—

Written option obligations
1

 
—

 
1

 
—

 
 
 
 
 
 
 
 
Total Liabilities
$
493

 
$
3

 
$
490

 
$
—


Notes
(1) Excludes approximately $141 million in net payables associated with security purchases and sales and various other payables.
(2) Excludes a $3 million payable for collateral on loaned securities in connection with TVARS’s participation in securities lending programs.

The following table provides a reconciliation of beginning and ending balances of pension plan assets measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3):
Fair Value Measurements Using Significant Unobservable Inputs
For the years ended September 30
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
 
Balance at October 1, 2011
$
813

Net realized/unrealized gains (losses)
85

Purchases, sales, issuances, and settlements (net)
(17
)
Transfers in and/or out of Level 3(1)
(248
)
 
 
Balance at September 30, 2012
633

Net realized/unrealized gains (losses)
45

Purchases, sales, issuances, and settlements (net)
(21
)
Transfers in and/or out of Level 3
(1
)
 
 
Balance at September 30, 2013
$
656


Note
(1) Transfers in and out of Level 3 in 2012 were primarily due to a change in TVA's policy to classify investments with redemption restriction periods of three months or less as Level 2 and investments with more restrictive redemption terms as Level 3.

The following descriptions of the valuation methods and assumptions used by the Plan to estimate the fair value of investments apply to investments held directly by the Plan. Third-party pricing vendors provide valuations for investments held by the Plan in most instances. In instances where pricing is determined to be based on unobservable inputs, a Level 3 classification has been assigned.
 
Vendor-provided prices for the Plan’s investments are subjected to automated tolerance checks by the trustee to identify and avoid, where possible, the use of inaccurate prices. Any questionable prices identified are reported to the vendor that provided the price. If the prices are validated, the primary pricing source is used. If not, a secondary source price that has passed the applicable tolerance check is used (or queried with the vendor if it is out of tolerance), resulting in either the use of a secondary price, where validated, or the last reported default price, as in the case of a missing price. For monthly valued accounts, where secondary price sources are available, an automated inter-source tolerance report identifies prices with an inter-vendor pricing variance of over two percent at an asset class level. For daily valued accounts, each security is assigned, where possible, an indicative major market index, against which daily price movements are automatically compared. Tolerance thresholds are established by asset class. Prices found to be outside of the applicable tolerance threshold are reported and queried with vendors as described above.
 
Equities. Investment securities, including common stock, mutual funds, and MLPs, listed on either a national or foreign securities exchange or traded in the over-the-counter National Market System, are generally valued each business day at the official closing price (typically the last reported sale price) on the exchange on which the security is primarily traded. If there are no current day sales, the securities are valued at their last quoted bid price. Equities priced by an exchange in an active market are classified as Level 1.
 
Preferred Securities. Preferred securities are valued at their quoted market price (Level 1 inputs). Most preferred securities classified as Level 2 have been priced by dealer quote.  Others may have been evaluated using theoretical assumptions based on observable market data, such as yields on bonds from the same issuer or industry.
 
Corporate Debt Securities. Corporate bonds are valued based upon recent bid prices or the average of recent bid and asked prices when available (Level 2 inputs) and, if not available, they are valued through matrix pricing models developed by sources considered by management to be reliable. Matrix pricing, which is a mathematical technique commonly used to price debt securities that are not actively traded, values debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
 
Residential Mortgage-Backed Securities. Residential mortgage-backed securities consist of collateralized mortgage obligations ("CMOs") and U.S. pass-through security pools related to government-sponsored enterprises ("GSE"). CMO pricing is typically based on either a volatility-driven, multidimensional, single-cash-flow stream model or an option-adjusted spread model. These models incorporate available market data such as trade information, dealer quotes, market color, spreads, bids, and offers. Pricing for GSE securities, including the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association, is typically based on quotes from the To Be Announced ("TBA") market, which is highly liquid with multiple electronic platforms that facilitate the execution of trading between investors and broker/dealers. Prices from the TBA market are then compared against other live data feeds as well as input obtained directly from the dealer community. A tolerance check, adjusted dynamically in response to market conditions, is applied to check for consistency across the trading platforms and dealer quotes. If discrepancies are identified, the data is reviewed to resolve the differences and determine an appropriate evaluation. Residential mortgage-backed securities are considered to be priced using Level 2 inputs because of the nature of their market-data-based pricing models.
 
U.S. Treasury and Agency Securities. For U.S. Treasury securities, fair values reflect the closing price reported in the active market in which the security is traded (Level 1 inputs). Agency securities are typically priced using evaluated pricing applications and models incorporating U.S. Treasury yield curves. Agency securities are classified as Level 2 because of the nature of their market-data-based pricing models.
 
Debt Securities Issued by Foreign Governments. These include foreign government bonds and foreign government inflation-linked securities. They are typically priced based on proprietary discounted cash flow models, incorporating option-adjusted spread features as appropriate. Debt securities issued by foreign governments are classified as Level 2 because of the nature of their market-data-based pricing models.
 
Asset-Backed Securities. Asset-backed securities are typically priced based on a single cash-flow stream model, which incorporates available market data such as trade information, dealer quotes, market color, spreads, bids, and offers. Because of the market-data-based nature of such pricing models, asset-backed securities are classified as Level 2.
 
Debt Securities Issued by State and Local Governments. Debt securities issued by state and local governments are typically priced using market-data-based pricing models, and are therefore classified as Level 2. These pricing models incorporate market data such as quotes, trading levels, spread relationships, and yield curves, as applicable.
 
Commercial Mortgage-Backed Securities. Commercial mortgage-backed securities are typically priced based on a single-cash-flow stream model, which incorporates available market data such as trade information, dealer quotes, market color, spreads, bids, and offers. Because of the market-data-based nature of such pricing models, commercial mortgage-backed securities are classified as Level 2.
 
Private Equity Funds. Private equity limited partnerships and other similar alternative investments are reported at fair value, which is derived by independent appraisals or investment management judgment. The inputs used by the General Partners in estimating the fair value of the limited partnerships include the original transaction prices, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investments or comparable issues, subsequent rounds of financing, recapitalizations, and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. These investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discounts estimated by the General Partners in the absence of market information. Due to the lack of observable inputs, the determination of the fair value by the General Partners may differ materially from the value ultimately realized by the Partnership.
 
The private equity managers recognize realized gains or losses when they receive income or dispose of an investment. The net realized capital gains or losses, which include management fees and fund expenses, are allocated to the partners in proportion to their commitments. The fair values of the private equity funds are estimated utilizing the net asset values provided by the fund managers and are classified as Level 3.
 
The private equity limited partnerships typically make longer-term investments in private companies and seek to obtain financial returns through long-term appreciation based on corporate stewardship, improved operating processes, and financial restructuring, which may involve a merger or acquisition. Significant investment strategies include venture capital; buyout; mezzanine, or subordinated, debt; restructuring, or distressed, debt; and special situations. Venture capital partnerships consist of two main groupings. Early-stage venture capital partnerships invest in businesses still in the conceptual stage where products may not be fully developed and where revenues and/or profits may be several years away. Later-stage venture capital partnerships invest in more mature companies in need of growth or expansion capital. Buyout partnerships provide the equity capital for acquisition transactions either from a private seller or the public, which may represent the purchase of the entire company or a refinancing or recapitalization transaction where equity is invested. Mezzanine or subordinated debt partnerships provide the intermediate capital between equity and senior debt in a buyout or refinancing transaction and typically own a security in the company that carries current interest payments as well as a potential equity interest in the company. Restructuring or distressed debt partnerships purchase opportunities generated by overleveraged or poorly managed companies. Special situation partnerships include organizations with a specific industry focus not covered by the other private equity subclasses or unique opportunities that fall outside the regular subclasses.
 
The private equity funds have no investment withdrawal provisions prior to the termination of the partnerships. Partnerships generally continue 10 to 12 years after the inception of the fund. The partnerships are subject to three to four one-year extensions at the discretion of the General Partner. Partnerships can generally be dissolved by an 80 percent vote in interest by all limited partners, with some funds requiring the occurrence of a specific event.
 
Private Real Estate Investments. The Plan’s ownership in private real estate investments consists of a pro rata share and not a direct ownership of the underlying investments. The fair values of the Plan’s private real estate investments are estimated utilizing net asset values provided by the investment managers. The methodologies utilized by the investment managers to calculate their net asset values are summarized as follows:
 
The Plan is invested in limited partnerships that invest in real estate securities, real estate partnerships, and direct real estate properties. This includes investments in office, multifamily, industrial, and retail investment properties in the U.S. and international markets. The investment strategy focuses on distressed, opportunistic, and value-added opportunities. Partnership investments also include mortgage and/or real estate-related fixed-income instruments and related securities. Investments are diversified by property type and geographic location.
 
The Plan is invested in a commingled fund that develops, renovates, and re-leases real estate properties to create value. Investments are predominantly in top tier real estate markets that offer deep liquidity. Property types include residential, office, industrial, hotel, retail, and land. Properties are diversified by geographic region within the U.S. domestic market. The Plan is invested in a second commingled fund that invests primarily in core, well-leased, operating real estate properties with a focus on income generation. Investments are diversified by property type with a focus on office, industrial, apartment, and retail. Properties are diversified within the U.S. with an overweight to major market and coastal regions.
 
Fair value estimates of the underlying investments in these limited partnerships and commingled fund investments are primarily based upon property appraisal reports prepared by independent real estate appraisers within a reasonable amount of time following acquisition of the real estate and no less frequently than annually thereafter. The appraisals are based on one or a combination of three methodologies: cost of reproduction analysis, discounted cash flow analysis, and sales comparison analysis. Pricing for certain investments in mortgage-backed and asset-backed securities is typically based on models that incorporate observable inputs.
 
The Plan is invested in a private real estate investment trust formed to make direct or indirect investments in commercial timberland properties. Pricing for these types of investments is based on comprehensive appraisals that are conducted shortly after initial purchase of properties and at three-year intervals thereafter. All appraisals are conducted by third-party timberland appraisal firms. Appraisals are based on either a sales comparison analysis or a discounted cash flow analysis.
 
The fair value hierarchy level classifications for the Plan’s real estate investments are determined based on redemption terms. Investments which cannot be redeemed at the measurement date, but which can be redeemed at a future date, are evaluated based on the length of time until the investment will become redeemable in determining whether the investment should be reported in either Level 2 or Level 3 of the fair value hierarchy. Generally, investments which allow redemptions quarterly or more frequently are classified as Level 2, and investments with more restrictive redemption terms are classified as Level 3.
 
Derivatives. The Plan invests in a variety of derivative instruments. The valuation methodologies for these instruments are as follows:
 
Futures. The Plan enters into futures. The futures contracts are listed on either a national or foreign securities exchange and generally valued each business day at the official closing price (typically the last reported sales price) on the exchange on which the security is primarily traded. The pricing is performed by third-party vendors. Since futures are priced by an exchange in an active market, they are classified as Level 1.
 
Options. The Plan enters into purchased and written options. Options that are listed on either a national or foreign securities exchange are generally valued each business day at the official closing price (typically the last reported sales price) on the exchange on which the security is primarily traded. These options are classified as Level 1. Options traded over the counter and not on exchanges are priced by third-party vendors and are classified as Level 2.
 
Swaps. The Plan enters into various types of swaps. Credit default swaps are priced at market using models that consider cash flows, credit curves, recovery rates, and other factors. The pricing is performed by third-party vendors. Interest rate swap contracts are priced at market using forward rates derived from the swap curve, and the pricing is also performed by third-party vendors. Other swaps such as equity index swaps and variance swaps are priced by third-party vendors using market inputs such as spot rates, yield curves, and volatility. The Plan’s swaps are generally classified as Level 2 based on the observable nature of their pricing inputs.
 
Foreign Currency Forwards. The Plan enters into foreign currency forwards. All commitments are marked to market daily at the applicable translation rates, and any resulting unrealized gains or losses are recorded. Foreign currency forwards are priced by third-party vendors and are classified as Level 2.
 
Commingled Funds. The Plan invests in commingled funds, which include collective trusts, unit investment trusts, and similar investment funds that predominantly hold debt and/or equity securities as underlying assets. The Plan’s ownership consists of a pro rata share and not a direct ownership of an underlying investment. These commingled funds are valued at their closing net asset values (or unit value) per share as reported by the managers of the commingled funds and as supported by the unit prices of actual purchases and sale transactions occurring as of or close to the financial statement date (Level 2 inputs).
 
The Plan is invested in actively managed debt commingled funds. The actively managed equity funds seek to outperform certain equity benchmarks through a combination of fundamental and technical analysis. Active funds select portfolio positions based upon their research.
 
The Plan is invested in commingled funds, which invest across multiple asset classes that can be categorized as blended. These funds seek to outperform a passive benchmark through active security selection. The funds invest in securities across equity, fixed income, currency, and commodities. The portfolios employ fundamental, quantitative, and technical analysis.
 
The Plan’s investments in equity, debt, and blended commingled funds can generally be redeemed at any time upon notification of the investment managers, with required notice periods varying from same-day to monthly. These investments do not have unfunded commitments.
 
Institutional Mutual Funds. Participation units of institutional mutual funds are stated at their quoted redemption values as reported by the investment managers based on their net asset values, which reflect the fair values of the underlying investments. These funds are traded at published net asset values in an active market (Level 1 inputs).
 
Cash Equivalents and Other Short-Term Investments. Cash equivalents and other short-term investments represent securities with maturities of less than twelve months.  Cash equivalents are highly liquid securities and consists of certificates of deposit and commercial paper.  The carrying amounts of these instruments approximate their fair values and each are considered a Level 1 valuation classification.  Other short-term investments consists of U.S. Treasury securities, residential mortgage-backed securities, corporate bonds, and asset-backed securities.  U.S. Treasury securities are valued using the closing price reported in the active market in which the security is traded and is considered a Level 1 valuation classification.  Residential mortgage-backed securities and asset-backed securities are typically valued with pricing models using observable market data such as trade information, dealer quotes, market color, spreads, bids, and offers.  Accordingly, these securities are considered Level 2 classifications.  Corporate bonds are valued based upon recent bid prices or the average of recent bid and asked prices, or are valued through matrix pricing models using market information for similar benchmark quoted securities, and are also considered Level 2 classifications.
 
The valuation methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Cash Flows

Estimated Future Benefit Payments.  The following table sets forth the estimated future benefit payments under the benefit plans.
Estimated Future Benefits Payments
At September 30, 2013
 
 
Pension
Benefits
 
Other Post-Retirement Benefits
2014
$
720

 
$
40

2015
719

 
42

2016
727

 
43

2017
731

 
44

2018
736

 
45

2019 - 2023
3,773

 
210


Contributions.  In 2013, TVA made contributions of $6 million to the SERP and $47 million to the other post-retirement benefit plans. TVA expects to contribute $6 million to the SERP and $40 million to the other post-retirement benefit plans in 2014.  In 2009, TVA entered into an agreement with TVARS resulting in TVA contributing $1.0 billion for 2010 and as an advance on contributions for 2011 through 2013.  In 2011, TVA made an additional discretionary contribution to TVARS.  TVA plans to contribute $250 million to the defined pension plan in 2014.

Other Post-Employment Benefits

Post-employment benefit cost estimates are revised to properly reflect changes in actuarial assumptions made at the end of each year. TVA utilizes a discount rate determined by reference to the U.S. Treasury Constant Maturities corresponding to calculated average durations of TVA’s future estimated post-employment claims payments. The use of a 2.64 percent discount rate resulted in the recognition of approximately $(8) million in expenses in 2013 and an unpaid benefit obligation of about $535 million at September 30, 2013. The 2013 current portion of the obligation is $49 million and is recorded in Accounts payable and accrued liabilities. The 2013 long-term portion of $486 million is recorded in Post-retirement and post-employment benefit obligations. TVA utilized discount rates of 1.65 percent and 1.92 percent in 2012 and 2011, respectively. The use of these discount rates resulted in expense and unpaid benefit obligations of $52 million and $597 million, respectively, for 2012 and expense and unpaid benefit obligations of $81 million and $596 million, respectively, for 2011. The 2012 current portion of the obligation is $53 million and is recorded in Accounts payable and accrued liabilities. The 2012 long-term portion of $544 million is recorded in Post-retirement and post-employment benefit obligations. The amounts in the current portion of the obligation represent the total unpaid losses and administrative fees for each year that are due one month following TVA’s fiscal year end.

The decrease in the unpaid benefit obligation and expense from 2012 to 2013 is due primarily to the increase in the discount rate from 1.65 percent in 2012 to 2.64 percent in 2013 resulting in a decrease of $45 million.  Decreases in loss experiences and other changes in demographic experiences also decreased the unpaid benefit obligation and expense to a lesser degree.

While the 2012 discount rate increased the expense for 2012, the overall expense decreased for 2012 in comparison to
2011. The decrease in expense is primarily due to the improvement in TVA's loss experience and the 2012 discount rate
dropping only 27 basis points in comparison to the 2011 discount rate dropping 61 basis points from the 2010 discount rate.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies

Commitments

At September 30, 2013, the amounts of contractual cash commitments maturing in each of the next five years and beyond are shown below:
Commitments and Contingencies
Payments due in the year ending September 30
 
 
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Debt(1)
 
$
2,464

 
$
1,032

 
$
32

 
$
1,555

 
$
1,682

 
$
18,056

 
$
24,821

Debt of VIEs
 
30

 
32

 
33

 
35

 
36

 
1,175

 
1,341

Membership interests of variable interest entity subject to mandatory redemption
 
2

 
2

 
2

 
2

 
2

 
30

 
40

Lease obligations
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Capital
 
5

 
5

 
5

 
5

 
5

 
36

 
61

Non-cancelable operating
 
37

 
30

 
29

 
28

 
27

 
87

 
238

Purchase obligations
 
 

 
 
 
 

 
 

 
 

 
 

 
 

Power
 
219

 
204

 
219

 
231

 
230

 
3,336

 
4,439

Fuel
 
1,419

 
1,176

 
794

 
442

 
498

 
2,002

 
6,331

Other
 
255

 
210

 
184

 
182

 
502

 
1,221

 
2,554

Payments on other financings
 
100

 
104

 
104

 
104

 
104

 
401

 
917

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
4,531

 
$
2,795

 
$
1,402

 
$
2,584

 
$
3,086

 
$
26,344

 
$
40,742

Note
(1) Does not include noncash items of foreign currency exchange loss of $43 million and net discount on sale of Bonds of $85 million.

In addition to the cash requirements, above, TVA has contractual obligations in the form of revenue discounts related to energy prepayments.  See Note 1 — Energy Prepayment Obligations and Discounts on Sales.
Energy Prepayment Obligations
 
 
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Energy Prepayment Obligations
 
$
100

 
$
100

 
$
100

 
$
100

 
$
100

 
$
10

 
$
510

 
Debt. At September 30, 2013, TVA had outstanding discount notes of $2.4 billion and long-term debt (including current maturities) at varying maturities and interest rates of $22.4 billion for total outstanding indebtedness of $24.8 billion. See Note 12.

Debt of VIEs. At September 30, 2013, TVA had outstanding long-term debt (including current maturities) attributable to its three VIEs of which it is the primary beneficiary of $1.3 billion. See Note 8.

Membership Interests of VIE Subject to Mandatory Redemption. At September 30, 2013, TVA had outstanding membership interests subject to mandatory redemption (including current portion) of $40 million issued by one of its VIEs of which it is the primary beneficiary. See Note 8.

Leases.  TVA leases certain property, plant, and equipment under agreements with terms ranging from one to 80 years.  Of the total obligations for TVA’s capital leases, $18 million represents the cost of financing.  TVA’s rental expense for operating leases was $71 million in 2013, $67 million in 2012, and $77 million in 2011.

Power Purchase Obligations.  TVA has contracted with various independent power producers and LPCs for additional capability to be made available to TVA. Several of these agreements have contractual minimum payments.  In total, these agreements provide 1,621 MW of summer net capability.  The remaining terms of the agreements range up to 19 years.  TVA incurred $322 million, $447 million, and $713 million of expense under power purchase agreements during 2013, 2012, and 2011, respectively.  Certain power purchase obligations are accounted for as capital leases. Costs under TVA’s power purchase agreements not accounted for as capital leases are included in TVA's consolidated statements of operations as purchased power expense and are expensed as incurred.

Under federal law, TVA is obligated to purchase power from qualifying facilities, cogenerators, and small power producers.  As of September 30, 2013, there was a combined qualifying capacity of 913 MW, from six different suppliers, from which TVA purchased power under this law.  TVA’s obligations to purchase power from these qualifying facilities are not included in the Commitments and Contingencies table.

TVA, along with others, contracted with the Southeastern Power Administration ("SEPA") to obtain power and energy from eight U.S. Army Corps of Engineers hydroelectric facilities on the Cumberland River system.  The agreement with SEPA can be terminated upon three years’ notice, but this notice of termination may not become effective prior to June 30, 2017.  The contract requires SEPA to provide TVA an annual minimum of 1,500 hours of energy for each megawatt of TVA’s 405 MW allocation, and all surplus energy from the Cumberland River system.  Because hydroelectric production has been reduced at two of the hydroelectric facilities on the Cumberland River system and because of reductions in the summer stream flow on the Cumberland River, SEPA declared “force majeure” on February 25, 2007.  SEPA then instituted an emergency operating plan that, among other things, eliminates SEPA’s obligation to provide TVA and other affected customers with a minimum amount of power or energy.  It is unclear how long the emergency operating plan will remain in effect.  TVA’s obligations under its contract with SEPA are not included in the Commitments and Contingencies table.

Fuel Purchase Obligations.  TVA has approximately $2.3 billion in long-term fuel purchase commitments ranging in terms of up to 10 years primarily for the purchase and transportation of coal.  TVA also has approximately $4.0 billion of long-term commitments ranging in terms of up to 17 years for the purchase of enriched uranium and fabrication of nuclear fuel assemblies.

Other Obligations.  Other obligations of $2.6 billion consist of contracts at September 30, 2013, for goods and services primarily related to capital projects as well as other major recurring operating costs.

Contingencies

Nuclear Insurance.  The Price-Anderson Act provides a layered framework of protection to compensate for losses arising from a nuclear event in the United States.  For the first layer, all of the NRC nuclear plant licensees, including TVA, purchase $375 million of nuclear liability insurance from American Nuclear Insurers for each plant with an operating license.  Funds for the second layer, the Secondary Financial Program, would come from an assessment of up to $127 million from the licensees of each of the 104 NRC licensed reactors in the United States.  The assessment for any nuclear accident would be limited to $19 million per year per unit.  American Nuclear Insurers, under a contract with the NRC, administers the Secondary Financial Program.  With its six licensed units, TVA could be required to pay a maximum of $764 million per nuclear incident, but it would have to pay no more than $114 million per incident in any one year.  When the contributions of the nuclear plant licensees are added to the insurance proceeds of $375 million, over $13.0 billion, including a five percent surcharge for legal expenses, would be available.  Under the Price-Anderson Act, if the first two layers are exhausted, the U.S. Congress is required to take action to provide additional funds to cover the additional losses.

TVA carries property, decommissioning, and decontamination insurance of $4.6 billion for its licensed nuclear plants, with up to $2.1 billion available for a loss at any one site, to cover the cost of stabilizing or shutting down a reactor after an accident.  Some of this insurance, which is purchased from Nuclear Electric Insurance Limited ("NEIL"), may require the payment of retrospective premiums up to a maximum of approximately $105 million.

TVA purchases accidental outage (business interruption) insurance for TVA’s nuclear sites from NEIL.  In the event that an accident covered by this policy takes a nuclear unit offline or keeps a nuclear unit offline, NEIL will pay TVA, after a waiting period, an indemnity (a set dollar amount per week) up to a maximum indemnity of $490 million per unit.  This insurance policy may require the payment of retrospective premiums up to a maximum of approximately $32 million.

Decommissioning Costs.  TVA recognizes legal obligations associated with the future retirement of certain tangible long-lived assets related primarily to coal-fired generating plants and nuclear generating plants, hydroelectric generating plants/dams, transmission structures, and other property-related assets.

Nuclear.  Provision for decommissioning costs of nuclear generating units is based on options prescribed by the NRC procedures to dismantle and decontaminate the facilities to meet the NRC criteria for license termination.  At September 30, 2013, the present value of the estimated future decommissioning cost of $2.4 billion was included in AROs.  The actual decommissioning costs may vary from the derived estimates because of, among other things, changes in current assumptions, such as the assumed dates of decommissioning, changes in regulatory requirements, changes in technology, and changes in the cost of labor, materials, and equipment.  Utilities that own and operate nuclear plants are required to use different procedures in calculating nuclear decommissioning costs under GAAP than those that are used in calculating nuclear decommissioning costs when reporting to the NRC.  The two sets of procedures produce different estimates for the costs of decommissioning primarily because of the difference in the discount rates used to calculate the present value of decommissioning costs.

TVA maintains a NDT to provide funding for the ultimate decommissioning of its nuclear power plants.  TVA monitors the value of its NDT and believes that, over the long term and before cessation of nuclear plant operations and commencement of decommissioning activities, adequate funds from investments will be available to support decommissioning.  TVA’s nuclear power units are currently authorized to operate until 2020-2036, depending on the unit.  It may be possible to extend the operating life of some of the units with approval from the NRC.  See Note 7 — Nuclear Decommissioning Costs and Note 11.

Non-Nuclear Decommissioning.  The present value of the estimated future non-nuclear decommissioning cost ARO was $1.1 billion at September 30, 2013.  This decommissioning cost estimate involves estimating the amount and timing of future expenditures and making judgments concerning whether or not such costs are considered a legal obligation.  Estimating the amount and timing of future expenditures includes, among other things, making projections of the timing and duration of the asset retirement process and how costs will escalate with inflation.  The actual decommissioning costs may vary from the derived estimates because of changes in current assumptions, such as the assumed dates of decommissioning, changes in regulatory requirements, changes in technology, and changes in the cost of labor, materials, and equipment.

TVA maintains an ART to help fund the ultimate decommissioning of its power assets.  Estimates involved in determining if additional funding will be made to the ART include inflation rate and rate of return projections on the fund investments.  See Note 7 — Non-Nuclear Decommissioning Costs and Note 11.

Environmental Matters. TVA’s power generation activities, like those across the utility industry and in other industrial sectors, are subject to most federal, state, and local environmental laws and regulations.  Major areas of regulation affecting TVA’s activities include air quality control, water quality control, and management and disposal of solid and hazardous wastes.  In the future, regulations in all of these areas are expected to become more stringent.  Regulations are also expected to apply to new emissions and sources, with a particular emphasis on climate change, renewable generation, and energy efficiency.

TVA has incurred, and expects to continue to incur, substantial capital and operating and maintenance costs to comply with evolving environmental requirements primarily associated with, but not limited to, the operation of TVA’s coal-fired generating units.  It is virtually certain that environmental requirements placed on the operation of TVA’s coal-fired and other generating units will continue to become more restrictive and potentially apply to new emissions and sources.  Litigation over emissions or discharges from coal-fired generating units is also occurring, including litigation against TVA.  Failure to comply with environmental and safety laws can result in TVA being subject to enforcement actions, which can lead to the imposition of significant civil liability, including fines and penalties, criminal sanctions, and/or the shutting down of non-compliant facilities.

From 1977 to 2013, TVA spent approximately $5.6 billion to reduce emissions from its power plants, including $182 million, $38 million, and $34 million in 2013, 2012, and 2011, respectively.  TVA estimates that compliance with future Clean Air Act ("CAA") requirements (excluding greenhouse gas ("GHG") requirements) could lead to additional costs of $1.3 billion from 2014 to 2022.  There could be additional material costs if reductions of GHGs, including carbon dioxide ("CO2"), are mandated under the CAA or by legislation or regulation, or if future legislative, regulatory, or judicial actions lead to more stringent emission reduction requirements for conventional pollutants.  These costs cannot reasonably be predicted at this time because of the uncertainty of such potential actions.

Liability for releases and cleanup of hazardous substances is primarily regulated by the federal Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), and other federal and parallel state statutes.  In a manner similar to many other industries and power systems, TVA has generated or used hazardous substances over the years.

TVA is aware of alleged hazardous-substance releases at certain non-TVA areas for which it may have some liability.  Although there is little or no known evidence that TVA contributed any significant quantity of hazardous substances to most of the non-TVA areas, there is evidence that TVA sent some materials to Ward Transformer, a non-TVA site in Raleigh, North Carolina.  The Ward Transformer site is contaminated by PCBs from electrical equipment.  There is documentation showing that TVA sent a limited amount of electrical equipment containing PCBs to the site in 1974.  A working group of potentially responsible parties (the "PRP Work Group") is cleaning up on-site contamination in accordance with an agreement with the EPA.  The cleanup effort has been divided into four areas: two phases of soil cleanup; cleanup of off-site contamination in the downstream drainage basin; and supplemental groundwater remediation.  The cost estimate for the first phase of soil cleanup is approximately $55 million.  The cost estimate for the second phase of soil cleanup is $10 million.  Estimates for cleanup of off-site contamination in the downstream drainage basin range from $6 million to $25 million.  There are no reliable estimates for the supplemental groundwater remediation phase.  On April 30, 2009, the PRP Work Group filed an amended complaint in federal court against potentially responsible parties who had not yet settled, including TVA, regarding the two phases of soil cleanup.  TVA settled this lawsuit and its potential liability for the two phases of soil cleanup for $300 thousand and has been dismissed as a party.  Although the settlement with respect to the first two phases does not prohibit TVA from having liability in connection with the other two phases or any natural resource damages, the U.S. Department of Justice is attempting to negotiate a government-wide settlement of the liability of all federal agencies (including TVA) for cleanup of offsite contamination in the downstream drainage basin and the investigative portion of the supplemental groundwater remediation. TVA believes that its liability for the remaining two phases and natural resource damages is less than $1 million.

TVA operations at some TVA facilities have resulted in oil spills and other contamination that TVA is addressing.  At September 30, 2013, TVA’s estimated liability for cleanup and similar environmental work for those sites for which sufficient information is available to develop a cost estimate (primarily the TVA sites) was approximately $15 million on a non-discounted basis and was included in Accounts payable and accrued liabilities and Other long-term liabilities on the Balance Sheet.

Other. TVA is undertaking cost reduction initiatives with the goal of keeping rates low, keeping reliability high, and continuing to fulfill its broader mission of environmental stewardship and economic development.  TVA will focus on reducing operating and maintenance costs through further efficiency gains and streamlining the organization. Given that approximately 80 percent of TVA's operating and maintenance costs are related to labor, staffing level reductions will necessarily result from this process.  The evaluation of staffing levels will take into account attrition, elimination of open positions, and retirements in order to minimize the impact on current personnel.  Certain employees may be eligible for severance payments if impacted by the reorganization, but the amount of such payments is not reasonably estimable at this time as management's evaluation of staffing levels is not yet complete. Accordingly, no severance costs have been accrued as of September 30, 2013.  TVA’s goal is to reduce operating and maintenance costs by $500 million by 2015 as compared to its 2013 budget.

Legal Proceedings

From time to time, TVA is party to or otherwise involved in lawsuits, claims, proceedings, investigations, and other legal matters ("Legal Proceedings") that have arisen in the ordinary course of conducting TVA's activities, as a result of a catastrophic event or otherwise.  
 
General. At September 30, 2013, TVA had accrued approximately $302 million of probable losses with respect to Legal Proceedings and estimated the range of these losses to be from $302 million to $314 million.  Of the accrued amount, $189 million is included in Other long-term liabilities, $85 million is included in Accounts payable and accrued liabilities, and $28 million is included in Regulatory assets.  TVA is currently unable to estimate any amount or any range of amounts of reasonably possible losses, and no assurance can be given that TVA will not be subject to significant additional claims and liabilities.  If actual liabilities significantly exceed the estimates made, TVA's results of operations, liquidity, and financial condition could be materially adversely affected.
 
Environmental Agreements. In April 2011, TVA entered into two substantively similar agreements, one with the EPA and the other with Alabama, Kentucky, North Carolina, Tennessee, and three environmental advocacy groups: the Sierra Club, the National Parks Conservation Association, and Our Children's Earth Foundation (collectively, the "Environmental Agreements”). They became effective in June 2011. Under the Environmental Agreements, TVA committed to (1) retire on a phased schedule 18 coal-fired units with a combined summer net dependable capability of 2,200 MW, (2) control, convert, or retire additional coal-fired units with a combined summer net dependable capability of 3,500 MW, (3) comply with annual, declining emission caps for SO2 and NOx, (4) invest $290 million in certain TVA environmental projects, (5) provide $60 million to Alabama, Kentucky, North Carolina, and Tennessee to fund environmental projects, and (6) pay civil penalties of $10 million. In exchange for these commitments, most past claims against TVA based on alleged New Source Review and associated violations were waived and cannot be brought against TVA. Future claims including those for sulfuric acid mist and GHG emissions can still be brought against TVA, and claims for increases in particulates can also be pursued at many of TVA’s coal-fired units. Additionally, the Environmental Agreements do not address compliance with new laws and regulations or the cost associated with such compliance.
 
The liabilities related to the Environmental Agreements are included in Accounts payable and accrued liabilities and Other long-term liabilities on the September 30, 2013 Consolidated Balance Sheet. In conjunction with the approval of the Environmental Agreements, the TVA Board determined that it was appropriate to record TVA's liabilities under the Environmental Agreements as regulatory assets, and they are included as such on the September 30, 2013 Consolidated Balance Sheet and will be recovered in rates in future periods.
 
Several legal and administrative clean air proceedings have already been terminated in connection with the Environmental Agreements. Additionally, the proceeding discussed below involving the John Sevier CAA permit is expected to be narrowed in scope.
 
Legal Proceedings Related to the Kingston Ash Spill.  Seventy-eight lawsuits based on the Kingston ash spill have been filed in the United States District Court for the Eastern District of Tennessee.  Fifteen of these lawsuits have been dismissed, and 63 lawsuits are active and in various stages of litigation.  Plaintiffs are residents, businesses, and property owners in the Kingston area and allege tort claims for damage to property (for example, nuisance, strict liability, trespass, and negligence), with some plaintiffs also alleging claims for personal injury, business loss, and inverse condemnation.  Plaintiffs seek unspecified compensatory and punitive damages, court orders to clean up properties, and other relief.  TVA is the only active defendant in these actions.
 
A bench trial on the issue of dike failure causation in the seven earliest cases was held in September and October 2011 ("Phase I trial").  Plaintiffs in the 56 remaining cases have agreed to be bound by the Phase I trial record and decision.  In August 2012, the court issued its Phase I decision, finding that certain actions by TVA contributed to the ash spill.  On November 20, 2012, the court ordered the parties to participate in mediation within 120 days of the issuance of the order.  The court has extended the mediation period three times, and the mediation period is now scheduled to end on January 14, 2014. If the case is not resolved through mediation, the case will proceed to the damages phase ("Phase II") trial, during which the individual plaintiffs must prove both that they incurred damages and that the ash spill was the cause of the damages.  The date for the Phase II trial has not yet been set.

TVA has received several notices of intent to sue under various environmental statutes from both individuals and environmental groups, but no such suits have been filed.
 
Civil Penalty and Natural Resource Damages for the Kingston Ash Spill.  In June 2010, TDEC issued a civil penalty order of approximately $12 million to TVA for the Kingston ash spill, citing violations of the Tennessee Solid Waste Disposal Act and the Tennessee Water Quality Control Act.  Of the $12 million, TVA has satisfied $10 million, and TDEC has approved environmental projects valued at $2 million as a credit against the penalty amount.  In January 2011, TVA entered into a memorandum of agreement with TDEC and the U.S. Fish and Wildlife Service establishing a process and a method for resolving the natural resource damage claim associated with the Kingston ash spill.  As part of this memorandum of agreement, TVA agreed to pay $250 thousand each year for three years as a down payment on the amount of natural resource damages ultimately established, and to reimburse TDEC and the U.S. Fish and Wildlife Service for their costs.
 
Case Involving Tennessee Valley Authority Retirement System.  In March 2010, eight current and former participants in and beneficiaries of TVARS filed suit in the United States District Court for the Middle District of Tennessee against the six then-current members of the TVARS Board.  The lawsuit challenged the TVARS Board's decision to suspend the TVA contribution requirements for 2010 through 2013, and to amend the TVARS Rules and Regulations to (1) reduce the calculation for COLA benefits for CY 2010 through CY 2013, (2) reduce the interest crediting rate for the fixed fund accounts, and (3) increase the eligibility age to receive COLAs from age 55 to 60.  The plaintiffs allege that these actions violated the TVARS Board members' fiduciary duties to the plaintiffs (and the purported class) and the plaintiffs' contractual rights, among other claims.  The plaintiffs sought, among other things, unspecified damages, an order directing the TVARS Board to rescind the amendments, and the appointment of a seventh TVARS Board member.  Five of the six individual defendants filed motions to dismiss the lawsuit, while the remaining defendant filed an answer to the complaint.  In July 2010, TVA moved to intervene in the suit in the event it was not dismissed.  In September 2010, the district court dismissed the breach of fiduciary duty claim against the directors without prejudice, allowing the plaintiffs to file an amended complaint within 14 days against TVARS and TVA but not the individual directors.  The plaintiffs previously had voluntarily withdrawn their constitutional claims, so the court also dismissed those claims without prejudice.  The court dismissed with prejudice the plaintiffs' claims for breach of contract, violation of the Internal Revenue Code, and appointment of a seventh TVARS Board member. 
 
In September 2010, the plaintiffs filed an amended complaint against TVARS and TVA.  The plaintiffs allege, among other things, violations of their constitutional rights (due process, equal protection, and property rights), violations of the Administrative Procedure Act, and breach of statutory duties owed to the plaintiffs.  They seek a declaratory judgment and appropriate relief for the alleged statutory and constitutional violations and breaches of duty.  TVA filed its answer to the amended complaint in December 2010.  In May 2012, the court granted the parties' joint motion to administratively close the case subject to reopening to allow the parties the opportunity to engage in mediation. In July 2013, the court granted the plaintiffs' motion to reopen the lawsuit.
 
Case Arising out of Hurricane Katrina.  In April 2006, TVA was added as a defendant to a class action lawsuit brought in the United States District Court for the Southern District of Mississippi by 14 Mississippi residents allegedly injured by Hurricane Katrina.  The plaintiffs sued seven large oil companies and an oil company trade association, three large chemical companies and a chemical trade association, and 31 large companies involved in the mining and/or burning of coal, alleging that the defendants' GHG emissions contributed to global warming and were a proximate and direct cause of Hurricane Katrina's increased destructive force.  Action by the United States Supreme Court in January 2011 ended this case in a manner favorable to TVA.
 
However, in May 2011, under a Mississippi state statute that permits the re-filing of lawsuits that were dismissed on procedural grounds, the plaintiffs filed another lawsuit in the United States District Court for the Southern District of Mississippi against the same and additional defendants, again alleging that the defendants' GHG emissions contributed to global warming and were a proximate and direct cause of Hurricane Katrina's increased destructive force. The court dismissed the lawsuit in March 2012 for a variety of reasons, including that the lawsuit presented a non-justiciable political question and that all of the claims were preempted by the CAA. The plaintiffs appealed the dismissal to the United States Court of Appeals for the Fifth Circuit, which affirmed the dismissal on May 14, 2013.

Case Involving the NRC Waste Confidence Decision on Spent Nuclear Fuel Storage. In June 2012, the U.S. Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") vacated the NRC's updated WCD. The WCD is a generic determination by the NRC that spent nuclear fuel can be safely managed until a permanent off-site repository is established and has been a key component of the NRC licensing activities since 1984. The most recent update provided that the permanent repository would be available when necessary and that spent fuel could be stored for 60 years after a plant's license terminated. The D.C. Circuit vacated this update on the grounds that, among other things, the NRC failed to support it with an adequate National Environmental Policy Act review and the NRC did not evaluate what would happen if the repository was never built.

                In June 2012, multiple intervenor groups submitted a petition to the NRC to (a) hold in abeyance all pending reactor licensing decisions that would depend upon the WCD and (b) establish a process for ensuring that the remanded proceeding complies with the public participation requirements of Section 189a of the Atomic Energy Act.  In August 2012, the NRC issued an order (the "August NRC Order") preventing the issuance of a final licensing decision in all proceedings affected by the petition, including Watts Bar Unit 2 and Bellefonte Units 3 and 4.  While resolution of unrelated contentions can proceed, the NRC stated that it will not issue final licensing decisions until it has “appropriately addressed” the D.C. Circuit decision, and all pending contentions concerning the WCD are being held in abeyance pending the NRC's completion of an environmental review and generic rulemaking addressing the shortcomings identified by the D.C. Circuit. A draft rule and Environmental Impact Statement addressing the D.C. Circuit decision were issued by the NRC staff for public comment in September 2013. The NRC is currently scheduled to address this issue by September 2014.

Administrative Proceeding Regarding Renewal of Operating License for Sequoyah Nuclear Plant.  In May 2013, the Blue Ridge Environmental Defense League ("BREDL"), the Bellefonte Efficiency and Sustainability Team ("BEST"), and Mothers Against Tennessee River Radiation filed a petition with the NRC opposing the renewal of the operating license for Sequoyah Nuclear Plant Units 1 and 2. The petition contains eight specific contentions challenging the adequacy of the license renewal application that TVA submitted to the NRC in January 2013.  TVA filed a response with the Atomic Safety and Licensing Board ("ASLB") opposing the admission of all eight of the petitioners' contentions. In July 2013, the ASLB concluded that BREDL is the only one of the three petitioners that has standing to intervene in this proceeding. The ASLB also held that seven of the contentions were inadmissible, and held one portion of the remaining contention related to WCD in abeyance pending further direction from the NRC.

Administrative Proceedings Regarding Bellefonte Units 3 and 4.  TVA submitted its combined construction and operating license application ("CCOLA") for two Advanced Passive 1000 reactors at Bellefonte Units 3 and 4 to the NRC in October 2007.  In June 2008, Bellefonte Efficiency and Sustainability Team ("BEST"), BREDL, and Southern Alliance for Clean Energy ("SACE") submitted a joint petition for intervention and a request for a hearing.  The Atomic Safety and Licensing Board ("ASLB") denied standing to BEST and admitted four of the 20 contentions submitted by BREDL and SACE.  The NRC reversed the ASLB's decision to admit two of the four contentions, leaving only two contentions (concerning the estimated costs of the new nuclear plant and the impact of the facility's operations on aquatic ecology) to be litigated in a future hearing.  In January 2012, TVA notified the ASLB that the NRC had placed the CCOLA in “suspended” status indefinitely at TVA's request, and TVA requested that the ASLB hold the proceeding in abeyance pending a decision by TVA regarding the best path forward with regards to the CCOLA.
 
In July 2012, BREDL petitioned for the admission of another new, late-filed contention stemming from the D.C. Circuit's order vacating the WCD. This contention is being held in abeyance pursuant to the August NRC Order.

Administrative Proceedings Regarding Watts Bar Unit 2.  In July 2009, SACE, the Tennessee Environmental Council, the Sierra Club, We the People, and BREDL filed a request for a hearing and petition to intervene in the NRC administrative process reviewing TVA's application for an operating license for Watts Bar Unit 2.  In November 2009, the ASLB granted SACE's request for hearing, admitted two of SACE's seven contentions for hearing, and denied the request for hearing submitted on behalf of the other four petitioners.  The ASLB subsequently dismissed one contention, leaving one aquatic impact contention.  In November 2011, TVA filed a motion for summary disposition, arguing that additional aquatic studies conducted by TVA indicate there is no longer a genuine issue of material fact in connection with SACE's remaining aquatic impact contention.  In July 2013, SACE filed a motion to withdraw its aquatic impact contention.  The ASLB has granted this motion.

In July 2012, SACE petitioned for the admission of another new, late-filed contention, similar to the one filed in the Bellefonte Units 3 and 4 proceeding, stemming from the D.C. Circuit's order vacating the WCD. Similarly, this contention is being held in abeyance pursuant to the August NRC Order.

John Sevier Fossil Plant Clean Air Act Permit. In September 2010, the Environmental Integrity Project, the Southern Environmental Law Center, and the Tennessee Environmental Council filed a petition with the EPA, requesting that the EPA Administrator object to the CAA permit issued to TVA for operation of John Sevier. Among other things, the petitioners allege that repair, maintenance, or replacement activities undertaken at John Sevier Unit 3 in 1986 triggered the Prevention of Significant Deterioration ("PSD") requirements for SO2 and NOx. The CAA permit, issued by TDEC, remains in effect pending the disposition of the petition. The Environmental Agreements should narrow the scope of this proceeding. See Environmental Agreements.

National Environmental Policy Act Challenge at Gallatin Fossil Plant. To comply with the Environmental Agreements and the Mercury and Air Toxics Standards, TVA chose to reduce emissions at the Gallatin Fossil Plant by installing controls and an associated landfill. Pursuant to the National Environmental Policy Act ("NEPA"), TVA completed an Environmental Assessment in March 2013 to assess the impact of installing these emission controls. In April 2013, the Tennessee Environmental Council, Tennessee Scenic Rivers Association, Sierra Club, and Center for Biological Diversity filed suit in the United States District Court for the Middle District of Tennessee alleging that TVA violated NEPA when it decided to install additional emission controls and construct an associated landfill at the Gallatin Fossil Plant. Plaintiffs demand that TVA prepare an Environmental Impact Statement, and are asking the court to enjoin TVA from taking any further action relating to these matters pending compliance with NEPA. This case has been transferred to the United States District Court for the Eastern District of Tennessee.

Kingston Fossil Plant NPDES Permit Administrative Appeal.  The Sierra Club filed a challenge to the National Pollutant Discharge Elimination System ("NPDES") permit issued by Tennessee for the scrubber-gypsum pond discharge at Kingston in November 2009 before the Tennessee Board of Water Quality, Oil, and Gas ("TN Board").  TDEC is the defendant in the challenge, and TVA has intervened in support of TDEC's decision to issue the permit.  The matter was set for a hearing before the TN Board in February 2011, but has since been stayed by agreement of the parties.  
 
Bull Run Fossil Plant NPDES Permit Administrative Appeal.  SACE and the Tennessee Clean Water Network ("TCWN") filed a challenge to the NPDES permit for the Bull Run Fossil Plant in November 2010.  TDEC is the defendant in the challenge, and TVA's motion to intervene to support TDEC's decision to issue the permit was granted in January 2011.  At the contested case hearing in October 2013, the TN Board granted TDEC's and TVA's joint motion for involuntary dismissal following the conclusion of the petitioners' presentation of evidence.
 
Johnsonville Fossil Plant NPDES Permit Administrative Appeal.  SACE and TCWN filed a challenge to the NPDES permit for the Johnsonville Fossil Plant in March 2011.  TDEC is the defendant in the challenge.  TVA's motion to intervene was granted in August 2011. The matter has not yet been given a hearing date before the TN Board.
 
John Sevier Fossil Plant NPDES Permit Administrative Appeal.  SACE and TCWN filed a challenge to the NPDES permit for John Sevier in May 2011.  TDEC is the defendant in the challenge.  TVA's motion to intervene was granted in August 2011. The matter has not yet been given a hearing date before the TN Board.
 
Gallatin Fossil Plant NPDES Permit Administrative Appeal. SACE, TCWN, and the Sierra Club filed a challenge to the NPDES permit for the Gallatin Fossil Plant in June 2012. TDEC is the defendant in the challenge. TVA's motion to intervene was granted in September 2012. Administrative discovery is underway. The matter has been set for a hearing before the TN Board in September 2014.
 
Case Involving Colbert Fossil Plant.  On April 1, 2013, the Alabama Department of Environmental Management ("ADEM") filed suit in the Circuit Court of Colbert County, Alabama, alleging that unauthorized discharges from TVA's Colbert Fossil Plant were violating the Alabama Water Pollution Control Act.  On May 13, 2013, TVA and ADEM entered into a consent decree which resolves this lawsuit.  The decree requires, among other things, that TVA continue remediation efforts TVA had begun prior to the suit being filed and stop using an unlined landfill after a lined landfill is approved and constructed.  TVA also agreed to pay $150 thousand.

Petitions Resulting from Japanese Nuclear Events. As a result of events that occurred at the Fukushima Daiichi Nuclear Power Plant in March 2011, petitions have been filed with the NRC which could impact TVA's nuclear program. While some petitions have been dismissed after review, petitions that remain open include the following:
 
•
Petition to Immediately Suspend the Operating Licenses of GE BWR Mark I Units Pending the Full NRC Review With Independent Expert and Public Participation From Affected Emergency Planning Zone Communities
 
Beyond Nuclear filed a petition in April 2011, requesting that the NRC take emergency enforcement action against all nuclear reactor licensees that operate units that use the General Electric Mark I BWR design. TVA uses this design at Browns Ferry Units 1, 2, and 3. The petition requests the NRC to take several actions, including the suspension of the operating licenses at the affected nuclear units, including Browns Ferry, until several milestones have been met. In December 2011, the NRC provided its initial response to the petition. The NRC accepted five specific requests that would apply directly or indirectly to Browns Ferry, including issues relating to spent fuel pool use and location, Mark I containment hardened vent systems and design, and backup electrical power. Each of these items was accepted for further investigation, but the requests for immediate action were rejected. The NRC has not yet rendered a decision regarding the petition.

•
Twelve separate petitions on various issues
 
In August 2011, the Natural Resources Defense Council submitted twelve separate letters to the NRC requesting action on various health and safety aspects of operating nuclear facilities in the United States. The NRC is treating these as a single 10 CFR 2.206 Petition. The NRC has not yet rendered a decision regarding the petition.
 
•
Petition Pursuant to 10 CFR 2.206 - Demand For Information Regarding Compliance with 10 CFR 50, Appendix A, General Design Criterion 44, Cooling Water, and 10 CFR 50.49, Environmental Qualification of Electric Equipment Important to Safety for Nuclear Power Plants
 
A petition was filed by the Union of Concerned Scientists in July 2011, requesting that a demand for information be issued for affected licensees, including TVA with regards to Browns Ferry, describing how the facilities comply with General Design Criterion 44, Cooling Water, within Appendix A to 10 CFR Part 50, and with 10 CFR 50.49, Environmental Qualification of Electric Equipment Important to Safety for Nuclear Power Plants, for all applicable design and licensing bases events. The NRC has not yet rendered a decision regarding the petition.
Related Parties
Related Parties
Related Parties

TVA is a wholly-owned corporate agency of the federal government, and because of this relationship, TVA’s revenues and expenses are included as part of the federal budget as a revolving fund.  TVA’s purpose and responsibilities as an agency are described under the “Other Agencies” section of the federal budget.

TVA currently receives no appropriations from Congress and funds its business using power system revenues, power financings, and other revenues.  TVA is a source of cash to the federal government.  TVA must repay an additional $10 million of the Power Program Appropriation Investment, and then pay a return on the outstanding balance of this investment indefinitely.  See Note 16 — Appropriation Investment.

TVA also has access to a financing arrangement with the U.S. Treasury pursuant to the TVA Act.  TVA and the U.S. Treasury entered into a memorandum of understanding under which the U.S. Treasury provides TVA with a $150 million credit facility.  This credit facility was renewed and has a maturity date of September 30, 2014.  Access to this credit facility or other similar financing arrangements has been available to TVA since the 1960s.  See Note 12 — Credit Facility Agreements.

In the normal course of business, TVA contracts with other federal agencies for sales of electricity and other services.  Transactions with agencies of the federal government were as follows:
Related Party Transactions
For the years ended, or at, September 30
 
2013
 
2012
 
2011
Electricity sales
$
120

 
$
117

 
$
130

Other income
102

 
164

 
104

Operating and maintenance
314

 
375

 
295

Cash and cash equivalents
38

 
32

 
27

Accounts receivable, net
58

 
49

 
84

Accounts payable and accrued liabilities
133

 
204

 
175

Return on Power Program Appropriation Investment
7

 
7

 
7

Return of Power Program Appropriation Investment
20

 
20

 
20

Unaudited Quarterly Financial Information
Unaudited Quarterly Financial Information
Unaudited Quarterly Financial Information

A summary of the unaudited quarterly results of operations for the years 2013 and 2012 follows.  This summary should be read in conjunction with the audited consolidated financial statements appearing herein.  Results for interim periods may fluctuate as a result of seasonal weather conditions, changes in rates, and other factors.
Unaudited Quarterly Financial Information
2013
 
First
 
Second
 
Third
 
Fourth
 
Total
Operating revenues
$
2,579

 
$
2,741

 
$
2,602

 
$
3,034

 
$
10,956

Operating expenses
2,523

 
2,380

 
2,324

 
2,276

 
9,503

Operating income
56

 
361

 
278

 
758

 
1,453

Net income (loss)
(245
)
 
54

 
(12
)
 
474

 
271


Unaudited Quarterly Financial Information
2012
 
First
 
Second
 
Third
 
Fourth
 
Total
Operating revenues
$
2,568

 
$
2,604

 
$
2,777

 
$
3,271

 
$
11,220

Operating expenses
2,431

 
2,358

 
2,499

 
2,632

 
9,920

Operating income
137

 
246

 
278

 
639

 
1,300

Net income (loss)
(173
)
 
(94
)
 
(23
)
 
350

 
60

Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Policies)
General 

General

The Tennessee Valley Authority ("TVA") is a corporate agency and instrumentality of the United States that was created in 1933 by legislation enacted by the United States ("U.S.") Congress in response to a request by President Franklin D. Roosevelt.  TVA was created to, among other things, improve navigation on the Tennessee River, reduce the damage from destructive flood waters within the Tennessee River system and downstream on the lower Ohio and Mississippi Rivers, further the economic development of TVA's service area in the southeastern United States, and sell the electricity generated at the facilities TVA operates.

Today, TVA operates the nation's largest public power system and supplies power in most of Tennessee, northern Alabama, northeastern Mississippi, and southwestern Kentucky and in portions of northern Georgia, western North Carolina, and southwestern Virginia to a population of over nine million people.

TVA also manages the Tennessee River, its tributaries, and certain shorelines to provide, among other things, year-round navigation, flood damage reduction, and affordable and reliable electricity. Consistent with these primary purposes, TVA also manages the river system and public lands to provide recreational opportunities, adequate water supply, improved water quality, cultural and natural resource protection, and economic development.

The power program has historically been separate and distinct from the stewardship programs.  It is required to be self-supporting from power revenues and proceeds from power financings, such as proceeds from the issuance of bonds, notes, or other evidences of indebtedness ("Bonds").  Although TVA does not currently receive congressional appropriations, it is required to make annual payments to the U.S. Treasury in repayment of and as a return on the government's appropriation investment in TVA's power facilities (the "Power Program Appropriation Investment").  In the 1998 Energy and Water Development Appropriations Act, Congress directed TVA to fund essential stewardship activities related to its management of the Tennessee River system and nonpower or stewardship properties with power revenues in the event that there were insufficient appropriations or other available funds to pay for such activities in any fiscal year.  Congress has not provided any appropriations to TVA to fund such activities since 1999.  Consequently, during 2000, TVA began paying for essential stewardship activities primarily with power revenues, with the remainder funded with user fees and other forms of revenues derived in connection with those activities.  The activities related to stewardship properties do not meet the criteria of an operating segment under accounting principles generally accepted in the United States of America ("GAAP").  Accordingly, these assets and properties are included as part of the power program, TVA's only operating segment.

Power rates are established by the TVA Board of Directors ("TVA Board") as authorized by the Tennessee Valley Authority Act of 1933, as amended, 16 U.S.C. §§ 831-831ee (as amended, the “TVA Act”).  The TVA Act requires TVA to charge rates for power that will produce gross revenues sufficient to provide funds for operation, maintenance, and administration of its power system; payments to states and counties in lieu of taxes ("tax equivalents"); debt service on outstanding indebtedness; payments to the U.S. Treasury in repayment of and as a return on the Power Program Appropriation Investment; and such additional margin as the TVA Board may consider desirable for investment in power system assets, retirement of outstanding Bonds in advance of maturity, additional reduction of the Power Program Appropriation Investment, and other purposes connected with TVA's power business.  In setting TVA's rates, the TVA Board is charged by the TVA Act to have due regard for the primary objectives of the TVA Act, including the objective that power shall be sold at rates as low as are feasible.  Rates set by the TVA Board are not subject to review or approval by any state or other federal regulatory body.
Fiscal Year 
Fiscal Year

TVA's fiscal year ends September 30.  Years (2013, 2012, etc.) refer to TVA's fiscal years unless they are preceded by “CY,” in which case the references are to calendar years.
Cost-Based Regulation 
Cost-Based Regulation

Since the TVA Board is authorized by the TVA Act to set rates for power sold to its customers, TVA is self-regulated.  Additionally, TVA's regulated rates are designed to recover its costs.  In view of demand for electricity and the level of competition, TVA believes that rates, set at levels that will recover TVA's costs, can be charged and collected.  As a result of these factors, TVA records certain assets and liabilities that result from the regulated ratemaking process that would not be recorded under GAAP for non-regulated entities.  Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates.  Regulatory liabilities generally represent obligations to make refunds to customers for previous collections for costs that are not likely to be incurred or deferral of gains that will be credited to customers in future periods.  TVA assesses whether the regulatory assets are probable of future recovery by considering factors such as applicable regulatory changes, potential legislation, and changes in technology.  Based on these assessments, TVA believes the existing regulatory assets are probable of recovery.  This determination reflects the current regulatory and political environment and is subject to change in the future.  If future recovery of regulatory assets ceases to be probable, or any of the other factors described above cease to be applicable, TVA would no longer be considered to be a regulated entity and would be required to write off these costs.  Most regulatory asset write offs would be required to be recognized in earnings in the period in which future recovery ceases to be probable.

Basis of Presentation 
Basis of Presentation

The accompanying consolidated financial statements, which have been prepared in accordance with GAAP, include the accounts of TVA and variable interest entities of which TVA is determined to be the primary beneficiary. See Note 8. Intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates 
Use of Estimates

The preparation of financial statements requires TVA to estimate the effects of various matters that are inherently uncertain as of the date of the consolidated financial statements.  Although the consolidated financial statements are prepared in conformity with GAAP, TVA is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses reported during the reporting period.  Each of these estimates varies in regard to the level of judgment involved and its potential impact on TVA's financial results.  Estimates are considered critical either when a different estimate could have reasonably been used, or where changes in the estimate are reasonably likely to occur from period to period, and such use or change would materially impact TVA's financial condition, results of operations, or cash flows.
Reclassifications 
Reclassifications

Certain reclassifications have been made to the 2012 and 2011 Statements of Cash Flows in the Cash flows from operating activities section as $(14) million and $(21) million previously reported as Other, net for the years ended September 30, 2012 and 2011, respectively, were reclassified as Regulatory assets and $42 million for the year ended September 30, 2011, previously reported as Nuclear refueling outage amortization cost was reclassified as Other, net. Additionally, a reclassification has been made to the 2011 Statement of Cash Flows in the Cash flows from financing activities section as $5 million previously reported as Proceeds from leasebacks was reclassified as Other, net.
Cash and Cash Equivalents and Restricted Cash and Investments 
Cash and Cash Equivalents

Cash includes cash on hand and non-interest bearing cash and deposit accounts. All highly liquid investments with original maturities of three months or less are considered cash equivalents.

Restricted Cash and Investments

Restricted cash reflects amounts related to collateral posted with TVA by a swap counterparty.
    
Allowance for Uncollectible Accounts 
Allowance for Uncollectible Accounts

The allowance for uncollectible accounts reflects TVA's estimate of probable losses inherent in its accounts and loans receivable balances.  TVA determines the allowance based on known accounts, historical experience, and other currently available information including events such as customer bankruptcy and/or a customer failing to fulfill payment arrangements after 90 days.  It also reflects TVA's corporate credit department's assessment of the financial condition of customers and the credit quality of the receivables.

The allowance for uncollectible accounts was $1 million and $7 million at September 30, 2013, and 2012, respectively, for accounts receivable.  Additionally, loans receivable of $73 million and $76 million at September 30, 2013, and 2012, respectively, are included in Other long-term assets and reported net of allowances for uncollectible accounts of $10 million and $12 million at September 30, 2013, and 2012, respectively.

Revenues 
Energy Prepayment Obligations and Discounts on Sales

During 2002, TVA introduced an energy prepayment program, the discounted energy units ("DEU") program.  Under this program, TVA LPCs could purchase DEUs generally in $1 million increments, and each DEU entitles the purchaser to a $.025/kilowatt-hour discount on a specified quantity of firm power over a period of years (5, 10, 15, or 20) for each kilowatt-hour in the prepaid block.  The remainder of the price of the kilowatt-hours delivered to the LPC is due upon billing.  TVA’s DEU program allowed LPCs to use cash on hand to prepay TVA for some of their power needs, providing funding to TVA and a savings to LPCs in the form of a discount on future purchases.  The LPC receives a discount on a specified volume of firm energy purchased.  The supplement to the power contract specifies the discount rate (2.5 cents per kilowatt-hour), the monthly block of kilowatt-hours to which the discount applies, the number of years (term), and contingencies upon contract termination.

TVA has not offered the DEU program since the end of 2004.  Total sales for the program since inception have been approximately $55 million.  TVA is accounting for the prepayment proceeds as unearned revenue and is reporting the obligations to deliver power as Energy prepayment obligations and Current portion of energy prepayment obligations on the September 30, 2013 and 2012 Consolidated Balance Sheets.

TVA recognizes revenue as electricity is delivered to LPCs, based on the ratio of units of kilowatt-hours delivered to total units of kilowatt-hours under contract.  At September 30, 2013, approximately $54 million had been applied against power billings on a cumulative basis during the life of the program, of which approximately $2 million was recognized as noncash revenue during 2013.  Approximately $5 million was applied against power billings during each of 2012 and 2011.

In 2004, TVA and its largest customer, Memphis Light, Gas and Water Division ("MLGW"), entered into an energy prepayment agreement under which MLGW prepaid TVA $1.5 billion for the future costs of electricity to be delivered by TVA to MLGW over a period of 180 months.  TVA accounted for the prepayment as unearned revenue and is reporting the obligation to deliver power under this arrangement as Energy prepayment obligations and Current portion of energy prepayment obligations on the September 30, 2013 and 2012 Consolidated Balance Sheets.  TVA expects to recognize approximately $100 million of noncash revenue in each year of the arrangement as electricity is delivered to MLGW based on the ratio of units of kilowatt-hours delivered to total units of kilowatt-hours under contract.  At September 30, 2013, $990 million had been recognized as noncash revenue on a cumulative basis during the life of the agreement, $100 million of which was recognized as noncash revenue during each of 2013, 2012, and 2011.

Discounts, which are recorded as a reduction to electricity sales, for both programs amounted to $47 million for each of the years ended September 30, 2013, 2012, and 2011.
Revenues

Revenues from power sales are recorded as electricity is delivered to customers. In addition to power sales invoiced and recorded during the month, TVA accrues estimated unbilled revenues for power sales provided to six customers whose billing date occurs prior to the end of the month.  Exchange power sales are presented in the accompanying consolidated statements of operations as a component of Sales of electricity. Exchange power sales are sales of excess power after meeting TVA native load and directly served requirements.  (Native load refers to the customers on whose behalf a company, by statute, franchise, regulatory requirement, or contract, has undertaken an obligation to serve.) 

From time to time TVA transfers fiber optic capacity on TVA’s network to telecommunications service carriers and TVA local power company customers of TVA ("LPCs").  These transactions are structured as indefeasible rights of use ("IRUs"), which are the exclusive right to use a specified amount of fiber optic capacity for a specified term.  TVA accounts for the consideration received on transfers of fiber optic capacity for cash and on all of the other elements deliverable under an IRU as revenue ratably over the term of the agreement.  TVA does not recognize revenue on any contemporaneous exchanges of its fiber optic capacity for an IRU of fiber optic capacity of the counterparty to the exchange.

TVA engages in a wide array of arrangements in addition to power sales.  TVA records revenue when it is realized or realizable and earned when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the price or fee is fixed or determinable; and collectability is reasonably assured. Revenues from activities related to TVA’s overall mission are recorded as other operating revenue versus those that are not related to the overall mission, which are recorded in Other income (expense), net.

Inventories 
Inventories

Certain Fuel, Materials, and Supplies.  Coal, oil, limestone, tire-based fuel inventories, and materials and supplies inventories are valued using an average unit cost method.  A new average cost is computed after each inventory purchase transaction, and inventory issuances are priced at the latest moving weighted average unit cost. Natural gas inventories are valued using an average cost method, and a new average cost is computed monthly.

Allowance for Inventory Obsolescence.  TVA reviews material and supplies inventories by category and usage on a periodic basis.  Each category is assigned a probability of becoming obsolete based on the type of material and historical usage data.  Based on the estimated value of the inventory, TVA adjusts its allowance for inventory obsolescence.

Emission Allowances.  TVA has emission allowances for sulfur dioxide ("SO2") and nitrogen oxides ("NOx") which are accounted for as inventory.  The average cost of allowances used each month is charged to operating expense based on tons of SO2 and NOx emitted during the respective compliance periods.  Allowances granted to TVA by the Environmental Protection Agency ("EPA") are recorded at zero cost.

Property, Plant, and Equipment, and Depreciation 
Property, Plant, and Equipment, and Depreciation

Property, Plant, and Equipment. Additions to plant are recorded at cost, which includes direct and indirect costs and an allowance for funds used during construction ("AFUDC").  The cost of current repairs and minor replacements is charged to operating expense.  Nuclear fuel inventories, which are included in Property, plant, and equipment, are valued using the average cost method for raw materials and the specific identification method for nuclear fuel in a reactor.  Amortization of nuclear fuel in a reactor is calculated on a units-of-production basis and is included in fuel expense.

Depreciation. TVA accounts for depreciation of its properties using the composite depreciation convention of accounting.  Accordingly, the original cost of property retired, less salvage value, is charged to accumulated depreciation. Except as described below, depreciation is generally computed on a straight-line basis over the estimated service lives of the various classes of assets. Depreciation expense for the years ended September 30, 2013, 2012, and 2011 was $1.4 billion, $1.7 billion, and $1.4 billion, respectively. Depreciation expense expressed as a percentage of the average annual depreciable completed plant was 3.12 percent for 2013, 3.78 percent for 2012, and 3.21 percent for 2011.  Average depreciation rates by asset class are as follows:
Property, Plant, and Equipment Depreciation Rates
At September 30
(percent)
 
2013
 
2012
 
2011
Asset Class
 
Nuclear
2.86

 
2.71

 
2.58

Coal-Fired
3.47

 
5.65

 
3.80

Hydroelectric
1.30

 
1.35

 
1.43

Gas and oil-fired
3.21

 
3.67

 
3.70

Transmission
2.76

 
2.99

 
3.39

Other
8.14

 
8.10

 
7.39



In April 2011, TVA entered into two substantively similar agreements, one with the EPA and the other with Alabama, Kentucky, North Carolina, Tennessee, and three environmental advocacy groups (collectively, the "Environmental Agreements”).  See Note 20 — Legal Proceedings — Environmental Agreements.  Under the Environmental Agreements, TVA committed, among other things, to retire, on a phased schedule, 18 coal-fired units. 

Consistent with the Environmental Agreements, Units 1 and 2 at John Sevier Fossil Plant ("John Sevier") were retired on December 31, 2012 and Units 3 and 5 at Widows Creek Fossil Plant ("Widows Creek") were retired on July 31, 2013.  In addition on December 31, 2012, John Sevier Units 3 and 4 were idled, and on October 1, 2013, Colbert Fossil Plant ("Colbert") Unit 5 and Johnsonville Fossil Plant ("Johnsonville") Units 5, 6, 9, and 10 were idled. 

Depreciation rates are adjusted to reflect current assumptions so that the units will be fully depreciated by the applicable idle dates.  As a result of TVA's decision to idle or retire units, TVA recognized $49 million and $308 million in accelerated depreciation expense related to the units during the years ended September 30, 2013, and 2012, respectively.

On November 14, 2013, the TVA Board of Directors (the "TVA Board") approved the retirement of Colbert Units 1-5 no later than June 30, 2016 and the retirement of Widows Creek Unit 8. Additionally, the TVA Board approved the retirement of Paradise Fossil Plant ("Paradise") Units 1 and 2 upon the completion of a natural gas-fired plant at the Paradise location.

Capital Lease Agreements.  Property, plant, and equipment also includes assets recorded under capital lease agreements. These primarily consist of power production facilities, water treatment assets, and land of $42 million and power production facilities of $24 million at September 30, 2013 and 2012, respectively, and fuel fabrication and blending facilities of $5 million and $11 million at September 30, 2013 and 2012, respectively.

 Allowance for Funds Used During Construction.  AFUDC capitalized during the year ended September 30, 2013, was $168 million, of which $23 million is reflected in the consolidated balance sheets as a regulatory asset, as compared to $171 million capitalized during the year ended September 30, 2012.  TVA capitalizes interest as AFUDC, based on the average interest rate of TVA’s outstanding debt.  The allowance is applicable to construction in progress related to projects with (1) an expected total project cost of $1.0 billion or more, and (2) an estimated construction period of at least three years in duration. During 2012 and 2011, TVA also included certain nuclear fuel inventories in the calculation of the allowance. During 2012, the TVA Board approved a change in the AFUDC methodology which removed the inclusion of nuclear fuel from the AFUDC calculation effective October 1, 2012. The accumulated balance of costs, which is used to calculate AFUDC, averaged approximately $3.1 billion for the year ended September 30, 2013. Subsequent to August 31, 2013, the accumulated balance of costs for Bellefonte Nuclear Plant ("Bellefonte") were removed from this calculation.

Software Costs.  TVA capitalizes certain costs incurred in connection with developing or obtaining internal-use software. Capitalized software costs are included in Property, plant, and equipment on the consolidated balance sheets and are amortized primarily over five years.  At September 30, 2013 and 2012, unamortized computer software costs totaled $5 million and $26 million, respectively.  Amortization expense related to capitalized computer software costs was $31 million for each of 2013, 2012, and 2011.  Software costs that do not meet capitalization criteria are expensed as incurred.

Impairment of Assets.  TVA evaluates long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable.  For long-lived assets, TVA bases its evaluation on impairment indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements, and other external market conditions or factors that may be present.  If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, TVA determines whether an impairment has occurred based on an estimate of undiscounted cash flows attributable to the asset as compared with the carrying value of the asset.  If an impairment has occurred, the amount of the impairment recognized is measured as the excess of the asset’s carrying value over its fair value.  Additionally, TVA regularly evaluates construction projects.  If the project is canceled or deemed to have no future economic benefit, the project is written off as an asset impairment.

Decommissioning Costs 

Decommissioning Costs

TVA recognizes legal obligations associated with the future retirement of certain tangible long-lived assets.  These obligations relate to fossil fuel-fired generating plants, nuclear generating plants, hydroelectric generating plants/dams, transmission structures, and other property-related assets.  These other property-related assets include, but are not limited to, easements and coal rights.  Activities involved with retiring these assets could include decontamination and demolition of structures, removal and disposal of wastes, and site reclamation.  Revisions to the estimates of asset retirement obligations ("AROs") are made whenever factors indicate that the timing or amounts of estimated cash flows have changed.  Any accretion or depreciation expense related to these liabilities and assets is charged to a regulatory asset.  See Note 7 — Nuclear Decommissioning Costs and Non-Nuclear Decommissioning Costs.
Blended Low-Enriched Uranium Program 
Blended Low-Enriched Uranium Program

Under the blended low-enriched uranium ("BLEU") program, TVA, the Department of Energy ("DOE"), and certain nuclear fuel contractors have entered into agreements providing for the DOE's surplus of enriched uranium to be blended with other uranium down to a level that allows the blended uranium to be fabricated into fuel that can be used in nuclear power plants.   This blended nuclear fuel was first loaded in a Browns Ferry Nuclear Plant ("Browns Ferry") reactor in 2005 and is expected to continue to be used to reload the Browns Ferry reactors through at least 2016. BLEU fuel was loaded into Sequoyah Nuclear Plant ("Sequoyah") Unit 2 three times but is not expected to be used in the Sequoyah reactors in the future.

Under the terms of an interagency agreement between TVA and the DOE, in exchange for supplying highly enriched uranium materials to the appropriate third-party fuel processors for processing into usable BLEU fuel for TVA, the DOE participates to a degree in the savings generated by TVA’s use of this blended nuclear fuel.  Over the life of the program, TVA projects that the DOE’s share of savings generated by TVA’s use of this blended nuclear fuel could result in payments to the DOE of as much as $175 million.  TVA accrues an obligation with each BLEU reload batch related to the portion of the ultimate future payments estimated to be attributable to the BLEU fuel currently in use.  During 2009, the DOE and TVA agreed that this obligation will be offset by amounts that the DOE expects to owe TVA in the future for certain decommissioning costs that TVA will pay on the DOE’s behalf.  Accordingly, TVA will remit the BLEU fuel savings amounts to the DOE, only after those future decommissioning costs have been offset against TVA’s obligation to the DOE. At September 30, 2013, TVA had paid out approximately $106 million for this program and the obligation recorded was $6 million.

The third-party fuel processors own the conversion and processing facilities and will retain title to all land, property, plant, and equipment used in the BLEU fuel program.  However, the fuel fabrication contract qualifies as a capital lease, and TVA has recognized a capital lease asset and corresponding lease obligation related to amounts paid or payable to the processor.
Investment Funds 
Investment Funds

Investment funds consist primarily of trust funds designated to fund nuclear decommissioning requirements (see Note 20 — Contingencies — Decommissioning Costs), non-nuclear AROs (see Note 7 — Non-Nuclear Decommissioning Costs), and the Supplemental Executive Retirement Plan ("SERP") (see Note 19 — Overview of Plans and Benefits — Supplemental Executive Retirement Plan).  Nuclear decommissioning funds and SERP funds are invested in portfolios of securities generally designed to achieve a return in line with overall equity market performance, while asset retirement funds are invested in portfolios of securities generally designed to achieve a return in line with overall equity and debt market performance. The nuclear decommissioning funds, asset retirement funds, and SERP funds are all classified as trading.

Insurance 
Insurance

Although TVA uses private companies to administer its healthcare plans for eligible active and retired employees not covered by Medicare, TVA does not purchase health insurance.  Third-party actuarial specialists assist TVA in determining certain liabilities for self-insured claims.  TVA recovers the costs of claims through power rates and through adjustments to the participants’ contributions to their benefit plans.  These liabilities are included in Other liabilities on the balance sheets.

The Federal Employees' Compensation Act ("FECA") governs liability to employees for service-connected injuries.  TVA purchases excess workers' compensation insurance above a self-insured retention.

TVA purchases nuclear liability insurance, nuclear property, decommissioning, and decontamination insurance, and nuclear accidental outage insurance.  See Note 20 — Contingencies — Nuclear Insurance.

TVA purchases excess liability insurance for aviation, auto, marine, and general liability exposures.  TVA purchases property insurance for certain conventional (non-nuclear) assets.  

The insurance policies are subject to the terms and conditions of the specific policy.  Each of the insurance policies purchased contains deductibles or self-insured retentions.  TVA recovers the costs of losses through power rates.

In May 2013, TVA discontinued its directors and officers insurance program after determining that TVA's internal indemnification policies and procedures provided sufficient protection to TVA's directors and officers.

Research and Development Costs 
Research and Development Costs

Research and development costs are expensed when incurred.  TVA’s research programs include those related to transmission technologies, emerging technologies (clean energy, renewables, distributed resources, and energy efficiency), technologies related to generation (fossil fuel, nuclear, and hydroelectric), and environmental technologies.

Tax Equivalents 
Tax Equivalents

The TVA Act requires TVA to make payments to states and counties in which TVA conducts its power operations and in which TVA has acquired power properties previously subject to state and local taxation.  The total amount of these payments is five percent of gross revenues from sales of power during the preceding year, excluding sales or deliveries to other federal agencies and off-system sales with other utilities, with a provision for minimum payments under certain circumstances. TVA calculates tax equivalent expense by subtracting the prior year fuel cost-related tax equivalent regulatory asset or liability from the payments made to the states and counties and then adds back the current year fuel cost-related tax equivalent regulatory asset or liability. Fuel cost-related tax equivalent expense is recognized in the same accounting period in which the fuel cost-related revenue is recognized.

Maintenance Costs 
Maintenance Costs

TVA records maintenance costs and repairs related to its property, plant, and equipment in the statements of operations as they are incurred except for the recording of certain regulatory assets.  

Prior to 2010, TVA deferred nuclear outage costs that were incurred during the operating cycle subsequent to the refueling outage.  These costs are incurred in the process of performing a nuclear fuel reload outage, and the benefits of these costs are realized during the subsequent 18 to 24 months when the nuclear fuel is burned during its operating cycle in producing electricity.  The TVA Board historically included in rates the amortization of these deferred nuclear outage costs during the operating cycle subsequent to the refueling outage.

Beginning in 2010, TVA implemented a new policy to expense any future outage costs as incurred consistent with a rate-making change approved by the TVA Board.  However, TVA continued to amortize the related existing regulatory asset and included such amounts in rates.  These amounts became fully amortized in 2011.
Variable Interest Entities Variable Interest Entities (Policies)
Variable Interest Entity Policy
Variable Interest Entities

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of owning a controlling financial interest. The analysis to determine whether an entity is a VIE considers factors such as contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity, the extent of an entity's activities that either involve or are conducted on behalf of an investor with disproportionate voting rights, and the relationship of voting power to the amount of equity invested in an entity. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. The determination of the primary beneficiary requires continual reassessment.

When TVA determines that it has a variable interest in a variable interest entity, a qualitative evaluation is performed to assess which interest holders have the power to direct the activities that most significantly impact the economic performance of the entity and have the obligation to absorb losses or receive benefits that could be significant to the entity. The evaluation considers the purpose and design of the business, the risks that the business was designed to create and pass along to other entities, the activities of the business that can be directed and which party can direct them, and the expected relative impact of those activities on the economic performance of the business through its life. TVA has the power to direct the activities of an entity when it has the ability to make key operating and financing decisions, including, but not limited to, capital investment and the issuance of debt.

Southaven

On August 6, 2013, TVA and the United States of America entered into an asset purchase agreement for the reacquisition by TVA (as agent for the United States of America with respect to real property) of a 90 percent undivided interest in the Southaven Combined Cycle Combustion Turbine Facility ("Southaven CCF") and related real property located in Southaven, Mississippi (the “Asset Purchase Agreement”) from Seven States Power Corporation ("Seven States"), through its subsidiary, Seven States Southaven, LLC ("SSSL"). Seven States was formed by LPCs that distribute TVA power. Seven States originally purchased the 90 percent interest in the Southaven CCF and the related real property from TVA in 2008 and leased the interest back to TVA. TVA continued to operate the Southaven CCF. See Note 13 for further discussion regarding the purchase arrangement.

As a condition to the closing of the Asset Purchase Agreement, on August 9, 2013, TVA entered into a lease financing arrangement with Southaven Combined Cycle Generation, LLC ("SCCG") in which TVA agreed to lease the Southaven CCF to SCCG for a term of approximately 31 years (the “Southaven Head Lease”) in exchange for a one-time rental payment of $400 million to TVA. Also on August 9, 2013, SCCG leased the Southaven CCF back to TVA for a term of approximately 20 years (the “Southaven Facility Lease”) in exchange for scheduled amortizing, semi-annual lease payments commencing on February 15, 2014 and ending on August 15, 2033. Throughout the term of the Southaven Facility Lease, TVA is responsible for the operation and maintenance (and improvement to the extent required by applicable law) of the Southaven CCF and takes all power generated by the facility. The Southaven Head Lease will terminate upon expiration of the Southaven Facility Lease so long as all payments under the Southaven Facility Lease have been made and there is no significant event of default for which SCCG has exercised remedies to dispossess TVA of the Southaven CCF. Upon expiration of the Southaven Head Lease and Southaven Facility Lease, TVA will own the Southaven CCF at no additional cost to TVA.

SCCG, a newly formed special single-purpose entity, was established to finance the Southaven CCF through a $360 million secured notes issuance (the “SCCG notes”) and the issuance of $40 million of membership interests. See Note 12 —Secured Debt of VIEs. The membership interests were purchased by Southaven Holdco, LLC ("SHLLC"), also a newly-formed special single-purpose entity, established to acquire and hold the membership interests of SCCG. They were purchased by SHLLC with proceeds from the issuance of $40 million of secured notes (the “SHLLC notes”) and are subject to mandatory redemption pursuant to scheduled amortizing, semi-annual payments due each August 15 and February 15, with a final payment due on August 15, 2033. See Note 10 — Membership Interests of VIE Subject to Mandatory Redemption. The payment dates for the mandatorily redeemable membership interests are the same as those of the SHLLC notes, the SCCG notes, and the lease payments under the Southaven Facility Lease.

The sale of the SCCG notes, the membership interests in SCCG, and the SHLLC notes closed on August 9, 2013. The SCCG notes are secured by TVA’s lease payments. The SHLLC notes are secured by SHLLC’s investment in, and amounts receivable from, SCCG. TVA’s lease payments, under the terms of the Southaven Facility Lease, are equal to the sum of (i) SCCG’s semi-annual debt service payments, (ii) SHLLC’s semi-annual debt service payments, and (iii) scheduled pre-determined payments to be made to SSSL on each lease payment date by SHLLC as agreed in the Asset Purchase Agreement and SHLLC's formation documents (the "Seven States Return"). In addition to the lease payments, TVA pays the administrative and miscellaneous expenses incurred by SCCG and SHLLC. Certain agreements related to this transaction contain default and acceleration provisions.

TVA participated in the design, business conduct, and financial support of SCCG and has determined that it has a direct variable interest in SCCG resulting from risk associated with the value of the Southaven CCF at the end of the lease term. Based on its analysis, TVA has determined that it is the primary beneficiary of SCCG and, as such, is required to account for SCCG on a consolidated basis.

John Sevier

On January 17, 2012, TVA entered into a $1.0 billion construction management agreement and lease financing arrangement with John Sevier Combined Cycle Generation LLC ("JSCCG") for the completion and lease by TVA of the John Sevier Combined Cycle Facility ("John Sevier CCF"). JSCCG is a special single-purpose limited liability company formed in January 2012 to finance the John Sevier CCF through a $900 million secured note issuance (the “JSCCG notes”) and the issuance of $100 million of membership interests subject to mandatory redemption.  The membership interests were purchased by John Sevier Holdco LLC ("Holdco").  Holdco is a special single-purpose entity, also formed in January 2012, established to acquire and hold the membership interests in JSCCG.  A non-controlling interest in Holdco is held by a third party through nominal membership interests, to which none of the income, expenses, and cash flows is allocated. 
 
The membership interests held by Holdco in JSCCG were purchased with proceeds from the issuance of $100 million of secured notes (the “Holdco notes") and are subject to mandatory redemption pursuant to scheduled amortizing, semi-annual payments due each January 15 and July 15, with a final payment due on January 15, 2042. The payment dates for the mandatorily redeemable membership interests are the same as those of the Holdco notes. The sale of the JSCCG notes, the membership interests in JSCCG, and the Holdco notes closed on January 17, 2012. The JSCCG notes are secured by TVA’s lease payments, and the Holdco notes are secured by Holdco's investment in, and amounts receivable from, JSCCG. TVA’s lease payments to JSCCG are equal to and payable on the same dates as JSCCG’s and Holdco’s semi-annual debt service payments. In addition to the lease payments, TVA pays administrative and miscellaneous expenses incurred by JSCCG and Holdco. Certain agreements related to this transaction contain default and acceleration provisions.

Due to its participation in the design, business conduct, and credit and financial support of JSCCG and Holdco, TVA has determined that it has a variable interest in each of these entities. Based on its analysis, TVA has concluded that it is the primary beneficiary of JSCCG and Holdco and, as such, is required to account for the VIEs on a consolidated basis. Holdco’s membership interests in JSCCG are eliminated in consolidation.

Kingston Fossil Plant Ash Spill Kingston Fossil Plant Ash Spill (Policies)
Kingston Fossil Plant Ash Spill Policy
Financial Impact

Because of the uncertainty at this time of the final costs to complete the work prescribed by the ash disposal plan, a range of reasonable estimates has been developed by cost category.  Known amounts, most likely scenarios, or the low end of the range for each category have been accumulated and evaluated to determine the total estimate.  The range of costs varies from approximately $1.1 billion to approximately $1.2 billion.

TVA recorded an estimate of $1.1 billion for the cost of cleanup related to this event.  In August 2009, TVA began using regulatory accounting treatment to defer all actual costs already incurred and expected future costs related to the ash spill.  The cost is being charged to expense as it is collected in rates over 15 years, beginning October 1, 2009.  As the estimate changes, additional costs may be deferred and charged to expense prospectively as they are collected in future rates.

As work continues to progress and more information is available, TVA will review its estimates and revise them as appropriate.  TVA has accrued a portion of the estimated cost in current liabilities, with the remaining portion shown as a long-term liability on TVA's consolidated balance sheets.  Amounts spent since the event through September 30, 2013, totaled $956 million.  The remaining estimated liability at September 30, 2013, was $169 million.

TVA has not included the following categories of costs in the above estimate since it has been determined that these costs are currently either not probable or not reasonably estimable: penalties (other than the penalties set out in a June 2010 TDEC order), regulatory directives, natural resources damages (other than payments required under a memorandum of agreement with TDEC and the U.S. Fish and Wildlife Service establishing a process and a method for resolving the natural resource damages claim), future lawsuits, future claims, long-term environmental impact costs, final long-term disposition of the ash processing area, and costs associated with new laws and regulations.  There are certain other costs that will be incurred that have not been included in the estimate as they are appropriately accounted for in other areas of the consolidated financial statements.  Associated capital asset purchases are recorded in property, plant, and equipment.  Ash handling and disposition costs from current plant operations are recorded in operating expenses.  A portion of the dredge cell closure costs are also excluded from the estimate, as they are included in the non-nuclear ARO liability.

Benefit Plans Benefit Plans (Policies)
Benefit Plans
Accounting Mechanisms

Regulatory Accounting.  TVA has classified all amounts related to unrecognized prior service costs, net actuarial gains or losses, and the funded status as regulatory assets as such amounts are probable of collection in future rates.

Cost Method. TVA uses the projected unit credit cost method to determine the service cost and the projected benefit obligation for retirement, termination, and ancillary benefits.  Under this method, a “projected accrued benefit” is calculated at the beginning of the year and at the end of the year for each benefit that may be payable in the future.  The “projected accrued benefit” is based on the plan’s accrual formula and upon service at the beginning or end of the year, but it uses final average compensation, social security benefits, and other relevant factors projected to the age at which the employee is assumed to leave active service.  The projected benefit obligation is the actuarial present value of the “projected accrued benefits” at the beginning of the year for employed participants and is the actuarial present value of all benefits for other participants.  The service cost is the actuarial present value of the difference between the “projected accrued benefits” at the beginning and end of the year.

Amortization of Net Gain or Loss.  TVA utilizes the corridor approach for gain/loss amortization.  Differences between actuarial assumptions and actual plan results are deferred and amortized into periodic cost only when the accumulated differences exceed 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets.  If necessary, the excess is amortized over the average remaining service period of active employees.

Asset Method.  TVA recognizes the impact of asset performance on pension expense over a three-year phase-in period through a “market-related” value of assets calculation.  Since the “market-related” value of assets recognizes investment gains and losses over a three-year period, the future value of assets will be impacted as previously deferred gains or losses are recognized.  The “market-related” value is used in calculating expected return on plan assets and net gain or loss for pension cost determination.
Summary of Significant Accounting Policies Summary of Significant Accounting Policies (Tables)
Property, Plant, and Equipment Depreciation Rates
Average depreciation rates by asset class are as follows:
Property, Plant, and Equipment Depreciation Rates
At September 30
(percent)
 
2013
 
2012
 
2011
Asset Class
 
Nuclear
2.86

 
2.71

 
2.58

Coal-Fired
3.47

 
5.65

 
3.80

Hydroelectric
1.30

 
1.35

 
1.43

Gas and oil-fired
3.21

 
3.67

 
3.70

Transmission
2.76

 
2.99

 
3.39

Other
8.14

 
8.10

 
7.39

Accounts Receivable, Net Accounts Receivable, Net (Tables)
Accounts Receivable, Net
The table below summarizes the types and amounts of TVA’s accounts receivable:

Accounts Receivable, Net 
At September 30
 
2013
 
2012
Power receivables
$
1,495

 
$
1,585

Other receivables
73

 
88

Allowance for uncollectible accounts
(1
)
 
(7
)
Accounts receivable, net
$
1,567

 
$
1,666

Inventories, Net Inventories, Net (Tables)
Inventories, Net
The table below summarizes the types and amounts of TVA’s inventories:

Inventories, Net 
At September 30
 
2013
 
2012
Materials and supplies inventory
$
620

 
$
605

Fuel inventory
494

 
508

Emission allowance inventory
14

 
12

Allowance for inventory obsolescence
(37
)
 
(28
)
Inventories, net
$
1,091

 
$
1,097

Net Completed Plant Net Completed Plant (Tables)
Net Completed Plant
Net completed plant consisted of the following:
Net Completed Plant
At September 30
 
2013
 
2012
 
Cost
 
Accumulated Depreciation
 
 
Net
 
Cost
 
Accumulated Depreciation
 
Net
Coal-fired
$
13,847

 
$
8,429

 
$
5,418

 
$
13,726

 
$
7,962

 
$
5,764

Gas and oil-fired
3,386

 
1,008

 
2,378

 
3,334

 
916

 
2,418

Nuclear
18,725

 
9,103

 
9,622

 
18,042

 
8,791

 
9,251

Transmission
6,300

 
2,562

 
3,738

 
6,075

 
2,427

 
3,648

Hydroelectric
2,392

 
892

 
1,500

 
2,278

 
869

 
1,409

Other electrical plant
1,452

 
792

 
660

 
1,490

 
842

 
648

Subtotal
46,102

 
22,786

 
23,316

 
44,945

 
21,807

 
23,138

 
 
 
 
 
 
 
 
 
 
 
 
Multipurpose dams
928

 
356

 
572

 
928

 
347

 
581

Other stewardship
43

 
15

 
28

 
44

 
15

 
29

Subtotal
971

 
371

 
600

 
972

 
362

 
610

 
 
 
 
 
 
 
 
 
 
 
 
Total
$
47,073

 
$
23,157

 
$
23,916

 
$
45,917

 
$
22,169

 
$
23,748

Other Long-Term Assets Other Long-Term Assets (Tables)
Other Long-Term Assets
The table below summarizes the types and amounts of TVA’s other long-term assets:

Other Long-Term Assets 
At September 30
 
2013
 
2012
EnergyRight® receivables
$
117

 
$
115

Unamortized debt issue cost of power bonds
75

 
70

Loans and other long-term receivables, net
73

 
76

Coal contract derivative assets
1

 
107

Prepaid capacity payments
62

 
59

Currency swap assets
28

 
21

Other
89

 
61

Total other long-term assets
$
445

 
$
509

Regulatory Assets and Liabilities Regulatory Assets and Liabilities (Tables)
Regulatory Assets and Liabilities
Components of regulatory assets and regulatory liabilities are summarized in the table below. 
Regulatory Assets and Liabilities 
At September 30
 
2013
 
2012
Current regulatory assets
 
 
 
Unrealized losses on commodity derivatives
$
183

 
$
310

Deferred nuclear generating units
237

 
237

Environmental agreements
73

 
87

Fuel cost adjustment receivable
—

 
68

Environmental cleanup costs – Kingston ash spill
68

 
72

Total current regulatory assets
561

 
774

Non-current regulatory assets
 

 
 

Deferred pension costs and other post-retirement benefits costs
4,076

 
5,517

Unrealized losses on interest rate derivatives
808

 
1,332

Nuclear decommissioning costs
893

 
914

Environmental cleanup costs - Kingston ash spill
681

 
797

Construction costs
—

 
619

Non-nuclear decommissioning costs
571

 
550

Deferred nuclear generating units
1,438

 
473

Unrealized losses on commodity derivatives
139

 
335

Environmental agreements
189

 
237

Other non-current regulatory assets
336

 
353

Total non-current regulatory assets
9,131

 
11,127

Total regulatory assets
$
9,692

 
$
11,901

 
 
 
 
Current regulatory liabilities
 

 
 

Fuel cost adjustment tax equivalents
$
176

 
$
173

Fuel cost adjustment liability
29

 
—

Unrealized gains on commodity derivatives
7

 
18

Total current regulatory liabilities
212

 
191

 Non-current regulatory liabilities
 

 
 

Unrealized gains on commodity derivatives
1

 
109

Total non-current regulatory liabilities
1

 
109

Total regulatory liabilities
$
213

 
$
300

Variable Interest Entities Variable Interest Entities (Tables)
Variable Interest Entities

Summary of Impact of VIEs on Consolidated Balance Sheets
 
At September 30, 2013
 
At September 30, 2012
Current liabilities
 
 
 

Accrued interest
$
12

 
$
10

Current portion of membership interests of VIE subject to mandatory redemption
2

 
—

Current maturities of long-term debt of VIE
30

 
13

Total current liabilities
44

 
23

Other liabilities
 
 
 
Membership interests of VIE subject to mandatory redemption
38

 
—

Total other liabilities
38

 
—

Long-term debt, net
 
 
 
Long-term debt of VIE
1,311

 
981

Total long-term debt, net
1,311

 
981

Total liabilities
$
1,393

 
$
1,004

Other Long-Term Liabilities Other Long-Term Liabilities (Tables)
Other Long-Term Liabilities
The table below summarizes the types and amounts of Other long-term liabilities:

Other Long-Term Liabilities
At September 30
 
2013
 
2012
Interest rate swap liabilities
$
1,199

 
$
1,723

Environmental agreements liability
190

 
237

EnergyRight® financing obligation
149

 
148

Membership interests of VIE subject to mandatory redemption
38

 
—

Coal contract derivative liabilities
35

 
205

Commodity swap derivative liabilities
36

 
59

Currency swap liabilities
15

 
54

Other
199

 
254

Total other long-term liabilities
$
1,861

 
$
2,680

Asset Retirement Obligations Asset Retirement Obligations (Tables)
Asset Retirement Obligations
Reconciliation of Asset Retirement Obligation Liability

 
 
 
 
 
 
 
 
 
Nuclear
 
Non-Nuclear
 
Total
 
Balance at September 30, 2011
$
2,091

 
$
1,047

 
$
3,138

 
 
 
 
 
 
 
 
Settlements (ash storage areas)
—

 
(22
)
 
(22
)
 
Accretion (recorded as regulatory asset)
117

 
55

 
172

 
Additional obligations
—

 
2

 
2

 
Change in estimate
—

 
(1
)
 
(1
)
 
 
 
 
 
 
 
 
Balance at September 30, 2012
$
2,208

 
$
1,081

 
$
3,289

 
 
 
 
 
 
 
 
Settlements (ash storage areas)
—

 
(37
)
 
(37
)
 
Accretion (recorded as regulatory asset)
125

 
45

 
170

 
Additional obligations
—

 
—

 
—

 
Change in estimate
66

 
—

 
66

 
 
 
 
 
 
 
 
Balance at September 30, 2013
$
2,399

 
$
1,089

 
$
3,488

*


Note
* The current portion of ARO in the amount of $16 million is included in Accounts payable and accrued liabilities.
Debt and Other Obligations Debt and Other Obligations (Tables)
Debt Securities Activity 
The table below summarizes the long-term debt securities activity for the period from October 1, 2011, to September 30, 2013.
Debt Securities Activity
For the year ended September 30
 
 
2013
 
2012
Issues
 
 
 
 
Debt of variable interest entities
 
$
360

 
$
1,000

electronotes®
 
152

 
135

2012 Series A(1)
 
—

 
1,000

2012 Series B(2)
 
1,000

 
—

2013 Series A(3)
 
1,000

 
—

Discount on debt issues
 
(30
)
 
(9
)
Total
 
$
2,482

 
$
2,126

 
 
 
 
 
Redemptions/Maturities(4)
 
 
 
 
Debt of variable interest entities
 
$
13

 
$
6

electronotes®
 
50

 
189

1992 Series D
 
—

 
1,000

1998 Series C
 
1,359

 
—

1998 Series D
 
2

 
5

1999 Series A
 
1

 
2

2000 Series F
 
—

 
29

2002 Series A
 
—

 
1,486

2003 Series C
 
940

 
—

2009 Series A
 
4

 
4

2009 Series B
 
2

 
2

Total
 
$
2,371

 
$
2,723


Notes
(1) The 2012 Series A bonds were issued at 99.12 percent of par.
(2) The 2012 Series B bonds were issued at 97.49 percent of par.
(3) The 2013 Series A bonds were issued at 99.52 percent of par.
(4) All redemptions were at 100 percent of par.
Debt Outstanding 
Total debt outstanding at September 30, 2013, and 2012, consisted of the following:
 
Short-Term Debt
At September 30
 
CUSIP or Other Identifier
 
 
Maturity
 
 Call/(Put) Date
 
 
Coupon Rate
 
2013 Par
 
2012 Par
Short-term debt, net
 
 
 
 
 
 
 
$
2,432

 
$
1,507

Current maturities of long-term debt of variable interest entities
 
 
 
 
 
 
 
30

 
13

Current maturities of power bonds
 
 
 
 
 
 
 
 
 
 
880591EE8
 
5/15/2014
 

 
2.250%
 
3

 
3

880591EF5
 
6/15/2014
 
 
 
3.770%
 
26

 
3

880591CW0
 
3/15/2013
 
 
 
6.000%
 
—

 
1,359

880591DW9
 
8/1/2013
 
 
 
4.750%
 
—

 
940

88059TEL1
 
5/15/2014
 
 
 
2.650%
 
3

 
3

Total current maturities of power bonds
 
 
 
 
 
 
 
32

 
2,308

Total current debt outstanding, net
 
 
 
 
 
 
 
$
2,494

 
$
3,828


Long-Term Debt(1)
At September 30
 
CUSIP or Other Identifier
 
 
Maturity
 
Coupon
Rate
 
Call Date
 
2013 Par
 
2012 Par
 
Stock Exchange Listings
electronotes®(2)
 
05/15/2020 -
02/15/2043
 
2.375 - 4.875%
 
4/15/2013 -
02/15/2018
 
$
723

 
$
622

 
None
880591DY5
 
6/15/2015
 
4.375%
 
 
 
1,000

 
1,000

 
New York, Luxembourg
880591EE8(3)
 
11/15/2015
 
2.250%
 
 
 
4

 
8

 
None
880591DS8
 
12/15/2016
 
4.875%
 

 
524

 
524

 
New York
880591EA6
 
7/18/2017
 
5.500%
 
 
 
1,000

 
1,000

 
New York, Luxembourg
880591CU4
 
12/15/2017
 
6.250%
 
 
 
650

 
650

 
New York
880591EC2
 
4/1/2018
 
4.500%
 
 
 
1,000

 
1,000

 
New York, Luxembourg
880591EQ1
 
10/15/2018
 
1.750%
 
 
 
1,000

 
—

 
New York
880591EL2
 
2/15/2021
 
3.875%
 
 
 
1,500

 
1,500

 
New York
880591DC3
 
6/7/2021
 
5.805%
(4 
) 
 
 
324

 
324

 
New York, Luxembourg
880591EN8
 
8/15/2022
 
1.875%
 
 
 
1,000

 
1,000

 
New York
880591CJ9
 
11/1/2025
 
6.750%
 
 
 
1,350

 
1,350

 
New York, Hong Kong, Luxembourg, Singapore
880591300(5)
 
6/1/2028
 
4.060%
 
 
 
324

 
326

 
New York
880591409(5)
 
5/1/2029
 
4.150%
 
 
 
270

 
271

 
New York
880591DM1
 
5/1/2030
 
7.125%
 
 
 
1,000

 
1,000

 
New York, Luxembourg
880591DP4
 
6/7/2032
 
6.587%
(4 
) 
  
 
405

 
404

 
New York, Luxembourg
880591DV1
 
7/15/2033
 
4.700%
 
 
 
472

 
472

 
New York, Luxembourg
880591EF5(3)
 
6/15/2034
 
3.770%
 
 
 
414

 
440

 
None
880591DX7
 
6/15/2035
 
4.650%
 
 
 
436

 
436

 
New York
880591CK6
 
4/1/2036
 
5.980%
 
 
 
121

 
121

 
New York
880591CS9
 
4/1/2036
 
5.880%
 
 
 
1,500

 
1,500

 
New York
880591CP5
 
1/15/2038
 
6.150%
 
 
 
1,000

 
1,000

 
New York
880591ED0
 
6/15/2038
 
5.500%
 
 
 
500

 
500

 
New York
880591EH1
 
9/15/2039
 
5.250%
 
 
 
2,000

 
2,000

 
New York
880591EP3
 
12/15/2042
 
3.500%
 
 
 
1,000

 
—

 
New York
880591DU3
 
6/7/2043
 
4.962%
(4 
) 
  
 
243

 
242

 
New York, Luxembourg
880591CF7
 
7/15/2045
 
6.235%
 
7/15/2020
 
140

 
140

 
New York
880591EB4
 
1/15/2048
 
4.875%
 
 
 
500

 
500

 
New York, Luxembourg
880591DZ2
 
4/1/2056
 
5.375%
 
 
 
1,000

 
1,000

 
New York
880591EJ7
 
9/15/2060
 
4.625%
 
 
 
1,000

 
1,000

 
New York
Subtotal
 
 
 
 
 
 
 
22,400

 
20,330

 
 
Unamortized discounts, premiums, and other
 
 
 
 
 
 
 
(85
)
 
(61
)
 
 
Total long-term outstanding power bonds, net
 
 
 
 
 
 
 
22,315

 
20,269

 
 
Long-term debt of variable interest entities
 
 
 
 
 
 
 
1,311

 
981

 
 
Total long-term debt, net
 
 
 
 
 
 
 
$
23,626

 
$
21,250

 
 

Notes
(1)  Includes net exchange losses from currency transactions of $43 million at September 30, 2013 and $41 million at September 30, 2012.
(2)  Includes one electronotes® issue with partial maturities of principal for each required annual payment.
(3)  These Bonds include partial maturities of principal for each required annual payment.
(4)  The coupon rate represents TVA’s effective interest rate.
(5)  TVA PARRS, CUSIP numbers 880591300 and 880591409, may be redeemed under certain conditions.  See Put and Call Options.
Maturities Due 
Maturities Due in the Year Ending September 30
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Long-term power bonds and long-term debt of variable interest entities including current maturities(1)
$
62

 
$
1,064

 
$
65

 
$
1,590

 
$
1,718

 
$
19,231

 
$23,730

Note
(1) Does not include noncash items of foreign currency exchange loss of $43 million and net discount on sale of Bonds of $85 million.

Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions (Tables)
Summary of Derivative Instruments That Receive Hedge Accounting Treatment 
The following tables summarize the accounting treatment that certain of TVA's financial derivative transactions receive.
Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 1) 
 
 
 
 
 
 
Amount of Mark-to-Market(1) 
Gain (Loss) Recognized in Other Comprehensive Income (Loss)(2)
Years Ended September 30
Derivatives in Cash Flow Hedging Relationship
 
Objective of Hedge Transaction
 
Accounting for Derivative
Hedging Instrument
 
2013
 
2012
Currency swaps
 
To protect against changes in cash flows caused by changes in foreign currency exchange rates (exchange rate risk)
 
Cumulative unrealized gains and losses are recorded in OCI and reclassified to interest expense to the extent they are offset by cumulative gains and losses on the hedged transaction
 
$
78

 
$
99


Notes
(1) Mark-to-market ("MtM")
(2) Other comprehensive income (loss) ("OCI")

Summary of Derivative Instruments That Receive Hedge Accounting Treatment (part 2) 
 
 
Amount of Gain (Loss) Reclassified from
OCI to Interest Expense
Years Ended September 30
Derivatives in Cash Flow Hedging Relationship
 
2013
 
2012
Currency swaps
 
$
(1
)
 
$
(35
)

Note
There were no ineffective portions or amounts excluded from effectiveness testing for any of the periods presented.
Summary of Derivative Instruments That Do Not Receive Hedge Accounting Treatment





 
Amount of Gain
(Loss) Recognized in Income on Derivatives
Years Ended September 30
Derivative Type
 
Objective of Derivative
 
Accounting for Derivative Instrument
 
2013
 
2012
Interest rate swaps
 
To fix short-term debt variable rate to a fixed rate (interest rate risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities until settlement, at which time the gains/losses are recognized in gain/loss on derivative contracts.
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
Commodity contract derivatives
 
To protect against fluctuations in market prices of purchased coal or natural gas  (price risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities. Realized gains and losses due to contract settlements are recognized in fuel expense as incurred.

 
(11
)
 
(22
)
 
 
 
 
 
 
 
 
 
Commodity derivatives
under FTP
 
To protect against fluctuations in market prices of purchased commodities (price risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities. Realized gains and losses are recognized in fuel expense or purchased power expense when the related commodity is used in production.
 
(126
)
 
(342
)

Summary of Derivative Instruments That Do Not Receive Hedge Accounting Treatment 
Summary of Derivative Instruments That Do Not Receive Hedge Accounting Treatment





 
Amount of Gain
(Loss) Recognized in Income on Derivatives
Years Ended September 30
Derivative Type
 
Objective of Derivative
 
Accounting for Derivative Instrument
 
2013
 
2012
Interest rate swaps
 
To fix short-term debt variable rate to a fixed rate (interest rate risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities until settlement, at which time the gains/losses are recognized in gain/loss on derivative contracts.
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
Commodity contract derivatives
 
To protect against fluctuations in market prices of purchased coal or natural gas  (price risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities. Realized gains and losses due to contract settlements are recognized in fuel expense as incurred.

 
(11
)
 
(22
)
 
 
 
 
 
 
 
 
 
Commodity derivatives
under FTP
 
To protect against fluctuations in market prices of purchased commodities (price risk)
 
MtM gains and losses are recorded as regulatory assets or liabilities. Realized gains and losses are recognized in fuel expense or purchased power expense when the related commodity is used in production.
 
(126
)
 
(342
)


Note
All of TVA's derivative instruments that do not receive hedge accounting treatment have unrealized gains (losses) that would otherwise be recognized in income but
instead are deferred as regulatory assets and liabilities. As such, there was no related gain (loss) recognized in income for these unrealized gains (losses) for the
years ended 2013 and 2012.
Mark-to-Market Value of TVA Derivatives 
Mark-to-Market Values of TVA Derivatives
At September 30
 
2013
 
2012
Derivatives that Receive Hedge Accounting Treatment:
 
Balance
 
Balance Sheet Presentation
 
Balance
 
Balance Sheet Presentation
Currency swaps
 
 
 
 
 
 
 
£200 million Sterling
$
(15
)
 
Other long-term liabilities
 
$
(23
)
 
Other long-term liabilities
£250 million Sterling
51

 
Other long-term assets
 
21

 
Other long-term assets
£150 million Sterling
10

 
Other long-term assets
 
(31
)
 
Other long-term liabilities
 
 
 
 
 
 
 
 
Derivatives that Do Not Receive Hedge Accounting Treatment:
 
Balance
 
Balance Sheet Presentation
 
Balance
 
Balance Sheet Presentation
Interest rate swaps
 
 
 
 
 
 
 
$1.0 billion notional
(886
)
 
Other long-term liabilities
 
(1,247
)
 
Other long-term liabilities
$476 million notional
(300
)
 
Other long-term liabilities
 
(458
)
 
Other long-term liabilities
$42 million notional
(13
)
 
Other long-term liabilities
 
(18
)
 
Other long-term liabilities
Commodity contract derivatives
(141
)
 
Other long-term assets $1; Other current assets $2; Other long-term liabilities $(35); Accounts payable and accrued liabilities $(109)
 
(267
)
 
Other long-term assets $107; Other current assets $12; Other long-term liabilities $(205); Accounts payable and accrued liabilities $(181)
FTP
 
 
 
 
 
 
 
Margin cash account(1)
11

 
Other current assets
 
43

 
Other current assets
Derivatives under FTP(2)
(166
)
 
Other current assets $(97); Other long-term liabilities $(36); Accounts payable and accrued liabilities $(33)
 
(228
)
 
Other long-term assets $2; Other current assets $(104); Other long-term liabilities $(59); Accounts payable and accrued liabilities $(67)

Notes
(1)  In accordance with certain credit terms, TVA uses leverage to trade financial instruments under the FTP.  Therefore, the margin cash account balance does not represent 100 percent of the net market value of the derivative positions outstanding as shown in the Derivatives Under Financial Trading Program table.
(2)  The September 30, 2013, and September 30, 2012 balances in the Derivatives Under Financial Trading Program table show all open derivative positions in the FTP. 
Currency Swaps Outstanding 
TVA had the following currency swaps outstanding at September 30, 2013:

Currency Swaps Outstanding
At September 30, 2013
Effective Date of Currency Swap Contract
 
Associated TVA Bond Issues Currency Exposure
 
Expiration Date of Swap
 
Overall Effective
Cost to TVA
1999
 
£200 million
 
2021
 
5.81%
2001
 
£250 million
 
2032
 
6.59%
2003
 
£150 million
 
2043
 
4.96%
Commodity Contract Derivatives 
Commodity Contract Derivatives 
At September 30
 
2013
 
2012
 
Number of Contracts
 
Notional Amount
 
Fair Value (MtM)
 
Number of Contracts
 
Notional Amount
 
Fair Value (MtM)
Coal contract derivatives
19
 
43 million tons
 
$
(140
)
 
23
 
46 million tons
 
$
(267
)
Natural gas contract derivatives
13
 
39 million mmBtu
 
$
(1
)
 
25
 
51 million mmBtu
 
$
—

Derivatives Under Financial Trading Program 
Derivatives Under Financial Trading Program
 
At September 30, 2013
 
At September 30, 2012
 
Notional Amount
 
Fair Value (MtM)
(in millions)
 
Notional Amount
 
Fair Value (MtM)
(in millions)
Natural gas (in mmBtu)
 
 
 
 
 
 
 
Futures contracts
—

 
$
—

 
—

 
$
—

Swap contracts
152,922,500

 
(169
)
 
294,462,500

 
(232
)
Option contracts
—

 
—

 
—

 
—

Natural gas financial positions
152,922,500

 
$
(169
)
 
294,462,500

 
$
(232
)
 
 
 
 
 
 
 
 
Fuel oil/crude oil (in barrels)
 
 
 

 
 

 
 

Futures contracts
—

 
$
—

 
—

 
$
—

Swap contracts
1,205,000

 
3

 
1,390,000

 
4

Option contracts
—

 
—

 
—

 
—

Fuel oil/crude oil financial positions
1,205,000

 
$
3

 
1,390,000

 
$
4

 
 
 
 
 
 
 
 

Note
Due to the right of setoff and method of settlement, TVA elects to record commodity derivatives under the FTP based on its net commodity position with the broker or other counterparty.  Notional amounts disclosed represent the net absolute value of contractual amounts.
FTP Unrealized Gains (Losses) 
Financial Trading Program Unrealized Gains (Losses)
At September 30
 
 
 
 
 
FTP unrealized gains (losses) deferred as regulatory liabilities (assets)
 
2013
 
2012
 
 
 
 
 
Natural gas
 
$
(169
)
 
$
(232
)
Fuel oil/crude oil
 
3

 
4

Coal
 
—

 
—

FTP Realized Gains (Losses) 
Financial Trading Program Realized Gains (Losses)
Years Ended September 30
 
 
 
 
 
Decrease (increase) in fuel expense
 
2013
 
2012
 
 
 
 
 
Natural gas
 
$
(78
)
 
$
(116
)
Fuel oil/crude oil
 
4

 
10

Coal
 
(1
)
 
—


Financial Trading Program Realized Gains (Losses)
Years Ended September 30
 
 
 
 
 
Decrease (increase) in purchased power expense
 
2013
 
2012
 
 
 
 
 
Natural gas
 
$
(51
)
 
$
(236
)
Fair Value Measurements Fair Value Measurements - (Tables)
Valuation Techniques 
The measurement of fair value results in classification into a hierarchy by the inputs used to determine the fair value as follows:
Level 1
—
 
 
Unadjusted quoted prices in active markets accessible by the reporting entity for identical assets or liabilities.  Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing.
Level 2
 
—
 
 
Pricing inputs other than quoted market prices included in Level 1 that are based on observable market data and that are directly or indirectly observable for substantially the full term of the asset or liability.  These include quoted market prices for similar assets or liabilities, quoted market prices for identical or similar assets in markets that are not active, adjusted quoted market prices, inputs from observable data such as interest rate and yield curves, volatilities and default rates observable at commonly quoted intervals, and inputs derived from observable market data by correlation or other means.
Level 3
—
 
 
Pricing inputs that are unobservable, or less observable, from objective sources.  Unobservable inputs are only to be used to the extent observable inputs are not available.  These inputs maintain the concept of an exit price from the perspective of a market participant and should reflect assumptions of other market participants.  An entity should consider all market participant assumptions that are available without unreasonable cost and effort.  These are given the lowest priority and are generally used in internally developed methodologies to generate management's best estimate of the fair value when no observable market data is available.
Unrealized Investment Gains (Losses) 
TVA recorded unrealized gains and losses related to its trading securities held as of the end of each period as follows:

 
Unrealized Investment Gains (Losses)
At September 30
 
Financial Statement Presentation
 
2013
 
2012
 
 
 
 
 
 
SERP
Other income (expense)
 
$
2

 
$
4

NDT
Regulatory asset
 
48

 
121

ART
Regulatory asset
 
33

 
27

Fair Value Measurements 
Fair Value Measurements
At September 30, 2013

Assets
Quoted Prices in Active
 Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting(1)
 
Total
 
 
 
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
 
 
Equity securities
$
151

 
$
—

 
$
—

 
$
—

 
$
151

Debt securities
 

 
 

 
 

 
 

 
 

U.S. government corporations and
agencies
38

 
67

 
—

 
—

 
105

Corporate debt securities
—

 
255

 
—

 
—

 
255

Residential mortgage-backed securities
—

 
25

 
—

 
—

 
25

Commercial mortgage-backed securities
—

 
7

 
—

 
—

 
7

Collateralized debt obligations
—

 
10

 
—

 
—

 
10

Private partnerships
—

 
—

 
159

 
—

 
159

Commingled funds(2)
 

 
 

 
 

 
 

 

Equity security commingled funds
—

 
741

 
—

 
—

 
741

Debt security commingled funds
—

 
248

 
—

 
—

 
248

Total investments
189

 
1,353

 
159

 
—

 
1,701

Currency swaps
—

 
61

 
—

 
—

 
61

Commodity contract derivatives
—

 
—

 
3

 
—

 
3

Commodity derivatives under FTP
 

 
 

 
 

 
 

 
 

Swap contracts
—

 
101

 
—

 
(97
)
 
4

Total commodity derivatives under FTP
—

 
101

 
—

 
(97
)
 
4

 
 
 
 
 
 
 
 
 
 
Total
$
189

 
$
1,515

 
$
162

 
$
(97
)
 
$
1,769

 
 
 
 
 
 
 
 
 
 
Liabilities
Quoted Prices in Active Markets for Identical Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting(1)
 
Total
 
 
 
 
 
 
 
 
 
 
Currency swaps
$
—

 
$
15

 
$
—

 
$
—

 
$
15

Interest rate swaps
—

 
1,199

 
—

 
—

 
1,199

Commodity contract derivatives
—

 
1

 
143

 
—

 
144

Commodity derivatives under FTP
 

 
 

 
 

 
 

 
 

Swap contracts
—

 
267

 
—

 
(97
)
 
170

Total commodity derivatives under FTP
—

 
267

 
—

 
(97
)
 
170

 
 
 
 
 
 
 
 
 
 
Total
$
—

 
$
1,482

 
$
143

 
$
(97
)
 
$
1,528


Notes
(1)  Due to the right of setoff and method of settlement, TVA elects to record commodity derivatives under the FTP based on its net commodity position with the counterparty or broker.
(2) Commingled funds represent investment funds comprising multiple individual financial instruments and are classified in the table based on their existing investment portfolio as of the measurement date.  Commingled funds primarily composed of one class of security are classified in that category. 
Fair Value Measurements
At September 30, 2012
Assets
Quoted Prices in Active
 Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting(1)
 
Total
 
 
 
 
 
 
 
 
 
 
Investments
 
 
 
 
 
 
 
 
 
Equity securities
$
173

 
$
—

 
$
—

 
$
—

 
$
173

Debt securities
 

 
 

 
 

 
 

 
 

U.S. government corporations and
agencies
59

 
103

 
—

 
—

 
162

Corporate debt securities
—

 
197

 
—

 
—

 
197

Residential mortgage-backed securities
—

 
20

 
—

 
—

 
20

Commercial mortgage-backed securities
—

 
6

 
—

 
—

 
6

Collateralized debt obligations
—

 
12

 
—

 
—

 
12

Private partnerships
—

 
—

 
53

 
—

 
53

Commingled funds(2)
 

 
 

 
 

 
 

 


Equity security commingled funds
—

 
657

 
—

 
—

 
657

Debt security commingled funds
—

 
182

 
—

 
—

 
182

Total investments
232

 
1,177

 
53

 
—

 
1,462

Currency swaps
—

 
21

 
—

 
—

 
21

Commodity contract derivatives
—

 
—

 
119

 
—

 
119

Commodity derivatives under FTP
 

 
 

 
 

 
 

 
 

Swap contracts
—

 
123

 
—

 
(115
)
 
8

Total commodity derivatives under FTP
—

 
123

 
—

 
(115
)
 
8

 
 
 
 
 
 
 
 
 
 
Total
$
232

 
$
1,321

 
$
172

 
$
(115
)
 
$
1,610

 
 
 
 
 
 
 
 
 
 
Liabilities
Quoted Prices in Active Markets for Identical Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Netting(1)
 
Total
 
 
 
 
 
 
 
 
 
 
Currency swaps
$
—

 
$
54

 
$
—

 
$
—

 
$
54

Interest rate swaps
—

 
1,723

 
—

 
—

 
1,723

Commodity contract derivatives
—

 
—

 
386

 
—

 
386

Commodity derivatives under FTP
 
 
 
 
 
 
 
 
 

Swap contracts
—

 
351

 
—

 
(115
)
 
236

Total commodity derivatives under FTP
—

 
351

 
—

 
(115
)
 
236

 
 
 
 
 
 
 
 
 
 
Total
$
—

 
$
2,128

 
$
386

 
$
(115
)
 
$
2,399


Notes
(1)  Due to the right of setoff and method of settlement, TVA elects to record commodity derivatives under the FTP based on its net commodity position with the counterparty or broker.
(2) Commingled funds represent investment funds comprising multiple individual financial instruments and are classified in the table based on their existing investment portfolio as of the measurement date.  Commingled funds primarily composed of one class of security are classified in that category. 
Fair Value Measurements Using Significant Unobservable Inputs 
The following table presents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

Fair Value Measurements Using Significant Unobservable Inputs
For the Year Ended September 30
 
Private
Partnerships
 
Commodity Contract Derivatives
 
Interest Rate
Swaption
Balance at October 1, 2011
$
22

 
$
239

 
$
(1,077
)
Purchases
27

 
—

 
—

Issuances
—

 
—

 
—

Sales
—

 
—

 
—

Settlements(1)
—

 
—

 
1,077

Net unrealized gains (losses) deferred as regulatory assets and liabilities
4

 
(506
)
 
—

Balance at September 30, 2012
53

 
(267
)
 
—

 
 
 
 
 
 
Purchases
101

 
—

 
—

Issuances
—

 
—

 
—

Sales
(4
)
 
—

 
—

Settlements
—

 
—

 
—

Net unrealized gains (losses) deferred as regulatory assets and liabilities
9

 
127

 
—

Balance at September 30, 2013
$
159

 
$
(140
)
 
$
—


Note
(1) The interest rate swaption was converted to an interest rate swap in April 2012.
Quantitative Information about Level 3 Fair Value Measurements 

The following table presents quantitative information related to the significant unobservable inputs used in the measurement of fair value of TVA's assets and liabilities classified as Level 3 in the fair value hierarchy:

Quantitative Information about Level 3 Fair Value Measurements 
 
 
Fair Value at September 30 2013
 
Valuation Technique(s)
 
Unobservable Inputs
 
Range
 
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
Commodity contract derivatives
$
3

 
Discounted cash flow
 
Credit risk
 
21
%
* 
 
 
 
 
 
 
 
 
 
 
 
 
Pricing model
 
Coal supply and demand
 
0.9 - 1.0 billion tons/year

 
 
 
 
 
 
Long-term market prices
 
$10.25 - $85.25/ton

 
Liabilities
 
 
 
 
 
 
 
 
Commodity contract derivatives
$
143

 
Pricing model
 
Coal supply and demand
 
0.9 - 1.0 billion tons/year

 
 
 
 
 
 
Long-term market prices
 
$10.25 - $85.25/ton

 
* Applies to only one contract.
Estimated Values of Financial Instruments Not Recorded at Fair Value 
The estimated values of TVA's financial instruments not recorded at fair value at September 30, 2013, and September 30, 2012, were as follows:

Estimated Values of Financial Instruments Not Recorded at Fair Value
At September 30
 
 
 
2013
 
2012
 
Valuation Classification
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
EnergyRight® receivables (including current portion)
Level 2
 
$
150

 
$
150

 
$
150

 
$
150

 
 
 
 
 
 
 
 
 
 
Loans and other long-term receivables, net
Level 2
 
$
73

 
$
67

 
$
76

 
$
70

 
 
 
 
 
 
 
 
 
 
EnergyRight® purchase obligation (including current portion)
Level 2
 
$
186

 
$
210

 
$
185

 
$
209

 
 
 
 
 
 
 
 
 
 
Membership interests of variable interest entity subject to mandatory redemption (including current portion)
Level 2
 
$
40

 
$
50

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
Long-term outstanding power bonds (including current maturities), net
Level 2
 
$
22,347

 
$
24,603

 
$
22,577

 
$
28,041

 
 
 
 
 
 
 
 
 
 
Long-term debt of variable interest entities (including current maturities)
Level 2
 
$
1,341

 
$
1,386

 
$
994

 
$
1,116

Proprietary Capital Proprietary Capital (Tables)
Summary of Proprietary Capital Activity
The table below summarizes TVA's activities related to appropriated funds.
Summary of Proprietary Capital Activity
At or for the Years Ended September 30
 
2013
 
2012
Appropriation Investment
Power Program
 
Nonpower
 Programs
 
Power Program
 
Nonpower
 Programs
Balance at beginning of year
$
288

 
$
4,351

 
$
308

 
$
4,351

Return of power program appropriation investment
(20
)
 
—

 
(20
)
 
—

Balance at end of year
268

 
4,351

 
288

 
4,351

Retained Earnings
 

 
 

 
 

 
 

Balance at beginning of year
4,492

 
(3,731
)
 
4,429

 
(3,721
)
Net income (expense) for year
282

 
(11
)
 
70

 
(10
)
Return on power program appropriation investment
(7
)
 
—

 
(7
)
 
—

Balance at end of year
4,767

 
(3,742
)
 
4,492

 
(3,731
)
Net proprietary capital at September 30
$
5,035

 
$
609

 
$
4,780

 
$
620

Other Income (Expense), Net Other Income (Expense), Net (Tables)
Other Income (Expense), Net
Income and expenses not related to TVA’s operating activities are summarized in the following table:
Other Income (Expense), Net
For the years ended September 30
 
 
 
 
 
 
 
2013
 
2012
 
2011
Interest income
$
23

 
$
21

 
$
8

External services
18

 
7

 
19

Gains (losses) on investments
4

 
5

 
1

Miscellaneous
(1
)
 
—

 
2

Total other income (expense), net
$
44

 
$
33

 
$
30

Benefit Plans Benefit Plans (Tables)
Obligations and Funded Status 
The changes in plan obligations, assets, and funded status for the years ended September 30, 2013 and 2012, were as follows:
Obligations and Funded Status
For the year ended September 30
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2013
 
2012
Change in benefit obligation
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
11,995

 
$
11,255

 
$
811

 
$
800

Service cost
154

 
139

 
24

 
19

Interest cost
468

 
490

 
31

 
35

Plan participants’ contributions
29

 
30

 
79

 
80

Amendments
4

 
3

 
—

 
—

Actuarial loss (gain)
(549
)
 
686

 
(163
)
 
(2
)
Net transfers from variable fund/401(k) plan
4

 
7

 
—

 
—

Expenses paid
(6
)
 
(5
)
 
—

 
—

Benefits paid
(628
)
 
(610
)
 
(126
)
 
(121
)
Benefit obligation at end of year
11,471

 
11,995

 
656

 
811

 
 
 
 
 
 
 
 
Change in plan assets
 

 
 

 
 

 
 

Fair value of net plan assets at beginning of year
7,029

 
6,546

 
—

 
—

Actual return on plan assets
787

 
1,053

 
—

 
—

Plan participants’ contributions
29

 
30

 
79

 
80

Net transfers from variable fund/401(k) plan
4

 
7

 
—

 
—

Employer contributions
6

 
8

 
47

 
41

Expenses paid
(6
)
 
(5
)
 
—

 
—

Benefits paid
(628
)
 
(610
)
 
(126
)
 
(121
)
Fair value of net plan assets at end of year
7,221

 
7,029

 
—

 
—

 
 
 
 
 
 
 
 
Funded status
$
(4,250
)
 
$
(4,966
)
 
$
(656
)
 
$
(811
)
Amounts Recognized on TVA's Consolidated Balance Sheets 
Amounts related to these benefit plans recognized on TVA's consolidated balance sheets consist of regulatory assets that have not been recognized as components of net periodic benefit cost at September 30, 2013 and 2012, and the funded status of TVA’s benefit plans, which are included in Accounts payable and accrued liabilities and Post-retirement and post-employment benefit obligations:
Amounts Recognized on TVA's Consolidated Balance Sheets
At September 30
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2013
 
2012
Regulatory assets
$
3,910

 
$
5,168

 
$
166

 
$
349

Accounts payable and accrued liabilities
(5
)
 
(5
)
 
(39
)
 
(37
)
Pension and post-retirement benefit obligations(1)
(4,245
)
 
(4,961
)
 
(617
)
 
(774
)

Note
(1) Table above excludes $486 million and $544 million of post-employment benefit costs that are recorded in Post-retirement and post-employment benefit obligations on the Consolidated Balance Sheets at September 30, 2013 and 2012, respectively.

Postretirement Benefit Costs Deferred as Regulatory Assets 
Unrecognized amounts included in regulatory assets yet to be recognized as components of accrued benefit cost at September 30 consisted of:
Postretirement Benefit Costs Deferred as
Regulatory Assets
At September 30
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2013
 
2012
Unrecognized prior service cost (credit)
$
(203
)
 
$
(229
)
 
$
(45
)
 
$
(51
)
Unrecognized net loss
4,113

 
5,397

 
211

 
400

Total regulatory assets
$
3,910

 
$
5,168

 
$
166

 
$
349

Projected Benefit Obligations and Accumulated Benefit Obligations in Excess of Plan Assets 
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan at September 30, 2013, and 2012, were as follows:
Projected Benefit Obligations and Accumulated Benefit Obligations in Excess of Plan Assets
At September 30
 
2013
 
2012
Projected benefit obligation
$
11,471

 
$
11,955

Accumulated benefit obligation
11,216

 
11,680

Fair value of net plan assets
7,221

 
7,029

Components of Net Periodic Benefit Cost 
The components of net periodic benefit cost and other amounts recognized as changes in regulatory assets for the years ended September 30, 2013, and 2012, were as follows:

Components of Net Periodic Benefit Cost
For the years ended September 30
 
 
 
 
 
 
 
 
 
 
 
 
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2011
 
2013
 
2012
 
2011
Service cost
$
154

 
$
139

 
$
120

 
$
24

 
$
19

 
$
13

Interest cost
468

 
490

 
502

 
31

 
35

 
32

Expected return on plan assets
(428
)
 
(437
)
 
(488
)
 
—

 
—

 
—

Amortization of prior service cost
(22
)
 
(23
)
 
(23
)
 
(6
)
 
(6
)
 
(6
)
Recognized net actuarial loss
377

 
361

 
282

 
25

 
29

 
22

Net periodic benefit cost as actuarially determined
549

 
530

 
393

 
74

 
77

 
61

Amount charged (capitalized) due to actions of regulator
—

 
—

 
11

 
—

 
—

 
—

Total net periodic benefit cost recognized
$
549

 
$
530

 
$
404

 
$
74

 
$
77

 
$
61


Expected Amortization of Regulatory Assets in Next Fiscal Year 
The amounts in the regulatory asset that are expected to be recognized as components of net periodic benefit cost during the next fiscal year are as follows:
Expected Amortization of Regulatory Assets in 2014
At September 30, 2013
 
Pension Benefits
 
Other Post-Retirement
Benefits
 
Total
Prior service cost (credit)
$
(21
)
 
$
(6
)
 
$
(27
)
Net actuarial loss
278

 
11

 
289

Actuarial Assumptions 
TVA’s reported costs of providing the plan benefits are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various assumptions, the most significant of which are noted below.
Actuarial Assumptions
At September 30
 
Pension Benefits
 
Other Post-Retirement Benefits
 
2013
 
2012
 
2013
 
2012
Assumptions utilized to determine benefit obligations at September 30
 
 
 
 
 
 
 
Discount rate
5.00
%
 
4.00
%
 
5.05
%
 
4.00
%
Rate of compensation increase
5.72
%
 
4.44
%
 
N/A

 
N/A

Initial health care cost trend rate
N/A

 
N/A

 
8.00
%
 
8.50
%
Ultimate health care cost trend rate
N/A

 
N/A

 
5.00
%
 
5.00
%
Ultimate trend rate is reached in year beginning
N/A

 
N/A

 
2019

 
2019

 
 
 
 
 
 
 
 
Assumptions utilized to determine net periodic benefit cost for the years ended September 30
 

 
 

 
 

 
 

Discount rate
4.00
%
 
4.50
%
 
4.00
%
 
4.50
%
Expected return on plan assets
7.25
%
 
7.25
%
 
N/A

 
N/A

Rate of compensation increase
4.44
%
 
4.43
%
 
N/A

 
N/A

Initial health care cost trend rate
N/A

 
N/A

 
8.50
%
 
8.00
%
Ultimate health care cost trend rate
N/A

 
N/A

 
5.00
%
 
5.00
%
Ultimate trend rate is reached in year beginning
N/A

 
N/A

 
2019

 
2017

Sensitivity to Certain Changes in Pension Assumptions 
The following chart reflects the sensitivity of pension cost to changes in certain actuarial assumptions:
Sensitivity to Certain Changes in Pension Assumptions
At September 30, 2013
 
 
Actuarial Assumption
 
Change in Assumption
 
Impact on 2013 Pension Cost
 
Impact on 2013 Projected Benefit Obligation
 
 
 
Discount rate
 
(0.25
)
 
$
20

 
$
335

Rate of return on plan assets
 
(0.25
)
 
15

 
N/A

Sensitivity to Changes in Assumed Health Care Cost Trend Rates 
The following chart reflects the sensitivity of post-retirement benefit cost to changes in the health care trend rate:
Sensitivity to Changes in Assumed Health Care Cost Trend Rates
At September 30, 2013
 
1% Increase
 
1% Decrease
Effect on total of service and interest cost components for the year
$
8

 
$
(8
)
Effect on end-of-year accumulated post-retirement benefit obligation
87

 
(89
)
Asset Holdings and Fair Value Measurements 

Asset Holdings of TVARS
At September 30
 
 
 
 
Plan Assets at September 30
Asset Category
 
Target Allocation
 
2013
 
2012
Global equity
 
32
%
 
48
%
 
47
%
Private equity
 
10
%
 
6
%
 
6
%
Low volatility global public equity
 
5
%
 
—
%
 
—
%
Cash
 
2
%
 
2
%
 
1
%
Core fixed income
 
5
%
 
5
%
 
8
%
Long-term core fixed income
 
5
%
 
4
%
 
4
%
Investment grade credit
 
6
%
 
6
%
 
9
%
International emerging markets fixed income
 
5
%
 
—
%
 
—
%
High yield fixed income
 
5
%
 
10
%
 
10
%
Global TIPS
 
5
%
 
7
%
 
9
%
Private real assets
 
10
%
 
7
%
 
6
%
Commodities
 
5
%
 
—
%
 
—
%
MLPs
 
5
%
 
5
%
 
—
%
 
 
 
 
 
 
 
Total
 
100
%
 
100
%
 
100
%

Fair Value Measurements

The following table provides the fair value measurement amounts for assets held by TVARS at September 30, 2013:

TVA Retirement System
At September 30, 2013
 
Total(1) (2)
 
Quoted Prices in Active Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Equity securities
$
1,689

 
$
1,686

 
$
—

 
$
3

 
 
 
 
 
 
 
 
Preferred securities
22

 
17

 
—

 
5

 
 
 
 
 
 
 
 
Debt securities
 
 
 

 
 

 
 

Corporate debt securities
1,352

 
—

 
1,334

 
18

Residential mortgage-backed securities
355

 
—

 
352

 
3

Debt securities issued by U.S. Treasury and other U.S. government agencies
113

 
113

 
—

 
—

Debt securities issued by foreign governments
31

 
—

 
30

 
1

Asset-backed securities
120

 
—

 
110

 
10

Debt securities issued by state/local governments
36

 
—

 
36

 
—

Commercial mortgage-backed securities
21

 
—

 
18

 
3

 
 
 
 
 
 
 
 
Commingled Funds
 

 
 

 
 

 
 

Equity
1,182

 
—

 
1,182

 
—

Debt
786

 
—

 
786

 
—

Blended
263

 
—

 
263

 
—

Institutional mutual funds
26

 
26

 
—

 
—

Cash equivalents and other short-term investments
395

 
1

 
394

 
—

Private equity funds
528

 
—

 
—

 
528

Private real estate funds
382

 
—

 
297

 
85

Treasury bills, U.S. Government notes, and securities held as futures and other derivative collateral
39

 
8

 
31

 
—

Securities lending commingled funds
3

 
—

 
3

 
—

 
 
 
 
 
 
 
 
Derivatives
 

 
 

 
 

 
 

Foreign currency forward receivable
594

 
—

 
594

 
—

Purchased options
6

 
—

 
6

 
—

Interest rate swaps
4

 
—

 
4

 
—

Futures
4

 
4

 
—

 
 
 
 
 
 
 
 
 
 
Total Assets
$
7,951

 
$
1,855

 
$
5,440

 
$
656

Liabilities
 

 
 

 
 

 
 

Derivatives
 

 
 

 
 

 
 

Foreign currency forward payable
$
594

 
$
—

 
$
594

 
$
—

Credit default swaps
1

 
—

 
1

 
—

Written option obligations
1

 
—

 
1

 
—

 
 
 
 
 
 
 
 
Total Liabilities
$
596

 
$
—

 
$
596

 
$
—


Notes
(1) Excludes approximately $131 million in net payables associated with security purchases and sales and various other payables.
(2) Excludes a $3 million payable for collateral on loaned securities in connection with TVARS’s participation in securities lending programs.

The following table provides the fair value measurement amounts for assets held by TVARS at September 30, 2012:

TVA Retirement System
At September 30, 2012
 
Total(1) (2)
 
Quoted Prices in Active Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Equity securities
$
1,294

 
$
1,293

 
$
—

 
$
1

 
 
 
 
 
 
 
 
Preferred securities
26

 
18

 
3

 
5

 
 
 
 
 
 
 
 
Debt securities
 
 
 

 
 

 
 

Corporate debt securities
1,601

 
—

 
1,589

 
12

Residential mortgage-backed securities
390

 
—

 
386

 
4

Debt securities issued by U.S. Treasury and other U.S. government agencies
184

 
182

 
2

 
—

Debt securities issued by foreign governments
46

 
—

 
43

 
3

Asset-backed securities
109

 
—

 
95

 
14

Debt securities issued by state/local governments
46

 
—

 
41

 
5

Commercial mortgage-backed securities
28

 
—

 
28

 
—

 
 
 
 
 
 
 
 
Commingled Funds
 

 
 

 
 

 
 

Equity
1,129

 
—

 
1,129

 
—

Debt
802

 
—

 
802

 
—

Blended
275

 
—

 
275

 
—

Institutional mutual funds
32

 
32

 
—

 
—

Cash equivalents and other short-term investments
311

 
—

 
311

 
—

Private equity funds
519

 
—

 
—

 
519

Private real estate funds
340

 
—

 
270

 
70

Treasury bills, U.S. Government notes, and securities held as futures and other derivative collateral
37

 
5

 
32

 
—

Securities lending commingled funds
3

 
—

 
3

 
—

 
 
 
 
 
 
 
 
Derivatives
 

 
 

 
 

 
 

Foreign currency forward receivable
487

 
—

 
487

 
—

Purchased options
7

 
—

 
7

 
—

 
 
 
 
 
 
 
 
Total Assets
$
7,666

 
$
1,530

 
$
5,503

 
$
633

Liabilities
 

 
 

 
 

 
 

Derivatives
 

 
 

 
 

 
 

Foreign currency forward payable
$
488

 
$
—

 
$
488

 
$
—

Futures
3

 
3

 
—

 
—

Credit default swaps
1

 
—

 
1

 
—

Written option obligations
1

 
—

 
1

 
—

 
 
 
 
 
 
 
 
Total Liabilities
$
493

 
$
3

 
$
490

 
$
—


Notes
(1) Excludes approximately $141 million in net payables associated with security purchases and sales and various other payables.
(2) Excludes a $3 million payable for collateral on loaned securities in connection with TVARS’s participation in securities lending programs.

Fair Value Measurements Using Significant Unobservable Inputs 
The following table provides a reconciliation of beginning and ending balances of pension plan assets measured at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3):
Fair Value Measurements Using Significant Unobservable Inputs
For the years ended September 30
 
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
 
 
Balance at October 1, 2011
$
813

Net realized/unrealized gains (losses)
85

Purchases, sales, issuances, and settlements (net)
(17
)
Transfers in and/or out of Level 3(1)
(248
)
 
 
Balance at September 30, 2012
633

Net realized/unrealized gains (losses)
45

Purchases, sales, issuances, and settlements (net)
(21
)
Transfers in and/or out of Level 3
(1
)
 
 
Balance at September 30, 2013
$
656


Note
(1) Transfers in and out of Level 3 in 2012 were primarily due to a change in TVA's policy to classify investments with redemption restriction periods of three months or less as Level 2 and investments with more restrictive redemption terms as Level 3.
Estimated Future Benefit Payments 
  The following table sets forth the estimated future benefit payments under the benefit plans.
Estimated Future Benefits Payments
At September 30, 2013
 
 
Pension
Benefits
 
Other Post-Retirement Benefits
2014
$
720

 
$
40

2015
719

 
42

2016
727

 
43

2017
731

 
44

2018
736

 
45

2019 - 2023
3,773

 
210


Commitments and Contingencies Commitments and Contingencies (Tables)
Commitments and Contingencies 
At September 30, 2013, the amounts of contractual cash commitments maturing in each of the next five years and beyond are shown below:
Commitments and Contingencies
Payments due in the year ending September 30
 
 
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Debt(1)
 
$
2,464

 
$
1,032

 
$
32

 
$
1,555

 
$
1,682

 
$
18,056

 
$
24,821

Debt of VIEs
 
30

 
32

 
33

 
35

 
36

 
1,175

 
1,341

Membership interests of variable interest entity subject to mandatory redemption
 
2

 
2

 
2

 
2

 
2

 
30

 
40

Lease obligations
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Capital
 
5

 
5

 
5

 
5

 
5

 
36

 
61

Non-cancelable operating
 
37

 
30

 
29

 
28

 
27

 
87

 
238

Purchase obligations
 
 

 
 
 
 

 
 

 
 

 
 

 
 

Power
 
219

 
204

 
219

 
231

 
230

 
3,336

 
4,439

Fuel
 
1,419

 
1,176

 
794

 
442

 
498

 
2,002

 
6,331

Other
 
255

 
210

 
184

 
182

 
502

 
1,221

 
2,554

Payments on other financings
 
100

 
104

 
104

 
104

 
104

 
401

 
917

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
4,531

 
$
2,795

 
$
1,402

 
$
2,584

 
$
3,086

 
$
26,344

 
$
40,742

Note
(1) Does not include noncash items of foreign currency exchange loss of $43 million and net discount on sale of Bonds of $85 million.

Energy Prepayment Obligations 
Energy Prepayment Obligations
 
 
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Energy Prepayment Obligations
 
$
100

 
$
100

 
$
100

 
$
100

 
$
100

 
$
10

 
$
510

 
Related Parties Related Parties (Tables)
Related Parties
Transactions with agencies of the federal government were as follows:
Related Party Transactions
For the years ended, or at, September 30
 
2013
 
2012
 
2011
Electricity sales
$
120

 
$
117

 
$
130

Other income
102

 
164

 
104

Operating and maintenance
314

 
375

 
295

Cash and cash equivalents
38

 
32

 
27

Accounts receivable, net
58

 
49

 
84

Accounts payable and accrued liabilities
133

 
204

 
175

Return on Power Program Appropriation Investment
7

 
7

 
7

Return of Power Program Appropriation Investment
20

 
20

 
20

Unaudited Quarterly Financial Information Unaudited Quarterly Financial Information (Tables)
Unaudited Quarterly Financial Information
Unaudited Quarterly Financial Information
2013
 
First
 
Second
 
Third
 
Fourth
 
Total
Operating revenues
$
2,579

 
$
2,741

 
$
2,602

 
$
3,034

 
$
10,956

Operating expenses
2,523

 
2,380

 
2,324

 
2,276

 
9,503

Operating income
56

 
361

 
278

 
758

 
1,453

Net income (loss)
(245
)
 
54

 
(12
)
 
474

 
271


Unaudited Quarterly Financial Information
2012
 
First
 
Second
 
Third
 
Fourth
 
Total
Operating revenues
$
2,568

 
$
2,604

 
$
2,777

 
$
3,271

 
$
11,220

Operating expenses
2,431

 
2,358

 
2,499

 
2,632

 
9,920

Operating income
137

 
246

 
278

 
639

 
1,300

Net income (loss)
(173
)
 
(94
)
 
(23
)
 
350

 
60

Summary of Significant Accounting Policies Summary of Significant Accounting Policies - General (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2013
Customers
Sep. 30, 2013
People
Population of Service Area
 
 
Number of customers for whom unbilled revenues are estimated
6 
 
Population of TVA's service area (number of people)
 
9,000,000 
Possible amount of future payments to the Department of Energy under the blended low-enriched uranium program
 
$ 175 
Estimated future payments attributable to blended low-enriched uranium fuel currently in use
 
106 
Maximum original maturity
 
3 months 
Subsequent period after a nuclear refueling outage when the benefits of the costs are realized - minimum
 
18 months 
Subsequent period after a nuclear refueling outage when the benefits of the costs are realized - maximum
 
24 months 
Recorded cost for emission allowances granted by the Environmental Protection Agency
 
0 
BLEU fuel obligation
 
$ 6 
Summary of Significant Accounting Policies Summary of Significant Accounting Policies - Reclassificatons (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Reclassifications
 
 
Reclassification from Other, net to Regulatory assets costs
$ (14)
$ (21)
Reclassification from Nuclear refueling outage amortization to Other, net
 
42 
Reclassification from Proceeds from leasebacks to Other, net
 
$ 5 
Summary of Significant Accounting Policies Summary of Significant Accounting Policies - Allowance for Uncollectible Accounts (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Allowance for Uncollectible Accounts
 
 
Period of time for customers to fulfill payment arrangements
90 days 
 
Allowance for uncollectible accounts
$ 1 
$ 7 
Loans and other long-term receivables, net
73 
76 
Allowance for uncollectible accounts - loans receivable
$ 10 
$ 12 
Summary of Significant Accounting Policies Summary of Significant Accounting Policies - Property, Plant, and Equipment, and Depreciation (Details) (USD $)
12 Months Ended 12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2013
Nuclear
Sep. 30, 2012
Nuclear
Sep. 30, 2011
Nuclear
Sep. 30, 2013
Coal-Fired
Sep. 30, 2012
Coal-Fired
Sep. 30, 2011
Coal-Fired
Sep. 30, 2013
Hydroelectric
Sep. 30, 2012
Hydroelectric
Sep. 30, 2011
Hydroelectric
Sep. 30, 2013
Gas and Oil-Fired
Sep. 30, 2012
Gas and Oil-Fired
Sep. 30, 2011
Gas and Oil-Fired
Sep. 30, 2013
Transmission
Sep. 30, 2012
Transmission
Sep. 30, 2011
Transmission
Sep. 30, 2013
Other
Sep. 30, 2012
Other
Sep. 30, 2011
Other
Sep. 30, 2013
Electricity Generation Plant, Non-Nuclear
Sep. 30, 2012
Electricity Generation Plant, Non-Nuclear
Sep. 30, 2013
Fuel Fabrication and Blending Facilities
Sep. 30, 2012
Fuel Fabrication and Blending Facilities
Sep. 30, 2013
Regulatory assets [Member]
Jun. 30, 2011
Environmental Agreements
Units
Property, Plant, and Equipment, and Depreciation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation
$ 1,400,000,000 
$ 1,700,000,000 
$ 1,400,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Composite depreciation rate for completed plant
3.12% 
3.78% 
3.21% 
2.86% 
2.71% 
2.58% 
3.47% 
5.65% 
3.80% 
1.30% 
1.35% 
1.43% 
3.21% 
3.67% 
3.70% 
2.76% 
2.99% 
3.39% 
8.14% 
8.10% 
7.39% 
 
 
 
 
 
 
Number of units to be idled
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
18 
Accelerated depreciation
49,000,000 
308,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital leases
47,000,000 
35,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42,000,000 
24,000,000 
5,000,000 
11,000,000 
 
 
Allowance for funds used during construction and nuclear fuel expenditures
168,000,000 
171,000,000 
126,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
23,000,000 
 
AFUDC minimum total project cost
1,000,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum construction period.
3 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accumulated balance of qualifying projects
3,100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capitalized software amortization period
5 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unamortized computer software costs
5,000,000 
26,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization expense of capitalized computer software costs
$ 31,000,000 
$ 31,000,000 
$ 31,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Summary of Significant Accounting Policies Summary of Significant Accounting Policies - Energy Prepayment Obligations and Discounts on Sales (Details) (USD $)
12 Months Ended 24 Months Ended 108 Months Ended 12 Months Ended 108 Months Ended 12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2004
Sep. 30, 2004
Sep. 30, 2013
DEU [Member]
Sep. 30, 2013
MLGW
Sep. 30, 2012
MLGW
Sep. 30, 2011
MLGW
Sep. 30, 2013
MLGW
Sep. 30, 2013
Total
Sep. 30, 2012
Total
Sep. 30, 2011
Total
Energy Prepayment Obligations and Discounts on Sales
 
 
 
 
 
 
 
 
 
 
 
 
 
Incremental amount of discounted energy units
$ 1,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Discount per kilowatt-hour
0.025 
 
 
 
 
 
 
 
 
 
 
 
 
Discounted energy units contract period 1
5 years 
 
 
 
 
 
 
 
 
 
 
 
 
Discounted energy units contract period 2
10 years 
 
 
 
 
 
 
 
 
 
 
 
 
Discounted energy units contract period 3
15 years 
 
 
 
 
 
 
 
 
 
 
 
 
Discounted energy units contract period 4
20 years 
 
 
 
 
 
 
 
 
 
 
 
 
Total sales through DEU program since inception
 
 
 
 
55,000,000 
 
 
 
 
 
 
 
 
Deferred revenue, revenue recognized
2,000,000 
5,000,000 
5,000,000 
 
 
54,000,000 
100,000,000 
100,000,000 
100,000,000 
990,000,000 
47,000,000 
47,000,000 
47,000,000 
MLGW prepayment
 
 
 
1,500,000,000 
 
 
 
 
 
 
 
 
 
MLGW prepayment period
 
 
 
180 months 
 
 
 
 
 
 
 
 
 
Deferred revenue expected recognition each year
 
 
 
 
 
 
$ 100,000,000 
 
 
 
 
 
 
Accounts Receivable, Net Accounts Receivable, Net (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Accounts Receivable, Net
 
 
Power receivables
$ 1,495 
$ 1,585 
Other receivables
73 
88 
Allowance for uncollectible accounts
(1)
(7)
Accounts receivable, net
$ 1,567 
$ 1,666 
Inventories, Net Inventories, Net (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Inventories, Net
 
 
Materials and supplies inventory
$ 620 
$ 605 
Fuel inventory
494 
508 
Emission allowance inventory
14 
12 
Allowance for inventory obsolescence
(37)
(28)
Inventories, net
$ 1,091 
$ 1,097 
Net Completed Plant Net Completed Plant (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Completed Plant
 
 
Completed plant cost
$ 47,073 
$ 45,917 
Accumulated depreciation
23,157 
22,169 
Net completed plant
23,916 
23,748 
Coal-Fired
 
 
Completed Plant
 
 
Completed plant cost
13,847 
13,726 
Accumulated depreciation
8,429 
7,962 
Net completed plant
5,418 
5,764 
Gas and Oil-Fired
 
 
Completed Plant
 
 
Completed plant cost
3,386 
3,334 
Accumulated depreciation
1,008 
916 
Net completed plant
2,378 
2,418 
Nuclear
 
 
Completed Plant
 
 
Completed plant cost
18,725 
18,042 
Accumulated depreciation
9,103 
8,791 
Net completed plant
9,622 
9,251 
Transmission
 
 
Completed Plant
 
 
Completed plant cost
6,300 
6,075 
Accumulated depreciation
2,562 
2,427 
Net completed plant
3,738 
3,648 
Hydroelectric
 
 
Completed Plant
 
 
Completed plant cost
2,392 
2,278 
Accumulated depreciation
892 
869 
Net completed plant
1,500 
1,409 
Other Electrical Plant
 
 
Completed Plant
 
 
Completed plant cost
1,452 
1,490 
Accumulated depreciation
792 
842 
Net completed plant
660 
648 
Electric Subtotal
 
 
Completed Plant
 
 
Completed plant cost
46,102 
44,945 
Accumulated depreciation
22,786 
21,807 
Net completed plant
23,316 
23,138 
Multipurpose Dams
 
 
Completed Plant
 
 
Completed plant cost
928 
928 
Accumulated depreciation
356 
347 
Net completed plant
572 
581 
Other Stewardship
 
 
Completed Plant
 
 
Completed plant cost
43 
44 
Accumulated depreciation
15 
15 
Net completed plant
28 
29 
Other Subtotal
 
 
Completed Plant
 
 
Completed plant cost
971 
972 
Accumulated depreciation
371 
362 
Net completed plant
$ 600 
$ 610 
Other Long-Term Assets Other Long-Term Assets (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Other Long-Term Assets
 
 
EnergyRight® receivables
$ 117 
$ 115 
Unamortized debt Issue cost of power bonds
75 
70 
Loans and other long-term receivables, net
73 
76 
Coal contract derivative assets
1 
107 
Prepaid capacity payments
62 
59 
Currency swap asset
28 
21 
Other
89 
61 
Total other long-term assets
445 
509 
Energy Right Program
 
 
Other Long-Term Assets
 
 
Number of days in default
180 days 
 
Energy Right loans receivable, net of discount
150 
150 
Energy Right Program
 
 
Other Long-Term Assets
 
 
Number of days in default
180 days 
 
Energy Right Solutions program obligation
$ 186 
$ 185 
Regulatory Assets and Liabilities Regulatory Assets and Liabilities - Table (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Regulatory Assets and Liabilities
 
 
Current regulatory assets
$ 561 
$ 774 
Non-current regulatory assets
9,131 
11,127 
Regulatory assets
9,692 
11,901 
Current regulatory liabilities
212 
191 
Non-current regulatory liabilities
1 
109 
Regulatory liabilities
213 
300 
Fuel cost adjustment tax equivalents
 
 
Regulatory Assets and Liabilities
 
 
Current regulatory liabilities
176 
173 
Fuel cost adjustment receivable/payable
 
 
Regulatory Assets and Liabilities
 
 
Current regulatory liabilities
29 
0 
Unrealized gains/losses on commodity derivatives
 
 
Regulatory Assets and Liabilities
 
 
Current regulatory liabilities
7 
18 
Non-current regulatory liabilities
1 
109 
Unrealized gains/losses on commodity derivatives
 
 
Regulatory Assets and Liabilities
 
 
Current regulatory assets
183 
310 
Non-current regulatory assets
139 
335 
Deferred nuclear generating units
 
 
Regulatory Assets and Liabilities
 
 
Current regulatory assets
237 
237 
Non-current regulatory assets
1,438 
473 
Regulatory assets
1,700 
 
Environmental agreements
 
 
Regulatory Assets and Liabilities
 
 
Current regulatory assets
73 
87 
Non-current regulatory assets
189 
237 
Fuel cost adjustment receivable/payable
 
 
Regulatory Assets and Liabilities
 
 
Current regulatory assets
0 
68 
Environmental cleanup costs - Kingston ash spill
 
 
Regulatory Assets and Liabilities
 
 
Current regulatory assets
68 
72 
Non-current regulatory assets
681 
797 
Deferred pension costs and other post-retirement benefits costs
 
 
Regulatory Assets and Liabilities
 
 
Non-current regulatory assets
4,076 
5,517 
Unrealized losses on interest rate derivatives
 
 
Regulatory Assets and Liabilities
 
 
Non-current regulatory assets
808 
1,332 
Nuclear decommissioning costs
 
 
Regulatory Assets and Liabilities
 
 
Non-current regulatory assets
893 
914 
Construction costs
 
 
Regulatory Assets and Liabilities
 
 
Non-current regulatory assets
0 
619 
Non-nuclear decommissioning costs
 
 
Regulatory Assets and Liabilities
 
 
Non-current regulatory assets
571 
550 
Other non-current regulatory assets
 
 
Regulatory Assets and Liabilities
 
 
Non-current regulatory assets
$ 336 
$ 353 
Regulatory Assets and Liabilities Regulatory Assets and Liabilities (Details) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Jul. 31, 2005
Units
Sep. 30, 2013
Deferred Nuclear Generating Units and Construction Costs
Jul. 31, 2005
Deferred Nuclear Generating Units and Construction Costs
Sep. 30, 2013
Environmental Cleanup Costs - Kingston Ash Spill
Sep. 30, 2010
Environmental Cleanup Costs - Kingston Ash Spill
Sep. 30, 2009
Environmental Cleanup Costs - Kingston Ash Spill
Sep. 30, 2013
Environmental Agreements
Sep. 30, 2013
Energy Efficiency Projects
Environmental Agreements
Sep. 30, 2013
Paid to States
Environmental Agreements
Sep. 30, 2013
Civil Penalties
Environmental Agreements
Sep. 30, 2013
Derivatives Under FTP
Sep. 30, 2012
Derivatives Under FTP
Sep. 30, 2013
Deferred nuclear generating units
Regulatory Assets and Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net unrealized gains (losses)
 
 
 
 
 
 
 
 
 
 
 
 
$ 166,000,000 1
$ 228,000,000 1
 
Investment in deferred generating units
 
 
 
 
3,900,000,000 
 
 
 
 
 
 
 
 
 
 
Number of deferred generating units
 
 
2 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory Noncurrent Asset, Amortization Period
 
 
 
P10Y 
 
P15Y 
 
 
 
 
 
 
 
 
 
Remaining balance to be included in plant asset balance at completion
 
 
 
619,000,000 
 
 
 
 
 
 
 
 
 
 
 
Regulatory Assets
9,692,000,000 
11,901,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
1,700,000,000 
Yearly amortization of Deferred nuclear generating units
237,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Initial regulatory asset
 
 
 
 
 
 
 
 
360,000,000 
 
 
 
 
 
 
Investment in energy efficiency projects
 
 
 
 
 
 
 
 
290,000,000 
 
 
 
 
 
 
Amount to be provided to fund environmental projects
 
 
 
 
 
 
 
 
60,000,000 
 
 
 
 
 
 
Amount to be paid in civil penalties
 
 
 
 
 
 
 
 
10,000,000 
 
 
 
 
 
 
Regulatory asset amount expensed
 
 
 
 
 
 
 
 
 
52,000,000 
36,000,000 
10,000,000 
 
 
 
Total recorded estimate of Kingston cleanup costs
1,100,000,000 
 
 
 
 
1,100,000,000 
 
933,000,000 
 
 
 
 
 
 
 
Estimate increase
 
 
 
 
 
 
$ 192,000,000 
 
 
 
 
 
 
 
 
Current regulatory asset amortization period
 
 
 
 
 
12 months 
 
 
 
 
 
 
 
 
 
Variable Interest Entities Variable Interest Entities (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Aug. 9, 2013
Jan. 17, 2012
Variable Interest Entities
 
 
 
 
SSSL's former ownership interest
 
 
90.00% 
 
orginal lease term
 
 
31 years 
 
Initial liability
 
 
$ 400 
 
VIE Financing
 
 
 
 
Lease term
 
 
20 years 
 
Membership interests of VIE subject to mandatory redemption
40 
0 
40 
 
Total liabilities
1,393 
1,004 
 
1,000 
Interest expense
50 
34 
 
 
SCCG
 
 
 
 
VIE Financing
 
 
 
 
Face amount
 
 
360 
 
JSCCG
 
 
 
 
VIE Financing
 
 
 
 
Face amount
 
 
 
900 
Holdco
 
 
 
 
VIE Financing
 
 
 
 
Face amount
 
 
 
100 
Interest Payable, Current
 
 
 
 
VIE Financing
 
 
 
 
Total liabilities
12 
10 
 
 
Accounts payable and accrued liabilities
 
 
 
 
VIE Financing
 
 
 
 
Total liabilities
2 
0 
 
 
Other Long-term Debt, Current
 
 
 
 
VIE Financing
 
 
 
 
Total liabilities
30 
13 
 
 
Liabilities, Current
 
 
 
 
VIE Financing
 
 
 
 
Total liabilities
44 
23 
 
 
Other long-term liabilities
 
 
 
 
VIE Financing
 
 
 
 
Total liabilities
38 
0 
 
 
Long-term debt of variable interest entities
 
 
 
 
VIE Financing
 
 
 
 
Total liabilities
$ 1,311 
$ 981 
 
 
Kingston Fossil Plant Ash Spill Kingston Fossil Plant Ash Spill (Details) (USD $)
12 Months Ended
Sep. 30, 2013
Oct. 2, 2009
Dec. 31, 2008
Dredge_cells
Cubic_yards
Kingston Fossil Plant Ash Spill
 
 
 
Number of dredge cells that failed
 
 
1 
Cubic yards of water and coal fly ash that flowed out of the cell
 
 
5,000,000 
Kingston cost estimate low end of range
$ 1,100,000,000 
 
 
Kingston cost estimate high end of range
1,200,000,000 
 
 
Total recorded estimate of Kingston cleanup costs
1,100,000,000 
 
 
Period collected in rates
 
15 years 
 
Kingston cleanup amounts spent to date
956,000,000 
 
 
Remaining estimated Kingston liability
169,000,000 
 
 
Kingston insurance proceeds received
$ 92,000,000 
 
 
Other Long-Term Liabilities Other Long-Term Liabilities (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Aug. 9, 2013
Sep. 30, 2012
Other Long-Term Liabilities
 
 
 
Interest rate swap liabilities
$ 1,199 
 
$ 1,723 
Environmental agreements liability
190 
 
237 
EnergyRight® financing obligation
149 
 
148 
Membership interests of VIE subject to mandatory redemption, amount, noncurrent
38 
 
0 
Coal contract derivative liabilities
35 
 
205 
Commodity swap derivative liabilities
36 
 
59 
Currency swap liabilities
15 
 
54 
Other
199 
 
254 
Total other long-term liabilities
1,861 
 
2,680 
Percentage of membership interests issued
 
100.00% 
 
Membership interests of VIE subject to mandatory redemption
40 
40 
0 
SCCG balloon payment
 
4 
 
Membership interests of VIE subject to mandatory redemption, interest rate, stated percentage
 
7.00% 
 
Membership interests of VIE subject to mandatory redemption, amount, current
2 
 
 
Energy Right Program
 
 
 
Other Long-Term Liabilities
 
 
 
Number of days in default
180 days 
 
 
Energy Right Solutions program obligation
186 
 
185 
Accounts payable and accrued liabilities |
Energy Right Program
 
 
 
Other Long-Term Liabilities
 
 
 
Energy Right Solutions program obligation
$ 37 
 
$ 37 
Asset Retirement Obligations Asset Retirement Obligations (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Asset Retirement Obligations
 
 
Increase in ARO liability
$ 199 
 
Accretion expense
40 
 
Balance
3,289 
3,138 
Settlements (ash storage areas)
(37)
(22)
Accretion (recorded as regulatory asset)
170 
172 
Additional obligations
0 
2 
Change in estimate
66 
(1)
Balance
3,488 1
3,289 
Current portion of ARO
16 
 
Nuclear
 
 
Asset Retirement Obligations
 
 
Balance
2,208 
2,091 
Settlements (ash storage areas)
0 
0 
Accretion (recorded as regulatory asset)
125 
117 
Additional obligations
0 
0 
Change in estimate
66 
0 
Balance
2,399 
2,208 
Non-nuclear
 
 
Asset Retirement Obligations
 
 
Balance
1,081 
1,047 
Settlements (ash storage areas)
(37)
(22)
Accretion (recorded as regulatory asset)
45 
55 
Additional obligations
0 
2 
Change in estimate
0 
(1)
Balance
$ 1,089 
$ 1,081 
Debt and Other Obligations Debt and Other Obligations - General (Details) (USD $)
In Billions, unless otherwise specified
Sep. 30, 2015
Sep. 30, 2013
tests
Types_of_bonds
Sep. 30, 2010
Debt Instrument
 
 
 
Debt ceiling
 
$ 30.0 
 
Number of types of bonds outstanding
 
2 
 
Power bonds years to maturity - low end of range
 
1 year 
 
Power bonds years to maturity - high end of range
 
50 years 
 
Discount notes years to maturity - high end of range
 
1 year 
 
Number of bond tests
 
2 
 
Time period for meeting the bondholder protection test
5 years 
5 years 
5 years 
Debt and Other Obligations Debt and Other Obligations - Secured Debt of VIEs (Details) (USD $)
In Millions, unless otherwise specified
1 Months Ended
Jan. 17, 2012
Sep. 30, 2013
Aug. 9, 2013
Sep. 30, 2012
Debt Instrument
 
 
 
 
Membership interests of VIE subject to mandatory redemption
 
$ 40 
$ 40 
$ 0 
Proceeds paid to TVA from secured note issuance
970 
 
 
 
Long-term debt of variable interest entities including current maturities
 
1,341 
 
994 
SCCG
 
 
 
 
Debt Instrument
 
 
 
 
Face amount
 
 
360 
 
Interest rate
 
 
3.846% 
 
JSCCG
 
 
 
 
Debt Instrument
 
 
 
 
Face amount
900 
 
 
 
Interest rate
4.626% 
 
 
 
Cash deposited by JSCCG with lease trustee
30 
 
 
 
Holdco
 
 
 
 
Debt Instrument
 
 
 
 
Face amount
100 
 
 
 
Interest rate
7.10% 
 
 
 
Holdco balloon payment upon maturity
$ 10 
 
 
 
Debt and Other Obligations Debt and Other Obligations - Short-Term Debt (Details) (USD $)
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Short-term Debt
 
 
 
Short-term debt, weighted average interest rate
0.04% 
0.09% 
0.00% 
Short-term debt, maximum amount outstanding during period
$ 3,400,000,000 
$ 3,200,000,000 
$ 1,400,000,000 
Short-term debt, average amount outstanding
$ 1,900,000,000 
$ 1,100,000,000 
$ 363,000,000 
Weighted average interest rates during period
0.08% 
0.08% 
0.14% 
Debt and Other Obligations Debt and Other Obligations - Put and Call Options (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Basis_points
Rate_resets
Debt Instrument
 
Amount of redeemable bond issues outstanding
$ 848 
Call price - low end of range
100.00% 
Bond issues with survivor's option
23 
Bonds outstanding with survivor's option
708 
Number of issues of Putable Automatic Rate Reset Securities outstanding
2 
Fixed-rate period for coupon rate reset on PARRS
5 years 
Average time period
5 days 
PARRS 1998 Series D Bond
 
Debt Instrument
 
Amount of redeemable bond issues outstanding
324 
Debt Instrument, Basis Point Spread on Variable Rate
94 
Number of rate resets
6 
PARRS interest rate prior to rate reset
6.75% 
PARRS interest rate after rate reset
3.83% 
Amount of bonds redeemed
251 
PARRS 1999 Series A Bond
 
Debt Instrument
 
Amount of redeemable bond issues outstanding
270 
Debt Instrument, Basis Point Spread on Variable Rate
84 
Number of rate resets
5 
PARRS interest rate prior to rate reset
6.50% 
PARRS interest rate after rate reset
3.955% 
Amount of bonds redeemed
$ 255 
Debt and Other Obligations Debt and Other Obligations - Debt Securities Activity (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Debt Instrument
 
 
Amount
$ 2,371 
$ 2,723 
Discount on debt issues
(30)
(9)
Debt of variable interest entities
 
 
Debt Instrument
 
 
Amount
13 1
6 1
Electronotes
 
 
Debt Instrument
 
 
Amount
50 1
189 1
1992 Series D
 
 
Debt Instrument
 
 
Amount
0 1
1,000 1
1998 Series C
 
 
Debt Instrument
 
 
Amount
1,359 1
0 1
1998 Series D
 
 
Debt Instrument
 
 
Amount
2 1
5 1
1999 Series A
 
 
Debt Instrument
 
 
Amount
1 1
2 1
2000 Series F
 
 
Debt Instrument
 
 
Amount
0 1
29 1
2002 Series A
 
 
Debt Instrument
 
 
Amount
0 1
1,486 1
2003 Series C
 
 
Debt Instrument
 
 
Amount
940 1
0 1
2009 Series A
 
 
Debt Instrument
 
 
Amount
4 1
4 1
2009 Series B
 
 
Debt Instrument
 
 
Amount
2 1
2 1
Total
 
 
Debt Instrument
 
 
Percent of par value
100.00% 
 
Debt of variable interest entities
 
 
Debt Instrument
 
 
Amount
360 
1,000 
Electronotes
 
 
Debt Instrument
 
 
Amount
152 
135 
2012 Series A
 
 
Debt Instrument
 
 
Percent of par value
 
99.12% 
Amount
0 
1,000 2
2012 Series B
 
 
Debt Instrument
 
 
Percent of par value
97.49% 
 
Amount
1,000 3
0 
2013 Series A
 
 
Debt Instrument
 
 
Percent of par value
99.52% 
 
Amount
1,000 4
0 
Total
 
 
Debt Instrument
 
 
Amount
$ 2,482 
$ 2,126 
Debt and Other Obligations Debt and Other Obligations - Debt Outstanding (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Electronotes
Sep. 30, 2012
Short-term debt
 
 
Short-term debt, net
$ 2,432 
$ 1,507 
Current maturities of long-term debt of variable interest entities
30 
13 
Current maturities of power bonds
32 
2,308 
Total current debt outstanding, net
2,494 
3,828 
Long-term debt
 
 
Long-term power bonds
22,400 1
20,330 
Unamortized discount, premiums and other
(85)
(61)
Total long-term outstanding power bonds, net
22,315 1
20,269 
Long-term debt of variable interest entities
1,311 
981 
Total long-term debt, net
23,626 1
21,250 
Foreign currency exchange loss
43 
41 
Number of issues with partial maturities
1 
 
Electronotes
 
 
Long-term debt
 
 
Long-term power bonds
723 1 2
622 2
Maturity date - earliest
May 15, 2020 1 2
 
Maturity date - latest
Feb. 15, 2043 1 2
 
Coupon rate - minimum
2.375% 1 2
 
Coupon rate - maximum
4.875% 1 2
 
Call date - earliest
Apr. 15, 2013 1 2
 
Call date - latest
Feb. 15, 2018 1 2
 
880591DY5
 
 
Short-term debt
 
 
Maturity
Jun. 15, 2015 1
 
Coupon rate
4.375% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
1,000 
880591EE8
 
 
Short-term debt
 
 
Maturity
Nov. 15, 2015 1 3
 
Coupon rate
2.25% 1 3
 
Long-term debt
 
 
Long-term power bonds
4 1 3
8 3
880591DS8
 
 
Short-term debt
 
 
Maturity
Dec. 15, 2016 1
 
Coupon rate
4.875% 1
 
Long-term debt
 
 
Long-term power bonds
524 1
524 
880591EA6
 
 
Short-term debt
 
 
Maturity
Jul. 18, 2017 1
 
Coupon rate
5.50% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
1,000 
880591CU4
 
 
Short-term debt
 
 
Maturity
Dec. 15, 2017 1
 
Coupon rate
6.25% 1
 
Long-term debt
 
 
Long-term power bonds
650 1
650 
880591EC2
 
 
Short-term debt
 
 
Maturity
Apr. 01, 2018 1
 
Coupon rate
4.50% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
1,000 
880591EQ1
 
 
Short-term debt
 
 
Maturity
Oct. 15, 2018 1
 
Coupon rate
1.75% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
0 
880591EL2
 
 
Short-term debt
 
 
Maturity
Feb. 15, 2021 1
 
Coupon rate
3.875% 1
 
Long-term debt
 
 
Long-term power bonds
1,500 1
1,500 
880591DC3
 
 
Short-term debt
 
 
Maturity
Jun. 07, 2021 1
 
Coupon rate
5.805% 1 4
 
Long-term debt
 
 
Long-term power bonds
324 1
324 
880591EN8
 
 
Short-term debt
 
 
Maturity
Aug. 15, 2022 1
 
Coupon rate
1.875% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
1,000 
880591CJ9
 
 
Short-term debt
 
 
Maturity
Nov. 01, 2025 1
 
Coupon rate
6.75% 1
 
Long-term debt
 
 
Long-term power bonds
1,350 1
1,350 
880591300
 
 
Short-term debt
 
 
Maturity
Jun. 01, 2028 1 5
 
Coupon rate
4.06% 1 5
 
Long-term debt
 
 
Long-term power bonds
324 1 5
326 5
880591409
 
 
Short-term debt
 
 
Maturity
May 01, 2029 1 5
 
Coupon rate
4.15% 1 5
 
Long-term debt
 
 
Long-term power bonds
270 1 5
271 5
880591DM1
 
 
Short-term debt
 
 
Maturity
May 01, 2030 1
 
Coupon rate
7.125% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
1,000 
880591DP4
 
 
Short-term debt
 
 
Maturity
Jun. 07, 2032 1
 
Coupon rate
6.587% 1 4
 
Long-term debt
 
 
Long-term power bonds
405 1
404 
880591DV1
 
 
Short-term debt
 
 
Maturity
Jul. 15, 2033 1
 
Coupon rate
4.70% 1
 
Long-term debt
 
 
Long-term power bonds
472 1
472 
880591EF5
 
 
Short-term debt
 
 
Maturity
Jun. 15, 2034 1 3
 
Coupon rate
3.77% 1 3
 
Long-term debt
 
 
Long-term power bonds
414 1 3
440 3
880591DX7
 
 
Short-term debt
 
 
Maturity
Jun. 15, 2035 1
 
Coupon rate
4.65% 1
 
Long-term debt
 
 
Long-term power bonds
436 1
436 
880591CK6
 
 
Short-term debt
 
 
Maturity
Apr. 01, 2036 1
 
Coupon rate
5.98% 1
 
Long-term debt
 
 
Long-term power bonds
121 1
121 
880591CS9
 
 
Short-term debt
 
 
Maturity
Apr. 01, 2036 1
 
Coupon rate
5.88% 1
 
Long-term debt
 
 
Long-term power bonds
1,500 1
1,500 
880591CP5
 
 
Short-term debt
 
 
Maturity
Jan. 15, 2038 1
 
Coupon rate
6.15% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
1,000 
880591ED0
 
 
Short-term debt
 
 
Maturity
Jun. 15, 2038 1
 
Coupon rate
5.50% 1
 
Long-term debt
 
 
Long-term power bonds
500 1
500 
880591EH1
 
 
Short-term debt
 
 
Maturity
Sep. 15, 2039 1
 
Coupon rate
5.25% 1
 
Long-term debt
 
 
Long-term power bonds
2,000 1
2,000 
880591EP3
 
 
Short-term debt
 
 
Maturity
Dec. 15, 2042 1
 
Coupon rate
3.50% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
0 
880591DU3
 
 
Short-term debt
 
 
Maturity
Jun. 07, 2043 1
 
Coupon rate
4.962% 1 4
 
Long-term debt
 
 
Long-term power bonds
243 1
242 
880591CF7
 
 
Short-term debt
 
 
Maturity
Jul. 15, 2045 1
 
Coupon rate
6.235% 1
 
Long-term debt
 
 
Long-term power bonds
140 1
140 
Call date - earliest
Jul. 15, 2020 
 
880591EB4
 
 
Short-term debt
 
 
Maturity
Jan. 15, 2048 1
 
Coupon rate
4.875% 1
 
Long-term debt
 
 
Long-term power bonds
500 1
500 
880591DZ2
 
 
Short-term debt
 
 
Maturity
Apr. 01, 2056 1
 
Coupon rate
5.375% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
1,000 
880591EJ7
 
 
Short-term debt
 
 
Maturity
Sep. 15, 2060 1
 
Coupon rate
4.625% 1
 
Long-term debt
 
 
Long-term power bonds
1,000 1
1,000 
880591EE8
 
 
Short-term debt
 
 
Current maturities of power bonds
3 
3 
Maturity
May 15, 2014 
 
Coupon rate
2.25% 
 
880591EF5
 
 
Short-term debt
 
 
Current maturities of power bonds
26 
3 
Maturity
Jun. 15, 2014 
 
Coupon rate
3.77% 
 
880591CW0
 
 
Short-term debt
 
 
Current maturities of power bonds
0 
1,359 
Maturity
Mar. 15, 2013 
 
Coupon rate
6.00% 
 
880591DW9
 
 
Short-term debt
 
 
Current maturities of power bonds
0 
940 
Maturity
Aug. 01, 2013 
 
Coupon rate
4.75% 
 
88059TEL1
 
 
Short-term debt
 
 
Current maturities of power bonds
$ 3 
$ 3 
Maturity
May 15, 2014 
 
Coupon rate
2.65% 
 
Debt and Other Obligations Debt and Other Obligations - Maturities Due (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Debt Instrument
 
 
2014
$ 62 1
 
2015
1,064 1
 
2016
65 1
 
2017
1,590 1
 
2018
1,718 1
 
Thereafter
19,231 1
 
Total
23,730 1
 
Foreign currency exchange loss
43 
41 
Unamortized discount, premiums and other
$ 85 
$ 61 
Debt and Other Obligations Debt and Other Obligations - Credit Facility Agreements (Details) (USD $)
Sep. 30, 2013
Credit_facilities
Sep. 30, 2012
Credit Facility Agreements
 
 
Current borrowing capacity
$ 150,000,000 
 
Line of Credit
 
 
Credit Facility Agreements
 
 
Current borrowing capacity
150,000,000 
 
Credit facility agreements borrowings outstanding
0 
 
Revolving Credit Facilities
 
 
Credit Facility Agreements
 
 
Current borrowing capacity
2,500,000,000 
 
Credit facility agreements borrowings outstanding
 
0 
Number of revolving credit facilities
3 
 
Revolving credit facility 1
1,000,000,000 
 
Revolving credit facility 2
1,000,000,000 
 
Revolving credit facility 3
500,000,000 
 
Amount of letters of credit outstanding
$ 800,000,000 
$ 1,100,000,000 
Leaseback Obligations Leaseback Obligations (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2003
Units
Aug. 9, 2013
Sep. 30, 2012
Nov. 29, 2011
Agencies
Leaseback Obligations
 
 
 
 
 
Proceeds prior to 2004
 
$ 945 
 
 
 
Number of new peaking combustion turbine units in leaseback transactions
 
24 
 
 
 
Proceeds in 2003
 
389 
 
 
 
CT/QTE outstanding leaseback obligation
761 
 
 
825 
 
SSSL's former ownership interest
 
 
90.00% 
 
 
Outstanding Southaven leaseback obligation
 
 
364 
 
 
Lease term
 
 
20 years 
 
 
Seven States Return
$ 9 
 
 
 
 
Number of credit rating agencies
 
 
 
 
1 
Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions - Derivative Instruments That Receive Hedge Accounting Treatment (Details) (USD $)
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Summary of Derivative Instruments That Receive Hedge Accounting Treatment
 
 
 
Net unrealized gain (loss) on future cash flow hedges
$ 78,000,000 
$ 99,000,000 
$ (50,000,000)
Reclassification to earnings from cash flow hedges
(1,000,000)
(35,000,000)
7,000,000 
Ineffective portion excluded from testing
$ 0 1
$ 0 
 
Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions - Derivative Instruments That Do Not Receive Hedge Accounting Treatment (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Derivative
 
 
Amount of gain (loss) recognized in income on derivatives
$ 0 
 
Unrealized gains/losses on derivatives
0 
0 
FTP transaction limit
130 
 
Maximum hedge volume
75.00% 
 
Market value limitation of outstanding construction materials hedging transactions
100 
 
Portfolio value at risk limit for foreign currency transactions
5 
 
Interest Rate Swap
 
 
Derivative
 
 
Amount of gain (loss) recognized in income on derivatives
0 1
0 1
Unrealized losses on investments
524 
(168)
Commodity Contract Derivatives
 
 
Derivative
 
 
Amount of gain (loss) recognized in income on derivatives
(11)1
(22)1
Fair value
(141)
(267)
Commodity Derivatives Under Financial Trading Program
 
 
Derivative
 
 
Amount of gain (loss) recognized in income on derivatives
(126)1
(342)1
Fair value
(166)2
(228)2
Coal Contract Derivatives
 
 
Derivative
 
 
Number of contracts
19 
23 
Notional amount
43,000,000 
46,000,000 
Fair value
(140)
(267)
Natural Gas Contract Derivatives
 
 
Derivative
 
 
Number of contracts
13 
25 
Notional amount
39,000,000 
51,000,000 
Fair value
(1)
0 
Futures and options contracts
 
 
Derivative
 
 
Remaining terms
0 
 
Swap contracts
 
 
Derivative
 
 
Remaining terms
5 years 
 
Maximum |
Coal Contract Derivatives
 
 
Derivative
 
 
Derivative, Term of Contract
5 years 
 
Maximum |
Natural Gas Contract Derivatives
 
 
Derivative
 
 
Derivative, Term of Contract
2 years 
 
Coal Contract Derivatives
 
 
Derivative
 
 
Unrealized gains/losses on derivatives
0 
0 
Fair value
$ 0 
$ 0 
Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions - Mark-to-Market Values of TVA Derivatives (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
200 million Sterling currency swap |
Other long-term liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
$ (15)
$ (23)
250 million Sterling currency swap |
Other long-term assets
 
 
Derivatives, Fair Value
 
 
Fair value
51 
21 
150 million Sterling currency swap |
Other long-term assets
 
 
Derivatives, Fair Value
 
 
Fair value
10 
 
150 million Sterling currency swap |
Other long-term liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
 
(31)
$1.0 billion notional interest rate swap |
Other long-term liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
(886)
(1,247)
$476 million notional interest rate swap |
Other long-term liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
(300)
(458)
$42 million notional interest rate swap |
Other long-term liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
(13)
(18)
Commodity contract derivatives
 
 
Derivatives, Fair Value
 
 
Fair value
(141)
(267)
Commodity contract derivatives |
Other long-term assets
 
 
Derivatives, Fair Value
 
 
Fair value
1 
107 
Commodity contract derivatives |
Other current assets
 
 
Derivatives, Fair Value
 
 
Fair value
2 
12 
Commodity contract derivatives |
Other long-term liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
(35)
(205)
Commodity contract derivatives |
Accounts payable and accrued liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
(109)
(181)
Margin cash account |
Other current assets
 
 
Derivatives, Fair Value
 
 
Fair value
11 1
43 1
Derivatives Under FTP
 
 
Derivatives, Fair Value
 
 
Fair value
(166)2
(228)2
Derivatives Under FTP |
Other long-term assets
 
 
Derivatives, Fair Value
 
 
Fair value
0 2
2 2
Derivatives Under FTP |
Other current assets
 
 
Derivatives, Fair Value
 
 
Fair value
(97)2
(104)2
Derivatives Under FTP |
Other long-term liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
(36)2
(59)2
Derivatives Under FTP |
Accounts payable and accrued liabilities
 
 
Derivatives, Fair Value
 
 
Fair value
$ (33)2
$ (67)2
Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions - Currency Swaps Outstanding (Details) (GBP £)
In Millions, unless otherwise specified
Sep. 30, 2013
Bond_issues
Derivative
 
Number of British pound sterling denominated bond transactions
3 
1999 Currency Swap Contract
 
Derivative
 
Effective date of currency swap contract
1999 
Associated TVA bond issues currency exposure
£ 200 
Expiration date of swap
2021 
Overall effective cost to TVA
5.81% 
2001 Currency Swap Contract
 
Derivative
 
Effective date of currency swap contract
2001 
Associated TVA bond issues currency exposure
250 
Expiration date of swap
2032 
Overall effective cost to TVA
6.59% 
2003 Currency Swap Contract
 
Derivative
 
Effective date of currency swap contract
2003 
Associated TVA bond issues currency exposure
£ 150 
Expiration date of swap
2043 
Overall effective cost to TVA
4.96% 
Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions - Derivatives Under Financial Trading Program (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Derivative
 
 
FTP transaction limit
$ 130 
 
Unrealized gains/losses on derivatives
0 
0 
Natural Gas Futures
 
 
Derivative
 
 
Notional amount
0 1
0 1
Fair value
0 1
0 1
Fuel Oil/Crude Oil Futures
 
 
Derivative
 
 
Notional amount
0 1
0 1
Fair value
0 1
0 1
Natural Gas Swap
 
 
Derivative
 
 
Notional amount
152,922,500 1
294,462,500 1
Fair value
(169)1
(232)1
Fuel Oil/Crude Oil Swap
 
 
Derivative
 
 
Notional amount
1,205,000 1
1,390,000 1
Fair value
3 1
4 1
Natural Gas Option
 
 
Derivative
 
 
Notional amount
0 1
0 1
Fair value
0 1
0 1
Fuel Oil/Crude Oil Option
 
 
Derivative
 
 
Notional amount
0 1
0 1
Fair value
0 1
0 1
Natural Gas Total Contracts
 
 
Derivative
 
 
Notional amount
152,922,500 1
294,462,500 1
Unrealized gains/losses on derivatives
(169)
(232)
Decrease (increase) in fuel expense
(78)
(116)
Decrease (increase) in purchased power expense
(51)
(236)
Fair value
(169)1
(232)1
Fuel Oil/Crude Oil Total Contracts
 
 
Derivative
 
 
Notional amount
1,205,000 1
1,390,000 1
Unrealized gains/losses on derivatives
3 
4 
Decrease (increase) in fuel expense
4 
10 
Fair value
3 1
4 1
Coal Contract Total Contracts
 
 
Derivative
 
 
Unrealized gains/losses on derivatives
0 
0 
Decrease (increase) in fuel expense
(1)
0 
Fair value
0 
0 
Closed Derivative Contracts
 
 
Derivative
 
 
Fair value
$ (8)
$ (21)
Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions - Collateral (Details) (USD $)
12 Months Ended
Sep. 30, 2013
Credit of Customers
Customers
Sep. 30, 2012
Credit of Customers
Customers
Sep. 30, 2013
Collateral
Derivative
 
 
 
Number of customers that represent the percent of outstanding accounts receivable
3 
3 
 
Aggregate fair value of derivative instruments with credit-risk related contingent features that were in a liability position
 
 
$ 1,200,000,000 
Collateral obligations
 
 
800,000,000 
Collateral already posted
 
 
800,000,000 
Likely cash collateral obligation increase if credit is downgraded
 
 
$ 22,000,000 
Risk Management Activities and Derivative Transactions Risk Management Activities and Derivative Transactions - Counterparty Credit Risk (Details)
12 Months Ended
Sep. 30, 2013
Customers
Sep. 30, 2012
Customers
Derivative
 
 
Number of active future commission merchants
2 
 
Credit of Customers
 
 
Derivative
 
 
Number of customers that represent the percent of outstanding accounts receivable
3 
3 
Percent of total outstanding accounts receivables by customers
27.00% 
26.00% 
Percent of operating revenue represented by largest industrial customer
3.00% 
5.00% 
Power Purchase Agreement
 
 
Derivative
 
 
Megawatts in a power purchase agreement that expires on March 31, 2032
440 
 
Fair Value Measurements Fair Value Measurements - Investments (Details) (USD $)
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Investment Gains (Losses)
 
 
Investment fund securities classified as trading and measured at fair value
$ 1,700,000,000 
 
Equity investments not required to be measured at fair value
1,000,000 
 
Period of time where the investor contributes capital to an investment in a private partnership - minimum
3 years 
 
Period of time where the investor contributes capital to an investment in a private partnership - maximum
4 years 
 
Minimum investment period
10 years 
 
NDT unfunded commitments related to private partnerships
149,000,000 
 
Number of redemption or limited redemption options
0 
 
Number of readily available quoted exchange prices for the investments
0 
 
SERP
 
 
Investment Gains (Losses)
 
 
Unrealized gains (losses) on investments
2,000,000 
4,000,000 
NDT
 
 
Investment Gains (Losses)
 
 
Unrealized gains (losses) on investments
48,000,000 
121,000,000 
ART
 
 
Investment Gains (Losses)
 
 
Unrealized gains (losses) on investments
$ 33,000,000 
$ 27,000,000 
Fair Value Measurements Fair Value Measurements - Nonperformance Risk (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Nonperformance Risk
 
Derivative credit valuation adjustment, assets
$ 6 
Derivative credit valuation adjustment, liabilities
$ 1 
Fair Value Measurements Fair Value Measurements - Fair Value Measurements (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Investments
 
 
Equity securities
$ 151 
$ 173 
Debt securities
 
 
U.S. government corporations and agencies
105 
162 
Corporate debt securities
255 
197 
Residential mortgage-backed securities
25 
20 
Commercial mortgage-backed securities
7 
6 
Collateralized debt obligations
10 
12 
Private partnerships
159 
53 
Commingled funds
 
 
Equity security commingled funds
741 1
657 1
Debt security commingled funds
248 1
182 1
Total investments
1,701 
1,462 
Currency swaps
61 
21 
Commodity contact derivatives
3 
119 
Commodity derivatives under FTP
 
 
Swap contracts
4 
8 
Total commodity derivatives under FTP
4 
8 
Total
1,769 
1,610 
Liabilities [Abstract]
 
 
Currency swaps
15 
54 
Interest rate swaps
1,199 
1,723 
Commodity contract derivatives
144 
386 
Commodity derivatives under FTP
 
 
Swap contracts
170 
236 
Total commodity derivatives under FTP
170 
236 
Total
1,528 
2,399 
Fair Value, Inputs, Level 1
 
 
Investments
 
 
Equity securities
151 
173 
Debt securities
 
 
U.S. government corporations and agencies
38 
59 
Corporate debt securities
0 
0 
Residential mortgage-backed securities
0 
0 
Commercial mortgage-backed securities
0 
0 
Collateralized debt obligations
0 
0 
Private partnerships
0 
0 
Commingled funds
 
 
Equity security commingled funds
0 1
0 1
Debt security commingled funds
0 1
0 1
Total investments
189 
232 
Currency swaps
0 
0 
Commodity contact derivatives
0 
0 
Commodity derivatives under FTP
 
 
Swap contracts
0 
0 
Total commodity derivatives under FTP
0 
0 
Total
189 
232 
Liabilities [Abstract]
 
 
Currency swaps
0 
0 
Interest rate swaps
0 
0 
Commodity contract derivatives
0 
0 
Commodity derivatives under FTP
 
 
Swap contracts
0 
0 
Total commodity derivatives under FTP
0 
0 
Total
0 
0 
Fair Value, Inputs, Level 2
 
 
Investments
 
 
Equity securities
0 
0 
Debt securities
 
 
U.S. government corporations and agencies
67 
103 
Corporate debt securities
255 
197 
Residential mortgage-backed securities
25 
20 
Commercial mortgage-backed securities
7 
6 
Collateralized debt obligations
10 
12 
Private partnerships
0 
0 
Commingled funds
 
 
Equity security commingled funds
741 1
657 1
Debt security commingled funds
248 1
182 1
Total investments
1,353 
1,177 
Currency swaps
61 
21 
Commodity contact derivatives
0 
0 
Commodity derivatives under FTP
 
 
Swap contracts
101 
123 
Total commodity derivatives under FTP
101 
123 
Total
1,515 
1,321 
Liabilities [Abstract]
 
 
Currency swaps
15 
54 
Interest rate swaps
1,199 
1,723 
Commodity contract derivatives
1 
0 
Commodity derivatives under FTP
 
 
Swap contracts
267 
351 
Total commodity derivatives under FTP
267 
351 
Total
1,482 
2,128 
Fair Value, Inputs, Level 3
 
 
Investments
 
 
Equity securities
0 
0 
Debt securities
 
 
U.S. government corporations and agencies
0 
0 
Corporate debt securities
0 
0 
Residential mortgage-backed securities
0 
0 
Commercial mortgage-backed securities
0 
0 
Collateralized debt obligations
0 
0 
Private partnerships
159 
53 
Commingled funds
 
 
Equity security commingled funds
0 1
0 1
Debt security commingled funds
0 1
0 1
Total investments
159 
53 
Currency swaps
0 
0 
Commodity contact derivatives
3 
119 
Commodity derivatives under FTP
 
 
Swap contracts
0 
0 
Total commodity derivatives under FTP
0 
0 
Total
162 
172 
Liabilities [Abstract]
 
 
Currency swaps
0 
0 
Interest rate swaps
0 
0 
Commodity contract derivatives
143 
386 
Commodity derivatives under FTP
 
 
Swap contracts
0 
0 
Total commodity derivatives under FTP
0 
0 
Total
143 
386 
Netting
 
 
Investments
 
 
Equity securities
0 2
0 2
Debt securities
 
 
U.S. government corporations and agencies
0 2
0 2
Corporate debt securities
0 2
0 2
Residential mortgage-backed securities
0 2
0 2
Commercial mortgage-backed securities
0 2
0 2
Collateralized debt obligations
0 2
0 2
Private partnerships
0 2
0 2
Commingled funds
 
 
Equity security commingled funds
0 1 2
0 1 2
Debt security commingled funds
0 1 2
0 1 2
Total investments
0 2
0 2
Currency swaps
0 2
0 2
Commodity contact derivatives
0 2
0 2
Commodity derivatives under FTP
 
 
Swap contracts
(97)2
(115)2
Total commodity derivatives under FTP
(97)
(115)2
Total
(97)2
(115)2
Liabilities [Abstract]
 
 
Currency swaps
0 2
0 2
Interest rate swaps
0 2
0 2
Commodity contract derivatives
0 2
0 2
Commodity derivatives under FTP
 
 
Swap contracts
(97)2
(115)2
Total commodity derivatives under FTP
(97)2
(115)2
Total
$ (97)2
$ (115)2
Fair Value Measurements Fair Value Measurements - Fair Value Measurements Using Significant Unobservable Inputs (Details) (USD $)
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Fair Value Inputs, Assets and Liabilities, Quantitative Information [Line Items]
 
 
Commodity contact derivatives
$ 3,000,000 
$ 119,000,000 
Commodity contract derivatives
144,000,000 
386,000,000 
Liabilities
 
 
Number of contracts
1 
 
Fair Value Measurements
 
 
Amount of gain (loss) recognized in income
0 
 
Private Partnerships
 
 
Fair Value Measurements
 
 
Balances at beginning of period
53,000,000 
22,000,000 
Purchases
101,000,000 
27,000,000 
Issuances
0 
0 
Sales
(4,000,000)
0 
Settlements
0 
0 
Net unrealized gains (losses) deferred as regulatory assets and liabilities
9,000,000 
4,000,000 
Balances at end of period
159,000,000 
53,000,000 
Commodity Contract Derivatives
 
 
Fair Value Measurements
 
 
Balances at beginning of period
(267,000,000)
239,000,000 
Purchases
0 
0 
Issuances
0 
0 
Sales
0 
0 
Settlements
0 
0 
Net unrealized gains (losses) deferred as regulatory assets and liabilities
127,000,000 
(506,000,000)
Balances at end of period
(140,000,000)
(267,000,000)
Interest Rate Swaption
 
 
Fair Value Measurements
 
 
Balances at beginning of period
0 
(1,077,000,000)
Purchases
0 
0 
Issuances
0 
0 
Sales
0 
0 
Settlements
0 1
1,077,000,000 
Net unrealized gains (losses) deferred as regulatory assets and liabilities
0 
0 
Balances at end of period
0 
0 
Minimum
 
 
Assets
 
 
Fair value measurements tons per year
900,000,000 
 
Price per ton
10.25 
 
Liabilities
 
 
Fair value measurements tons per year
900,000,000 
 
Price per ton
10.25 
 
Maximum
 
 
Assets
 
 
Fair value inputs, counterparty credit risk
21.00% 2
 
Fair value measurements tons per year
1,000,000,000 
 
Price per ton
85.25 
 
Liabilities
 
 
Fair value measurements tons per year
1,000,000,000 
 
Price per ton
85.25 
 
Fair Value, Inputs, Level 3
 
 
Fair Value Inputs, Assets and Liabilities, Quantitative Information [Line Items]
 
 
Commodity contact derivatives
3,000,000 
119,000,000 
Commodity contract derivatives
$ 143,000,000 
$ 386,000,000 
Fair Value Measurements Fair Value Measurements - Estimated Values of Financial Instruments Not Recorded at Fair Value (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Aug. 9, 2013
Sep. 30, 2012
Estimated Values of Financial Intruments Not Recorded at Fair Value
 
 
 
EnergyRight receivables (including current portion)
$ 150 
 
$ 150 
Loans and other long-term receivables, net
73 
 
76 
Purchase obligation including current and non-current
186 
 
185 
Membership interests of VIE subject to mandatory redemption (including current portion)
40 
40 
0 
Long-term outstanding power bonds (including current maturities), net
22,347 
 
22,577 
Long-term debt of variable interest entities including current maturities
1,341 
 
994 
Fair Value
 
 
 
Estimated Values of Financial Intruments Not Recorded at Fair Value
 
 
 
EnergyRight receivables (including current portion)
150 
 
150 
Loans and other long-term receivables, net
67 
 
70 
Purchase obligation including current and non-current
210 
 
209 
Membership interests of VIE subject to mandatory redemption (including current portion)
 
50 
0 
Long-term outstanding power bonds (including current maturities), net
24,603 
 
28,041 
Long-term debt of variable interest entities including current maturities
$ 1,386 
 
$ 1,116 
Proprietary Capital Proprietary Capital (Details) (USD $)
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Appropriation Investment
 
 
 
Amount of appropriation investment that must be repaid
$ 1,000,000,000 
 
 
Unpaid appropriation investment
10,000,000 
 
 
Remaining appropriation investment
258,000,000 
 
 
Balance at beginning of year
5,326,000,000 
5,229,000,000 
5,137,000,000 
Net income (loss)
271,000,000 
60,000,000 
162,000,000 
Return of power program appropriation investment
20,000,000 
20,000,000 
20,000,000 
Return on power program appropriation investment
7,000,000 
7,000,000 
7,000,000 
Balance at end of year
5,647,000,000 
5,326,000,000 
5,229,000,000 
Net proprietary capital at September 30
5,647,000,000 
5,326,000,000 
 
Computed average interest rate payable
2.10% 
2.33% 
2.40% 
Nonpower Programs Appropriation Investment
 
 
 
Appropriation Investment
 
 
 
Balance at beginning of year
4,351,000,000 
4,351,000,000 
 
Return of power program appropriation investment
0 
0 
 
Balance at end of year
4,351,000,000 
4,351,000,000 
 
Power Program Appropriation Investment
 
 
 
Appropriation Investment
 
 
 
Balance at beginning of year
288,000,000 
308,000,000 
328,000,000 
Net income (loss)
0 
0 
0 
Return of power program appropriation investment
20,000,000 
20,000,000 
20,000,000 
Return on power program appropriation investment
0 
0 
0 
Balance at end of year
268,000,000 
288,000,000 
308,000,000 
Power Program Retained Earnings
 
 
 
Appropriation Investment
 
 
 
Balance at beginning of year
4,492,000,000 
4,429,000,000 
4,264,000,000 
Net income (loss)
282,000,000 
70,000,000 
172,000,000 
Return of power program appropriation investment
0 
0 
0 
Return on power program appropriation investment
7,000,000 
7,000,000 
7,000,000 
Balance at end of year
4,767,000,000 
4,492,000,000 
4,429,000,000 
Net proprietary capital at September 30
5,035,000,000 
4,780,000,000 
 
Nonpower Programs Retained Earnings
 
 
 
Appropriation Investment
 
 
 
Balance at beginning of year
(3,731,000,000)
(3,721,000,000)
 
Net income (loss)
(11,000,000)
(10,000,000)
 
Return on power program appropriation investment
0 
0 
 
Balance at end of year
(3,742,000,000)
(3,731,000,000)
 
Net proprietary capital at September 30
609,000,000 
620,000,000 
 
Power Program Appropriation Investment
 
 
 
Appropriation Investment
 
 
 
Return of power program appropriation investment
$ 20,000,000 
$ 20,000,000 
$ 20,000,000 
Proprietary Capital Proprietary Capital - Accumulated Other Comprehensive Income (Loss) (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Accumulated Other Comprehensive Income (Loss)
 
 
 
Net unrealized gain (loss) on future cash flow hedges
$ 78 
$ 99 
$ (50)
Reclassification to earnings from cash flow hedges
(1)
(35)
7 
Net effect on earnings
0 
0 
0 
Reclassification to earnings from cash flow hedges in the next twelve months
$ 53 
 
 
Other Income (Expense), Net Other Income (Expense), Net (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Other Income (Expense), Net
 
 
 
Interest income
$ 23 
$ 21 
$ 8 
External services
18 
7 
19 
Gains (losses) on investments
4 
5 
1 
Miscellaneous
(1)
0 
2 
Total other income (expense), net
$ 44 
$ 33 
$ 30 
Supplemental Cash Flow Information Supplemental Cash Flow Information (Details) (USD $)
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Supplemental Cash Flow Information
 
 
 
Interest paid
$ 1,300,000,000 
$ 1,400,000,000 
$ 1,400,000,000 
Interest capitalized
168,000,000 
171,000,000 
126,000,000 
Payments to Acquire Other Productive Assets
162,000,000 
212,000,000 
199,000,000 
Accounts payable and accrued liabilities
 
 
 
Supplemental Cash Flow Information
 
 
 
Construction in progress and Nuclear fuel expenditures
$ 270,000,000 
$ 204,000,000 
$ 307,000,000 
Benefit Plans Components of Benefit Plans (Details) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Number_of_defined_benefit_plan_investment_funds
Sep. 30, 2013
Number_of_qualified_defined_benefit_pension_plans
Number_of_defined_benefit_plan_structures
plans
Number_of_qualified_defined_contribution_plans
Years
Dec. 31, 2012
Sep. 30, 2012
Dec. 31, 2011
Sep. 30, 2011
Dec. 31, 2010
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
 
Number of defined benefit plans
 
 
1 
 
 
 
 
 
Number of definied contribution plans
 
 
1 
 
 
 
 
 
Number of unfunded post-retirement health care plans
 
 
2 
 
 
 
 
 
Number of benefit plan structures
 
 
2 
 
 
 
 
 
Number of consecutive highest base pay years
 
 
3 
 
 
 
 
 
Percentage of straight-time earnings for cash balance benefit credit
 
 
6.00% 
 
 
 
 
 
Percentage added to consumer price index for interest credit of cash balance benefit
 
 
3.00% 
 
 
 
 
 
Minimum interest credit percentage for cash balance benefit
 
 
6.00% 
 
 
 
 
 
Maximum interest credit percentage for cash balance benefit
 
 
10.00% 
 
 
 
 
 
Rate of cash balance benefit credit for calendar year
 
6.00% 
 
 
6.00% 
 
 
 
Number of defined benefit plan investment funds
 
2 
 
 
 
 
 
 
Fixed and variable fund annual maximum contribution
 
 
 
 
$ 10,000 
 
 
 
Fixed fund balance interest credits after January 1, 2010
 
 
6.00% 
 
 
 
 
 
Fixed fund balance credit percentage subtracted from the actuarial rate of return after January 1, 2010
 
 
0.50% 
 
 
 
 
 
Fixed fund interest credit rate
 
 
6.00% 
6.00% 
 
 
 
 
Fixed fund interest credit amount
 
 
36,000,000 
 
38,000,000 
 
 
 
Defined contribution plan contribution amount
 
 
34,000,000 
 
34,000,000 
 
31,000,000 
 
Market-related value phase-in period number of years
 
 
3 
 
 
 
 
 
Number of years during which cost of living adjustment changed
4 years 
 
 
 
 
 
 
 
Cost of Living Adjustment Cap
 
2.30% 
 
0.00% 
 
1.15% 
 
0.00% 
Cost of living adjustment cap for calendar year 2014 and forward
5.00% 
 
 
 
 
 
 
 
Retirement age of eligibility for cost of living adjustment after January 1, 2010
 
 
 
 
 
 
 
60 
Original benefit structure
 
 
 
 
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
 
Defined contribution plan employer matching contribution rate
 
 
0.25 
 
 
 
 
 
Defined contribution plan, maximum annual contribution per employee, percent
 
 
1.50% 
 
 
 
 
 
Cash Balance Benefit Structure
 
 
 
 
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
 
Defined contribution plan employer matching contribution rate
 
 
$ 0.75 
 
 
 
 
 
Defined contribution plan, maximum annual contribution per employee, percent
 
 
4.50% 
 
 
 
 
 
Benefit Plans Obligations and Funded Status (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Sep. 30, 2010
Sep. 30, 2013
Pension Benefits
Sep. 30, 2012
Pension Benefits
Sep. 30, 2011
Pension Benefits
Sep. 30, 2014
Other Post-retirement Benefits
Sep. 30, 2013
Other Post-retirement Benefits
Sep. 30, 2012
Other Post-retirement Benefits
Sep. 30, 2011
Other Post-retirement Benefits
Change in benefit obligation
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation
 
 
 
 
$ 11,471 
$ 11,995 
$ 11,255 
 
$ 656 
$ 811 
$ 800 
Service cost
 
 
 
 
154 
139 
120 
 
24 
19 
13 
Interest cost
 
 
 
 
468 
490 
502 
 
31 
35 
32 
Plan participants' contributions
 
 
 
 
29 
30 
 
 
79 
80 
 
Amendments
 
 
 
 
4 
3 
 
 
0 
0 
 
Actuarial loss (gain)
 
 
 
 
(549)
686 
 
 
(163)
(2)
 
Net transfers from variable fund/401(k) plan
 
 
 
 
4 
7 
 
 
0 
0 
 
Expenses paid
 
 
 
 
(6)
(5)
 
 
0 
0 
 
Benefits paid
 
 
 
 
(628)
(610)
 
 
(126)
(121)
 
Change in plan assets
 
 
 
 
 
 
 
 
 
 
 
Fair value of net plan assets
 
 
 
 
7,221 
7,029 
6,546 
 
0 
0 
0 
Actual return on plan assets
 
 
 
 
787 
1,053 
 
 
0 
0 
 
Employer contributions
 
 
 
 
6 
8 
 
40 
47 
41 
 
Defined Benefit Plan, Funded Status of Plan [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Funded status
 
 
 
 
(4,250)
(4,966)
 
 
(656)
(811)
 
Discount rate
 
4.00% 
4.50% 
 
5.00% 
4.00% 
4.50% 
 
5.05% 
4.00% 
 
Amount of defined benefit plan actuarial gain (loss) from discount rate change
 
 
 
 
(1,400)
683 
 
 
(93)
(49)
 
Impact of previously excluded retiree benefits
705 
 
 
 
 
 
 
 
 
 
 
Amount of defined benefit plan actuarial gain (loss) from excise tax change
 
 
 
 
 
 
 
 
(33)
 
 
Amount of defined benefit plan actuarial gain (loss) from plan demographic experience changes
 
 
 
 
 
 
 
 
43 
 
 
Pension and Other Postretirement Benefit Plan Partcipation Rate
 
85.00% 
90.00% 
 
 
 
 
 
 
 
 
Defined Benefit Plan, Health Care Cost Trend Rate Assumed for Next Fiscal Year
8.00% 
8.50% 
8.00% 
8.00% 
 
 
 
 
8.00% 
8.50% 
8.00% 
Amount of defined benefit plan actuarial gain (loss) from health care cost trend rate change
 
 
 
 
 
 
 
 
 
46 
 
Change in accumulated postretirement benefit obligation
 
$ 11 
 
 
 
 
 
 
 
 
 
Benefit Plans Amounts Recognized on TVA's Consolidated Balance Sheets (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Defined Benefit Plan Disclosure
 
 
Regulatory assets
$ 9,131 
$ 11,127 
Accounts payable and accrued liabilities
(1,627)
(1,922)
Post-retirement and post-employment benefit obligations
(5,348)
(6,279)
Pension Benefits
 
 
Defined Benefit Plan Disclosure
 
 
Regulatory assets
3,910 
5,168 
Accounts payable and accrued liabilities
(5)
(5)
Post-retirement and post-employment benefit obligations
(4,245)1
(4,961)1
Other Post-retirement Benefits
 
 
Defined Benefit Plan Disclosure
 
 
Regulatory assets
166 
349 
Accounts payable and accrued liabilities
(39)
(37)
Post-retirement and post-employment benefit obligations
(617)1
(774)1
Pension and Other Postretirement Defined Benefit Plans, Liabilities, Noncurrent [Member]
 
 
Defined Benefit Plan Disclosure
 
 
Postemployment benefits liability, noncurrent
$ 486 
$ 544 
Benefit Plans Postretirement Benefit Costs Deferred as Regulatory Assets (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Defined Benefit Plan Disclosure
 
 
Regulatory assets
$ 9,131 
$ 11,127 
Pension Benefits
 
 
Defined Benefit Plan Disclosure
 
 
Unrecognized prior service cost (credit)
(203)
(229)
Unrecognized net loss
4,113 
5,397 
Regulatory assets
3,910 
5,168 
Other Post-retirement Benefits
 
 
Defined Benefit Plan Disclosure
 
 
Unrecognized prior service cost (credit)
(45)
(51)
Unrecognized net loss
211 
400 
Regulatory assets
$ 166 
$ 349 
Benefit Plans Projected Benefit Obligations and Accumulated Benefit Obligations in Exess of Plan Assets (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Sep. 30, 2012
Defined Benefit Plan Disclosure
 
 
Projected benefit obligation
$ 11,471 
$ 11,955 
Accumulated benefit obligation
11,216 
11,680 
Fair value of net plan assets
$ 7,221 
$ 7,029 
Benefit Plans Components of Net Periodic Benefit Cost (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Pension Benefits
 
 
 
Defined Benefit Plan Disclosure
 
 
 
Service cost
$ 154 
$ 139 
$ 120 
Interest cost
468 
490 
502 
Expected return on plan assets
(428)
(437)
(488)
Amortization of prior service cost
(22)
(23)
(23)
Recognized net actuarial loss
377 
361 
282 
Net periodic benefit cost as acutarially determined
549 
530 
393 
Amount charged (capitlaized) due to actions of regulator
0 
0 
11 
Total net periodic benefit cost
549 
530 
404 
Other Post-retirement Benefits
 
 
 
Defined Benefit Plan Disclosure
 
 
 
Service cost
24 
19 
13 
Interest cost
31 
35 
32 
Expected return on plan assets
0 
0 
0 
Amortization of prior service cost
(6)
(6)
(6)
Recognized net actuarial loss
25 
29 
22 
Net periodic benefit cost as acutarially determined
74 
77 
61 
Amount charged (capitlaized) due to actions of regulator
0 
0 
0 
Total net periodic benefit cost
$ 74 
$ 77 
$ 61 
Benefit Plans Expected Amortization of Regulatory Assets in Next Fiscal Year (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Defined Benefit Plan Disclosure
 
Prior service cost (credit)
$ (27)
Net actuarial loss
289 
Pension Benefits
 
Defined Benefit Plan Disclosure
 
Prior service cost (credit)
(21)
Net actuarial loss
278 
Other Post-retirement Benefits
 
Defined Benefit Plan Disclosure
 
Prior service cost (credit)
(6)
Net actuarial loss
$ 11 
Benefit Plans Actuarial Assumptions (Details)
12 Months Ended
Dec. 31, 2014
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2010
Sep. 30, 2010
Sep. 30, 2019
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
Discount rate
 
 
4.00% 
4.50% 
 
 
 
Rate of compensation increase
 
5.72% 
4.44% 
 
 
 
 
Defined Benefit Plan, Health Care Cost Trend Rate Assumed for Next Fiscal Year
 
8.00% 
8.50% 
8.00% 
 
8.00% 
 
Defined Benefit Plan, Ultimate Health Care Cost Trend Rate
 
5.00% 
 
 
 
 
 
Expected return on plan assets
 
7.25% 
7.25% 
7.50% 
 
 
 
Defined Benefit Plan, Assumptions Maintained for Calculating Net Periodic Benefit Cost, Expected Long-term Return on Assets
 
7.25% 
 
 
 
 
 
Actual rate of return on plan assets
 
11.69% 
16.81% 
 
 
 
 
Period during which actual company compensation experience study performed
 
5 years 
 
 
 
 
 
Rate of compensation increase-low end of range
 
3.50% 
 
 
 
 
 
Rate of compensation increase-high end of range
 
13.00% 
 
 
 
 
 
Minimum percentage increase in twelve-month average CPI-U necessary to receive COLA
 
1.00% 
 
 
 
 
 
Number of years during which cost of living adjustment changed
4 years 
 
 
 
 
 
 
Retirement age of eligibility for cost of living adjustment after January 1, 2010
 
 
 
 
60 
 
 
Retirement age of eligibility for cost of living adjustment before January 1, 2010
 
 
 
 
55 
 
 
Cost of living adjustment assumption
 
1.60% 
2.50% 
 
 
 
2.50% 
Rate of inflation
 
2.00% 
 
 
 
 
 
Pension Benefits
 
 
 
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
Discount rate
 
5.00% 
4.00% 
4.50% 
 
 
 
Rate of compensation increase
 
5.72% 
4.44% 
 
 
 
 
Discount rate
 
4.00% 
4.50% 
 
 
 
 
Expected return on plan assets
 
7.25% 
7.25% 
 
 
 
 
Rate of compensation increase
 
4.44% 
4.43% 
 
 
 
 
Other Post-retirement Benefits
 
 
 
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
Discount rate
 
5.05% 
4.00% 
 
 
 
 
Defined Benefit Plan, Health Care Cost Trend Rate Assumed for Next Fiscal Year
 
8.00% 
8.50% 
8.00% 
 
 
 
Defined Benefit Plan, Ultimate Health Care Cost Trend Rate
 
5.00% 
5.00% 
5.00% 
 
 
 
Defined Benefit Plan, Year that Rate Reaches Ultimate Trend Rate
 
2019 
2019 
2017 
 
 
 
Discount rate
 
 
4.00% 
4.50% 
 
 
 
Minimum
 
 
 
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
Cost of living adjustment assumption
 
1.00% 
 
 
 
 
 
Maximum
 
 
 
 
 
 
 
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
Cost of living adjustment assumption
 
5.00% 
 
 
 
 
 
Benefit Plans Sensitivity to Certain Changes in Pension Assumptions (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Discount rate
 
Defined Benefit Plan Disclosure
 
Change in Assumption
(0.25%)
Impact on Pension Cost
$ 20 
Impact on Projected Benefit Obligation
335 
Rate of return on plan assets
 
Defined Benefit Plan Disclosure
 
Change in Assumption
(0.25%)
Impact on Pension Cost
$ 15 
Benefit Plans Sensitivity to Changes in Assumed Health Care Cost Trend Rates (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Defined Benefit Plan Disclosure
 
Effect of one percentage point increase on total service and interest cost components
$ 8 
Effect of one percentage point decrease on total service and interest cost components
(8)
Effect of one percentage point increase on end-of-year accumulated postretirement benefit obligation
87 
Effect of one percentage point decrease on end-of-year accumulated postretirement benefit obligation
$ (89)
Benefit Plans Asset Holdings (Details)
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Equity securities
 
 
Defined Benefit Plan Disclosure
 
 
New Policy Target Allocation
47.00% 
 
Target Allocation
32.00% 
 
Plan Asset Allocations
48.00% 
47.00% 
Private equity funds
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
10.00% 
 
Plan Asset Allocations
6.00% 
6.00% 
Low volatility global public equity [Member]
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
5.00% 
 
Plan Asset Allocations
0.00% 
0.00% 
Cash and cash equivalents
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
2.00% 
 
Plan Asset Allocations
2.00% 
1.00% 
Core fixed income
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
5.00% 
 
Plan Asset Allocations
5.00% 
8.00% 
Long-term core fixed income
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
5.00% 
 
Plan Asset Allocations
4.00% 
4.00% 
Investment grade credit
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
6.00% 
 
Plan Asset Allocations
6.00% 
9.00% 
Foreign Corporate Debt Securities [Member]
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
5.00% 
 
Plan Asset Allocations
0.00% 
0.00% 
High yield fixed income
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
5.00% 
 
Plan Asset Allocations
10.00% 
10.00% 
Global TIPS
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
5.00% 
 
Plan Asset Allocations
7.00% 
9.00% 
Private real assets
 
 
Defined Benefit Plan Disclosure
 
 
New Policy Target Allocation
10.00% 
 
Target Allocation
10.00% 
 
Plan Asset Allocations
7.00% 
6.00% 
Commodities
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
5.00% 
 
Plan Asset Allocations
0.00% 
0.00% 
MLPs
 
 
Defined Benefit Plan Disclosure
 
 
Target Allocation
5.00% 
 
Plan Asset Allocations
5.00% 
0.00% 
Debt securities
 
 
Defined Benefit Plan Disclosure
 
 
New Policy Target Allocation
28.00% 
 
Public real assets
 
 
Defined Benefit Plan Disclosure
 
 
New Policy Target Allocation
15.00% 
 
Benefit Plans Fair Value Measurements (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Fair Value, Inputs, Level 1
Sep. 30, 2012
Fair Value, Inputs, Level 1
Sep. 30, 2013
Fair Value, Inputs, Level 2
Sep. 30, 2012
Fair Value, Inputs, Level 2
Sep. 30, 2013
Fair Value, Inputs, Level 3
Sep. 30, 2012
Fair Value, Inputs, Level 3
Sep. 30, 2011
Fair Value, Inputs, Level 3
Sep. 30, 2013
Equity securities
Sep. 30, 2012
Equity securities
Sep. 30, 2013
Equity securities
Fair Value, Inputs, Level 1
Sep. 30, 2012
Equity securities
Fair Value, Inputs, Level 1
Sep. 30, 2013
Equity securities
Fair Value, Inputs, Level 2
Sep. 30, 2012
Equity securities
Fair Value, Inputs, Level 2
Sep. 30, 2013
Equity securities
Fair Value, Inputs, Level 3
Sep. 30, 2012
Equity securities
Fair Value, Inputs, Level 3
Sep. 30, 2013
Preferred securities [Member]
Sep. 30, 2012
Preferred securities [Member]
Sep. 30, 2013
Preferred securities [Member]
Fair Value, Inputs, Level 1
Sep. 30, 2012
Preferred securities [Member]
Fair Value, Inputs, Level 1
Sep. 30, 2013
Preferred securities [Member]
Fair Value, Inputs, Level 2
Sep. 30, 2012
Preferred securities [Member]
Fair Value, Inputs, Level 2
Sep. 30, 2013
Preferred securities [Member]
Fair Value, Inputs, Level 3
Sep. 30, 2012
Preferred securities [Member]
Fair Value, Inputs, Level 3
Sep. 30, 2013
Corporate debt securities
Sep. 30, 2012
Corporate debt securities
Sep. 30, 2013
Corporate debt securities
Fair Value, Inputs, Level 1
Sep. 30, 2012
Corporate debt securities
Fair Value, Inputs, Level 1
Sep. 30, 2013
Corporate debt securities
Fair Value, Inputs, Level 2
Sep. 30, 2012
Corporate debt securities
Fair Value, Inputs, Level 2
Sep. 30, 2013
Corporate debt securities
Fair Value, Inputs, Level 3
Sep. 30, 2012
Corporate debt securities
Fair Value, Inputs, Level 3
Sep. 30, 2013
Residential mortgage-backed securities
Sep. 30, 2012
Residential mortgage-backed securities
Sep. 30, 2013
Residential mortgage-backed securities
Fair Value, Inputs, Level 1
Sep. 30, 2012
Residential mortgage-backed securities
Fair Value, Inputs, Level 1
Sep. 30, 2013
Residential mortgage-backed securities
Fair Value, Inputs, Level 2
Sep. 30, 2012
Residential mortgage-backed securities
Fair Value, Inputs, Level 2
Sep. 30, 2013
Residential mortgage-backed securities
Fair Value, Inputs, Level 3
Sep. 30, 2012
Residential mortgage-backed securities
Fair Value, Inputs, Level 3
Sep. 30, 2013
Debt securities issued by U.S. Treasury and other U.S. government agencies
Sep. 30, 2012
Debt securities issued by U.S. Treasury and other U.S. government agencies
Sep. 30, 2013
Debt securities issued by U.S. Treasury and other U.S. government agencies
Fair Value, Inputs, Level 1
Sep. 30, 2012
Debt securities issued by U.S. Treasury and other U.S. government agencies
Fair Value, Inputs, Level 1
Sep. 30, 2013
Debt securities issued by U.S. Treasury and other U.S. government agencies
Fair Value, Inputs, Level 2
Sep. 30, 2012
Debt securities issued by U.S. Treasury and other U.S. government agencies
Fair Value, Inputs, Level 2
Sep. 30, 2013
Debt securities issued by U.S. Treasury and other U.S. government agencies
Fair Value, Inputs, Level 3
Sep. 30, 2012
Debt securities issued by U.S. Treasury and other U.S. government agencies
Fair Value, Inputs, Level 3
Sep. 30, 2013
Debt securities issued by foreign governments
Sep. 30, 2012
Debt securities issued by foreign governments
Sep. 30, 2013
Debt securities issued by foreign governments
Fair Value, Inputs, Level 1
Sep. 30, 2012
Debt securities issued by foreign governments
Fair Value, Inputs, Level 1
Sep. 30, 2013
Debt securities issued by foreign governments
Fair Value, Inputs, Level 2
Sep. 30, 2012
Debt securities issued by foreign governments
Fair Value, Inputs, Level 2
Sep. 30, 2013
Debt securities issued by foreign governments
Fair Value, Inputs, Level 3
Sep. 30, 2012
Debt securities issued by foreign governments
Fair Value, Inputs, Level 3
Sep. 30, 2013
Asset-backed securities
Sep. 30, 2012
Asset-backed securities
Sep. 30, 2013
Asset-backed securities
Fair Value, Inputs, Level 1
Sep. 30, 2012
Asset-backed securities
Fair Value, Inputs, Level 1
Sep. 30, 2013
Asset-backed securities
Fair Value, Inputs, Level 2
Sep. 30, 2012
Asset-backed securities
Fair Value, Inputs, Level 2
Sep. 30, 2013
Asset-backed securities
Fair Value, Inputs, Level 3
Sep. 30, 2012
Asset-backed securities
Fair Value, Inputs, Level 3
Sep. 30, 2013
Debt securities issued by state/local governments
Sep. 30, 2012
Debt securities issued by state/local governments
Sep. 30, 2013
Debt securities issued by state/local governments
Fair Value, Inputs, Level 1
Sep. 30, 2012
Debt securities issued by state/local governments
Fair Value, Inputs, Level 1
Sep. 30, 2013
Debt securities issued by state/local governments
Fair Value, Inputs, Level 2
Sep. 30, 2012
Debt securities issued by state/local governments
Fair Value, Inputs, Level 2
Sep. 30, 2013
Debt securities issued by state/local governments
Fair Value, Inputs, Level 3
Sep. 30, 2012
Debt securities issued by state/local governments
Fair Value, Inputs, Level 3
Sep. 30, 2013
Commercial mortgage-backed securities
Sep. 30, 2012
Commercial mortgage-backed securities
Sep. 30, 2013
Commercial mortgage-backed securities
Fair Value, Inputs, Level 1
Sep. 30, 2012
Commercial mortgage-backed securities
Fair Value, Inputs, Level 1
Sep. 30, 2013
Commercial mortgage-backed securities
Fair Value, Inputs, Level 2
Sep. 30, 2012
Commercial mortgage-backed securities
Fair Value, Inputs, Level 2
Sep. 30, 2013
Commercial mortgage-backed securities
Fair Value, Inputs, Level 3
Sep. 30, 2012
Commercial mortgage-backed securities
Fair Value, Inputs, Level 3
Sep. 30, 2013
Equity security commingled funds
Sep. 30, 2012
Equity security commingled funds
Sep. 30, 2013
Equity security commingled funds
Fair Value, Inputs, Level 1
Sep. 30, 2012
Equity security commingled funds
Fair Value, Inputs, Level 1
Sep. 30, 2013
Equity security commingled funds
Fair Value, Inputs, Level 2
Sep. 30, 2012
Equity security commingled funds
Fair Value, Inputs, Level 2
Sep. 30, 2013
Equity security commingled funds
Fair Value, Inputs, Level 3
Sep. 30, 2012
Equity security commingled funds
Fair Value, Inputs, Level 3
Sep. 30, 2013
Debt security commingled funds
Sep. 30, 2012
Debt security commingled funds
Sep. 30, 2013
Debt security commingled funds
Fair Value, Inputs, Level 1
Sep. 30, 2012
Debt security commingled funds
Fair Value, Inputs, Level 1
Sep. 30, 2013
Debt security commingled funds
Fair Value, Inputs, Level 2
Sep. 30, 2012
Debt security commingled funds
Fair Value, Inputs, Level 2
Sep. 30, 2013
Debt security commingled funds
Fair Value, Inputs, Level 3
Sep. 30, 2012
Debt security commingled funds
Fair Value, Inputs, Level 3
Sep. 30, 2013
Blended security commingled funds
Sep. 30, 2012
Blended security commingled funds
Sep. 30, 2013
Blended security commingled funds
Fair Value, Inputs, Level 1
Sep. 30, 2012
Blended security commingled funds
Fair Value, Inputs, Level 1
Sep. 30, 2013
Blended security commingled funds
Fair Value, Inputs, Level 2
Sep. 30, 2012
Blended security commingled funds
Fair Value, Inputs, Level 2
Sep. 30, 2013
Blended security commingled funds
Fair Value, Inputs, Level 3
Sep. 30, 2012
Blended security commingled funds
Fair Value, Inputs, Level 3
Sep. 30, 2013
Institutional mutual funds
Sep. 30, 2012
Institutional mutual funds
Sep. 30, 2013
Institutional mutual funds
Fair Value, Inputs, Level 1
Sep. 30, 2012
Institutional mutual funds
Fair Value, Inputs, Level 1
Sep. 30, 2013
Institutional mutual funds
Fair Value, Inputs, Level 2
Sep. 30, 2012
Institutional mutual funds
Fair Value, Inputs, Level 2
Sep. 30, 2013
Institutional mutual funds
Fair Value, Inputs, Level 3
Sep. 30, 2012
Institutional mutual funds
Fair Value, Inputs, Level 3
Sep. 30, 2013
Cash and cash equivalents
Sep. 30, 2012
Cash and cash equivalents
Sep. 30, 2013
Cash and cash equivalents
Fair Value, Inputs, Level 1
Sep. 30, 2012
Cash and cash equivalents
Fair Value, Inputs, Level 1
Sep. 30, 2013
Cash and cash equivalents
Fair Value, Inputs, Level 2
Sep. 30, 2012
Cash and cash equivalents
Fair Value, Inputs, Level 2
Sep. 30, 2013
Cash and cash equivalents
Fair Value, Inputs, Level 3
Sep. 30, 2012
Cash and cash equivalents
Fair Value, Inputs, Level 3
Sep. 30, 2013
Private equity funds
Sep. 30, 2012
Private equity funds
Sep. 30, 2013
Private equity funds
Fair Value, Inputs, Level 1
Sep. 30, 2012
Private equity funds
Fair Value, Inputs, Level 1
Sep. 30, 2013
Private equity funds
Fair Value, Inputs, Level 2
Sep. 30, 2012
Private equity funds
Fair Value, Inputs, Level 2
Sep. 30, 2013
Private equity funds
Fair Value, Inputs, Level 3
Sep. 30, 2012
Private equity funds
Fair Value, Inputs, Level 3
Sep. 30, 2013
Private real estate funds
Sep. 30, 2012
Private real estate funds
Sep. 30, 2013
Private real estate funds
Fair Value, Inputs, Level 1
Sep. 30, 2012
Private real estate funds
Fair Value, Inputs, Level 1
Sep. 30, 2013
Private real estate funds
Fair Value, Inputs, Level 2
Sep. 30, 2012
Private real estate funds
Fair Value, Inputs, Level 2
Sep. 30, 2013
Private real estate funds
Fair Value, Inputs, Level 3
Sep. 30, 2012
Private real estate funds
Fair Value, Inputs, Level 3
Sep. 30, 2013
Treasury bills, U.S. Government notes and securities held as futures and other derivative collateral
Sep. 30, 2012
Treasury bills, U.S. Government notes and securities held as futures and other derivative collateral
Sep. 30, 2013
Treasury bills, U.S. Government notes and securities held as futures and other derivative collateral
Fair Value, Inputs, Level 1
Sep. 30, 2012
Treasury bills, U.S. Government notes and securities held as futures and other derivative collateral
Fair Value, Inputs, Level 1
Sep. 30, 2013
Treasury bills, U.S. Government notes and securities held as futures and other derivative collateral
Fair Value, Inputs, Level 2
Sep. 30, 2012
Treasury bills, U.S. Government notes and securities held as futures and other derivative collateral
Fair Value, Inputs, Level 2
Sep. 30, 2013
Treasury bills, U.S. Government notes and securities held as futures and other derivative collateral
Fair Value, Inputs, Level 3
Sep. 30, 2012
Treasury bills, U.S. Government notes and securities held as futures and other derivative collateral
Fair Value, Inputs, Level 3
Sep. 30, 2013
Securities lending commingled funds
Sep. 30, 2012
Securities lending commingled funds
Sep. 30, 2013
Securities lending commingled funds
Fair Value, Inputs, Level 1
Sep. 30, 2012
Securities lending commingled funds
Fair Value, Inputs, Level 1
Sep. 30, 2013
Securities lending commingled funds
Fair Value, Inputs, Level 2
Sep. 30, 2012
Securities lending commingled funds
Fair Value, Inputs, Level 2
Sep. 30, 2013
Securities lending commingled funds
Fair Value, Inputs, Level 3
Sep. 30, 2012
Securities lending commingled funds
Fair Value, Inputs, Level 3
Sep. 30, 2013
Foreign currency forward
Sep. 30, 2012
Foreign currency forward
Sep. 30, 2013
Foreign currency forward
Fair Value, Inputs, Level 1
Sep. 30, 2012
Foreign currency forward
Fair Value, Inputs, Level 1
Sep. 30, 2013
Foreign currency forward
Fair Value, Inputs, Level 2
Sep. 30, 2012
Foreign currency forward
Fair Value, Inputs, Level 2
Sep. 30, 2013
Foreign currency forward
Fair Value, Inputs, Level 3
Sep. 30, 2012
Foreign currency forward
Fair Value, Inputs, Level 3
Sep. 30, 2013
Interest rate swaps
Sep. 30, 2013
Interest rate swaps
Fair Value, Inputs, Level 1
Sep. 30, 2013
Interest rate swaps
Fair Value, Inputs, Level 2
Sep. 30, 2013
Interest rate swaps
Fair Value, Inputs, Level 3
Sep. 30, 2013
Options
Sep. 30, 2012
Options
Sep. 30, 2013
Options
Fair Value, Inputs, Level 1
Sep. 30, 2012
Options
Fair Value, Inputs, Level 1
Sep. 30, 2013
Options
Fair Value, Inputs, Level 2
Sep. 30, 2012
Options
Fair Value, Inputs, Level 2
Sep. 30, 2013
Options
Fair Value, Inputs, Level 3
Sep. 30, 2012
Options
Fair Value, Inputs, Level 3
Sep. 30, 2013
Futures
Sep. 30, 2012
Futures
Sep. 30, 2013
Futures
Fair Value, Inputs, Level 1
Sep. 30, 2012
Futures
Fair Value, Inputs, Level 1
Sep. 30, 2013
Futures
Fair Value, Inputs, Level 2
Sep. 30, 2012
Futures
Fair Value, Inputs, Level 2
Sep. 30, 2012
Futures
Fair Value, Inputs, Level 3
Sep. 30, 2013
Credit default swaps
Sep. 30, 2012
Credit default swaps
Sep. 30, 2013
Credit default swaps
Fair Value, Inputs, Level 1
Sep. 30, 2012
Credit default swaps
Fair Value, Inputs, Level 1
Sep. 30, 2013
Credit default swaps
Fair Value, Inputs, Level 2
Sep. 30, 2012
Credit default swaps
Fair Value, Inputs, Level 2
Sep. 30, 2013
Credit default swaps
Fair Value, Inputs, Level 3
Sep. 30, 2012
Credit default swaps
Fair Value, Inputs, Level 3
Sep. 30, 2013
Minimum
Number_of_extensions
Years
Sep. 30, 2013
Maximum
Years
Number_of_extensions
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of gross plan assets
$ 7,951 1 2
$ 7,666 1 3
$ 1,855 
$ 1,530 
$ 5,440 
$ 5,503 
$ 656 
$ 633 
$ 813 
$ 1,689 1 2
$ 1,294 1 3
$ 1,686 
$ 1,293 
$ 0 
$ 0 
$ 3 
$ 1 
$ 22 1 2
$ 26 1 3
$ 17 
$ 18 
$ 0 
$ 3 
$ 5 
$ 5 
$ 1,352 1 2
$ 1,601 1 3
$ 0 
$ 0 
$ 1,334 
$ 1,589 
$ 18 
$ 12 
$ 355 1 2
$ 390 1 3
$ 0 
$ 0 
$ 352 
$ 386 
$ 3 
$ 4 
$ 113 1 2
$ 184 1 3
$ 113 
$ 182 
$ 0 
$ 2 
$ 0 
$ 0 
$ 31 1 2
$ 46 1 3
$ 0 
$ 0 
$ 30 
$ 43 
$ 1 
$ 3 
$ 120 1 2
$ 109 1 3
$ 0 
$ 0 
$ 110 
$ 95 
$ 10 
$ 14 
$ 36 1 2
$ 46 1 3
$ 0 
$ 0 
$ 36 
$ 41 
$ 0 
$ 5 
$ 21 1 2
$ 28 1 3
$ 0 
$ 0 
$ 18 
$ 28 
$ 3 
$ 0 
$ 1,182 1 2
$ 1,129 1 3
$ 0 
$ 0 
$ 1,182 
$ 1,129 
$ 0 
$ 0 
$ 786 1 2
$ 802 1 3
$ 0 
$ 0 
$ 786 
$ 802 
$ 0 
$ 0 
$ 263 1 2
$ 275 1 3
$ 0 
$ 0 
$ 263 
$ 275 
$ 0 
$ 0 
$ 26 1 2
$ 32 1 3
$ 26 
$ 32 
$ 0 
$ 0 
$ 0 
$ 0 
$ 395 1 2
$ 311 1 3
$ 1 
$ 0 
$ 394 
$ 311 
$ 0 
$ 0 
$ 528 1 2
$ 519 1 3
$ 0 
$ 0 
$ 0 
$ 0 
$ 528 
$ 519 
$ 382 1 2
$ 340 1 3
$ 0 
$ 0 
$ 297 
$ 270 
$ 85 
$ 70 
$ 39 1 2
$ 37 1 3
$ 8 
$ 5 
$ 31 
$ 32 
$ 0 
$ 0 
$ 3 1 2
$ 3 1 3
$ 0 
$ 0 
$ 3 
$ 3 
$ 0 
$ 0 
$ 594 1 2
$ 487 1 3
$ 0 
$ 0 
$ 594 
$ 487 
$ 0 
$ 0 
$ 4 1 2
$ 0 
$ 4 
$ 0 
$ 6 1 2
$ 7 1 3
$ 0 
$ 0 
$ 6 
$ 7 
$ 0 
$ 0 
$ 4 1 2
 
$ 4 
 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities
596 1 2
493 1 3
0 
3 
596 
490 
0 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
594 1 2
488 1 3
0 
0 
594 
488 
0 
0 
 
 
 
 
1 1 2
1 1 3
0 
0 
1 
1 
0 
0 
 
3 1 3
 
3 
 
0 
0 
1 1 2
1 1 3
0 
0 
1 
1 
0 
0 
 
 
Net payables
131 
141 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payables for collateral on loaned securities
$ 3 
$ 3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inter-vendor pricing variance
2.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of years partnerships in private equity generally continue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 
12 
Number of one year extensions for partnerships in private equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3 
4 
Voting percentage required to desolve partnership in private equity
80.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Benefit Plans Fair Value Measurements Using Significant Unobservable Inputs (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Defined Benefit Plan Disclosure
 
 
 
Fair value of gross plan assets
$ 7,951 1 2
$ 7,666 1 3
 
Fair Value, Inputs, Level 3
 
 
 
Defined Benefit Plan Disclosure
 
 
 
Fair value of gross plan assets
656 
633 
813 
Net realized/unrealized gains and losses
45 
85 
 
Purchases, sales, issuances, and settlements
(21)
(17)
 
Transfers in and/or out of Level 3
$ (1)4
$ (248)4
 
Benefit Plans Estimated Future Benefit Payments (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Pension Benefits
 
Defined Benefit Plan Disclosure
 
Defined Benefit Plan, Expected Future Benefit Payments, Next Twelve Months
$ 720 
Defined Benefit Plan, Expected Future Benefit Payments, Year Two
719 
Defined Benefit Plan, Expected Future Benefit Payments, Year Three
727 
Defined Benefit Plan, Expected Future Benefit Payments, Year Four
731 
Defined Benefit Plan, Expected Future Benefit Payments, Year Five
736 
Defined Benefit Plan, Expected Future Benefit Payments, Five Fiscal Years Thereafter
3,773 
Other Post-retirement Benefits
 
Defined Benefit Plan Disclosure
 
Defined Benefit Plan, Expected Future Benefit Payments, Next Twelve Months
40 
Defined Benefit Plan, Expected Future Benefit Payments, Year Two
42 
Defined Benefit Plan, Expected Future Benefit Payments, Year Three
43 
Defined Benefit Plan, Expected Future Benefit Payments, Year Four
44 
Defined Benefit Plan, Expected Future Benefit Payments, Year Five
45 
Defined Benefit Plan, Expected Future Benefit Payments, Five Fiscal Years Thereafter
$ 210 
Benefit Plans Contributions (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2014
Supplemental Employee Retirement Plans, Defined Benefit
Sep. 30, 2013
Supplemental Employee Retirement Plans, Defined Benefit
Sep. 30, 2014
Other Post-retirement Benefits
Sep. 30, 2013
Other Post-retirement Benefits
Sep. 30, 2012
Other Post-retirement Benefits
Sep. 30, 2013
Pension Benefits
Sep. 30, 2012
Pension Benefits
Sep. 30, 2014
Other Pension Plans, Defined Benefit
Sep. 30, 2009
Other Pension Plans, Defined Benefit
Defined Benefit Plan Disclosure
 
 
 
 
 
 
 
 
 
Employer contributions
$ 6 
$ 6 
$ 40 
$ 47 
$ 41 
$ 6 
$ 8 
$ 250 
$ 1,000 
Benefit Plans Other Postemployment Benefits (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Basis_points
Sep. 30, 2011
Basis_points
Other Post-Employment Benefits
 
 
 
Discount rate
2.64% 
1.65% 
1.92% 
Period expense
$ (8)
$ 52 
$ 81 
Postemployment benefits liability
535 
597 
596 
Increase (Decrease) in Postemployment Obligations
45 
 
 
Change in discount rate assumption for post employment benefit expense
 
27 
61 
Pension and Other Postretirement Defined Benefit Plans, Liabilities, Noncurrent [Member]
 
 
 
Other Post-Employment Benefits
 
 
 
Postemployment benefits liability, noncurrent
486 
544 
 
Accounts payable and accrued liabilities
 
 
 
Other Post-Employment Benefits
 
 
 
Postemployment benefits liability, current
$ 49 
$ 53 
 
Commitments and Contingencies Commitments and Contingencies - Table (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2013
Obligations
 
 
 
Time period shown for contractual commitments
 
 
5 years 
2014
$ 62 1
 
 
2015
1,064 1
 
 
2016
65 1
 
 
2017
1,590 1
 
 
2018
1,718 1
 
 
Thereafter
19,231 1
 
 
Total
23,730 1
 
 
Total
149 
148 
 
2014
100 
 
 
2015
100 
 
 
2016
100 
 
 
2017
100 
 
 
2018
100 
 
 
Thereafter
10 
 
 
Total
510 
 
 
Foreign currency exchange loss
43 
41 
 
Net discount on sale of Bonds
85 
 
 
Debt
 
 
 
Obligations
 
 
 
2014
2,464 1
 
2,464 1
2015
1,032 1
 
1,032 1
2016
32 1
 
32 1
2017
1,555 1
 
1,555 1
2018
1,682 1
 
1,682 1
Thereafter
18,056 1
 
18,056 1
Total
24,821 1
 
24,821 1
Debt of VIEs
 
 
 
Obligations
 
 
 
2014
30 
 
30 
2015
32 
 
32 
2016
33 
 
33 
2017
35 
 
35 
2018
36 
 
36 
Thereafter
1,175 
 
1,175 
Total
1,341 
 
1,341 
Financial Instruments Subject to Mandatory Redemption, Financial Instrument [Domain]
 
 
 
Obligations
 
 
 
2014
2 
 
2 
2015
2 
 
2 
2016
2 
 
2 
2017
2 
 
2 
2018
2 
 
2 
Thereafter
30 
 
30 
Total
40 
 
40 
Lease Obligations - Capital
 
 
 
Obligations
 
 
 
2014
5 
 
5 
2015
5 
 
5 
2016
5 
 
5 
2017
5 
 
5 
2018
5 
 
5 
Thereafter
36 
 
36 
Total
61 
 
61 
Lease Obligations - Non-Cancelable Operating
 
 
 
Obligations
 
 
 
2014
37 
 
37 
2015
30 
 
30 
2016
29 
 
29 
2017
28 
 
28 
2018
27 
 
27 
Thereafter
87 
 
87 
Total
238 
 
238 
Purchase Obligations - Power
 
 
 
Obligations
 
 
 
2014
219 
 
219 
2015
204 
 
204 
2016
219 
 
219 
2017
231 
 
231 
2018
230 
 
230 
Thereafter
3,336 
 
3,336 
Total
4,439 
 
4,439 
Purchase Obligations - Fuel
 
 
 
Obligations
 
 
 
2014
1,419 
 
1,419 
2015
1,176 
 
1,176 
2016
794 
 
794 
2017
442 
 
442 
2018
498 
 
498 
Thereafter
2,002 
 
2,002 
Total
6,331 
 
6,331 
Purchase Obligations - Other
 
 
 
Obligations
 
 
 
2014
255 
 
255 
2015
210 
 
210 
2016
184 
 
184 
2017
182 
 
182 
2018
502 
 
502 
Thereafter
1,221 
 
1,221 
Total
2,554 
 
2,554 
Payments on Other Financings
 
 
 
Obligations
 
 
 
2014
100 
 
100 
2015
104 
 
104 
2016
104 
 
104 
2017
104 
 
104 
2018
104 
 
104 
Thereafter
401 
 
401 
Total
917 
 
917 
Total
 
 
 
Obligations
 
 
 
2014
4,531 
 
4,531 
2015
2,795 
 
2,795 
2016
1,402 
 
1,402 
2017
2,584 
 
2,584 
2018
3,086 
 
3,086 
Thereafter
26,344 
 
26,344 
Total
$ 40,742 
 
$ 40,742 
Commitments and Contingencies Commitments and Contingencies - Energy Prepayment Obligations (Details) (USD $)
In Millions, unless otherwise specified
Sep. 30, 2013
Obligations
 
2014
$ 100 
2015
100 
2016
100 
2017
100 
2018
100 
Thereafter
10 
Total
$ 510 
Commitments and Contingencies Commitments and Contingencies - Debt (Details) (USD $)
In Billions, unless otherwise specified
Sep. 30, 2013
variable_interest_entities
Debt Instrument
 
Outstanding discount notes
$ 2.4 
Outstanding long-term debt including current maturities)
22.4 
Long-term and short-term debt combined
24.8 
Number of VIEs
3 
Outstanding long-term debt (including current maturities) of VIEs
$ 1.3 
Commitments and Contingencies Commitments and Contingencies - Leases (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Years
Sep. 30, 2012
Sep. 30, 2011
Leases
 
 
 
Lease terms low end of range
1 
 
 
Lease terms high end of range
80 
 
 
Cost of financing
$ 18 
 
 
Rental expense for operating leases
$ 71 
$ 67 
$ 77 
Commitments and Contingencies Commitments and Contingencies - Purchase Obligations (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Hours
Facilities
Megawatts
Sep. 30, 2012
Sep. 30, 2011
Aug. 9, 2013
Obligations
 
 
 
 
Membership interests of VIE subject to mandatory redemption
$ 40 
$ 0 
 
$ 40 
Megawatts provided under power purchase obligations
1,621 
 
 
 
Remaining terms of the agreements, high end of range
19 years 
 
 
 
Power purchased under agreement
322 
447 
713 
 
Number of U.S. Army Corps of Engineers hydroelectric facilities contracted with to obtain power
8 
 
 
 
Agreement termination notice period
3 years 
 
 
 
Minimum required hours of power
1,500 
 
 
 
Megawatt allocation
405 
 
 
 
Number of hydroelectic facilities with reduced production
2 
 
 
 
Maximum term length for the purchase and transportation of coal
10 years 
 
 
 
Long-term purchase commitment
149 
148 
 
 
Maximum term for purchase of enriched uranium and fabrication of nuclear fuel assemblies
17 years 
 
 
 
Purchase Agreements Required by Federal Law
 
 
 
 
Obligations
 
 
 
 
Megawatts provided under power purchase obligations
913 
 
 
 
Number of suppliers
6 
 
 
 
Purchase Obligations - Coal [Member]
 
 
 
 
Obligations
 
 
 
 
Long-term purchase commitment
2,300 
 
 
 
Purchase Obligations - Nuclear Fuel [Member]
 
 
 
 
Obligations
 
 
 
 
Long-term purchase commitment
4,000 
 
 
 
Purchase Obligations - Other
 
 
 
 
Obligations
 
 
 
 
Long-term purchase commitment
$ 2,554 
 
 
 
Commitments and Contingencies Commitments and Contingencies - Contingencies (Details) (USD $)
12 Months Ended
Sep. 30, 2013
reactors
Procedures
Sites
Areas
Insurance_layers
Phases
Units
Sep. 30, 2012
Sep. 30, 2011
Contingencies
 
 
 
Nuclear liability insurance
$ 375,000,000 
 
 
Assessment from licensees for each licensed reactor
127,000,000 
 
 
Number of licensed reactors in US
104 
 
 
Nuclear accident assessment limitation per year per unit
19,000,000 
 
 
Number of licensed nuclear units
6 
 
 
Maximum assessment per nuclear incident
764,000,000 
 
 
Maximum payment required per accident in any one year
114,000,000 
 
 
Total amount of protection available
13,000,000,000 
 
 
Surcharge for legal expenses
5.00% 
 
 
The U.S. Congress is required to take action if these layes are exhausted
2 
 
 
Amount of property, decommissioning, and decontamination insurance carried
4,600,000,000 
 
 
Amount of insurance available for loss at any one site
2,100,000,000 
 
 
Number of sites
1 
 
 
Maximum amount of retrospecitve premiums
105,000,000 
 
 
Maximum idemnity if a covered accident tasks or keeps a nuclear unit offline
490,000,000 
 
 
Maximum amount of retrospective premiums
32,000,000 
 
 
Number of procedures for determining estimates for the costs of nuclear decommissioning
2 
 
 
Amount spent to reduce emissions since 1977
5,600,000,000 
 
 
Amount spent to reduce emissions
182,000,000 
38,000,000 
34,000,000 
Possible additional future costs for compliance with Clean Air Act requirements
1,300,000,000 
 
 
Estimated liability for cleanup and similar environmental work on a non-discounted basis
15,000,000 
 
 
Number of areas of cleanup
4 
 
 
Number of phases of soil cleanup
2 
 
 
Amount of settlement for potential liability related to soil cleanup
300,000 
 
 
Cost estimate for first phase of soil cleanup
55,000,000 
 
 
Cost estimate for second phase of soil cleanup
10,000,000 
 
 
Low end of cleanup estimate
6,000,000 
 
 
High end of cleanup estimate
25,000,000 
 
 
Remaining natural resource damages are less than
1,000,000 
 
 
Percent of Operation and Maintenance Cost
80.00% 
 
 
Expected increase (decrease) in operation and maintenance expense
500,000,000 
 
 
Nuclear
 
 
 
Contingencies
 
 
 
Future estimated decommissioning cost
2,400,000,000 
 
 
Non-nuclear
 
 
 
Contingencies
 
 
 
Future estimated decommissioning cost
$ 1,100,000,000 
 
 
Commitments and Contingencies Commitments and Contingencies - Legal Proceedings (Details) (USD $)
12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended
Dec. 31, 2010
Sep. 30, 2013
Phases
Sep. 30, 2013
General
Apr. 30, 2011
Environmental Agreements
Agreements
Groups
Jun. 30, 2011
Environmental Agreements
Megawatts
Units
Sep. 30, 2013
Kingston Ash Spill
Number_of_extensions
Legal_actions
Jun. 30, 2010
Kingston Ash Spill
Years
Sep. 30, 2010
Case Involving Tennessee Valley Authority Retirement System
Mar. 31, 2010
Case Involving Tennessee Valley Authority Retirement System
People
Dec. 31, 2010
Case Involving Tennessee Valley Authority Retirement System
Apr. 30, 2006
Case Arising out of Hurricane Katrina
People
Companies
Jun. 30, 2012
Case Involving the NRC Waste Confidence Decision on Spent Nuclear Fuel Storage
Jul. 31, 2013
Administrative Proceedings Regarding Sequoyah U1 and U2 [Member]
Legal_actions
May 31, 2013
Administrative Proceedings Regarding Sequoyah U1 and U2 [Member]
Jun. 30, 2008
Administrative Proceedings Regarding Bellefonte Units 3 and 4
Legal_actions
Sep. 30, 2012
Administrative Proceedings Regarding Bellefonte Units 3 and 4
Nov. 30, 2009
Administrative Proceedings Regarding Watts Bar Nuclear Plant Unit 2
Legal_actions
People
Sep. 30, 2012
Administrative Proceedings Regarding Watts Bar Nuclear Plant Unit 2
Legal_actions
May 13, 2013
Case involving Colbert Fossil Plant [Member]
Dec. 31, 2011
Petitions Resulting from Japanese Nuclear Events
Legal_actions
Aug. 31, 2011
Petitions Resulting from Japanese Nuclear Events
Legal_actions
Sep. 30, 2013
Other long-term liabilities
General
Sep. 30, 2013
Accounts payable and accrued liabilities
General
Sep. 30, 2013
Noncurrent Regulatory Assets [Member]
General
Legal Proceedings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of phases of soil cleanup
 
2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Legal loss contingency accrual
 
 
$ 302,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 189,000,000 
$ 85,000,000 
$ 28,000,000 
Estimated range of losses low end of range
 
1,100,000,000 
302,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated range of losses high end of range
 
1,200,000,000 
314,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of similar environmental agreements entered into
 
 
 
2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of environmental agreements entered into with the EPA
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of environmental agreements entered into with Alabama, Kentucky, North Carolina, and Tennessee
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of environmental agreements entered into with environmental advocacy groups
 
 
 
3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of units to be idled
 
 
 
 
18 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Megawatts option 1
 
 
 
 
2,200 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Megawatts option 2
 
 
 
 
3,500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount to be invested in certain environmental projects
 
 
 
 
290,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount to be provided to fund environmental projects
 
 
 
 
60,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount to pay civil penalties
 
 
 
 
10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of lawsuits filed
 
 
 
 
 
78 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of lawsuits dismissed
 
 
 
 
 
15 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of active lawsuits
 
 
 
 
 
63 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of cases that received a bench trial
 
 
 
 
 
7 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of remaining cases
 
 
 
 
 
56 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Length of time to complete mediation
 
 
 
 
 
120 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of times mediation extended
 
 
 
 
 
3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of lawsuits filed under various environmental statutes
 
 
 
 
 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Civil penalty order issued June 1, 2010
 
 
 
 
 
 
12,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of civil penalty order satisfied
 
 
 
 
 
10,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit against civil penalty order
 
 
 
 
 
2,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Down payment on natural resource damages
 
 
 
 
 
 
250,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of years to pay for natural resource damages
 
 
 
 
 
 
3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of participants that filed suit
 
 
 
 
 
 
 
 
8 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of TVARS Board members
 
 
 
 
 
 
 
 
6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Board Members Appointed
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement age of eligibility for cost of living adjustment before January 1, 2010
55 
 
 
 
 
 
 
 
 
55 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retirement age of eligibility for cost of living adjustment after January 1, 2010
60 
 
 
 
 
 
 
 
 
60 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of defendants that filed a motion to dismiss
 
 
 
 
 
 
 
 
5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of individual defendants
 
 
 
 
 
 
 
 
6 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Remaining defendant
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of days to file an ammended complaint
 
 
 
 
 
 
 
14 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of Mississippi residents allegedly injured
 
 
 
 
 
 
 
 
 
 
14 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of large oil companies sued
 
 
 
 
 
 
 
 
 
 
7 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of oil company trade associations sued
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of large chemical companies sued
 
 
 
 
 
 
 
 
 
 
3 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of chemical trade associations sued
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of large companies sued
 
 
 
 
 
 
 
 
 
 
31 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of years that spent fuel can be stored after a plant's license is terminated
 
 
 
 
 
 
 
 
 
 
 
60 years 
 
 
 
 
 
 
 
 
 
 
 
 
Opposed contentions
 
 
 
 
 
 
 
 
 
 
 
 
 
8 
 
 
 
 
 
 
 
 
 
 
Number of contentions submitted by BREDL BEST and MATRR
 
 
 
 
 
 
 
 
 
 
 
 
 
8 
 
 
 
 
 
 
 
 
 
 
Number of petitioners with standing
 
 
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
Number of petitioners
 
 
 
 
 
 
 
 
 
 
 
 
3 
 
 
 
 
 
 
 
 
 
 
 
Number of contentions dismissed
 
 
 
 
 
 
 
 
 
 
 
 
7 
 
 
 
1 
 
 
 
 
 
 
 
Number of contentions left
 
 
 
 
 
 
 
 
 
 
 
 
1 
 
2 
 
 
 
 
 
 
 
 
 
Number of admitted contentions submitted by BREDL and SACE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 
 
 
 
 
 
 
 
 
 
Number of contentions submitted by BREDL and SACE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20 
 
 
 
 
 
 
 
 
 
Number of contentions no longer admitted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 
 
 
 
 
 
 
 
 
 
Number of BREDL contentions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
Number of contentions admitted for hearing
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 
 
 
 
 
 
 
 
Number of SACE contentions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7 
1 
 
 
 
 
 
 
Number of other petitioners
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 
 
 
 
 
 
 
 
Number of contentions remaining
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
Payment related to case involving Colbert Fossil Plant
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 150,000 
 
 
 
 
 
Number of requests accepted by the NRC
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 
 
 
 
 
Number of separate petitions filed by the Natural Resources Defense Council
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12 
 
 
 
Related Parties Related Parties (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Related Parties
 
 
 
Unpaid appropriation investment
$ 10 
 
 
Current borrowing capacity
150 
 
 
Sales of electricity
120 
117 
130 
Other income
102 
164 
104 
Operating and maintenance
314 
375 
295 
Cash and cash equivalents
38 
32 
27 
Accounts receivable, net
58 
49 
84 
Accounts payable and accrued liabilities
133 
204 
175 
Return on power program appropriation investment
7 
7 
7 
Return of power program appropriation investment
$ 20 
$ 20 
$ 20 
Unaudited Quarterly Financial Information Unaudited Quarterly Financial Information (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended 3 Months Ended
Sep. 30, 2013
Sep. 30, 2012
Sep. 30, 2011
Dec. 31, 2012
First Quarter
Dec. 31, 2011
First Quarter
Mar. 31, 2013
Second Quarter
Mar. 31, 2012
Second Quarter
Jun. 30, 2013
Third Quarter
Jun. 30, 2012
Third Quarter
Sep. 30, 2013
Fourth Quarter
Sep. 30, 2012
Fourth Quarter
Operating revenues
$ 10,956 
$ 11,220 
$ 11,841 
$ 2,579 
$ 2,568 
$ 2,741 
$ 2,604 
$ 2,602 
$ 2,777 
$ 3,034 
$ 3,271 
Operating expenses
9,503 
9,920 
10,404 
2,523 
2,431 
2,380 
2,358 
2,324 
2,499 
2,276 
2,632 
Operating income
1,453 
1,300 
1,437 
56 
137 
361 
246 
278 
278 
758 
639 
Net income (loss)
$ 271 
$ 60 
$ 162 
$ (245)
$ (173)
$ 54 
$ (94)
$ (12)
$ (23)
$ 474 
$ 350