The tables below set forth, by level, our financial assets that were accounted for at fair value for the respective periods. The table does not include assets and liabilities that are measured at historical cost or any basis other than fair value (in thousands):


	Fair Value Measured at Reporting Date Using
June 30, 2020	Level 1		Level 2		Level 3		Total

Assets
Cash equivalents:
Money market funds	$	236,037	$	—	$	—	$	236,037


	$	236,037	$	—	$	—	$	236,037
Liabilities
Accrued expenses and other current liabilities	$	1,451	$	—	$	—	$	1,451
Derivatives:
Natural gas fixed price forward contracts	—		—		5,185		5,185

Embedded EPP derivatives	—		—		5,480		5,480
Interest rate swap agreements	—		17,881		—		17,881
	$	1,451	$	17,881	$	10,665	$	29,997


	Fair Value Measured at Reporting Date Using
December 31, 2019	Level 1		Level 2		Level 3		Total

Assets
Cash equivalents:
Money market funds	$	276,615	$	—	$	—	$	276,615

Interest rate swap agreements	—		3		—		3
	$	276,615	$	3	$	—	$	276,618
Liabilities
Accrued expenses and other current liabilities	$	996	$	—	$	—	$	996
Derivatives:
Natural gas fixed price forward contracts	—		—		6,968		6,968

Embedded EPP derivatives	—		—		6,176		6,176
Interest rate swap agreements	—		9,241		—		9,241



	$	996	$	9,241	$	13,144	$	23,381

Interest Rate Swap Agreements - Interest rate swap agreements are valued using quoted prices for similar contracts and are therefore classified as Level 2 financial assets. Interest rate swaps are designed as hedging instruments and are recognized at fair value on our condensed consolidated balance sheets. As of June 30, 2020, $2.0 million of the loss on the interest rate swaps accumulated in other comprehensive income (loss) is expected to be reclassified into earnings in the next 12 months.

Natural Gas Fixed Price Forward Contracts - Natural gas fixed price forward contracts are valued using a combination of factors including the counterparty's credit rating and estimates of future natural gas prices and therefore, as no observable inputs to support market activity are available, are classified as Level 3 liabilities.

June 30, 2020

December 31, 2019

Number of

Contracts

(MMBTU)²

Fair
Value

Number of
Contracts
(MMBTU)²

Fair
Value

Liabilities¹:

Natural gas fixed price forward contracts (not under hedging relationships)

1,407

5,185

1,991

6,968

¹ Recorded in current liabilities and derivative liabilities in the consolidated balance sheets.

² One MMBTU is a traditional unit of energy used to describe the heat value (energy content) of fuels.

For the three months ended June 30, 2020 and 2019, we marked-to-market the fair value of our natural gas fixed price forward contracts and recorded an unrealized loss of $0.1 million and an unrealized loss of $1.1 million, respectively. For the three months ended June 30, 2020 and 2019, we marked-to-market the fair value of our natural gas fixed price forward contracts and recorded a realized gain of $1.5 million and a realized gain of $1.1 million, respectively, on the settlement of these contracts in cost of revenue on our condensed consolidated statement of operations.

For the six months ended June 30, 2020 and 2019, we marked-to-market the fair value of our natural gas fixed price forward contracts and recorded an unrealized loss of $0.7 million and an unrealized loss of $0.7 million, respectively. For the six months ended June 30, 2020 and 2019, we marked-to-market the fair value of our natural gas fixed price forward contracts and recorded a realized gain of $2.5 million and a realized gain of $1.6 million, respectively, on the settlement of these contracts in cost of revenue on our condensed consolidated statement of operations.

Embedded EPP Derivative Liability in Sales Contracts - We estimated the fair value of the embedded EPP derivatives in certain sales contracts using a Monte Carlo simulation model which considers various potential electricity price curves over the sales contracts' terms. We use historical grid prices and available forecasts of future electricity prices to estimate future electricity prices. We have classified these derivatives as a Level 3 financial liability. For the three months ended June 30, 2020 and 2019, we marked-to-market the fair value of our embedded EPP derivatives and recorded an unrealized gain of $0.4 million and an unrealized loss of $0.5 million, respectively, in gain (loss) on revaluation of embedded derivatives on our condensed consolidated statement of operations.

For the six months ended June 30, 2020 and 2019, we marked-to-market the fair value of our embedded EPP derivatives and recorded an unrealized loss of $0.7 million and an unrealized loss of $1.1 million, respectively, in gain (loss) on revaluation of embedded derivatives on our condensed consolidated statement of operations.

There were no transfers between fair value measurement classifications during the three and six months ended June 30, 2020 and 2019. The changes in the Level 3 financial liabilities were as follows (in thousands):


	Natural Gas Fixed Price Forward Contracts		Embedded EPP Derivative Liability		Total












Liabilities at December 31, 2019	$	6,968	$	6,176	$	13,144
Settlement of natural gas fixed price forward contracts	(2,478)		—		(2,478)
Changes in fair value	695		(696)		(1)
Liabilities at June 30, 2020	$	5,185	$	5,480	$	10,665

As of June 30, 2020

Commodity Contracts

Derivative Liabilities

Valuation Technique

Unobservable Input

Units

Range

Average

(in thousands)

($ per Units)

Natural Gas

5,185

Discounted Cash Flow

Forward basis price

MMBtu

$2.25 - $4.62

3.07

As of December 31, 2019

Commodity Contracts

Derivative Liabilities

Valuation Technique

Unobservable Input

Units

Range

Average

(in thousands)

($ per Units)

Natural Gas

6,968

Discounted Cash Flow

Forward basis price

MMBtu

$2.39 - $5.65

3.23

The unobservable inputs used in the fair value measurement of the natural gas commodity types consist of inputs that are less observable due in part to lack of available broker quotes, supported by little, if any, market activity at the measurement date or are based on internally developed models. Certain basis prices (i.e., the difference in pricing between two locations) included in the valuation of natural gas contracts were deemed unobservable.

To estimate the liabilities related to the EPP contracts an option pricing method was implemented through a Monte Carlo simulation. The unobservable inputs were simulated based on the available values for Avoided Cost and Cost of Electricity as calculated for June 30, 2020 and December 31, 2019, using an expected growth rate of 7% over the contracts life and volatility of 20%. The estimated growth rate and volatility were estimated based on the historical tariff changes for the period 2008 to 2020. Avoided Cost is the Transmission and Distribution cost expressed in dollars per kilowatt hours avoided in the given year of the contract, calculated using the billing rates of the effective utility tariff applied during the year to the host account for which usage is offset by the generator. If the billing rates within the utility tariff change during the measurement period, the average of the amount of charge for each rate shall be weighted by the number of effective months for each amount.

The inputs listed above would have had a direct impact on the fair values of the above derivatives if they were adjusted. Generally, an increase in natural gas prices and a decrease in electric grid prices would each result in an increase in the estimated fair value of our derivative liabilities.

Customer Receivables and Debt Instruments - We estimate fair value for customer financing receivables, senior secured notes, term loans and convertible promissory notes based on rates currently offered for instruments with similar maturities and terms (Level 3). The following table presents the estimated fair values and carrying values of customer receivables and debt instruments (in thousands):


	June 30, 2020						December 31, 2019
	Net Carrying Value		Fair Value		Net Carrying Value		Fair Value

Customer receivables
Customer financing receivables	$	53,365	$	44,157	$	55,855	$	44,002
Debt instruments
Recourse:
LIBOR + 4% term loan due November 2020	697		713		1,536		1,590
5% convertible promissory Constellation note due December 2021	—		—		36,482		32,070

10% convertible promissory notes due December 2021¹	263,405		411,448		273,410		302,047
10% notes due July 2024	83,497		83,977		89,962		97,512
10.25% senior secured notes due March 2027	68,437		63,690		—		—
Non-recourse:

7.5% term loan due September 2028	32,645		37,651		34,969		41,108

6.07% senior secured notes due March 2030	78,565		89,032		80,016		87,618
LIBOR + 2.5% term loan due December 2021	118,473		117,855		120,436		120,510

Long-Lived Assets - Our long-lived assets include property, plant and equipment and Energy Servers capitalized in connection with our Managed Services Program, Purchase Power Agreement Programs and other similar arrangements. The carrying amounts of our long-lived assets are periodically reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable or that the useful life is shorter than originally estimated.

During the six months ended June 30, 2020, we upgraded 0.4 megawatts of Energy Servers in PPA IIIb by decommissioning these systems and selling and installing new Energy Servers. As a result of these upgrades, the useful lives of all other remaining Energy Servers included within our long-lived assets were reassessed and we concluded that no change in the useful lives or impairment of these remaining Energy Servers was identified in the period ended June 30, 2020. See Note 13, Purchase Power Agreement Programs for further information.