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Fair Value Disclosures

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Line Items]

Fair Value Disclosures

9. FAIR VALUE DISCLOSURES

A. DEBT AND INVESTMENTS

PROGRESS ENERGY

DEBT

The carrying amount of our long-term debt, including current maturities, was $13.937 billion and $12.941 billion at June 30, 2012 and December 31, 2011, respectively. The estimated fair value of this debt was $16.4 billion and $15.3 billion at June 30, 2012 and December 31, 2011, respectively, and is classified within Level 2 (see further discussion under “B. Fair Value Measurements”).

INVESTMENTS

Certain investments in debt and equity securities that have readily determinable market values are accounted for as available-for-sale securities at fair value. Our available-for-sale securities include investments in stocks, bonds and cash equivalents held in trust funds, pursuant to NRC requirements, to fund certain costs of decommissioning the Utilities' nuclear plants as discussed in Note 5C of the 2011 Form 10-K. Nuclear decommissioning trust (NDT) funds are presented on the Consolidated Balance Sheets at fair value.

The following table summarizes our available-for-sale securities at June 30, 2012 and December 31, 2011:

(in millions)		Fair Value		Unrealized Losses		Unrealized Gains
June 30, 2012
Common stock equity		$	1,109	$	29	$	462
Preferred stock and other equity			47		-		14
Corporate debt			88		-		7
U.S. state and municipal debt			135		2		9
U.S. and foreign government debt			293		-		17
Money market funds and other			85		-		1
	Total	$	1,757	$	31	$	510

December 31, 2011
Common stock equity		$	1,033	$	29	$	401
Preferred stock and other equity			29		-		11
Corporate debt			86		-		6
U.S. state and municipal debt			128		2		7
U.S. and foreign government debt			284		-		18
Money market funds and other			70		-		1
	Total	$	1,630	$	31	$	444

The NDT funds are managed by third-party investment managers who have a right to sell securities without our authorization. Net unrealized gains and losses of the NDT funds that would be recorded in earnings or other comprehensive income by a nonregulated entity are recorded as regulatory assets and liabilities pursuant to ratemaking treatment. Therefore, the preceding table includes the unrealized gains and losses for the NDT funds based on the original cost of the trust investments.

The aggregate fair value of investments that related to the June 30, 2012 and December 31, 2011 unrealized losses was $151 million and $136 million, respectively.

At June 30, 2012, the fair value of our available-for-sale debt securities by contractual maturity was:

(in millions)
Due in one year or less	$	54
Due after one through five years		213
Due after five through 10 years		156
Due after 10 years		107
Total	$	530

The following table presents selected information about our sales of available-for-sale securities during the three and six months ended June 30, 2012 and 2011. Realized gains and losses were determined on a specific identification basis.

	Three months ended June 30				Six months ended June 30
(in millions)		2012		2011		2012		2011
Proceeds	$	215	$	1,448	$	519	$	3,192
Realized gains		8		6		15		14
Realized losses		1		6		-		10

PEC

DEBT

The carrying amount of PEC's long-term debt, including current maturities, was $5.190 billion and $4.193 billion at June 30, 2012 and December 31, 2011, respectively. The estimated fair value of this debt was $5.8 billion and $4.7 billion at June 30, 2012 and December 31, 2011, respectively, and is classified within Level 2 (see further discussion under “B. Fair Value Measurements”).

INVESTMENTS

Certain investments in debt and equity securities that have readily determinable market values are accounted for as available-for-sale securities at fair value. PEC's available-for-sale securities include investments in stocks, bonds and cash equivalents held in trust funds, pursuant to NRC requirements, to fund certain costs of decommissioning PEC's nuclear plants as discussed in Note 5C of the 2011 Form 10-K. NDT funds are presented on the Consolidated Balance Sheets at fair value.

The following table summarizes PEC's available-for-sale securities at June 30, 2012 and December 31, 2011:

(in millions)		Fair Value		Unrealized Losses		Unrealized Gains
June 30, 2012
Common stock equity		$	727	$	19	$	293
Preferred stock and other equity			22		-		9
Corporate debt			73		-		6
U.S. state and municipal debt			62		-		4
U.S. and foreign government debt			229		-		15
Money market funds and other			54		-		1
	Total	$	1,167	$	19	$	328

December 31, 2011
Common stock equity		$	673	$	20	$	255
Preferred stock and other equity			17		-		7
Corporate debt			69		-		5
U.S. state and municipal debt			56		-		3
U.S. and foreign government debt			226		-		16
Money market funds and other			60		-		1
	Total	$	1,101	$	20	$	287

The aggregate fair value of investments that related to the June 30, 2012 and December 31, 2011 unrealized losses was $109 million and $98 million, respectively.

At June 30, 2012, the fair value of PEC's available-for-sale debt securities by contractual maturity was:

(in millions)
Due in one year or less	$	10
Due after one through five years		203
Due after five through 10 years		91
Due after 10 years		71
Total	$	375

The following table presents selected information about PEC's sales of available-for-sale securities during the three and six months ended June 30, 2012 and 2011. Realized gains and losses were determined on a specific identification basis.

	Three months ended June 30				Six months ended June 30
(in millions)		2012		2011		2012		2011
Proceeds	$	120	$	119	$	250	$	250
Realized gains		5		3		10		6
Realized losses		1		4		3		5

PEF

DEBT

The carrying amount of PEF's long-term debt, including current maturities, was $4.482 billion at June 30, 2012 and December 31, 2011. The estimated fair value of this debt was $5.5 billion and $5.4 billion at June 30, 2012 and December 31, 2011, respectively, and is classified within Level 2 (see further discussion under “B. Fair Value Measurements”).

INVESTMENTS

Certain investments in debt and equity securities that have readily determinable market values are accounted for as available-for-sale securities at fair value. PEF's available-for-sale securities include investments in stocks, bonds and cash equivalents held in trust funds, pursuant to NRC requirements, to fund certain costs of decommissioning PEF's nuclear plant as discussed in Note 5C of the 2011 Form 10-K. The NDT funds are presented on the Balance Sheets at fair value.

The following table summarizes PEF's available-for-sale securities at June 30, 2012 and December 31, 2011:

(in millions)		Fair Value		Unrealized Losses		Unrealized Gains
June 30, 2012
Common stock equity		$	382	$	10	$	169
Preferred stock and other equity			25		-		5
Corporate debt			15		-		1
U.S. state and municipal debt			73		2		5
U.S. and foreign government debt			64		-		2
Money market funds and other			31		-		-
	Total	$	590	$	12	$	182

December 31, 2011
Common stock equity		$	360	$	9	$	146
Preferred stock and other equity			12		-		4
Corporate debt			17		-		1
U.S. state and municipal debt			72		2		4
U.S. and foreign government debt			58		-		2
Money market funds and other			10		-		-
	Total	$	529	$	11	$	157

The NDT funds are managed by third-party investment managers who have a right to sell securities without our authorization. Net unrealized gains and losses of the NDT funds that would be recorded in earnings or other comprehensive income by a nonregulated entity are recorded as regulatory assets and liabilities pursuant to ratemaking treatment. Therefore, the preceding table includes unrealized gains and losses for the NDT funds based on the original cost of the trust investments.

The aggregate fair value of investments that related to the June 30, 2012 and December 31, 2011 unrealized losses was $42 million and $38 million, respectively.

At June 30, 2012, the fair value of PEF's available-for-sale debt securities by contractual maturity was:

(in millions)
Due in one year or less	$	44
Due after one through five years		10
Due after five through 10 years		65
Due after 10 years		36
Total	$	155

The following table presents selected information about PEF's sales of available-for-sale securities during the three and six months ended June 30, 2012 and 2011. Realized gains and losses were determined on a specific identification basis.

	Three months ended June 30				Six months ended June 30
(in millions)		2012		2011		2012		2011
Proceeds	$	95	$	1,329	$	269	$	2,935
Realized gains		3		3		5		8
Realized losses		2		2		3		5

B. FAIR VALUE MEASUREMENTS

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., an exit price). Fair value measurements require the use of market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, corroborated by market data, or generally unobservable. Valuation techniques are required to maximize the use of observable inputs and minimize the use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.

GAAP also establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, and requires fair value measurements to be categorized based on the observability of those inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). The three levels of the fair value hierarchy are as follows:

Level 1 – The pricing inputs are unadjusted quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives and listed equities.

Level 2 – The pricing inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in less than active markets.

Level 3 – The pricing inputs include significant inputs generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management's best estimate of fair value. Level 3 instruments may include longer-term instruments that extend into periods in which quoted prices or other observable inputs are not available.

We generally classify our and the Utilities' long-term debt within Level 2. Fair value measurements of long-term debt are obtained from an independent third-party and may take into account a number of factors, including valuations of other comparable financial instruments in terms of rating, structure, maturity and/or covenant protection; comparable trades, where observable; and general interest rate and market conditions. We do not make any adjustments to the long-term debt fair value measurements obtained from the independent third-party and we corroborate the fair value measurements against comparable market data.

The following tables set forth, by level within the fair value hierarchy, our and the Utilities' financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2012 and December 31, 2011. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

PROGRESS ENERGY
(in millions)				Level 1		Level 2		Level 3		Total
June 30, 2012
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	1,109	$	-	$	-	$	1,109
		Preferred stock and other equity		36		11		-		47
		Corporate debt		-		88		-		88
		U.S. state and municipal debt		-		135		-		135
		U.S. and foreign government debt		128		165		-		293
		Money market funds and other		1		84		-		85
	Total nuclear decommissioning trust funds			1,274		483		-		1,757
	Derivatives
		Commodity forward contracts		-		8		-		8
	Other marketable securities
		Money market and other		16		-		-		16
		Total assets	$	1,290	$	491	$	-	$	1,781

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	572	$	30	$	602
		Interest rate contracts		-		22		-		22
		Contingent value obligations		-		3		-		3
		Total liabilities	$	-	$	597	$	30	$	627

(in millions)				Level 1		Level 2		Level 3		Total
December 31, 2011
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	1,033	$	-	$	-	$	1,033
		Preferred stock and other equity		28		1		-		29
		Corporate debt		-		86		-		86
		U.S. state and municipal debt		-		128		-		128
		U.S. and foreign government debt		87		197		-		284
		Money market funds and other		-		87		-		87
	Total nuclear decommissioning trust funds			1,148		499		-		1,647
	Derivatives
		Commodity forward contracts		-		5		-		5
	Other marketable securities
		Money market and other		20		-		-		20
		Total assets	$	1,168	$	504	$	-	$	1,672

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	668	$	24	$	692
		Interest rate contracts		-		93		-		93
		Contingent value obligations		-		14		-		14
		Total liabilities	$	-	$	775	$	24	$	799

PEC
(in millions)				Level 1		Level 2		Level 3		Total
June 30, 2012
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	727	$	-	$	-	$	727
		Preferred stock and other equity		22		-		-		22
		Corporate debt		-		73		-		73
		U.S. state and municipal debt		-		62		-		62
		U.S. and foreign government debt		105		124		-		229
		Money market funds and other		1		50		-		51
	Total nuclear decommissioning trust funds			855		309		-		1,164
	Derivatives
		Commodity forward contracts		-		2		-		2
	Other marketable securities			2		-		-		2
		Total assets	$	857	$	311	$	-	$	1,168

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	158	$	28	$	186
		Interest rate contracts		-		11		-		11
		Total liabilities	$	-	$	169	$	28	$	197

(in millions)				Level 1		Level 2		Level 3		Total
December 31, 2011
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	673	$	-	$	-	$	673
		Preferred stock and other equity		17		-		-		17
		Corporate debt		-		69		-		69
		U.S. state and municipal debt		-		56		-		56
		U.S. and foreign government debt		81		145		-		226
		Money market funds and other		-		47		-		47
	Total nuclear decommissioning trust funds			771		317		-		1,088
	Other marketable securities			6		-		-		6
		Total assets	$	777	$	317	$	-	$	1,094

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	177	$	24	$	201
		Interest rate contracts		-		47		-		47
		Total liabilities	$	-	$	224	$	24	$	248

PEF
(in millions)				Level 1		Level 2		Level 3		Total
June 30, 2012
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	382	$	-	$	-	$	382
		Preferred stock and other equity		14		11		-		25
		Corporate debt		-		15		-		15
		U.S. state and municipal debt		-		73		-		73
		U.S. and foreign government debt		23		41		-		64
		Money market funds and other		-		34		-		34
	Total nuclear decommissioning trust funds			419		174		-		593
	Derivatives
		Commodity forward contracts		-		6		-		6
	Other marketable securities			1		-		-		1
		Total assets	$	420	$	180	$	-	$	600

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	414	$	2	$	416
		Interest rate contracts		-		11		-		11
		Total liabilities	$	-	$	425	$	2	$	427

(in millions)				Level 1		Level 2		Level 3		Total
December 31, 2011
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	360	$	-	$	-	$	360
		Preferred stock and other equity		11		1		-		12
		Corporate debt		-		17		-		17
		U.S. state and municipal debt		-		72		-		72
		U.S. and foreign government debt		6		52		-		58
		Money market funds and other		-		40		-		40
	Total nuclear decommissioning trust funds			377		182		-		559
	Derivatives
		Commodity forward contracts		-		5		-		5
	Other marketable securities			1		-		-		1
		Total assets	$	378	$	187	$	-	$	565

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	491	$	-	$	491
		Interest rate contracts		-		8		-		8
		Total liabilities	$	-	$	499	$	-	$	499

The determination of the fair values in the preceding tables incorporates various factors, including risks of nonperformance by us or our counterparties. Such risks consider not only the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits or letters of credit), but also the impact of our and the Utilities' credit risk on our liabilities.

Commodity forward contract derivatives and interest rate contract derivatives reflect positions held by us and the Utilities. Most over-the-counter commodity forward contract derivatives and interest rate contract derivatives are valued using financial models which utilize observable inputs for similar instruments and are classified within Level 2. Such models may be internally developed, but are similar to models commonly used across industries to value derivative contracts. To determine fair value, we utilize various inputs and factors including market data and assumptions that market participants would use in pricing assets or liabilities as well as assumptions about the risks inherent in the inputs to the valuation technique. The inputs and factors may include forward commodity prices and price curves, volumes and notional amounts, location, interest rates and credit quality of us and our counterparties. Certain commodity derivatives are valued utilizing pricing inputs that are not observable for substantially the full term of the contract, or for which the impact of the unobservable period is significant to the fair value of the derivative. Such derivatives are classified within Level 3. See Note 11 for discussion of risk management activities and derivative transactions.

NDT funds reflect the assets of the Utilities' nuclear decommissioning trusts. The assets of the trusts are invested primarily in exchange-traded equity securities (classified within Level 1) and marketable debt securities, most of which are valued using Level 1 inputs for similar instruments and are classified within Level 2.

Transfers into (out of) Levels 1, 2 or 3 represent existing assets or liabilities previously categorized as a higher level for which the inputs to the estimate became less observable or assets and liabilities that were previously classified as Level 2 or 3 for which the lowest significant input became more observable during the period. Transfers into and out of each level are measured at the end of the period. There were no transfers into (out of) Levels 1, 2 and 3 during the period.

We issued Contingent Value Obligations (CVOs) in connection with the acquisition of Florida Progress Corporation (Florida Progress), as discussed in Note 16 in the 2011 Form 10-K. The CVOs not held by us are derivatives recorded at fair value based on quoted prices from a less-than-active market and are classified as Level 2.

QUALITATIVE AND QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

A reconciliation of changes in the fair value of our and PEC's commodity derivative liabilities classified as Level 3 in the fair value hierarchy for the periods ended June 30 follows:

PROGRESS ENERGY
		Three months ended June 30				Six months ended June 30
(in millions)			2012		2011		2012		2011
Derivatives, net at beginning of period		$	27	$	32	$	24	$	36
Total losses, realized and unrealized - commodities
	deferred as regulatory assets and liabilities, net		3		5		6		1
Derivatives, net at end of period		$	30	$	37	$	30	$	37

PEC
		Three months ended June 30				Six months ended June 30
(in millions)			2012		2011		2012		2011
Derivatives, net at beginning of period		$	27	$	32	$	24	$	36
Total losses, realized and unrealized - commodities
	deferred as regulatory assets and liabilities, net		1		5		4		1
Derivatives, net at end of period		$	28	$	37	$	28	$	37

During the three and six months ended June 30, 2012 and 2011, PEF's assets and liabilities classified as Level 3 were not material.

Substantially all unrealized gains and losses on derivatives are deferred as regulatory liabilities or assets consistent with ratemaking treatment. There were no Level 3 realized gains or losses, purchases, sales, issuances or settlements during the period.

For commodity derivative contracts classified as Level 3, we utilize internally-developed financial models based upon the income approach (discounted cash flow method) to measure the fair values. The primary inputs to these models are the forward commodity prices used to develop the forward price curves for the respective instrument. The pricing inputs are derived from published exchange transaction prices and other observable or public data sources. For the commodity derivative contracts classified as Level 3, the pricing inputs for natural gas forward price curves are not observable for the full term of the related contracts. In isolation, increases (decreases) in these unobservable natural gas forward prices would result in favorable (unfavorable) fair value adjustments. In the absence of observable market information that supports the pricing inputs, there is a presumption that the transaction price is equal to the last observable price for a similar period. We regularly evaluate and validate the pricing inputs we use to estimate fair value by a market participant price verification procedure, which provides a comparison of our forward commodity curves to market participant generated curves.

Quantitative information about our and PEC's commodity derivative liabilities classified as Level 3 follows:

PROGRESS ENERGY
(in millions)	Fair Value		Valuation Technique	Unobservable Input		Range (price per MMBtu)
June 30, 2012
Commodity natural gas hedges	$	30	Discounted cash flow	Forward natural gas curves	$	3.956	-	4.374


PEC
(in millions)	Fair Value		Valuation Technique	Unobservable Input		Range (price per MMBtu)
June 30, 2012
Commodity natural gas hedges	$	28	Discounted cash flow	Forward natural gas curves	$	3.956	-	4.374

PEC

Fair Value Disclosures [Line Items]

Fair Value Disclosures

9. FAIR VALUE DISCLOSURES

A. DEBT AND INVESTMENTS

PEC

DEBT

INVESTMENTS

The following table summarizes PEC's available-for-sale securities at June 30, 2012 and December 31, 2011:

(in millions)		Fair Value		Unrealized Losses		Unrealized Gains
June 30, 2012
Common stock equity		$	727	$	19	$	293
Preferred stock and other equity			22		-		9
Corporate debt			73		-		6
U.S. state and municipal debt			62		-		4
U.S. and foreign government debt			229		-		15
Money market funds and other			54		-		1
	Total	$	1,167	$	19	$	328

December 31, 2011
Common stock equity		$	673	$	20	$	255
Preferred stock and other equity			17		-		7
Corporate debt			69		-		5
U.S. state and municipal debt			56		-		3
U.S. and foreign government debt			226		-		16
Money market funds and other			60		-		1
	Total	$	1,101	$	20	$	287

The aggregate fair value of investments that related to the June 30, 2012 and December 31, 2011 unrealized losses was $109 million and $98 million, respectively.

At June 30, 2012, the fair value of PEC's available-for-sale debt securities by contractual maturity was:

(in millions)
Due in one year or less	$	10
Due after one through five years		203
Due after five through 10 years		91
Due after 10 years		71
Total	$	375

	Three months ended June 30				Six months ended June 30
(in millions)		2012		2011		2012		2011
Proceeds	$	120	$	119	$	250	$	250
Realized gains		5		3		10		6
Realized losses		1		4		3		5

B. FAIR VALUE MEASUREMENTS

PEC
(in millions)				Level 1		Level 2		Level 3		Total
June 30, 2012
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	727	$	-	$	-	$	727
		Preferred stock and other equity		22		-		-		22
		Corporate debt		-		73		-		73
		U.S. state and municipal debt		-		62		-		62
		U.S. and foreign government debt		105		124		-		229
		Money market funds and other		1		50		-		51
	Total nuclear decommissioning trust funds			855		309		-		1,164
	Derivatives
		Commodity forward contracts		-		2		-		2
	Other marketable securities			2		-		-		2
		Total assets	$	857	$	311	$	-	$	1,168

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	158	$	28	$	186
		Interest rate contracts		-		11		-		11
		Total liabilities	$	-	$	169	$	28	$	197

(in millions)				Level 1		Level 2		Level 3		Total
December 31, 2011
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	673	$	-	$	-	$	673
		Preferred stock and other equity		17		-		-		17
		Corporate debt		-		69		-		69
		U.S. state and municipal debt		-		56		-		56
		U.S. and foreign government debt		81		145		-		226
		Money market funds and other		-		47		-		47
	Total nuclear decommissioning trust funds			771		317		-		1,088
	Other marketable securities			6		-		-		6
		Total assets	$	777	$	317	$	-	$	1,094

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	177	$	24	$	201
		Interest rate contracts		-		47		-		47
		Total liabilities	$	-	$	224	$	24	$	248

QUALITATIVE AND QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

A reconciliation of changes in the fair value of our and PEC's commodity derivative liabilities classified as Level 3 in the fair value hierarchy for the periods ended June 30 follows:

PEC
		Three months ended June 30				Six months ended June 30
(in millions)			2012		2011		2012		2011
Derivatives, net at beginning of period		$	27	$	32	$	24	$	36
Total losses, realized and unrealized - commodities
	deferred as regulatory assets and liabilities, net		1		5		4		1
Derivatives, net at end of period		$	28	$	37	$	28	$	37

Quantitative information about our and PEC's commodity derivative liabilities classified as Level 3 follows:


PEC
(in millions)	Fair Value		Valuation Technique	Unobservable Input		Range (price per MMBtu)
June 30, 2012
Commodity natural gas hedges	$	28	Discounted cash flow	Forward natural gas curves	$	3.956	-	4.374

PEF

Fair Value Disclosures [Line Items]

Fair Value Disclosures

9. FAIR VALUE DISCLOSURES

A. DEBT AND INVESTMENTS

PEF

DEBT

INVESTMENTS

The following table summarizes PEF's available-for-sale securities at June 30, 2012 and December 31, 2011:

(in millions)		Fair Value		Unrealized Losses		Unrealized Gains
June 30, 2012
Common stock equity		$	382	$	10	$	169
Preferred stock and other equity			25		-		5
Corporate debt			15		-		1
U.S. state and municipal debt			73		2		5
U.S. and foreign government debt			64		-		2
Money market funds and other			31		-		-
	Total	$	590	$	12	$	182

December 31, 2011
Common stock equity		$	360	$	9	$	146
Preferred stock and other equity			12		-		4
Corporate debt			17		-		1
U.S. state and municipal debt			72		2		4
U.S. and foreign government debt			58		-		2
Money market funds and other			10		-		-
	Total	$	529	$	11	$	157

The NDT funds are managed by third-party investment managers who have a right to sell securities without our authorization. Net unrealized gains and losses of the NDT funds that would be recorded in earnings or other comprehensive income by a nonregulated entity are recorded as regulatory assets and liabilities pursuant to ratemaking treatment. Therefore, the preceding table includes unrealized gains and losses for the NDT funds based on the original cost of the trust investments.

The aggregate fair value of investments that related to the June 30, 2012 and December 31, 2011 unrealized losses was $42 million and $38 million, respectively.

At June 30, 2012, the fair value of PEF's available-for-sale debt securities by contractual maturity was:

(in millions)
Due in one year or less	$	44
Due after one through five years		10
Due after five through 10 years		65
Due after 10 years		36
Total	$	155

	Three months ended June 30				Six months ended June 30
(in millions)		2012		2011		2012		2011
Proceeds	$	95	$	1,329	$	269	$	2,935
Realized gains		3		3		5		8
Realized losses		2		2		3		5

B. FAIR VALUE MEASUREMENTS

PEF
(in millions)				Level 1		Level 2		Level 3		Total
June 30, 2012
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	382	$	-	$	-	$	382
		Preferred stock and other equity		14		11		-		25
		Corporate debt		-		15		-		15
		U.S. state and municipal debt		-		73		-		73
		U.S. and foreign government debt		23		41		-		64
		Money market funds and other		-		34		-		34
	Total nuclear decommissioning trust funds			419		174		-		593
	Derivatives
		Commodity forward contracts		-		6		-		6
	Other marketable securities			1		-		-		1
		Total assets	$	420	$	180	$	-	$	600

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	414	$	2	$	416
		Interest rate contracts		-		11		-		11
		Total liabilities	$	-	$	425	$	2	$	427

(in millions)				Level 1		Level 2		Level 3		Total
December 31, 2011
Assets
	Nuclear decommissioning trust funds
		Common stock equity	$	360	$	-	$	-	$	360
		Preferred stock and other equity		11		1		-		12
		Corporate debt		-		17		-		17
		U.S. state and municipal debt		-		72		-		72
		U.S. and foreign government debt		6		52		-		58
		Money market funds and other		-		40		-		40
	Total nuclear decommissioning trust funds			377		182		-		559
	Derivatives
		Commodity forward contracts		-		5		-		5
	Other marketable securities			1		-		-		1
		Total assets	$	378	$	187	$	-	$	565

Liabilities
	Derivatives
		Commodity forward contracts	$	-	$	491	$	-	$	491
		Interest rate contracts		-		8		-		8
		Total liabilities	$	-	$	499	$	-	$	499

QUALITATIVE AND QUANTITATIVE INFORMATION ABOUT LEVEL 3 FAIR VALUE MEASUREMENTS

During the three and six months ended June 30, 2012 and 2011, PEF's assets and liabilities classified as Level 3 were not material.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

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