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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

_______________ 
(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
)
 
_________________
(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.