XML 46 R17.htm IDEA: XBRL DOCUMENT v2.4.0.6
Fair Value Measurements
 3 Months Ended
Mar. 31, 2013
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]
(9)
Fair Value Measurements

The carrying value of the Company's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. The Company has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•
Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•
Level 3 — Unobservable inputs reflect the Company's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.

The following table presents the Company's assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):
 
 
Input Levels for Fair Value Measurements
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Other(1)
 
Total
As of March 31, 2013
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
3

 
$
52

 
$
42

 
$
(48
)
 
$
49

Money market mutual funds(2)
 
554

 
—

 
—

 
—

 
554

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
116

 
—

 
—

 
—

 
116

International government obligations
 
—

 
1

 
—

 
—

 
1

Corporate obligations
 
—

 
34

 
—

 
—

 
34

Municipal obligations
 
—

 
4

 
—

 
—

 
4

Agency, asset and mortgage-backed obligations
 
—

 
2

 
—

 
—

 
2

Auction rate securities
 
—

 
—

 
42

 
—

 
42

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
197

 
—

 
—

 
—

 
197

International companies
 
720

 
—

 
—

 
—

 
720

Investment funds
 
77

 
—

 
—

 
—

 
77

 
 
$
1,667


$
93


$
84


$
(48
)
 
$
1,796

Liabilities:
 
 

 
 

 
 

 
 

 
 

Commodity derivatives
 
$
(4
)

$
(227
)

$
(6
)

$
90

 
$
(147
)
Interest rate derivatives
 
—

 
(10
)
 
—

 
—

 
(10
)
 
 
$
(4
)
 
$
(237
)
 
$
(6
)
 
$
90

 
$
(157
)
 
 
 
Input Levels for Fair Value Measurements
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Other(1)
 
Total
As of December 31, 2012
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
1

 
$
55

 
$
39

 
$
(47
)
 
$
48

Money market mutual funds(2)
 
589

 
—

 
—

 
—

 
589

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
104

 
—

 
—

 
—

 
104

International government obligations
 
—

 
1

 
—

 
—

 
1

Corporate obligations
 
—

 
32

 
—

 
—

 
32

Municipal obligations
 
—

 
4

 
—

 
—

 
4

Agency, asset and mortgage-backed obligations
 
—

 
6

 
—

 
—

 
6

Auction rate securities
 
—

 
—

 
41

 
—

 
41

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
187

 
—

 
—

 
—

 
187

International companies
 
677

 
—

 
—

 
—

 
677

Investment funds
 
71

 
—

 
—

 
—

 
71

 
 
$
1,629

 
$
98

 
$
80

 
$
(47
)
 
$
1,760

Liabilities:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
(10
)
 
$
(313
)
 
$
(7
)
 
$
109

 
$
(221
)
Interest rate derivatives
 
—

 
(13
)
 
—

 
—

 
(13
)
 
 
$
(10
)
 
$
(326
)
 
$
(7
)
 
$
109

 
$
(234
)

(1)
Represents netting under master netting arrangements and a net cash collateral receivable of $42 million and $62 million as of March 31, 2013 and December 31, 2012, respectively.
(2)
Amounts are included in cash and cash equivalents; current investments and restricted cash and investments; and noncurrent investments and restricted cash and investments on the Consolidated Balance Sheets. The fair value of these money market mutual funds approximates cost.

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which the Company transacts. When quoted prices for identical contracts are not available, the Company uses forward price curves. Forward price curves represent the Company's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. The Company bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent energy brokers, exchanges, direct communication with market participants and actual transactions executed by the Company. Market price quotations for certain major electricity and natural gas trading hubs are generally readily obtainable for the applicable term of the Company's outstanding derivative contracts; therefore, the Company's forward price curves for those locations and periods reflect observable market quotes. Market price quotations for other electricity and natural gas trading hubs are not as readily obtainable due to the length of the contract. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, the Company uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts. Refer to Note 8 for further discussion regarding the Company's risk management and hedging activities.

The Company's investments in money market mutual funds and debt and equity securities are accounted for as available-for-sale securities and are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics. The fair value of the Company's investments in auction rate securities, where there is no current liquid market, is determined using pricing models based on available observable market data and the Company's judgment about the assumptions, including liquidity and nonperformance risks, which market participants would use when pricing the asset.

The following table reconciles the beginning and ending balances of the Company's assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):
 
Three-Month Periods
 
Ended March 31,
 
 
 
Auction
 
Commodity
 
Rate
 
Derivatives
 
Securities
2013:
 
 
 
Beginning balance
$
32

 
$
41

Changes included in earnings(1)
9

 
—

Changes in fair value recognized in other comprehensive income
(3
)
 
1

Changes in fair value recognized in net regulatory assets
1

 
—

Purchases
2

 
—

Settlements
(5
)
 
—

Ending balance
$
36

 
$
42


 
Three-Month Periods
 
Ended March 31,
 
 
 
Auction
 
Commodity
 
Rate
 
Derivatives
 
Securities
2012:
 
 
 
Beginning balance
$
23

 
$
35

Changes included in earnings(1)
10

 
—

Changes in fair value recognized in other comprehensive income
(3
)
 
2

Changes in fair value recognized in net regulatory assets
9

 
—

Sales
—

 
(1
)
Settlements
(14
)
 
—

Ending balance
$
25

 
$
36


(1)
Changes included in earnings are reported as operating revenue on the Consolidated Statements of Operations. For commodity derivatives held as of March 31, 2013 and 2012, net unrealized gains included in earnings for the three-month periods ended March 31, 2013 and 2012 totaled $1 million and $7 million, respectively.
The Company's long-term debt is carried at cost on the Consolidated Financial Statements. The fair value of the Company's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of the Company's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of the Company's long-term debt (in millions):
 
As of March 31, 2013
 
As of December 31, 2012
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
20,487

 
$
24,477

 
$
20,735

 
$
24,924