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Financial Instruments And Investments (Notes)
 3 Months Ended
Mar. 31, 2014
Financial Instruments And Investments [Abstract]  
Financial Instruments and Investments
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): 
 
March 31, 2014
 
December 31, 2013
 
Carrying
Amount
 
Estimated
Fair
Value
 
Carrying
Amount
 
Estimated
Fair
Value
Pollution Control Bonds
$
193,135

 
$
202,897

 
$
193,135

 
$
193,990

Senior Notes
696,508

 
744,856

 
696,485

 
734,515

RGRT Senior Notes (1)
110,000

 
116,560

 
110,000

 
115,850

RCF (1)
45,951

 
45,951

 
14,352

 
14,352

Total
$
1,045,594

 
$
1,110,264

 
$
1,013,972

 
$
1,058,707

_______________ 
(1)
Nuclear fuel financing as of March 31, 2014 and December 31, 2013 is funded through the $110 million RGRT Senior Notes and $20.0 million and $14.4 million, respectively under the RCF. As of March 31, 2014, $26.0 million was outstanding under the RCF for working capital or general corporate purposes. As of December 31, 2013, no amount was outstanding under the RCF for working capital or 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 $217.5 million and $214.1 million at March 31, 2014 and December 31, 2013, 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): 
 
March 31, 2014
 
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
$
4,667

 
$
(28
)
 
$
2,457

 
$
(170
)
 
$
7,124

 
$
(198
)
U.S. Government Bonds
1,548

 
(1
)
 
16,128

 
(893
)
 
17,676

 
(894
)
Municipal Obligations
6,860

 
(101
)
 
13,038

 
(651
)
 
19,898

 
(752
)
Corporate Obligations
2,734

 
(66
)
 
1,299

 
(44
)
 
4,033

 
(110
)
Total Debt Securities
15,809

 
(196
)
 
32,922

 
(1,758
)
 
48,731

 
(1,954
)
Common Stock
1,614

 
(122
)
 
—

 
—

 
1,614

 
(122
)
Total Temporarily Impaired Securities
$
17,423

 
$
(318
)
 
$
32,922

 
$
(1,758
)
 
$
50,345

 
$
(2,076
)
 
_________________
(1)
Includes approximately 119 securities.
 
December 31, 2013
 
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
$
6,444

 
$
(169
)
 
$
1,421

 
$
(119
)
 
$
7,865

 
$
(288
)
U.S. Government Bonds
8,114

 
(245
)
 
10,866

 
(840
)
 
18,980

 
(1,085
)
Municipal Obligations
12,286

 
(335
)
 
7,782

 
(479
)
 
20,068

 
(814
)
Corporate Obligations
3,284

 
(96
)
 
901

 
(54
)
 
4,185

 
(150
)
Total Debt Securities
30,128

 
(845
)
 
20,970

 
(1,492
)
 
51,098

 
(2,337
)
Common Stock
2,305

 
(126
)
 
—

 
—

 
2,305

 
(126
)
Total Temporarily Impaired Securities
$
32,433

 
$
(971
)
 
$
20,970

 
$
(1,492
)
 
$
53,403

 
$
(2,463
)
 
_________________
(2)
Includes approximately 122 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 does not anticipate expending 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): 
 
March 31, 2014
 
December 31, 2013
 
Fair
Value
 
Unrealized
Gains
 
Fair
Value
 
Unrealized
Gains
Description of Securities:
 
 
 
 
 
 
 
Federal Agency Mortgage Backed Securities
$
10,276

 
$
489

 
$
9,929

 
$
433

U.S. Government Bonds
9,719

 
180

 
6,258

 
126

Municipal Obligations
10,237

 
528

 
8,783

 
450

Corporate Obligations
9,758

 
649

 
9,188

 
506

Total Debt Securities
39,990

 
1,846

 
34,158

 
1,515

Common Stock
105,835

 
43,402

 
103,808

 
43,145

Common Collective Trust-Equity Funds
16,891

 
235

 
—

 
—

Equity Mutual Funds
—

 
—

 
16,802

 
3,081

Cash and Cash Equivalents
4,448

 
—

 
5,924

 
—

Total
$
167,164

 
$
45,483

 
$
160,692

 
$
47,741


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 ten years or more. The mortgage-backed securities have an estimated weighted average maturity which generally range from three years to eight years and reflects anticipated future prepayments. The contractual year for maturity of these available-for-sale securities as of March 31, 2014 is as follows (in thousands): 
 
Total
 
2014
 
2015
through
2018
 
2019 through 2023
 
2024 and Beyond
Municipal Debt Obligations
$
30,135

 
$
976

 
$
13,279

 
$
12,562

 
$
3,318

Corporate Debt Obligations
13,791

 
317

 
3,324

 
5,963

 
4,187

U.S. Government Bonds
27,395

 
1,210

 
14,347

 
6,434

 
5,404


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 and twelve months ended March 31, 2014 and 2013, the Company recognized other than temporary impairment losses on its available-for-sale securities as follows (in thousands): 
 
Three Months Ended
 
Twelve Months Ended
 
March 31,
 
March 31,
 
2014
 
2013
 
2014
 
2013
Unrealized holding losses included in pre-tax income
$
—

 
$
—

 
$
—

 
$
(479
)

 











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
 
Twelve Months Ended
 
March 31,
 
March 31,
 
2014
 
2013
 
2014
 
2013
Proceeds from sales or maturities of available-for-sale securities
$
28,827

 
$
10,907

 
$
74,067

 
$
89,870

Gross realized gains included in pre-tax income
$
3,014

 
$
39

 
$
3,961

 
$
1,128

Gross realized losses included in pre-tax income
(149
)
 
(197
)
 
(385
)
 
(2,062
)
Gross unrealized losses included in pre-tax income
—

 
—

 
—

 
(479
)
Net gains (losses) in pre-tax income
$
2,865

 
$
(158
)
 
$
3,576

 
$
(1,413
)
Net unrealized holding gains included in accumulated other comprehensive income
$
998

 
$
6,793

 
$
11,904

 
$
8,562

Net (gains) losses reclassified out of accumulated other comprehensive income
(2,865
)
 
158

 
(3,576
)
 
1,413

Net gains (losses) in other comprehensive income
$
(1,867
)
 
$
6,951

 
$
8,328

 
$
9,975


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 investment in debt securities which are included in deferred charges and other assets on the 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, mutual funds 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. The Common Collective Trusts are valued using the net asset value ("NAV") provided by the administrator of the fund. The NAV price is quoted on a restrictive market although the underlying investments are traded on active markets.
•
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 investment 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.



During the first quarter of 2014, the Company sold its nuclear decommissioning trust investments in equity mutual funds, classified as Level 1, and invested those assets in common collective trusts which are classified as Level 2. The fair value of the Company’s decommissioning trust funds and investment in debt securities, at March 31, 2014 and December 31, 2013, 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 March 31, 2014
 
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
$
1,503

 
$
—

 
$
—

 
$
1,503

Available for sale:
 
 
 
 
 
 
 
U.S. Government Bonds
$
27,395

 
$
27,395

 
$
—

 
$
—

Federal Agency Mortgage Backed Securities
17,400

 
—

 
17,400

 
—

Municipal Obligations
30,135

 
—

 
30,135

 
—

Corporate Obligations
13,791

 
—

 
13,791

 
—

Subtotal, Debt Securities
88,721

 
27,395

 
61,326

 
—

Common Stock
107,449

 
107,449

 
—

 
—

Common Collective Trust-Equity Funds
16,891

 
—

 
16,891

 
—

Cash and Cash Equivalents
4,448

 
4,448

 
—

 
—

Total available for sale
$
217,509

 
$
139,292

 
$
78,217

 
$
—

Description of Securities
Fair Value as of December 31, 2013
 
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
$
1,555

 
$
—

 
$
—

 
$
1,555

Available for sale:
 
 
 
 
 
 
 
U.S. Government Bonds
$
25,238

 
$
25,238

 
$
—

 
$
—

Federal Agency Mortgage Backed Securities
17,794

 
—

 
17,794

 
—

Municipal Obligations
28,851

 
—

 
28,851

 
—

Corporate Obligations
13,373

 
—

 
13,373

 
—

Subtotal, Debt Securities
85,256

 
25,238

 
60,018

 
—

Common Stock
106,113

 
106,113

 
—

 
—

Equity Mutual Funds
16,802

 
16,802

 
—

 
—

Cash and Cash Equivalents
5,924

 
5,924

 
—

 
—

Total available for sale
$
214,095

 
$
154,077

 
$
60,018

 
$
—


There were no transfers in or out of Level 1 and Level 2 fair value measurements categories due to changes in observable inputs during the three and twelve month periods ending March 31, 2014 and 2013. There were no purchases, sales, issuances, and settlements related to the assets in the Level 3 fair value measurement category during the three and twelve months ended March 31, 2014 and 2013.