NRG Energy (NRG)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o		Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-15891

NRG Energy, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)		41-1724239 (I.R.S. Employer Identification No.)
211 Carnegie Center, Princeton, New Jersey (Address of principal executive offices)		08540 (Zip Code)

(609) 524-4500
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ       No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ       No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No þ

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes þ       No o

     As of November 1, 2010, there were 247,197,248 shares of common stock outstanding, par value $0.01 per share.

 

 

TABLE OF CONTENTS
Index

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION			3
GLOSSARY OF TERMS			4
PART I — FINANCIAL INFORMATION			8
ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES			8
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			49
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			86
ITEM 4 — CONTROLS AND PROCEDURES			88
PART II — OTHER INFORMATION			89
ITEM 1 — LEGAL PROCEEDINGS			89
ITEM 1A — RISK FACTORS			89
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			89
ITEM 3 — DEFAULTS UPON SENIOR SECURITIES			89
ITEM 4 — (REMOVED AND RESERVED)			89
ITEM 5 — OTHER INFORMATION			90
ITEM 6 — EXHIBITS			91
SIGNATURES			92
EX-31.1
EX-31.2
EX-31.3
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

     This Quarterly Report on Form 10-Q of NRG Energy, Inc., or NRG or the Company, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words “believes,” “projects,” “anticipates,” “plans,” “expects,” “intends,” “estimates” and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause NRG’s actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors, risks and uncertainties include the factors described under Risks Factors Related to NRG Energy, Inc. in Part I, Item 1A, of the Company’s Annual Report on Form 10-K, for the year ended December 31, 2009, including the following:

•

General economic conditions, changes in the wholesale power markets and fluctuations in the cost of fuel;

•

Volatile power supply costs and demand for power;

•

Hazards customary to the power production industry and power generation operations such as fuel and electricity price volatility, unusual weather conditions, catastrophic weather-related or other damage to facilities, unscheduled generation outages, maintenance or repairs, unanticipated changes to fuel supply costs or availability due to higher demand, shortages, transportation problems or other developments, environmental incidents, or electric transmission or gas pipeline system constraints and the possibility that NRG may not have adequate insurance to cover losses as a result of such hazards;

•

The effectiveness of NRG’s risk management policies and procedures, and the ability of NRG’s counterparties to satisfy their financial commitments;

•

Counterparties’ collateral demands and other factors affecting NRG’s liquidity position and financial condition;

•

NRG’s ability to operate its businesses efficiently, manage capital expenditures and costs tightly, and generate earnings and cash flows from its asset-based businesses in relation to its debt and other obligations;

•

NRG’s ability to enter into contracts to sell power and procure fuel on acceptable terms and prices;

•

The liquidity and competitiveness of wholesale markets for energy commodities;

•

Government regulation, including compliance with regulatory requirements and changes in market rules, rates, tariffs and environmental laws and increased regulation of carbon dioxide and other greenhouse gas emissions;

•

Price mitigation strategies and other market structures employed by ISOs or RTOs that result in a failure to adequately compensate NRG’s generation units for all of its costs;

•

NRG’s ability to borrow additional funds and access capital markets, as well as NRG’s substantial indebtedness and the possibility that NRG may incur additional indebtedness going forward;

•

Operating and financial restrictions placed on NRG and its subsidiaries that are contained in the indentures governing NRG’s outstanding notes, in NRG’s Senior Credit Facility, and in debt and other agreements of certain of NRG subsidiaries and project affiliates generally;

•

NRG’s ability to implement its RepoweringNRG strategy of developing and building new power generation facilities, including new nuclear, wind and solar projects;

•

NRG’s ability to implement its econrg strategy of finding ways to meet the challenges of climate change, clean air and protecting natural resources while taking advantage of business opportunities;

•

NRG’s ability to implement its FORNRG strategy of increasing the return on invested capital through operational performance improvements and a range of initiatives at plants and corporate offices to reduce costs or generate revenues;

•

NRG’s ability to achieve its strategy of regularly returning capital to shareholders;

•

Reliant Energy’s ability to maintain market share;

•

NRG’s ability to successfully evaluate investments in new business and growth initiatives; and

•

NRG’s ability to successfully integrate and manage acquired businesses.

     Forward-looking statements speak only as of the date they were made, and NRG undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause NRG’s actual results to differ materially from those contemplated in any forward-looking statements included in this Quarterly Report on Form 10-Q should not be construed as exhaustive.

GLOSSARY OF TERMS

     When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:

2009 Form 10-K		NRG’s Annual Report on Form 10-K for the year ended December 31, 2009
Baseload capacity		Electric power generation capacity normally expected to serve loads on an around-the-clock basis throughout the calendar year
CAA		Clean Air Act
CAIR		Clean Air Interstate Rule
CAISO		California Independent System Operator
CATR		Clean Air Transport Rule
Capital Allocation Plan		Share repurchase program
Capital Allocation Program		NRG’s plan of allocating capital between debt reduction, reinvestment in the business, and share repurchases through the Capital Allocation Plan
C&I		Commercial, industrial and governmental/institutional
CFTC		U.S. Commodity Futures Trading Commission
CO2		Carbon dioxide
CPS		CPS Energy
CSF Debt		CSF I and CSF II issued notes and preferred interest, individually referred to as CSF I Debt and CSF II Debt
CSRA		Credit Sleeve Reimbursement Agreement with Merrill Lynch in connection with acquisition of Reliant Energy, as hereinafter defined
CSRA Amendment		Amendment of the existing CSRA with Merrill Lynch which became effective October 5, 2009
DNREC		Delaware Department of Natural Resources and Environmental Control
ERCOT		Electric Reliability Council of Texas, the Independent System Operator and the regional reliability coordinator of the various electricity systems within Texas
Exchange Act		The Securities Exchange Act of 1934, as amended
FASB		Financial Accounting Standards Board — the designated organization for establishing standards for financial accounting and reporting
FERC		Federal Energy Regulatory Commission
Funded Letter of Credit Facility		NRG’s $1.3 billion term loan-backed fully funded senior secured letter of credit facility, of which $500 million matures on February 1, 2013, and $800 million matures on August 31, 2015, and is a component of NRG’s Senior Credit Facility
GHG		Greenhouse Gases
GWh		Gigawatt hour
IGCC		Integrated Gasification Combined Cycle
ISO		Independent System Operator, also referred to as Regional Transmission Organizations, or RTO
ISO-NE		ISO New England Inc.
kW		Kilowatts
kWh		Kilowatt-hours

LIBOR		London Inter-Bank Offer Rate
LTIP		Long-Term Incentive Plan
MACT		Maximum Achievable Control Technology
Mass		Residential and small business
Merit Order		A term used for the ranking of power stations in order of ascending marginal cost
MIBRAG		Mitteldeutsche Braunkohlengesellschaft mbH
MMBtu		Million British Thermal Units
MW		Megawatts
MWh		Saleable megawatt hours net of internal/parasitic load megawatt-hours
NAAQS		National Ambient Air Quality Standards
NINA		Nuclear Innovation North America LLC
NOx		Nitrogen oxide
NPNS		Normal Purchase Normal Sale
NRC		U.S. Nuclear Regulatory Commission
NYISO		New York Independent System Operator
OCI		Other comprehensive income
Phase II 316(b) Rule		A section of the Clean Water Act regulating cooling water intake structures
PJM		PJM Interconnection, LLC
PJM market		The wholesale and retail electric market operated by PJM primarily in all or parts of Delaware, the District of Columbia, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia
PM 2.5		Particulate matter particles with a diameter of 2.5 micrometers or less
PPA		Power Purchase Agreement
PUCT		Public Utility Commission of Texas
Reliant Energy		NRG’s retail business in Texas purchased on May 1, 2009, from Reliant Energy, Inc. which is now known as RRI Energy, Inc., or RRI
Repowering		Technologies utilized to replace, rebuild, or redevelop major portions of an existing electrical generating facility, not only to achieve a substantial emissions reduction, but also to increase facility capacity, and improve system efficiency
RepoweringNRG		NRG’s program designed to develop, finance, construct and operate new, highly efficient, environmentally responsible capacity
RERH		RERH Holding, LLC and its subsidiaries
Revolving Credit Facility		NRG’s $875 million senior secured revolving credit facility, which matures on August 31, 2015, and is a component of NRG’s Senior Credit Facility
RGGI		Regional Greenhouse Gas Initiative
RMR		Reliability Must-Run
ROIC		Return on invested capital
RRI		RRI Energy, Inc. (formerly Reliant Energy, Inc.)
Sarbanes-Oxley		Sarbanes-Oxley Act of 2002, as amended
SEC		United States Securities and Exchange Commission

Securities Act		The Securities Act of 1933, as amended
Senior Credit Facility		NRG’s senior secured facility, which is comprised of a Term Loan Facility, an $875 million Revolving Credit Facility and a $1.3 billion Funded Letter of Credit Facility
Senior Notes		The Company’s $6.5 billion outstanding unsecured senior notes consisting of $1.2 billion of 7.25% senior notes due 2014, $2.4 billion of 7.375% senior notes due 2016, $1.1 billion of 7.375% senior notes due 2017, $700 million of 8.5% senior notes due 2019 and $1.1 billion of senior notes due 2020
SO2		Sulfur dioxide
STP		South Texas Project — nuclear generating facility located near Bay City, Texas in which NRG owns a 44% Interest
STPNOC		South Texas Project Nuclear Operating Company
TANE		Toshiba America Nuclear Energy Corporation
TANE Facility		NINA’s $500 million credit facility with TANE which matures on February 24, 2012
TEPCO		The Tokyo Electric Power Company of Japan, Inc.
Term Loan Facility		A senior first priority secured term loan, of which approximately $975 million matures on February 1, 2013, and $1.0 billion matures on August 31, 2015, and is a component of NRG’s Senior Credit Facility
TNEA		TEPCO Nuclear Energy America LLC
Tonnes		Metric tonnes, which are units of mass or weight in the metric system each equal to 2,205lbs and are the global measurement for GHG
TWh		Terawatt hour
U.S.		United States of America
U.S. DOE		United States Department of Energy
U.S. EPA		United States Environmental Protection Agency
U.S. GAAP		Accounting principles generally accepted in the United States
VaR		Value at Risk

ACCOUNTING PRONOUNCEMENTS

     The FASB has established the FASB Accounting Standards Codification, or ASC, as the source of authoritative U.S. GAAP. The FASB issues updates to the ASC through Accounting Standards Updates, or ASUs. The following ASC topics and ASUs are referenced in this report:

ASC 280		ASC-280, Segment Reporting
ASC 450		ASC-450, Contingencies
ASC 740		ASC-740, Income Taxes
ASC 805		ASC-805, Business Combinations
ASC 810		ASC-810, Consolidation
ASC 815		ASC-815, Derivatives and Hedging
ASC 820		ASC-820, Fair Value Measurements and Disclosures
ASC 980		ASC-980, Regulated Operations
ASU 2009-15		ASU No. 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing
ASU 2009-17		ASU No. 2009-17, Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities
ASU 2010-02		ASU No. 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary—a Scope Clarification
ASU 2010-06		ASU No. 2010-06, Fair Value Measurement and Disclosures: Improving Disclosures about Fair Value Measurements
ASU 2010-09		ASU No. 2010-09, Subsequent Events (Topic 815): Amendments to Certain Recognition and Disclosure Requirements
ASU 2010-10		ASU No. 2010-10, Consolidation (Topic 810): Amendments for Certain Investment Funds

PART I — FINANCIAL INFORMATION

ITEM 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three months ended September 30,								Nine months ended September 30,
(In millions, except for per share amounts)		2010				2009				2010				2009
Operating Revenues
Total operating revenues		$	2,685			$	2,916			$	7,033			$	6,811
Operating Costs and Expenses
Cost of operations			1,835				1,893				4,803				3,901
Depreciation and amortization			210				212				620				594
Selling, general and administrative			172				182				441				396
Acquisition-related transaction and integration costs			—				6				—				41
Development costs			14				12				36				34
Total operating costs and expenses			2,231				2,305				5,900				4,966
Gain on sale of assets			—				—				23				—
Operating Income			454				611				1,156				1,845
Other Income/(Expense)
Equity in earnings of unconsolidated affiliates			16				6				41				33
Gain on sale of equity method investment			—				—				—				128
Other income/(expense), net			11				5				34				(9	)
Interest expense			(169	)			(178	)			(469	)			(475	)
Total other expense			(142	)			(167	)			(394	)			(323	)
Income Before Income Taxes			312				444				762				1,522
Income tax expense			89				166				271				614
Net Income			223				278				491				908
Less: Net loss attributable to noncontrolling interest			—				—				(1	)			(1	)
Net income attributable to NRG Energy, Inc.			223				278				492				909
Dividends for preferred shares			2				6				7				27
Income available for NRG Energy, Inc. common stockholders		$	221			$	272			$	485			$	882
Earnings per share attributable to NRG Energy, Inc. common stockholders
Weighted average number of common shares outstanding — basic			252				249				254				247
Net income per weighted average common share — basic		$	0.88			$	1.09			$	1.91			$	3.58
Weighted average number of common shares outstanding — diluted			253				272				255				274
Net income per weighted average common share — diluted		$	0.87			$	1.02			$	1.90			$	3.29

See notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30, 2010				December 31, 2009
(In millions, except shares)		(unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	3,447			$	2,304
Funds deposited by counterparties			457				177
Restricted cash			19				2
Accounts receivable — trade, less allowance for doubtful accounts of $35 and $29, respectively			904				876
Inventory			463				541
Derivative instruments valuation			2,479				1,636
Cash collateral paid in support of energy risk management activities			477				361
Prepayments and other current assets			250				311
Total current assets			8,496				6,208
Property, plant and equipment, net of accumulated depreciation of $3,606 and $3,052, respectively			11,844				11,564
Other Assets
Equity investments in affiliates			510				409
Note receivable — affiliate and capital leases, less current portion			402				504
Goodwill			1,713				1,718
Intangible assets, net of accumulated amortization of $948 and $648, respectively			1,541				1,777
Nuclear decommissioning trust fund			389				367
Derivative instruments valuation			1,001				683
Restricted cash supporting funded letter of credit facility			1,301				—
Other non-current assets			222				148
Total other assets			7,079				5,606
Total Assets		$	27,419			$	23,378
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Current portion of long-term debt and capital leases		$	157			$	571
Accounts payable			765				697
Derivative instruments valuation			2,072				1,473
Deferred income taxes			381				197
Cash collateral received in support of energy risk management activities			457				177
Accrued expenses and other current liabilities			650				647
Total current liabilities			4,482				3,762
Other Liabilities
Long-term debt and capital leases			9,063				7,847
Funded letter of credit			1,300				—
Nuclear decommissioning reserve			313				300
Nuclear decommissioning trust liability			256				255
Deferred income taxes			1,747				1,783
Derivative instruments valuation			500				387
Out-of-market contracts			235				294
Other non-current liabilities			1,054				806
Total non-current liabilities			14,468				11,672
Total Liabilities			18,950				15,434
3.625% convertible perpetual preferred stock (at liquidation value, net of issuance costs)			248				247
Commitments and Contingencies
Stockholders’ Equity
Preferred stock (at liquidation value, net of issuance costs)			—				149
Common stock			3				3
Additional paid-in capital			5,316				4,948
Retained earnings			3,817				3,332
Less treasury stock, at cost — 53,767,753 and 41,866,451 shares, respectively			(1,503	)			(1,163	)
Accumulated other comprehensive income			571				416
Noncontrolling interest			17				12
Total Stockholders’ Equity			8,221				7,697
Total Liabilities and Stockholders’ Equity		$	27,419			$	23,378

See notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(In millions)
Nine months ended September 30,		2010				2009
Cash Flows from Operating Activities
Net income		$	491			$	908
Adjustments to reconcile net income to net cash provided by operating activities:
Distributions and equity in earnings of unconsolidated affiliates			(19	)			(33	)
Depreciation and amortization			620				594
Provision for bad debts			46				37
Amortization of nuclear fuel			30				28
Amortization of financing costs and debt discount/premiums			23				35
Amortization of intangibles and out-of-market contracts			(17	)			79
Changes in deferred income taxes and liability for uncertain tax benefits			272				561
Changes in nuclear decommissioning trust liability			26				19
Changes in derivatives			(48	)			(234	)
Changes in collateral deposits supporting energy risk management activities			(116	)			13
(Gain)/loss on sale and disposal of assets, net			(6	)			2
Gain on sale of equity method investment			—				(128	)
Loss/(gain) on sale of emission allowances			4				(8	)
Gain recognized on settlement of pre-existing relationship			—				(31	)
Amortization of unearned equity compensation			23				20
Changes in option premiums collected, net of acquisition			60				(278	)
Cash used by changes in other working capital, net of acquisition			(248	)			(304	)
Net Cash Provided by Operating Activities			1,141				1,280
Cash Flows from Investing Activities
Acquisition of businesses, net of cash acquired			(142	)			(356	)
Capital expenditures			(490	)			(560	)
Increase in restricted cash, net			(17	)			(10	)
Decrease/(increase) in notes receivable			28				(18	)
Purchases of emission allowances			(56	)			(68	)
Proceeds from sale of emission allowances			14				20
Investments in nuclear decommissioning trust fund securities			(245	)			(237	)
Proceeds from sales of nuclear decommissioning trust fund securities			219				218
Proceeds from renewable energy grants			102				—
Proceeds from sale of assets, net			30				6
Proceeds from sale of equity method investment			—				284
Other			(13	)			(6	)
Net Cash Used by Investing Activities			(570	)			(727	)
Cash Flows from Financing Activities
Payment of dividends to preferred stockholders			(7	)			(27	)
Payment for treasury stock			(180	)			(250	)
Net receipt from/(payments for) acquired derivatives that include financing elements			58				(140	)
Installment proceeds from sale of noncontrolling interest in subsidiary			50				50
Proceeds from issuance of long-term debt			1,252				843
Proceeds from issuance of term loan for funded letter of credit facility			1,300				—
Increase in restricted cash supporting funded letter of credit facility			(1,301	)			—
Proceeds from issuance of common stock			2				1
Payment of deferred debt issuance costs			(70	)			(29	)
Payments for short and long-term debt			(529	)			(248	)
Net Cash Provided by Financing Activities			575				200
Effect of exchange rate changes on cash and cash equivalents			(3	)			3
Net Increase in Cash and Cash Equivalents			1,143				756
Cash and Cash Equivalents at Beginning of Period			2,304				1,494
Cash and Cash Equivalents at End of Period		$	3,447			$	2,250

See notes to condensed consolidated financial statements.

NRG ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 — Basis of Presentation

     NRG Energy, Inc., or NRG or the Company, is primarily a wholesale power generation company with a significant presence in major competitive power markets in the U.S., as well as a major retail electricity provider in the ERCOT (Texas) market. NRG is engaged in the ownership, development, construction and operation of power generation facilities, both conventional and renewable, the transacting in and trading of fuel and transportation services, the trading of energy, capacity and related products in the U.S. and select international markets, and supply of electricity and energy services to retail electricity customers in the Texas market.

     The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the SEC’s regulations for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The following notes should be read in conjunction with the accounting policies and other disclosures as set forth in the notes to the Company’s financial statements in its Annual Report on Form 10-K for the year ended December 31, 2009, or 2009 Form 10-K. Interim results are not necessarily indicative of results for a full year.

     In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all material adjustments consisting of normal and recurring accruals necessary to present fairly the Company’s consolidated financial position as of September 30, 2010, the results of operations for the three and nine months ended September 30, 2010, and 2009, and cash flows for the nine months ended September 30, 2010, and 2009. Certain prior-year amounts have been reclassified for comparative purposes.

Use of Estimates

     The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions impact the reported amount of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements. They also impact the reported amount of net earnings during the reporting period. Actual results could be different from these estimates.

Note 2 — Summary of Significant Accounting Policies

Other Cash Flow Information

     NRG’s investing activities do not include capital expenditures of $215 million which were accrued and unpaid at September 30, 2010.

Recent Accounting Developments

     ASU No. 2009-17 — On January 1, 2010, the Company adopted the provisions of ASU No. 2009-17, Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, or ASU 2009-17. This guidance amends ASC 810 by altering how a company determines when an entity that is insufficiently capitalized or not controlled through its voting interests should be consolidated. The previous ASC 810 guidance required a quantitative analysis of the economic risk/rewards of a Variable Interest Entity, or a VIE, to determine the primary beneficiary. ASU 2009-17 specifies that a qualitative analysis be performed, requiring the primary beneficiary to have both the power to direct the activities of a VIE that most significantly impact the entities’ economic performance, as well as either the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company’s adoption of ASU 2009-17 on January 1, 2010, did not have an impact on its results of operations, financial position or cash flows.

     ASU No. 2010-10 — In February 2010, the FASB issued ASU No. 2010-10, Consolidation (Topic 810): Amendments for Certain Investment Funds, or ASU 2010-10. The amendments to ASC 810 clarify that related parties should be considered when evaluating the criteria for determining whether a decision maker’s or service provider’s fee represents a variable interest. In addition, the amendments clarify that a quantitative calculation should not be the sole basis for evaluating whether a decision maker’s or service provider’s fee represents a variable interest. The Company adopted the provisions of ASU 2010-10 effective January 1, 2010, with no impact on its results of operations, financial position or cash flows.

     Other effects of ASU 2009-17/ASU 2010-10 adoption — NRG determined that one of its equity method investments was a VIE as of January 1, 2010, upon adoption of this new guidance. NRG owns a 50% interest in Sherbino I Wind Farm LLC, or Sherbino, a 150 MW wind farm operated as a joint venture with BP Wind Energy North America Inc. The Company has determined that Sherbino is a VIE, but the Company is not the primary beneficiary, under the amended guidance in ASU 2009-17 and ASU 2010-10. Therefore, NRG will continue to account for its investment in Sherbino under the equity method. NRG’s maximum exposure to loss is limited to its equity investment, which is $100 million as of September 30, 2010.

     Borrowings of an equity method investment — In December 2008, Sherbino entered into a 15-year term loan facility which is non-recourse to NRG. As of September 30, 2010, the outstanding principal balance of the term loan facility was $131 million, and is secured by substantially all of Sherbino’s assets and membership interests.

     ASU No. 2010-09 — In February 2010, the FASB issued ASU No. 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements, or ASU 2010-09. Under the amendments of ASU 2010-09, an entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. As this guidance provides only disclosure requirements, the adoption of ASU 2010-09 effective January 1, 2010, did not impact the Company’s results of operations, financial position or cash flows.

     Other — The following accounting standards were adopted on January 1, 2010, with no impact on the Company’s results of operations, financial position or cash flows:

•

ASU No. 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing, or ASU 2009-15.

•

ASU No. 2010-02, Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary — a Scope Clarification, or ASU 2010-02.

•

ASU No. 2010-06, Fair Value Measurement and Disclosures: Improving Disclosures about Fair Value Measurements, or ASU 2010-06.

Note 3 — Comprehensive Income

     The following table summarizes the components of the Company’s comprehensive income/(loss), net of tax:

		Three months ended								Nine months ended
		September 30,								September 30,
(In millions)		2010				2009				2010				2009
Net income		$	223			$	278			$	491			$	908
Changes in derivative activity			59				(73	)			162				(9	)
Foreign currency translation adjustment			36				20				(6	)			38
Reclassification adjustment for translation gain realized upon sale of foreign investments			—				—				—				(22	)
Unrealized gain/(loss) on available-for-sale securities			—				1				(1	)			3
Other comprehensive income/(loss)			95				(52	)			155				10
Less: Comprehensive loss attributable to noncontrolling interest			—				—				(1	)			(1	)
Comprehensive income attributable to NRG Energy, Inc.		$	318			$	226			$	647			$	919

The following table summarizes the changes in the Company’s accumulated other comprehensive income, net of tax:

(In millions)
Accumulated other comprehensive income as of December 31, 2009		$	416
Changes in derivative activity			162
Foreign currency translation adjustment			(6	)
Unrealized loss on available-for-sale securities			(1	)
Accumulated other comprehensive income as of September 30, 2010		$	571

Note 4 — Business Acquisitions and Dispositions

Acquisitions Closed or Announced in 2010

     The following acquisitions were announced during the third quarter of 2010:

     Green Mountain — On September 16, 2010, NRG agreed to acquire Green Mountain Energy Company, or Green Mountain, for $350 million in cash. Austin-based Green Mountain, a leading retail provider of clean energy products and services, has residential and commercial customers primarily in Texas, Oregon, and the New York metro region. Green Mountain also delivers renewable products and services to select utilities that are better for the environment, as well as providers in New York and New Jersey. Green Mountain, which will be managed and operated as a distinct retail business within NRG, offers cleaner electricity products from renewable sources and a variety of carbon offset products. NRG anticipates funding the transaction with cash on hand. The transaction, which is expected to close in November 2010, has received the required regulatory approvals, but remains subject to customary closing conditions.

     Dynegy Plants — On August 13, 2010, NRG signed a definitive agreement with an affiliate of The Blackstone Group L.P., or Blackstone, to purchase 3,884 MW of Dynegy Inc., or Dynegy, assets in California and Maine for $1.36 billion in cash. The Dynegy plants in California consist of 1,020 MW of combined cycle, 2,159 MW of steam turbine, and 165 MW of combustion turbine generating capacity, each gas-fired with the exception of an oil-fired combustion turbine. The Maine plant is a 540 MW gas-fired combined cycle facility. Out of the total California capacity to be acquired, 2,159 MW are under tolling agreements with 165 MW under an RMR agreement. The Maine plant dispatches into ISO-NE where it earns capacity revenues. The Company anticipates funding the acquisition with cash on hand. The acquisition is subject to the satisfaction of closing conditions, including the completion of Blackstone’s acquisition of Dynegy in a separately announced merger (which, itself, requires a vote by the shareholders of Dynegy), and the receipt of required government approvals. There are no assurances that the conditions to Blackstone’s acquisition of Dynegy will be satisfied or that Blackstone’s acquisition of Dynegy will be consummated on the terms agreed to, if at all.

     Cottonwood — On August 12, 2010, NRG agreed to acquire the Cottonwood Generating Station, a 1,279 MW combined cycle natural gas plant in the Entergy zone of east Texas, or Cottonwood, from Kelson Limited Partnership for $525 million in cash. The Company intends to fund the Cottonwood acquisition with cash on hand. The Cottonwood acquisition is expected to close by year end, subject to customary closing conditions and regulatory approvals.

     The following acquisitions closed during the second quarter of 2010:

     Northwind Phoenix — On June 22, 2010, NRG, through its wholly-owned subsidiary, NRG Thermal LLC, or NRG Thermal, acquired Northwind Phoenix, LLC, or Northwind Phoenix, for a total purchase price of $100 million in cash, plus a payment for acquired working capital. Northwind Phoenix owns and operates a district cooling system that provides chilled water to commercial buildings in the Phoenix central business district. In addition, Northwind Phoenix maintains and operates Combined Heat and Power plants that provide chilled water, steam and electricity in metropolitan Tucson and to portions of Arizona State University campuses in Tempe and Mesa. The acquisition was financed by the issuance of $100 million in notes by NRG Thermal. See Note 8, Long-Term Debt to this Form 10-Q, for information related to the notes issued.

     South Trent — On June 14, 2010, NRG acquired South Trent Wind LLC, owner of the South Trent wind farm, or South Trent, a 101 MW wind farm near Sweetwater, Texas, for a total purchase price of $111 million. South Trent commenced operations in January 2009 and consists of 44 turbines producing up to 2.3 MW of power each. The project has a 20-year PPA, which commenced January 2009, for all generation from the site. In connection with the acquisition, NRG paid $32 million in cash and South Trent entered into a financing arrangement that includes a $79 million term loan. See Note 8, Long-Term Debt to this Form 10-Q, for information related to this financing arrangement.

2009 Acquisition of Reliant Energy

     As discussed more fully in Note 3 — Business Acquisitions, to the Company’s 2009 Form 10-K, NRG acquired Reliant Energy on May 1, 2009, for total consideration of approximately $401 million. The following measurement period adjustments to the provisional amounts recorded as of December 31, 2009, attributable to refinement of the underlying appraisal assumptions, were recognized during the first quarter of 2010, the end of the measurement period: customer relationships decreased by $6 million and current and non-current liabilities increased by $6 million, resulting in no change to net assets acquired. The accounting for this business combination was completed on March 31, 2010.

Dispositions

     Padoma — On January 11, 2010, NRG sold its terrestrial wind development company, Padoma Wind Power LLC, or Padoma, to Enel North America, Inc., or Enel. NRG retained its existing ownership interest in its three Texas wind farms: Sherbino, Elbow Creek and Langford. In addition, NRG will maintain a strategic partnership with Enel to evaluate potential opportunities in renewable energy, including the opportunity to participate in wind projects currently in development. NRG recognized a gain on the sale of Padoma of $23 million, which was recorded as a component of operating income in the statement of operations.

     MIBRAG — On June 10, 2009, NRG sold its 50% ownership interest in Mibrag B.V. whose principal holding was MIBRAG. For its share, NRG received EUR 203 million ($284 million at an exchange rate of 1.40 U.S.$/EUR), net of transaction costs. During the nine months ended September 30, 2009, NRG recognized an after-tax gain of $128 million. Prior to completion of the sale, NRG continued to record its share of MIBRAG’s operations to Equity in earnings of unconsolidated affiliates. In connection with the transaction, NRG entered into a foreign currency forward contract to hedge the impact of exchange rate fluctuations on the sale proceeds. For the nine months ended September 30, 2009, NRG recorded an exchange loss of $24 million on the contract within Other income/(expense), net.

Note 5 — Fair Value of Financial Instruments

     The estimated carrying values and fair values of NRG’s recorded financial instruments are as follows:

		Carrying Amount								Fair Value
		September 30,				December 31,				September 30,				December 31,
		2010				2009				2010				2009
		(In millions)
Assets:
Cash and cash equivalents		$	3,447			$	2,304			$	3,447			$	2,304
Funds deposited by counterparties			457				177				457				177
Restricted cash			19				2				19				2
Cash collateral paid in support of energy risk management activities			477				361				477				361
Investment in available-for-sale securities (classified within other non-current assets):
Debt securities			7				9				7				9
Marketable equity securities			4				5				4				5
Trust fund investments			391				369				391				369
Notes receivable			178				231				192				238
Derivative assets			3,480				2,319				3,480				2,319
Restricted cash supporting funded letter of credit facility			1,301				—				1,301				—
Liabilities:
Long-term debt, including current portion			9,112				8,295				9,290				8,211
Funded letter of credit			1,300				—				1,271				—
Cash collateral received in support of energy risk management activities			457				177				457				177
Derivative liabilities		$	2,572			$	1,860			$	2,572			$	1,860

Recurring Fair Value Measurements

     The following table presents assets and liabilities measured and recorded at fair value on the Company’s condensed consolidated balance sheet on a recurring basis and their level within the fair value hierarchy:

(In millions)						Fair Value
As of September 30, 2010		Level 1				Level 2				Level 3				Total
Cash and cash equivalents		$	3,447			$	—			$	—			$	3,447
Funds deposited by counterparties			457				—				—				457
Restricted cash			19				—				—				19
Cash collateral paid in support of energy risk management activities			477				—				—				477
Investment in available-for-sale securities (classified within other non-current assets):
Debt securities			—				—				7				7
Marketable equity securities			4				—				—				4
Trust fund investments
Cash and cash equivalents			12				—				—				12
U.S. government and federal agency obligations			31				—				—				31
Federal agency mortgage-backed securities			—				57				—				57
Commercial mortgage-backed securities			—				10				—				10
Corporate debt securities			—				51				—				51
Marketable equity securities			191				—				37				228
Foreign government fixed income securities			—				2				—				2
Derivative assets
Commodity contracts			1,219				2,194				59				3,472
Interest rate contracts			—				—				8				8
Restricted cash supporting funded letter of credit facility			1,301				—				—				1,301
Total assets		$	7,158			$	2,314			$	111			$	9,583
Cash collateral received in support of energy risk management activities		$	457			$	—			$	—			$	457
Derivative liabilities
Commodity contracts			1,347				993				112				2,452
Interest rate contracts			—				120				—				120
Total liabilities		$	1,804			$	1,113			$	112			$	3,029

(In millions)		Fair Value
As of December 31, 2009		Level 1				Level 2				Level 3				Total
Cash and cash equivalents		$	2,304			$	—			$	—			$	2,304
Funds deposited by counterparties			177				—				—				177
Restricted cash			2				—				—				2
Cash collateral paid in support of energy risk management activities			361				—				—				361
Investment in available-for-sale securities (classified within other non-current assets):
Debt securities			—				—				9				9
Marketable equity securities			5				—				—				5
Trust fund investments			214				118				37				369
Derivative assets			489				1,767				63				2,319
Total assets		$	3,552			$	1,885			$	109			$	5,546
Cash collateral received in support of energy risk management activities		$	177			$	—			$	—			$	177
Derivative liabilities			501				1,283				76				1,860
Total liabilities		$	678			$	1,283			$	76			$	2,037

     There have been no transfers during the three months and nine months ended September 30, 2010, between Levels 1 and 2. The following table reconciles the beginning and ending balances for financial instruments that are recognized at fair value in the consolidated financial statements using significant unobservable inputs:

		Three months ended September 30, 2010																Nine months ended September 30, 2010
		Debt				Trust Fund												Debt				Trust Fund
(In millions)		Securities				Investments				Derivatives(a)				Total				Securities				Investments				Derivatives(a)				Total
Beginning Balance		$	10			$	32			$	(76	)		$	(34	)		$	9			$	37			$	(13	)		$	33
Total gains/(losses) (realized and unrealized)
Included in earnings			3				—				18				21				3				—				(13	)			(10	)
Included in OCI			(1	)			—				—				(1	)			—				—				—				—
Included in nuclear decommissioning obligations			—				5				—				5				—				—				—				—
Purchases			—				—				(10	)			(10	)			—				—				(1	)			(1	)
Sales			(5	)			—				—				(5	)			(5	)			—				—				(5	)
Transfer into Level 3 (b)			—				—				31				31				—				—				(16	)			(16	)
Transfer out of Level 3 (b)			—				—				(8	)			(8	)			—				—				(2	)			(2	)
Ending balance as of September 30, 2010		$	7			$	37			$	(45	)		$	(1	)		$	7			$	37			$	(45	)		$	(1	)
The amount of the total gains for the period included in earnings attributable to the change in unrealized gains relating to assets still held as of September 30, 2010		$	—			$	—			$	12			$	12			$	—			$	—			$	(24	)		$	(24	)
		Three months ended September 30, 2009																Nine months ended September 30, 2009
		Debt				Trust Fund												Debt				Trust Fund
(In millions)		Securities				Investments				Derivatives(a)				Total				Securities				Investments				Derivatives(a)				Total
Beginning Balance		$	7			$	34			$	50			$	91			$	7			$	31			$	49			$	87
Total gains/(losses) (realized and unrealized)
Included in earnings			—				—				(80	)			(80	)			—				—				(110	)			(110	)
Included in OCI			1				—				—				1				1				—				—				1
Included in nuclear decommissioning obligations			—				6				—				6				—				8				—				8
Purchases/(sales), net			—				—				1				1				—				1				(3	)			(2	)
Transfer in/(out) of Level 3 (b)			—				—				(41	)			(41	)			—				—				(6	)			(6	)
Ending balance as of September 30, 2009		$	8			$	40			$	(70	)		$	(22	)		$	8			$	40			$	(70	)		$	(22	)
The amount of the total gains for the period included in earnings attributable to the change in unrealized gains relating to assets still held as of September 30, 2009		$	—			$	—			$	(25	)		$	(25	)		$	—			$	—			$	3			$	3

(a)	Consists of derivative assets and liabilities, net.
(b)	Transfers in/(out) of Level 3 are related to the availability of external broker quotes, and are valued as of the end of the reporting period. All transfers in/(out) are with Level 2.

     Realized and unrealized gains and losses included in earnings that are related to the energy derivatives are recorded in operating revenues and cost of operations.

     In determining the fair value of NRG’s Level 2 and 3 derivative contracts, NRG applies a credit reserve to reflect credit risk which is calculated based on credit default swaps. As of September 30, 2010, the credit reserve resulted in a $6 million decrease in fair value which is composed of a $3 million loss in OCI and a $3 million loss in operating revenue and cost of operations.

     In addition to the credit risk discussion as disclosed in Note 2, Summary of Significant Accounting Policies, to the Company’s 2009 Form 10-K, the following item is a discussion of the concentration of credit risk for the Company’s financial instruments. Credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. NRG is exposed to counterparty credit risk through various activities including wholesale sales, fuel purchases and retail supply and retail customer credit risk through its retail load activities.

     The Company monitors and manages counterparty credit risk through credit policies that include: (i) an established credit approval process; (ii) a daily monitoring of counterparties’ credit limits; (iii) the use of credit mitigation measures such as margin, collateral, prepayment arrangements, or volumetric limits; (iv) the use of payment netting agreements; and (v) the use of master netting agreements that allow for the netting of positive and negative exposures of various contracts associated with a single counterparty. Risks surrounding counterparty performance and credit could ultimately impact the amount and timing of expected cash flows. The Company seeks to mitigate counterparty credit risk with a diversified portfolio of counterparties. The Company also has credit protection within various agreements to call on additional collateral support if and when necessary. Cash margin is collected and held at NRG to cover the credit risk of the counterparty until positions settle.

     As of September 30, 2010, counterparty credit exposure to a significant portion of the Company’s counterparties was $1.7 billion and NRG held collateral (cash and letters of credit) against those positions of $461 million, resulting in a net exposure of $1.2 billion. Counterparty credit exposure is discounted at the risk free rate. The following table highlights the counterparty credit quality and the net counterparty credit exposure by industry sector. Net counterparty credit exposure is defined as the aggregate net asset position for NRG with counterparties where netting is permitted under the enabling agreement and includes all cash flow, mark-to-market and Normal Purchase Normal Sale, or NPNS, and non-derivative transactions. The exposure is shown net of collateral held, and includes amounts net of receivables or payables.

		Net Exposure (b)
Category		(% of Total)
Financial institutions			63	%
Utilities, energy, merchants, marketers and other			27
Coal suppliers			6
ISOs			4
Total as of September 30, 2010			100	%

		Net Exposure (b)
Category		(% of Total)
Investment grade			75	%
Non-Investment grade			6
Non-rated (a)			19
Total as of September 30, 2010			100	%

(a)	For non-rated counterparties, the majority are related to ISO and municipal public power entities, which are considered investment grade equivalent ratings based on NRG’s internal credit ratings.
(b)	Counterparty credit exposure excludes uranium and coal transportation contracts from counterparty credit exposure because of the illiquidity of the reference markets.

     NRG has counterparty credit risk exposure to certain counterparties representing more than 10% of the total net exposure discussed above and the aggregate of such counterparties was $435 million. Approximately 79% of NRG’s positions relating to this credit risk roll-off by the end of 2012. Changes in hedge positions and market prices will affect credit exposure and counterparty concentration. Given the credit quality, diversification and term of the exposure in the portfolio, NRG does not anticipate a material impact on the Company’s financial results or results of operations from nonperformance by any of NRG’s counterparties.

     Counterparty credit exposure described above excludes credit risk exposure under California tolling agreements, Northeast and South Central load obligations and a coal supply agreement, which are generally long-term. As external sources or observable market quotes are not available to estimate such exposure, the Company valued these contracts based on various techniques including but not limited to internal models based on a fundamental analysis of the market and extrapolation of observable market data with similar characteristics. Based on these valuation techniques, as of September 30, 2010, credit risk exposure to these counterparties is approximately $550 million. Many of these power contracts are with utilities or public power entities that have strong credit quality and specific public utility commission or other regulatory support. In the case of the coal supply agreement, NRG holds a lien against the underlying asset. These factors significantly reduce the risk of loss.

Retail Customer Credit Risk

     NRG is exposed to retail credit risk through the Company’s competitive electricity supply business, which serves C&I customers and the Mass market in Texas. Retail credit risk results when a customer fails to pay for services rendered. The losses may result from both nonpayment of customer accounts receivable and the loss of in-the-money forward value. NRG manages retail credit risk through the use of established credit policies that include monitoring of the portfolio, and the use of credit mitigation measures such as deposits or prepayment arrangements.

     As of September 30, 2010, the Company’s retail customer credit exposure to C&I customers was diversified across many customers and various industries, with a significant portion of the exposure with government entities.

     NRG is also exposed to retail customer credit risk relating to its Mass customers, which results in a write-off of bad debt. During 2010, the Company continued to experience improved customer payment behavior, but current economic conditions may affect the ability of the Company’s customers to pay bills in a timely manner, which could increase customer delinquencies and may lead to an increase in bad debt expense.

     This footnote should be read in conjunction with the complete description under Note 5, Fair Value of Financial Instruments, to the Company’s 2009 Form 10-K.

Note 6 — Nuclear Decommissioning Trust Fund

     NRG’s nuclear decommissioning trust fund assets, which are for its portion of the decommissioning of the South Texas Project, or STP, are comprised of securities classified as available-for-sale and recorded at fair value based on actively quoted market prices. NRG accounts for the nuclear decommissioning trust fund in accordance with ASC-980 — Regulated Operations, or ASC 980. Since the Company is in compliance with the Public Utility Commission of Texas, or PUCT, rules and regulations regarding decommissioning trusts and the cost of decommissioning is the responsibility of the Texas ratepayers, not NRG, all realized and unrealized gains or losses (including other than-temporary-impairments) related to the Nuclear Decommissioning Trust Fund are recorded to the Nuclear Decommissioning Trust Liability to the ratepayers and are not included in net income or accumulated other comprehensive income, consistent with regulatory treatment.

     The following table summarizes the aggregate fair values and unrealized gains and losses (including other-than-temporary impairments) for the securities held in the trust funds as of September 30, 2010, and December 31, 2009, as well as information about the contractual maturities of those securities. The cost of securities sold is determined on the specific identification method.

		As of September 30, 2010																As of December 31, 2009
														Weighted-																Weighted-
														average																average
		Fair				Unrealized				Unrealized				maturities				Fair				Unrealized				Unrealized				maturities
(In millions, except otherwise noted)		Value				gains				losses				(in years)				Value				gains				losses				(in years)
Cash and cash equivalents		$	12			$	—			$	—				—			$	4			$	—			$	—				—
U.S. government and federal agency obligations			29				2				—				10				23				1				—				8
Federal agency mortgage-backed securities			57				2				—				22				60				2				—				23
Commercial mortgage-backed securities			10				—				—				29				10				—				1				29
Corporate debt securities			51				4				1				10				48				3				1				10
Marketable equity securities			228				95				1				—				220				89				2				—
Foreign government fixed income securities			2				—				—				7				2				—				—				6
Total		$	389			$	103			$	2							$	367			$	95			$	4

     The following tables summarize proceeds from sales of available-for-sale securities and the related realized gains and losses from these sales:

		Nine months ended September 30,
(In millions)		2010				2009
Realized gains		$	4			$	2
Realized losses			2				2
Proceeds from sale of securities			219				218

Note 7 — Accounting for Derivative Instruments and Hedging Activities

     This footnote should be read in conjunction with the complete description under Note 6, Accounting for Derivative Instruments and Hedging Activities, to the Company’s 2009 Form 10-K.

Energy-Related Commodities

     As of September 30, 2010, NRG had cash flow hedge energy-related derivative financial instruments extending through December 2013.

Interest Rate Swaps

     NRG is exposed to changes in interest rates through the Company’s issuance of variable and fixed rate debt. In order to manage the Company’s interest rate risk, NRG enters into interest rate swap agreements. As of September 30, 2010, NRG had interest rate derivative instruments extending through June 2028, the majority of which had been designated as either cash flow or fair value hedges.

Volumetric Underlying Derivative Transactions

     The following table summarizes the net notional volume buy/(sell) of NRG’s open derivative transactions broken out by commodity, excluding those derivatives that qualified for the NPNS exception as of September 30, 2010, and December 31, 2009. Option contracts are reflected using delta volume. Delta volume equals the notional volume of an option adjusted for the probability that the option will be in-the-money at its expiration date.

				Total Volume
				September 30, 2010				December 31, 2009
Commodity		Units		(In millions)
Emissions		Short Ton			(7	)			(2	)
Coal		Short Ton			39				55
Natural Gas		MMBtu			(189	)			(484	)
Oil		Barrel			—				1
Power		MWh			1				5
Capacity		MW/Day			(1	)			(2	)
Interest		Dollars		$	3,203			$	3,291

Fair Value of Derivative Instruments

     The following table summarizes the fair value within the derivative instrument valuation on the balance sheet:

		Fair Value
		Derivative Assets								Derivative Liabilities
		September 30,				December 31,				September 30,				December 31,
(In millions)		2010				2009				2010				2009
Derivatives Designated as Cash Flow or Fair Value Hedges:
Interest rate contracts current		$	—			$	—			$	34			$	2
Interest rate contracts long-term			8				8				85				106
Commodity contracts current			478				300				2				12
Commodity contracts long-term			562				508				—				6
Total Derivatives Designated as Cash Flow or Fair Value Hedges			1,048				816				121				126
Derivatives Not Designated as Cash Flow or Fair Value Hedges:
Commodity contracts current			2,001				1,336				2,036				1,459
Commodity contracts long-term			431				167				414				275
Interest rate contracts long-term			—				—				1				—
Total Derivatives Not Designated as Cash Flow or Fair Value Hedges			2,432				1,503				2,451				1,734
Total Derivatives		$	3,480			$	2,319			$	2,572			$	1,860

Accumulated Other Comprehensive Income

     The following table summarizes the effects of ASC 815 on NRG’s Accumulated OCI balance attributable to cash flow hedge derivatives, net of tax:

		Three months ended September 30, 2010												Nine months ended September 30, 2010
		Energy				Interest								Energy				Interest
(In millions)		Commodities				Rate				Total				Commodities				Rate				Total
Beginning balance		$	575			$	(66	)		$	509			$	461			$	(55	)		$	406
Reclassified from Accumulated OCI to income:
- Due to realization of previously deferred amounts			(110	)			—				(110	)			(344	)			—				(344	)
Mark-to-market of cash flow hedge accounting contracts			173				(4	)			169				521				(15	)			506
Accumulated OCI balance at September 30, 2010, net of $342 tax		$	638			$	(70	)		$	568			$	638			$	(70	)		$	568
Gains/(losses) expected to be realized from Accumulated OCI during the next 12 months, net of $224 tax		$	407			$	(24	)		$	383			$	407			$	(24	)		$	383
Gains recognized in income from the ineffective portion of cash flow hedges		$	14			$	—			$	14			$	—			$	2			$	2
		Three months ended September 30, 2009												Nine months ended September 30, 2009
		Energy				Interest								Energy				Interest
(In millions)		Commodities				Rate				Total				Commodities				Rate				Total
Beginning balance		$	445			$	(66	)		$	379			$	406			$	(91	)		$	315
Reclassified from Accumulated OCI to income:
- Due to realization of previously deferred amounts			(75	)			—				(75	)			(263	)			—				(263	)
- Due to discontinuation of cash flow hedge accounting			—				—				—				(135	)			—				(135	)
Mark-to-market of cash flow hedge accounting contracts			4				(2	)			2				366				23				389
Accumulated OCI balance at September 30, 2009, net of $189 tax		$	374			$	(68	)		$	306			$	374			$	(68	)		$	306
Gains/(losses) expected to be realized from OCI during the next 12 months, net of $172 tax		$	288			$	(3	)		$	285			$	288			$	(3	)		$	285
Gains recognized in income from the ineffective portion of cash flow hedges		$	16			$	4			$	20			$	17			$	4			$	21