Company: TVC
Filing Date: 2025-11-13
Form Type: 10-K
Source: 0001376986-25-000056
Chunk: 394

Company: Tennessee Valley Authority
Filing Date: 2025-11-13
Form: 10-K
Item: Item 7
Chunk 394
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  Unrealized gains (losses) on natural gas purchase contracts, included as part of unrealized gains (losses) on commodity contract derivatives, relate to the mark-to-market ("MtM") valuation of natural gas purchase contracts.  The natural gas purchase contracts qualify as commodity contract derivatives but do not qualify for cash flow hedge accounting treatment.  As a result, TVA recognizes the changes in the market value of these commodity contract derivatives as a regulatory liability or asset.  This treatment reflects TVA's ability and intent to recover the cost of these commodity contract derivatives on a settlement basis for ratemaking purposes through the fuel cost adjustment.  TVA recognizes the actual cost of fuel received under these contracts in fuel and purchased power expense at the time the fuel is used to generate electricity.  These contracts expire at various times through October 2035.  Unrealized gains and losses on 

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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 16 — Risk Management Activities and Derivative Transactions.Currently, TVA is hedging exposure to the price of natural gas under the Financial Hedging Program ("FHP").  Deferred gains and losses relating to TVA's FHP are included as part of unrealized gains and losses on commodity contract derivatives.  TVA defers all MtM unrealized gains or losses as regulatory liabilities or assets, respectively, and records the realized gains or losses in fuel and purchased power expense as the contracts settle to match the delivery period of the underlying commodity.  These contracts expire at various times through December 2029.  This accounting treatment reflects TVA's ability and intent to include the realized gains or losses of these commodity contract derivatives in future periods through the fuel cost adjustment.  Net unrealized gains and losses for any settlements that occur within 12 months or less are classified as a current regulatory liability or asset on TVA's Consolidated Balance Sheets.  See Note 16 — Risk Management Activities and Derivative Transactions.Unrealized Losses on Interest Rate Derivatives.  TVA uses regulatory accounting treatment to defer the unrealized gains and losses on certain interest rate derivative contracts.  When amounts in these contracts are realized, the resulting gains or losses are included in the ratemaking formula.  The unrealized losses on these interest rate derivatives are recorded on TVA's Consolidated Balance Sheets as current and non-current regulatory assets, and the related realized