XML 81 R45.htm IDEA: XBRL DOCUMENT v3.10.0.1
Fair Value Measurements
 9 Months Ended
Sep. 30, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements
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 financial 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 September 30, 2018
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
—

 
$
53

 
$
99

 
$
(35
)
 
$
117

Interest rate derivatives
 
3

 
22

 
11

 
—

 
36

Mortgage loans held for sale
 
—

 
501

 
—

 
—

 
501

Money market mutual funds(2)
 
716

 
—

 
—

 
—

 
716

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
183

 
—

 
—

 
—

 
183

International government obligations
 
—

 
4

 
—

 
—

 
4

Corporate obligations
 
—

 
47

 
—

 
—

 
47

Municipal obligations
 
—

 
2

 
—

 
—

 
2

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
300

 
—

 
—

 
—

 
300

International companies
 
1,622

 
—

 
—

 
—

 
1,622

Investment funds
 
187

 
—

 
—

 
—

 
187

 
 
$
3,011


$
629


$
110


$
(35
)
 
$
3,715

Liabilities:
 
 

 
 

 
 

 
 

 
 

Commodity derivatives
 
$
(1
)

$
(168
)

$
(15
)

$
110

 
$
(74
)
Interest rate derivatives
 
—

 
(5
)
 
(1
)
 
—

 
(6
)
 
 
$
(1
)
 
$
(173
)
 
$
(16
)
 
$
110

 
$
(80
)
 
 
Input Levels for Fair Value Measurements
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Other(1)
 
Total
As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
1

 
$
42

 
$
104

 
$
(29
)
 
$
118

Interest rate derivatives
 
—

 
15

 
9

 
—

 
24

Mortgage loans held for sale
 
—

 
465

 
—

 
—

 
465

Money market mutual funds(2)
 
685

 
—

 
—

 
—

 
685

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
176

 
—

 
—

 
—

 
176

International government obligations
 
—

 
5

 
—

 
—

 
5

Corporate obligations
 
—

 
36

 
—

 
—

 
36

Municipal obligations
 
—

 
2

 
—

 
—

 
2

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
288

 
—

 
—

 
—

 
288

International companies
 
1,968

 
—

 
—

 
—

 
1,968

Investment funds
 
178

 
—

 
—

 
—

 
178

 
 
$
3,296

 
$
565

 
$
113

 
$
(29
)
 
$
3,945

Liabilities:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
(3
)
 
$
(167
)
 
$
(10
)
 
$
105

 
$
(75
)
Interest rate derivatives
 
—

 
(8
)
 
—

 
—

 
(8
)
 
 
$
(3
)
 
$
(175
)
 
$
(10
)
 
$
105

 
$
(83
)

(1)
Represents netting under master netting arrangements and a net cash collateral receivable of $75 million and $76 million as of September 30, 2018 and December 31, 2017, 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.

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. 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 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
 
Nine-Month Periods
 
Ended September 30,
 
Ended September 30,
 
 
 
Interest
 
 
 
Interest
 
Commodity
 
Rate
 
Commodity
 
Rate
 
Derivatives
 
Derivatives
 
Derivatives
 
Derivatives
2018:
 
 
 
 
 
 
 
Beginning balance
$
83

 
$
17

 
$
94

 
$
9

Changes included in earnings
(1
)
 
54

 
3

 
140

Changes in fair value recognized in OCI
1

 
—

 
1

 
—

Changes in fair value recognized in net regulatory assets
3

 
—

 
(11
)
 
—

Purchases
1

 
—

 
2

 
—

Settlements
(3
)
 
(61
)
 
(5
)
 
(139
)
Ending balance
$
84

 
$
10

 
$
84

 
$
10

2017:
 
 
 
 
 
 
 
Beginning balance
$
81

 
$
8

 
$
60

 
$
6

Changes included in earnings
7

 
34

 
19

 
100

Changes in fair value recognized in OCI
(1
)
 
—

 
(3
)
 
—

Changes in fair value recognized in net regulatory assets
(3
)
 
—

 
(5
)
 
—

Purchases
—

 
8

 
1

 
6

Settlements
2

 
(37
)
 
14

 
(99
)
Ending balance
$
86

 
$
13

 
$
86

 
$
13


The Company's long-term debt is carried at cost on the Consolidated Balance Sheets. 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 September 30, 2018
 
As of December 31, 2017
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
37,558

 
$
40,520

 
$
35,193

 
$
40,522
PacifiCorp [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements
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 financial 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 September 30, 2018
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
—

 
$
20

 
$
—

 
$
(10
)
 
$
10

Money market mutual funds(2)
 
310

 
—

 
—

 
—

 
310

Investment funds
 
26

 
—

 
—

 
—

 
26

 
 
$
336

 
$
20

 
$
—

 
$
(10
)
 
$
346

 
 
 
 
 
 
 
 
 
 
 
Liabilities - Commodity derivatives
 
$
—

 
$
(125
)
 
$
—

 
$
80

 
$
(45
)
 
 
 
 
 
 
 
 
 
 
 
As of December 31, 2017
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
—

 
$
13

 
$
—

 
$
(4
)
 
$
9

Money market mutual funds(2)
 
21

 
—

 
—

 
—

 
21

Investment funds
 
21

 
—

 
—

 
—

 
21

 
 
$
42

 
$
13

 
$
—

 
$
(4
)
 
$
51

 
 
 
 
 
 
 
 
 
 
 
Liabilities - Commodity derivatives
 
$
—

 
$
(117
)
 
$
—

 
$
78

 
$
(39
)


(1)
Represents netting under master netting arrangements and a net cash collateral receivable of $70 million and $74 million as of September 30, 2018 and December 31, 2017, respectively.

(2)
Amounts are included in cash and cash equivalents, other current assets and other assets 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 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 three 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 three 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 9 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. When available, 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. 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.

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 (in millions):
 
 
As of September 30, 2018
 
As of December 31, 2017
 
 
Carrying
 
Fair
 
Carrying
 
Fair
 
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
 
Long-term debt
 
$
7,014

 
$
7,862

 
$
7,005

 
$
8,370
MidAmerican Energy Company [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements
air 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 financial 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 September 30, 2018:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
—

 
$
4

 
$
1

 
$
(2
)
 
$
3

Money market mutual funds(2)
 
88

 
—

 
—

 
—

 
88

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
183

 
—

 
—

 
—

 
183

International government obligations
 
—

 
4

 
—

 
—

 
4

Corporate obligations
 
—

 
47

 
—

 
—

 
47

Municipal obligations
 
—

 
2

 
—

 
—

 
2

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
300

 
—

 
—

 
—

 
300

International companies
 
6

 
—

 
—

 
—

 
6

Investment funds
 
21

 
—

 
—

 
—

 
21

 
 
$
598

 
$
57

 
$
1

 
$
(2
)
 
$
654

 
 
 
 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
 
$
—

 
$
(7
)
 
$
(2
)
 
$
3

 
$
(6
)
 
 
Input Levels for Fair Value Measurements
 
 
 
 
 
 
Level 1
 
Level 2
 
Level 3
 
Other(1)
 
Total
As of December 31, 2017:
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Commodity derivatives
 
$
—

 
$
3

 
$
4

 
$
(2
)
 
$
5

Money market mutual funds(2)
 
133

 
—

 
—

 
—

 
133

Debt securities:
 
 
 
 
 
 
 
 
 
 
United States government obligations
 
176

 
—

 
—

 
—

 
176

International government obligations
 
—

 
5

 
—

 
—

 
5

Corporate obligations
 
—

 
36

 
—

 
—

 
36

Municipal obligations
 
—

 
2

 
—

 
—

 
2

Equity securities:
 
 
 
 
 
 
 
 
 
 
United States companies
 
288

 
—

 
—

 
—

 
288

International companies
 
7

 
—

 
—

 
—

 
7

Investment funds
 
15

 
—

 
—

 
—

 
15

 
 
$
619

 
$
46

 
$
4

 
$
(2
)
 
$
667

 
 
 
 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
 
$
—

 
$
(9
)
 
$
(1
)
 
$
2

 
$
(8
)

(1)
Represents netting under master netting arrangements and a net cash collateral receivable of $1 million and $- million as of September 30, 2018 and December 31, 2017, 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 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.

MidAmerican Energy's investments in money market mutual funds and debt and equity securities 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 following table reconciles the beginning and ending balances of MidAmerican Energy's commodity derivative assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):
 
Three-Month Periods
 
Nine-Month Periods
 
Ended September 30,
 
Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Beginning balance
$
(1
)
 
$
(1
)
 
$
3

 
$
(2
)
Changes in fair value recognized in net regulatory assets
(1
)
 
(2
)
 
(4
)
 
(2
)
Settlements
1

 
1

 
—

 
2

Ending balance
$
(1
)
 
$
(2
)
 
$
(1
)
 
$
(2
)


MidAmerican Energy's long-term debt is carried at cost on the Balance Sheets. 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 (in millions):
 
As of September 30, 2018
 
As of December 31, 2017
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
 
 
 
 
 
 
 
Long-term debt
$
5,380

 
$
5,612

 
$
5,042

 
$
5,686
MidAmerican Funding, LLC and Subsidiaries [Domain]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements
Fair Value Measurements

Refer to Note 9 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 (in millions):
 
As of September 30, 2018
 
As of December 31, 2017
 
Carrying
Value
 
Fair
Value
 
Carrying
Value
 
Fair
Value
 
 
 
 
 
 
 
 
Long-term debt
$
5,620

 
$
5,908

 
$
5,282

 
$
6,006
Nevada Power Company [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements
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 September 30, 2018
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
Commodity derivatives
$
—

 
$
—

 
$
1

 
$
1

Money market mutual funds(1)
67

 
—

 
—

 
67

Investment funds
2

 
—

 
—

 
2

 
$
69

 
$
—

 
$
1

 
$
70

 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
$
—

 
$
—

 
$
(8
)
 
$
(8
)
 
 
 
 
 
 
 
 
As of December 31, 2017
 
 
 
 
 
 
 
Assets - investment funds
$
2

 
$
—

 
$
—

 
$
2

 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
$
—

 
$
—

 
$
(3
)
 
$
(3
)


(1)
Amounts are included in cash and cash equivalents 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 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. 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 September 30, 2018 and December 31, 2017, 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.

Nevada Power's investments in money market mutual funds and equity securities 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 assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):
 
Three-Month Periods
 
Nine-Month Periods
 
Ended September 30,
 
Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Beginning balance
$
(9
)
 
$
(4
)
 
$
(3
)
 
$
(14
)
Changes in fair value recognized in regulatory assets
2

 
(1
)
 
(6
)
 
(3
)
Settlements
—

 
1

 
2

 
13

Ending balance
$
(7
)
 
$
(4
)
 
$
(7
)
 
$
(4
)


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 (in millions):
 
As of September 30, 2018
 
As of December 31, 2017
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
2,351

 
$
2,653

 
$
2,600

 
$
3,088
Sierra Pacific Power Company [Member]  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value Measurements
Fair Value Measurements

The carrying value of Sierra Pacific'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. Sierra Pacific 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 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.

The following table presents Sierra Pacific'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 September 30, 2018
 
 
 
 
 
 
 
Assets - money market mutual funds(1)
$
18

 
$
—

 
$
—

 
$
18

 
 
 
 
 
 
 
 
Liabilities - commodity derivatives
$
—

 
$
—

 
$
(1
)
 
$
(1
)
 
 
 
 
 
 
 
 
As of December 31, 2017
 
 
 
 
 
 
 
Assets - investment funds
$
—

 
$
—

 
$
—

 
$
—


(1)
Amounts are included in cash and cash equivalents 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 Sierra Pacific transacts. When quoted prices for identical contracts are not available, Sierra Pacific uses forward price curves. Forward price curves represent Sierra Pacific's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. Sierra Pacific 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, Sierra Pacific 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. The determination of the fair value for derivative contracts not only includes counterparty risk, but also the impact of Sierra Pacific's nonperformance risk on its liabilities, which as of September 30, 2018 and December 31, 2017, had an immaterial impact to the fair value of its derivative contracts. As such, Sierra Pacific considers its derivative contracts to be valued using Level 3 inputs.

Sierra Pacific's investments in money market mutual funds and equity securities 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 Sierra Pacific's commodity derivative liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):
 
Three-Month Periods
 
Nine-Month Periods
 
Ended September 30,
 
Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
Beginning balance
$
(2
)
 
$
—

 
$
—

 
$
—

Changes in fair value recognized in regulatory assets
2

 
—

 
(1
)
 
—

Settlements
(1
)
 
—

 
—

 
—

Ending balance
$
(1
)
 
$
—

 
$
(1
)
 
$
—



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 (in millions):
 
As of September 30, 2018
 
As of December 31, 2017
 
Carrying
 
Fair
 
Carrying
 
Fair
 
Value
 
Value
 
Value
 
Value
 
 
 
 
 
 
 
 
Long-term debt
$
1,120

 
$
1,153

 
$
1,120

 
$
1,221