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Financial Instruments And Investments (Notes)
 3 Months Ended
Mar. 31, 2017
Fair Value Disclosures [Abstract]  
Financial Instruments and Investments
Financial Instruments and Investments
The 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 Revolving Credit Facility ("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 estimated 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, 2017
 
December 31, 2016
 
Carrying
Amount
 
Estimated
Fair
Value
 
Carrying
Amount
 
Estimated
Fair
Value
Pollution Control Bonds
$
190,844

 
$
204,599

 
$
190,775

 
$
206,818

Senior Notes
993,170

 
1,126,625

 
993,086

 
1,112,285

RGRT Senior Notes (1)
94,822

 
98,555

 
94,795

 
98,855

RCF (1)
134,178

 
134,178

 
81,574

 
81,574

Total
$
1,413,014

 
$
1,563,957

 
$
1,360,230

 
$
1,499,532

_______________ 
(1)
Nuclear fuel financing, as of March 31, 2017 and December 31, 2016, is funded through the $95 million Rio Grande Resources Trust ("RGRT") Senior Notes and $40.2 million and $37.6 million, respectively under the RCF. As of March 31, 2017, $94.0 million was outstanding under the RCF for working capital or general corporate purposes. As of December 31, 2016, $44.0 million 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 $265.9 million and $255.7 million at March 31, 2017 and December 31, 2016, respectively. These securities are classified as available for sale and recorded at their estimated fair value using the FASB guidance for certain investments in debt and equity 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, 2017
 
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
$
11,142

 
$
(249
)
 
$
424

 
$
(23
)
 
$
11,566

 
$
(272
)
U.S. Government Bonds
32,621

 
(739
)
 
9,876

 
(570
)
 
42,497

 
(1,309
)
Municipal Obligations
9,152

 
(298
)
 
4,413

 
(385
)
 
13,565

 
(683
)
Corporate Obligations
9,665

 
(131
)
 
2,491

 
(208
)
 
12,156

 
(339
)
Total Debt Securities
62,580

 
(1,417
)
 
17,204

 
(1,186
)
 
79,784

 
(2,603
)
Common Stock
541

 
(53
)
 
—

 
—

 
541

 
(53
)
Total Temporarily Impaired Securities
$
63,121

 
$
(1,470
)
 
$
17,204

 
$
(1,186
)
 
$
80,325

 
$
(2,656
)
 
_________________
(1)
Includes 139 securities.
 
December 31, 2016
 
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
$
11,582

 
$
(239
)
 
$
436

 
$
(22
)
 
$
12,018

 
$
(261
)
U.S. Government Bonds
31,655

 
(762
)
 
17,976

 
(835
)
 
49,631

 
(1,597
)
Municipal Obligations
9,596

 
(394
)
 
4,067

 
(372
)
 
13,663

 
(766
)
Corporate Obligations
7,971

 
(172
)
 
2,092

 
(172
)
 
10,063

 
(344
)
Total Debt Securities
60,804

 
(1,567
)
 
24,571

 
(1,401
)
 
85,375

 
(2,968
)
Common Stock
2,760

 
(167
)
 
—

 
—

 
2,760

 
(167
)
Institutional Equity Funds-International Equity
22,945

 
(110
)
 
—

 
—

 
22,945

 
(110
)
Total Temporarily Impaired Securities
$
86,509

 
$
(1,844
)
 
$
24,571

 
$
(1,401
)
 
$
111,080

 
$
(3,245
)
 
_________________
(2)
Includes 152 securities.
The Company monitors the length of time specific securities trade below their 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. The Company recognizes impairment losses on certain of its securities deemed to be other than temporary. In accordance with the FASB guidance, these impairment losses are recognized in net income, and a lower cost basis is established for these securities. In addition, the Company will research the future prospects of individual securities as necessary. The Company does not anticipate expending monies held in trust before 2044 or a later period when decommissioning of Palo Verde begins.
For the three and twelve months ended March 31, 2017 and 2016, the Company recognized other than temporary impairment losses on its available-for-sale securities as follow (in thousands):
 
Three Months Ended
 
Twelve Months Ended
 
March 31,
 
March 31,
 
2017
 
2016
 
2017
 
2016
Unrealized holding losses included in pre-tax income
$
—

 
$
(156
)
 
$
(196
)
 
$
(494
)

The reported securities 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, 2017
 
December 31, 2016
 
Fair
Value
 
Unrealized
Gains
 
Fair
Value
 
Unrealized
Gains
Description of Securities:
 
 
 
 
 
 
 
Federal Agency Mortgage Backed Securities
$
6,991

 
$
276

 
$
7,430

 
$
319

U.S. Government Bonds
15,811

 
198

 
12,237

 
138

Municipal Obligations
4,086

 
144

 
2,481

 
144

Corporate Obligations
14,393

 
710

 
12,350

 
655

Total Debt Securities
41,281

 
1,328

 
34,498

 
1,256

Common Stock
62,487

 
34,868

 
61,884

 
34,066

Equity Mutual Funds
50,225

 
5,690

 
42,244

 
3,345

Institutional Funds - International Equity
24,737

 
1,722

 
—

 
—

Cash and Cash Equivalents
6,802

 
—

 
6,002

 
—

Total
$
185,532

 
$
43,608

 
$
144,628

 
$
38,667


The Company's marketable securities include investments in mortgage backed securities, municipal, corporate and federal debt obligations. The contractual year for maturity of these available-for-sale securities as of March 31, 2017 is as follows (in thousands): 
 
Total
 
2017
 
2018
through
2021
 
2022 through 2026
 
2027 and Beyond
Municipal Debt Obligations
$
17,651

 
$
804

 
$
6,366

 
$
9,203

 
$
1,278

Corporate Debt Obligations
26,549

 
—

 
10,110

 
7,511

 
8,928

U.S. Government Bonds
58,308

 
5,928

 
27,123

 
14,834

 
10,423

Federal Agency Mortgage Backed Securities
18,557

 
—

 
6

 
356

 
18,195


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 from accumulated other comprehensive income into net income. The proceeds from the sale of these securities during the three and twelve months ended March 31, 2017 and 2016 and the related effects on pre-tax income are as follows (in thousands): 
 
Three Months Ended
 
Twelve Months Ended
 
March 31,
 
March 31,
 
2017
 
2016
 
2017
 
2016
Proceeds from sales or maturities of available-for-sale securities
$
26,055

 
$
24,078

 
$
93,245

 
$
102,003

Gross realized gains included in pre-tax income
$
2,587

 
$
1,832

 
$
9,968

 
$
10,429

Gross realized losses included in pre-tax income
(396
)
 
(288
)
 
(1,329
)
 
(1,178
)
Gross unrealized losses included in pre-tax income
—

 
(156
)
 
(196
)
 
(494
)
Net gains included in pre-tax income
$
2,191

 
$
1,388

 
$
8,443

 
$
8,757

Net unrealized holding gains (losses) included in accumulated other comprehensive income
$
7,721

 
$
2,190

 
$
13,975

 
$
(1,730
)
Net gains reclassified from accumulated other comprehensive income
(2,191
)
 
(1,388
)
 
(8,443
)
 
(8,757
)
Net gains (losses) in other comprehensive
income
$
5,530

 
$
802

 
$
5,532

 
$
(10,487
)

Fair Value Measurements. The 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 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. The Institutional Funds 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. During the third quarter of 2016, the Company concluded that the NAV used for determining the fair value of the Institutional Funds- International Equity investments have readily determinable fair values. Accordingly, such fund values have been re-categorized from Level 2 to Level 1 hierarchy.
•
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 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. The 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 March 31, 2017 and December 31, 2016, and the level within the three levels of the fair value hierarchy defined by the FASB guidance are presented in the table below (in thousands): 
Description of Securities
Fair Value as of March 31, 2017
 
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
$
1,628

 
$
—

 
$
—

 
$
1,628

Available for sale:
 
 
 
 
 
 
 
U.S. Government Bonds
$
58,308

 
$
58,308

 
$
—

 
$
—

Federal Agency Mortgage Backed Securities
18,557

 
—

 
18,557

 
—

Municipal Obligations
17,651

 
—

 
17,651

 
—

Corporate Obligations
26,549

 
—

 
26,549

 
—

Subtotal, Debt Securities
121,065

 
58,308

 
62,757

 
—

Common Stock
63,028

 
63,028

 
—

 
—

Equity Mutual Funds
50,225

 
50,225

 
—

 
—

Institutional Funds-International Equity
24,737

 
24,737

 
—

 
—

Cash and Cash Equivalents
6,802

 
6,802

 
—

 
—

Total Available for Sale
$
265,857

 
$
203,100

 
$
62,757

 
$
—

Description of Securities
Fair Value as of December 31, 2016
 
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
$
1,421

 
$
—

 
$
—

 
$
1,421

Available for sale:
 
 
 
 
 
 
 
U.S. Government Bonds
$
61,868

 
$
61,868

 
$
—

 
$
—

Federal Agency Mortgage Backed Securities
19,448

 
—

 
19,448

 
—

Municipal Obligations
16,144

 
—

 
16,144

 
—

Corporate Obligations
22,413

 
—

 
22,413

 
—

Subtotal, Debt Securities
119,873

 
61,868

 
58,005

 
—

Common Stock
64,644

 
64,644

 
—

 
—

Equity Mutual Funds
42,244

 
42,244

 
—

 
—

Institutional Funds-International Equity
22,945

 
22,945

 
—

 
—

Cash and Cash Equivalents
6,002

 
6,002

 
—

 
—

Total Available for Sale
$
255,708

 
$
197,703

 
$
58,005

 
$
—



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 ended March 31, 2017 and 2016. 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, 2017 and 2016.