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Fair Value Measurements (Notes)
 12 Months Ended
Dec. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements [Text Block]
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 December 31, 2015
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
—

 
$
16

 
$
93

 
$
(16
)
 
$
93

Interest rate derivatives
—

 
5

 
5

 
—

 
10

Mortgage loans held for sale
—

 
327

 
—

 
—

 
327

Money market mutual funds(2)
421

 
—

 
—

 
—

 
421

Debt securities:
 
 
 
 
 
 
 
 
 
United States government obligations
133

 
—

 
—

 
—

 
133

International government obligations
—

 
2

 
—

 
—

 
2

Corporate obligations
—

 
39

 
—

 
—

 
39

Municipal obligations
—

 
1

 
—

 
—

 
1

Agency, asset and mortgage-backed obligations
—

 
3

 
—

 
—

 
3

Auction rate securities
—

 
—

 
44

 
—

 
44

Equity securities:
 
 
 
 
 
 
 
 
 
United States companies
239

 
—

 
—

 
—

 
239

International companies
1,244

 
—

 
—

 
—

 
1,244

Investment funds
136

 
—

 
—

 
—

 
136

 
$
2,173

 
$
393

 
$
142

 
$
(16
)
 
$
2,692

Liabilities:
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
(13
)
 
$
(283
)
 
$
(46
)
 
$
119

 
$
(223
)
Interest rate derivatives
—

 
(13
)
 
(1
)
 
—

 
(14
)
 
$
(13
)
 
$
(296
)
 
$
(47
)
 
$
119

 
$
(237
)

As of December 31, 2014
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
1

 
$
48

 
$
94

 
$
(40
)
 
$
103

Interest rate derivatives
—

 
5

 
—

 
—

 
5

Mortgage loans held for sale
—

 
279

 
—

 
—

 
279

Money market mutual funds(2)
320

 
—

 
—

 
—

 
320

Debt securities:
 
 
 
 
 
 
 
 
 
United States government obligations
136

 
—

 
—

 
—

 
136

International government obligations
—

 
1

 
—

 
—

 
1

Corporate obligations
—

 
39

 
—

 
—

 
39

Municipal obligations
—

 
2

 
—

 
—

 
2

Agency, asset and mortgage-backed obligations
—

 
2

 
—

 
—

 
2

Auction rate securities
—

 
—

 
45

 
—

 
45

Equity securities:
 
 
 
 
 
 
 
 
 
United States companies
238

 
—

 
—

 
—

 
238

International companies
886

 
—

 
—

 
—

 
886

Investment funds
137

 
—

 
—

 
—

 
137

 
$
1,718

 
$
376

 
$
139

 
$
(40
)
 
$
2,193

Liabilities:
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
(18
)
 
$
(274
)
 
$
(43
)
 
$
115

 
$
(220
)
Interest rate derivatives
—

 
(10
)
 
—

 
—

 
(10
)
 
$
(18
)
 
$
(284
)
 
$
(43
)
 
$
115

 
$
(230
)

(1)
Represents netting under master netting arrangements and a net cash collateral receivable of $103 million and $75 million as of December 31, 2015 and 2014, respectively.
(2)
Amounts are included in cash and cash equivalents; other current assets; 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 brokers, exchanges, direct communication with market participants and actual transactions executed by the Company. Market price quotations are generally readily obtainable for the applicable term of the Company's outstanding derivative contracts; therefore, the Company's forward price curves reflect observable market quotes. Market price quotations for certain 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 14 for further discussion regarding the Company's risk management and hedging activities.

The Company's mortgage loans held for sale are valued based on independent quoted market prices, where available, or the prices of other mortgage whole loans with similar characteristics. As necessary, these prices are adjusted for typical securitization activities, including servicing value, portfolio composition, market conditions and liquidity.

The Company's investments in money market mutual funds and debt and equity securities are stated at fair value and are primarily accounted for as available-for-sale securities. 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 for the years ended December 31 (in millions):
 
Commodity Derivatives
 
Interest Rate Derivatives
 
Auction Rate Securities
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
51

 
$
60

 
$
32

 
$
—

 
$
—

 
$
—

 
$
45

 
$
44

 
$
41

Changes included in earnings
19

 
19

 
34

 
87

 
—

 
—

 
—

 
—

 
—

Changes in fair value recognized in OCI
(7
)
 
—

 
(2
)
 
—

 
—

 
—

 
(1
)
 
1

 
3

Changes in fair value recognized in net regulatory assets
(19
)
 
5

 
1

 
—

 
—

 
—

 
—

 
—

 
—

Purchases
1

 
1

 
4

 
—

 
—

 
—

 
—

 
—

 
—

Settlements
2

 
1

 
(9
)
 
(86
)
 
—

 
—

 
—

 
—

 
—

Transfers from Level 2
—

 
(35
)
 
—

 
3

 
—

 
—

 
—

 
—

 
—

Ending balance
$
47

 
$
51

 
$
60

 
$
4

 
$
—

 
$
—

 
$
44

 
$
45

 
$
44



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 as of December 31 (in millions):
 
2015
 
2014
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
37,972

 
$
41,785

 
$
38,649

 
$
43,863
PacifiCorp [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements [Text Block]
Fair Value Measurements

The carrying value of PacifiCorp'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. PacifiCorp 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 PacifiCorp 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 PacifiCorp's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. PacifiCorp develops these inputs based on the best information available, including its own data.

The following table presents PacifiCorp'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 December 31, 2015
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
—

 
$
9

 
$
3

 
$
(3
)
 
$
9

Money market mutual funds(2)
13

 
—

 
—

 
—

 
13

Investment funds
15

 
—

 
—

 
—

 
15

 
$
28

 
$
9

 
$
3

 
$
(3
)
 
$
37

 
 
 
 
 
 
 
 
 
 
Liabilities - Commodity derivatives
$
—

 
$
(148
)
 
$
—

 
$
78

 
$
(70
)
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
Commodity derivatives
$
—

 
$
25

 
$
4

 
$
(11
)
 
$
18

Money market mutual funds(2)
30

 
—

 
—

 
—

 
30

 
$
30

 
$
25

 
$
4

 
$
(11
)
 
$
48

 
 
 
 
 
 
 
 
 
 
Liabilities - Commodity derivatives
$
—

 
$
(114
)
 
$
—

 
$
39

 
$
(75
)

(1)
Represents netting under master netting arrangements and a net cash collateral receivable of $75 million and $28 million as of December 31, 2015 and 2014, respectively.
(2)
Amounts are included in cash and cash equivalents, other current assets and other assets on the Consolidated Balance Sheets. Money market mutual funds are accounted for as available-for-sale securities and the fair value 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 PacifiCorp transacts. When quoted prices for identical contracts are not available, PacifiCorp uses forward price curves. Forward price curves represent PacifiCorp's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. PacifiCorp 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 PacifiCorp. Market price quotations for certain major electricity and natural gas trading hubs are generally readily obtainable for the first six years; therefore, PacifiCorp'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 for the first six years. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, PacifiCorp 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 11 for further discussion regarding PacifiCorp's risk management and hedging activities.
 
PacifiCorp's investments in money market mutual funds and investment funds are stated at fair value. PacifiCorp uses a readily observable quoted market price or net asset value of an identical security in an active market to record the fair value.

PacifiCorp's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of PacifiCorp'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 PacifiCorp'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 PacifiCorp's long-term debt as of December 31 (in millions):

 
2015
 
2014
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
7,114

 
$
8,210

 
$
6,985

 
$
8,358
MidAmerican Energy Company [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements [Text Block]
Fair Value Measurements

The carrying value of MidAmerican Energy'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. MidAmerican Energy has various financial assets and liabilities that are measured at fair value on the 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 MidAmerican Energy 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 MidAmerican Energy's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. MidAmerican Energy develops these inputs based on the best information available, including its own data.
The following table presents MidAmerican Energy's assets and liabilities recognized on the 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 December 31, 2015:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
—

 
$
8

 
$
18

 
$
(13
)
 
$
13

Money market mutual funds(2)
 
56

 
—

 
—

 
—

 
56

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
133

 
—

 
—

 
—

 
133

International government obligations
 
—

 
2

 
—

 
—

 
2

Corporate obligations
 
—

 
39

 
—

 
—

 
39

Municipal obligations
 
—

 
1

 
—

 
—

 
1

Agency, asset and mortgage-backed obligations
 
—

 
3

 
—

 
—

 
3

Auction rate securities
 
—

 
—

 
26

 
—

 
26

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
239

 
—

 
—

 
—

 
239

International companies
 
6

 
—

 
—

 
—

 
6

Investment funds
 
4

 
—

 
—

 
—

 
4

 
 
$
438

 
$
53

 
$
44

 
$
(13
)
 
$
522

 
 
 
 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
 
$
(13
)
 
$
(61
)
 
$
(24
)
 
$
41

 
$
(57
)
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2014:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
1

 
$
18

 
$
24

 
$
(26
)
 
$
17

Money market mutual funds(2)
 
1

 
—

 
—

 
—

 
1

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
136

 
—

 
—

 
—

 
136

International government obligations
 
—

 
1

 
—

 
—

 
1

Corporate obligations
 
—

 
39

 
—

 
—

 
39

Municipal obligations
 
—

 
2

 
—

 
—

 
2

Agency, asset and mortgage-backed obligations
 
—

 
2

 
—

 
—

 
2

Auction rate securities
 
—

 
—

 
26

 
—

 
26

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
238

 
—

 
—

 
—

 
238

International companies
 
5

 
—

 
—

 
—

 
5

 
 
$
381

 
$
62

 
$
50

 
$
(26
)
 
$
467

 
 
 
 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
 
$
(18
)
 
$
(87
)
 
$
(12
)
 
$
73

 
$
(44
)

(1)
Represents netting under master netting arrangements and a net cash collateral receivable of $28 million and $47 million as of December 31, 2015 and 2014, respectively.
(2)
Amounts are included in cash and cash equivalents and investments and restricted cash and investments on the Balance Sheets. The fair value of these money market mutual funds approximates cost.

Derivative contracts are recorded on the 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 MidAmerican Energy transacts. When quoted prices for identical contracts are not available, MidAmerican Energy uses forward price curves. Forward price curves represent MidAmerican Energy's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. MidAmerican Energy 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 MidAmerican Energy. Market price quotations are generally readily obtainable for the applicable term of MidAmerican Energy's outstanding derivative contracts; therefore, MidAmerican Energy's forward price curves reflect observable market quotes. Market price quotations for certain 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, MidAmerican Energy 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, related volatility, counterparty creditworthiness and duration of contracts. Refer to Note 12 for further discussion regarding MidAmerican Energy's risk management and hedging activities.

MidAmerican Energy's investments in money market mutual funds and debt and equity securities are stated at fair value and are accounted for as available-for-sale securities. 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 MidAmerican Energy'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 MidAmerican Energy'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 MidAmerican Energy's assets measured at fair value on a recurring basis using significant Level 3 inputs for the years ended December 31 (in millions):
 
 
Commodity Derivatives
 
Auction Rate Securities
 
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
12

 
$
(3
)
 
$
—

 
$
26

 
$
23

 
$
21

Changes included in earnings(1)
 
11

 
12

 
3

 
—

 
—

 
—

Changes in fair value recognized in OCI
 
(7
)
 
—

 
(2
)
 
—

 
3

 
2

Changes in fair value recognized in net regulatory assets
 
(25
)
 
6

 
—

 
—

 
—

 
—

Purchases
 
1

 
1

 
—

 
—

 
—

 
—

Settlements
 
2

 
(4
)
 
(4
)
 
—

 
—

 
—

Ending balance
 
$
(6
)
 
$
12

 
$
(3
)
 
$
26

 
$
26

 
$
23

(1)
Changes included in earnings are reported as nonregulated operating revenue on the Statements of Operations. Net unrealized (losses) gains included in earnings for the years ended December 31, 2015, 2014 and 2013, related to commodity derivatives held at December 31, 2015, 2014 and 2013, totaled $8 million, $16 million and $(5) million, respectively.
MidAmerican Energy's long-term debt is carried at cost on the Financial Statements. The fair value of MidAmerican Energy'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 MidAmerican Energy'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 MidAmerican Energy's long-term debt as of December 31, (in millions):
 
2015
 
2014
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
 
 
 
 
 
 
 
 
Long-term debt
$
4,271

 
$
4,636

 
$
4,056

 
$
4,581
MidAmerican Funding, LLC and Subsidiaries [Domain]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements [Text Block]
Fair Value Measurements

Refer to Note 13 of MidAmerican Energy's Notes to Financial Statements.

MidAmerican Funding's long-term debt is carried at cost on the Consolidated Financial Statements. The fair value of MidAmerican Funding'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 MidAmerican Funding'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 MidAmerican Funding's long-term debt as of December 31 (in millions):
 
2015
 
2014
 
Carrying
Value
 
Fair Value
 
Carrying
Value
 
Fair Value
 
 
 
 
 
 
 
 
Long-term debt
$
4,597

 
$
5,051

 
$
4,381

 
$
5,012
Nevada Power Company [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements [Text Block]
Fair Value Measurements

The carrying value of Nevada Power'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. Nevada Power has various financial assets and liabilities that are measured at fair value on the Consolidated Balance Sheets 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 Nevada Power 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 Nevada Power's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. Nevada Power develops these inputs based on the best information available, including its own data.

The following table presents Nevada Power'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
 
Total
As of December 31, 2015
 
 
 
 
 
 
 
Assets - investment funds
$
5

 
$
—

 
$
—

 
$
5

 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
$
—

 
$
—

 
$
(22
)
 
$
(22
)
 
 
 
 
 
 
 
 
As of December 31, 2014
 
 
 
 
 
 
 
Assets - investment funds
$
20

 
$
—

 
$
—

 
$
20

 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
$
—

 
$
—

 
$
(30
)
 
$
(30
)


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 Nevada Power transacts. When quoted prices for identical contracts are not available, Nevada Power uses forward price curves. Forward price curves represent Nevada Power's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. Nevada Power bases its forward price curves upon internally developed models, with internal and external fundamental data inputs. Market price quotations for certain electricity and natural gas trading hubs are not as readily obtainable due to markets that are not active. Given that limited market data exists for these contracts, Nevada Power uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The model incorporates a mid-market pricing convention (the mid‑point price between bid and ask prices) as a practical expedient for valuing its assets and liabilities measured and reported at fair value. Interest rate swaps are valued using a financial model which utilizes observable inputs for similar instruments based primarily on market price curves. The determination of the fair value for derivative contracts not only includes counterparty risk, but also the impact of Nevada Power's nonperformance risk on its liabilities, which as of December 31, 2015, had an immaterial impact to the fair value of its derivative contracts. As such, Nevada Power considers its derivative contracts to be valued using Level 3 inputs. Refer to Note 8 for further discussion regarding Nevada Power's risk management and hedging activities.

Nevada Power's investments in money market mutual funds 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.

The following table reconciles the beginning and ending balances of Nevada Power's commodity derivative liabilities measured at fair value on a recurring basis using significant Level 3 inputs for the years ended December 31 (in millions):
 
 
2015
 
2014
Beginning balance
 
$
(30
)
 
$
(47
)
Changes in fair value recognized in regulatory assets
 
—

 
9

Purchases
 
—

 
—

Settlements
 
8

 
8

Ending balance
 
$
(22
)
 
$
(30
)


Nevada Power's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of Nevada Power'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 Nevada Power'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 Nevada Power's long-term debt as of December 31 (in millions):
 
2015
 
2014
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
2,788

 
$
3,240

 
$
3,034

 
$
3,712
Sierra Pacific Power Company [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements [Text Block]
Fair Value Measurements

The carrying value of Sierra Pacific's cash, certain cash equivalents, receivables, investments held in Rabbi trusts, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. Sierra Pacific has various financial assets and liabilities, principally related to derivative contracts, that are measured at fair value on the Consolidated Balance Sheets 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 Sierra Pacific 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 Sierra Pacific's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. Sierra Pacific develops these inputs based on the best information available, including its own data.

Sierra Pacific's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of Sierra Pacific'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 Sierra Pacific'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 Sierra Pacific's long-term debt as of December 31 (in millions):
 
2015
 
2014
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
1,165

 
$
1,248

 
$
1,164

 
$
1,301