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Financial Instruments And Investments (Notes)
 3 Months Ended
Mar. 31, 2015
Fair Value Disclosures [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, 2015
 
December 31, 2014
 
Carrying
Amount
 
Estimated
Fair
Value
 
Carrying
Amount
 
Estimated
Fair
Value
Pollution Control Bonds
$
193,135

 
$
212,948

 
$
193,135

 
$
213,083

Senior Notes
846,070

 
1,010,568

 
846,044

 
968,728

RGRT Senior Notes (1)
110,000

 
118,070

 
110,000

 
117,215

RCF (1)
58,345

 
58,345

 
14,532

 
14,532

Total
$
1,207,550

 
$
1,399,931

 
$
1,163,711

 
$
1,313,558

_______________ 
(1)
Nuclear fuel financing as of March 31, 2015 and December 31, 2014 is funded through the $110 million RGRT Senior Notes and $17.3 million and $14.5 million, respectively under the RCF. As of March 31, 2015, $41.0 million was outstanding under the RCF for working capital or general corporate purposes. As of December 31, 2014, 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 $237.6 million and $234.3 million at March 31, 2015 and December 31, 2014, 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, 2015
 
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
$
—

 
$
—

 
$
2,362

 
$
(32
)
 
$
2,362

 
$
(32
)
U.S. Government Bonds
—

 
—

 
17,868

 
(453
)
 
17,868

 
(453
)
Municipal Obligations
9,265

 
(126
)
 
8,807

 
(465
)
 
18,072

 
(591
)
Corporate Obligations
2,833

 
(66
)
 
2,508

 
(103
)
 
5,341

 
(169
)
Total Debt Securities
12,098

 
(192
)
 
31,545

 
(1,053
)
 
43,643

 
(1,245
)
Common Stock
3,414

 
(139
)
 
—

 
—

 
3,414

 
(139
)
Total Temporarily Impaired Securities
$
15,512

 
$
(331
)
 
$
31,545

 
$
(1,053
)
 
$
47,057

 
$
(1,384
)
 
_________________
(1)
Includes 108 securities.
 
December 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 (2):
 
 
 
 
 
 
 
 
 
 
 
Federal Agency Mortgage Backed Securities
$
—

 
$
—

 
$
2,383

 
$
(57
)
 
$
2,383

 
$
(57
)
U.S. Government Bonds
1,552

 
(2
)
 
20,060

 
(573
)
 
21,612

 
(575
)
Municipal Obligations
6,433

 
(65
)
 
8,570

 
(410
)
 
15,003

 
(475
)
Corporate Obligations
2,455

 
(24
)
 
2,461

 
(111
)
 
4,916

 
(135
)
Total Debt Securities
10,440

 
(91
)
 
33,474

 
(1,151
)
 
43,914

 
(1,242
)
Common Stock
1,475

 
(229
)
 
—

 
—

 
1,475

 
(229
)
Common Collective Trust-Equity Funds
22,736

 
(821
)
 
—

 
—

 
22,736

 
(821
)
Total Temporarily Impaired Securities
$
34,651

 
$
(1,141
)
 
$
33,474

 
$
(1,151
)
 
$
68,125

 
$
(2,292
)
 
_________________
(2)
Includes 106 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 is expected or is scheduled 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, 2015
 
December 31, 2014
 
Fair
Value
 
Unrealized
Gains
 
Fair
Value
 
Unrealized
Gains
Description of Securities:
 
 
 
 
 
 
 
Federal Agency Mortgage Backed Securities
$
18,270

 
$
770

 
$
15,388

 
$
665

U.S. Government Bonds
24,984

 
630

 
20,016

 
567

Municipal Obligations
11,594

 
543

 
11,642

 
595

Corporate Obligations
15,662

 
1,038

 
13,762

 
850

Total Debt Securities
70,510

 
2,981

 
60,808

 
2,677

Common Stock
90,331

 
43,886

 
99,160

 
48,253

Common Collective Trust-Equity Funds
23,760

 
745

 
—

 
—

Cash and Cash Equivalents
5,961

 
—

 
6,193

 
—

Total
$
190,562

 
$
47,612

 
$
166,161

 
$
50,930








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 two years to six years and reflects anticipated future prepayments. The contractual year for maturity of these available-for-sale securities as of March 31, 2015 is as follows (in thousands): 
 
Total
 
2015
 
2016
through
2019
 
2020 through 2024
 
2025 and Beyond
Municipal Debt Obligations
$
29,666

 
$
837

 
$
11,093

 
$
12,963

 
$
4,773

Corporate Debt Obligations
21,003

 
713

 
5,849

 
7,748

 
6,693

U.S. Government Bonds
42,852

 
3,051

 
17,549

 
14,638

 
7,614


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. The Company did not recognize other than temporary impairment losses on its available-for-sale securities in the three and twelve month periods ending March 31, 2015 and 2014, respectively.
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,
 
2015
 
2014
 
2015
 
2014
Proceeds from sales or maturities of available-for-sale securities
$
24,642

 
$
28,827

 
$
104,126

 
$
74,067

Gross realized gains included in pre-tax income
$
3,782

 
$
3,014

 
$
8,626

 
$
3,961

Gross realized losses included in pre-tax income
(37
)
 
(149
)
 
(396
)
 
(385
)
Net gains in pre-tax income
$
3,745

 
$
2,865

 
$
8,230

 
$
3,576

Net unrealized holding gains included in accumulated other comprehensive income
$
1,014

 
$
998

 
$
10,843

 
$
11,904

Net gains reclassified out of accumulated other comprehensive income
(3,745
)
 
(2,865
)
 
(8,230
)
 
(3,576
)
Net gains (losses) in other comprehensive income
$
(2,731
)
 
$
(1,867
)
 
$
2,613

 
$
8,328


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 analysis. Financial assets utilizing Level 3 inputs are 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, 2015 and December 31, 2014, 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, 2015
 
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
$
1,625

 
$
—

 
$
—

 
$
1,625

Available for sale:
 
 
 
 
 
 
 
U.S. Government Bonds
$
42,852

 
$
42,852

 
$
—

 
$
—

Federal Agency Mortgage Backed Securities
20,632

 
—

 
20,632

 
—

Municipal Obligations
29,666

 
—

 
29,666

 
—

Corporate Obligations
21,003

 
—

 
21,003

 
—

Subtotal, Debt Securities
114,153

 
42,852

 
71,301

 
—

Common Stock
93,745

 
93,745

 
—

 
—

Common Collective Trust-Equity Funds
23,760

 
—

 
23,760

 
—

Cash and Cash Equivalents
5,961

 
5,961

 
—

 
—

Total available for sale
$
237,619

 
$
142,558

 
$
95,061

 
$
—

Description of Securities
Fair Value as of December 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
$
1,653

 
$
—

 
$
—

 
$
1,653

Available for sale:
 
 
 
 
 
 
 
U.S. Government Bonds
$
41,628

 
$
41,628

 
$
—

 
$
—

Federal Agency Mortgage Backed Securities
17,771

 
—

 
17,771

 
—

Municipal Obligations
26,645

 
—

 
26,645

 
—

Corporate Obligations
18,678

 
—

 
18,678

 
—

Subtotal, Debt Securities
104,722

 
41,628

 
63,094

 
—

Common Stock
100,635

 
100,635

 
—

 
—

Common Collective Trust-Equity Funds
22,736

 
—

 
22,736

 
—

Cash and Cash Equivalents
6,193

 
6,193

 
—

 
—

Total available for sale
$
234,286

 
$
148,456

 
$
85,830

 
$
—


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, 2015 and 2014. 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, 2015 and 2014.