Seattle City Light 2016 ANNUAL REPORT | Audited Financial Statements 67 THE CITY OF SEATTLE—CITY LIGHT DEPARTMENT NOTES TO FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015 - 67 - The undiscounted aggregate contract amounts, fair value, and unrealized gain or (loss) of the Department’s commodity derivative instruments qualifying as normal purchases and normal sales at December 31, 2016 and 2015 consisted of the following: ($ in millions) Aggregate Contract Amount Aggregate Fair Value Unrealized Gain (Loss) 2016 Sales 23.3 $ 26.6 $ (3.3) $ Purchases 2.2 2.4 0.2 Total 25.5 $ 29.0 $ (3.1) $ Aggregate Contract Amount Aggregate Fair Value Unrealized Gain (Loss) 2015 Sales 13.3 $ 13.5 $ (0.2) $ Purchases 1.4 1.3 (0.1) Total 14.7 $ 14.8 $ (0.3) $ All derivative instruments not considered as normal purchases and normal sales are to be recorded within the financial statements using derivative accounting according to GASB Statement No. 53. In 2010, the Seattle City Council adopted a resolution granting the Department authority to enter into certain physical put and call options that would not be considered normal purchases and normal sales under GASB Statement No. 53. The Department did not have any such activity for 2016 and 2015. In addition, the Seattle City Council has deferred recognition of the effects of reporting the fair value of derivative financial instruments for rate-making purposes, and the Department maintains regulatory accounts to defer the accounting impact of these accounting adjustments in accordance with GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (see Note 7 Other Assets and Note 16 Deferred Inflows of Resources). Market Risk—Market risk is, in general, the risk of fluctuation in the market price of the commodity being traded and is influenced primarily by supply and demand. Market risk includes the fluctuation in the market price of associated derivative commodity instruments. Market risk may also be influenced by the number of active, creditworthy market participants, and to the extent that nonperformance by market participants of their contractual obligations and commitments affects the supply of, or demand for, the commodity. Because the Department is active in the wholesale energy market, it is subject to market risk. Credit Risk—Credit risk relates to the potential losses that the Department would incur as a result of nonperformance by counterparties of their contractual obligations to deliver energy or make financial settlements. Changes in market prices may dramatically alter the size of credit risk with counterparties, even when conservative credit limits are established. The Department seeks to mitigate credit risk by: entering into bilateral contracts that specify credit terms and protections against default; applying credit limits and duration criteria to existing and prospective counterparties; and actively monitoring current credit exposures. The Department also seeks assurances of performance through collateral requirements in the form of letters of credit, parent company guarantees, or prepayment. The Department has concentrations of suppliers and customers in the electric industry including: electric utilities; electric generators and transmission providers; financial institutions; and energy marketing and trading companies. In addition, the Department has concentrations of credit risk related to geographic