Financial Instruments And Investments

6 Months Ended

Jun. 30, 2012

Financial Instruments And Investments [Abstract]

Fair Value Disclosures [Text Block]

Financial Instruments and Investments

FASB guidance requires the Company to disclose estimated fair values for its financial instruments. The Company has determined that cash and temporary investments, investment in debt securities, accounts receivable, decommissioning trust funds, long-term debt, short-term borrowings under the RCF, accounts payable and customer deposits meet the definition of financial instruments. The carrying amounts of cash and temporary investments, accounts receivable, accounts payable and customer deposits approximate fair value because of the short maturity of these items. Investments in debt securities and decommissioning trust funds are carried at fair value.

Long-Term Debt and Short-Term Borrowings Under the RCF. The fair values of the Company’s long-term debt and short-term borrowings under the RCF are based on estimated market prices for similar issues and are presented below (in thousands):

	June 30, 2012				December 31, 2011
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Pollution Control Bonds	$	193,135	$	212,159	$	193,135	$	206,756
Senior Notes	546,689		679,250		546,662		700,371
RGRT Senior Notes (1)	110,000		120,190		110,000		116,985
RCF (1)	110,760		110,760		33,379		33,379
Total	$	960,584	$	1,122,359	$	883,176	$	1,057,491

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(1) Nuclear fuel financing as of June 30, 2012 and December 31, 2011 is funded through the $110 million RGRT Senior Notes and $34.8 million and $13.4 million, respectively under the RCF. As of June 30, 2012 and December 31, 2011, $76.0 million and $20.0 million, respectively, were outstanding under the RCF for working capital and general corporate purposes. The interest rate on the Company’s borrowings under the RCF is reset throughout the quarter reflecting current market rates. Consequently, the carrying value approximates fair value.

Marketable Securities. The Company’s marketable securities, included in decommissioning trust funds in the balance sheets, are reported at fair value which was $178.3 million and $168.0 million at June 30, 2012 and December 31, 2011, respectively. These securities are classified as available for sale under FASB guidance for certain investments in debt and equity securities and are valued using prices and other relevant information generated by market transactions involving identical or comparable securities. The reported fair values include gross unrealized losses on marketable securities whose impairment the Company has deemed to be temporary. The tables below present the gross unrealized losses and the fair value of these securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in thousands):

	June 30, 2012
	Less than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Description of Securities (1):
Federal Agency Mortgage Backed Securities	$	15	$	(1	)	$	1,048	$	(26	)	$	1,063	$	(27	)
U.S. Government Bonds	4,785		(41		)	1,175		(40		)	5,960		(81		)
Municipal Obligations	8,297		(71		)	4,938		(232		)	13,235		(303		)
Corporate Obligations	1,144		(8		)	912		(13		)	2,056		(21		)
Total Debt Securities	14,241		(121		)	8,073		(311		)	22,314		(432		)
Common Stock	5,487		(706		)	1,103		(211		)	6,590		(917		)
Total Temporarily Impaired Securities	$	19,728	$	(827	)	$	9,176	$	(522	)	$	28,904	$	(1,349	)

_________________

(1) Includes approximately 67 securities.

	December 31, 2011
	Less than 12 Months					12 Months or Longer					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Description of Securities (2):
Federal Agency Mortgage Backed Securities	$	515	$	(8	)	$	1,233	$	(23	)	$	1,748	$	(31	)
U.S. Government Bonds	100		(1		)	2,413		(38		)	2,513		(39		)
Municipal Obligations	2,275		(31		)	4,731		(144		)	7,006		(175		)
Corporate Obligations	3,525		(118		)	1,234		(43		)	4,759		(161		)
Total Debt Securities	6,415		(158		)	9,611		(248		)	16,026		(406		)
Common Stock	10,688		(2,065		)	1,740		(489		)	12,428		(2,554		)
Total Temporarily Impaired Securities	$	17,103	$	(2,223	)	$	11,351	$	(737	)	$	28,454	$	(2,960	)

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(2) Includes approximately 96 securities.

The Company monitors the length of time the security trades below its cost basis along with the amount and percentage of the unrealized loss in determining if a decline in fair value of marketable securities below recorded cost is considered to be other than temporary. In addition, the Company will research the future prospects of individual securities as necessary. As a result of these factors, as well as the Company’s intent and ability to hold these securities until their market price recovers, these securities are considered temporarily impaired. The Company will not have a requirement to expend monies held in trust before 2044 or a later period when the Company begins to decommission Palo Verde.

The reported fair values also include gross unrealized gains on marketable securities which have not been recognized in the Company’s net income. The table below presents the unrecognized gross unrealized gains and the fair value of these securities, aggregated by investment category (in thousands):

	June 30, 2012				December 31, 2011
	Fair Value		Unrealized Gains		Fair Value		Unrealized Gains
Description of Securities:
Federal Agency Mortgage Backed Securities	$	22,065	$	1,206	$	25,077	$	1,220
U.S. Government Bonds	9,129		754		10,263		972
Municipal Obligations	27,017		1,621		30,310		1,792
Corporate Obligations	10,679		705		7,641		459
Total Debt Securities	68,890		4,286		73,291		4,443
Common Stock	67,252		20,885		62,479		15,681
Equity Mutual Funds	9,073		393		—		—
Cash and Cash Equivalents	4,160		—		3,739		—
Total	$	149,375	$	25,564	$	139,509	$	20,124

The Company’s marketable securities include investments in municipal, corporate and federal debt obligations. Substantially all of the Company’s mortgage-backed securities, based on contractual maturity, are due in 10 years years or more. The mortgage-backed securities have an estimated weighted average maturity which generally range from 3 years to 7 years years and reflects anticipated future prepayments. The contractual year for maturity of these available-for-sale securities as of June 30, 2012 is as follows (in thousands):

	Total		2012		2013 through 2016		2017 through 2021		2022 and Beyond
Municipal Debt Obligations	$	40,252	$	989	$	10,993	$	16,847	$	11,423
Corporate Debt Obligations	12,735		—		3,740		5,314		3,681
U.S. Government Bonds	15,089		—		4,261		8,034		2,794

The Company recognizes impairment losses on certain of its securities deemed to be other than temporary. In accordance with FASB guidance, these impairment losses are recognized in net income, and a lower cost basis is established for these securities. For the three, six and twelve months ended June 30, 2012 and 2011, the Company recognized other than temporary impairment losses on its available-for-sale securities as follows (in thousands):

	Three Months Ended						Six Months Ended						Twelve Months Ended
	June 30,						June 30,						June 30,
	2012			2011			2012			2011			2012			2011
Gross unrealized holding losses included in pre-tax income	$	(166	)	$	(199	)	$	(166	)	$	(199	)	$	(2,083	)	$	(199	)

The Company’s marketable securities in its decommissioning trust funds are sold from time to time and the Company uses the specific identification basis to determine the amount to reclassify out of accumulated other comprehensive income and into net income. The proceeds from the sale of these securities and the related effects on pre-tax income are as follows (in thousands):

	Three Months Ended						Six Months Ended						Twelve Months Ended
	June 30,						June 30,						June 30,
	2012			2011			2012			2011			2012			2011
Proceeds from sales of available-for-sale securities	$	39,934		$	22,175		$	59,513		$	36,406		$	106,033		$	63,857
Gross realized gains included in pre-tax income	$	690		$	432		$	1,079		$	696		$	1,862		$	1,200
Gross realized losses included in pre-tax income	(1,971		)	(235		)	(2,147		)	(294		)	(2,574		)	(511		)
Gross unrealized losses included in pre-tax income	(166		)	(199		)	(166		)	(199		)	(2,083		)	(199		)
Net gains (losses) in pre-tax income	$	(1,447	)	$	(2	)	$	(1,234	)	$	203		$	(2,795	)	$	490
Net unrealized holding gains (losses) included in accumulated other comprehensive income	$	(2,341	)	$	416		$	5,817		$	2,589		$	4,798		$	13,232
Net (gains) losses reclassified out of accumulated other comprehensive income	1,447			2			1,234			(203		)	2,795			(490		)
Net gains (losses) in other comprehensive income	$	(894	)	$	418		$	7,051		$	2,386		$	7,593		$	12,742

Fair Value Measurements. FASB guidance requires the Company to provide expanded quantitative disclosures for financial assets and liabilities recorded on the balance sheet at fair value. Financial assets carried at fair value include the Company’s decommissioning trust investments and investments in debt securities which are included in deferred charges and other assets on the consolidated balance sheets. The Company has no liabilities that are measured at fair value on a recurring basis. The FASB guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:

• Level 1 – Observable inputs that reflect quoted market prices for identical assets and liabilities in active markets. Financial assets utilizing Level 1 inputs include the nuclear decommissioning trust investments in active exchange-traded equity securities and U.S. treasury securities that are in a highly liquid and active market.

• Level 2 – Inputs other than quoted market prices included in Level 1 that are observable for the asset or liability either directly or indirectly. Financial assets utilizing Level 2 inputs include the nuclear decommissioning trust investments in fixed income securities. The fair value of these financial instruments is based on evaluated prices that reflect observable market information, such as actual trade information of similar securities, adjusted for observable differences.

• Level 3 – Unobservable inputs using data that is not corroborated by market data and primarily based on internal Company analysis using models and various other analyses. Financial assets utilizing Level 3 inputs include the Company’s investments in debt securities.

The securities in the Company’s decommissioning trust funds are valued using prices and other relevant information generated by market transactions involving identical or comparable securities. FASB guidance identifies this valuation technique as the “market approach” with observable inputs. The Company analyzes available-for-sale securities to determine if losses are other than temporary.

The fair value of the Company’s decommissioning trust funds and investments in debt securities, at June 30, 2012 and December 31, 2011, and the level within the three levels of the fair value hierarchy defined by FASB guidance are presented in the table below (in thousands):

Description of Securities	Fair Value as of June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Trading Securities:
Investments in Debt Securities	$	1,228	$	—	$	—	$	1,228
Available for sale:
U.S. Government Bonds	$	15,089	$	15,089	$	—	$	—
Federal Agency Mortgage Backed Securities	23,128		—		23,128		—
Municipal Bonds	40,252		—		40,252		—
Corporate Asset Backed Obligations	12,735		—		12,735		—
Subtotal Debt Securities	91,204		15,089		76,115		—
Common Stock	73,842		73,842		—		—
Equity Mutual Funds	9,073		9,073		—		—
Cash and Cash Equivalents	4,160		4,160		—		—
Total available for sale	$	178,279	$	102,164	$	76,115	$	—

Description of Securities	Fair Value as of December 31, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Trading Securities:
Investments in Debt Securities	$	1,120	$	—	$	—	$	1,120
Available for sale:
U.S. Government Bonds	$	12,776	$	12,776	$	—	$	—
Federal Agency Mortgage Backed Securities	26,825		—		26,825		—
Municipal Bonds	37,316		—		37,316		—
Corporate Asset Backed Obligations	12,400		—		12,400		—
Subtotal Debt Securities	89,317		12,776		76,541		—
Common Stock	74,907		74,907		—		—
Cash and Cash Equivalents	3,739		3,739		—		—
Total available for sale	$	167,963	$	91,422	$	76,541	$	—

There were no transfers in and out of Level 1 and Level 2 fair value measurements categories during the three, six and twelve month periods ending June 30, 2012 and June 30, 2011.     

During the fourth quarter of 2011, the Company sold an investment in a debt security for $2.0 million that was categorized as a Level 3 investment. The Company realized in the consolidated statement of operations as investment and interest income a gain on the sale of the debt security of $0.4 million during the twelve month period ending June 30, 2012. There were no other purchases, sales, issuances, or settlements related to the assets in the Level 3 fair value measurement category during the three, six and twelve month periods ending June 30, 2012 and 2011.