Fair Value Measurements

6 Months Ended

Jun. 30, 2012

14.	FAIR VALUE MEASUREMENTS

GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad categories, giving the highest priority to quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. A definition of the various levels, as well as discussion of the various measurements within the levels, is as follows:

Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets that Great Plains Energy and KCP&L have access to at the measurement date. Assets and liabilities categorized within this level consist of Great Plains Energy’s and KCP&L’s various exchange traded derivative instruments and equity and U.S. Treasury securities that are actively traded within KCP&L’s decommissioning trust fund and GMO’s Supplemental Executive Retirement Plan (SERP) rabbi trust fund.

Level 2 – Market-based inputs for assets or liabilities that are observable (either directly or indirectly) or inputs that are not observable but are corroborated by market data. Assets categorized within this level consist of Great Plains Energy’s and KCP&L’s various non-exchange traded derivative instruments traded in over-the-counter markets and certain debt securities within KCP&L’s decommissioning trust fund and GMO’s SERP rabbi trust fund.

Level 3 – Unobservable inputs, reflecting Great Plains Energy’s and KCP&L’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Assets categorized within this level consist of Great Plains Energy’s various non-exchange traded derivative instruments traded in over-the-counter markets for which sufficiently observable market data is not available to corroborate the valuation inputs.

The following tables include Great Plains Energy’s and KCP&L’s balances of financial assets and liabilities measured at fair value on a recurring basis at June 30, 2012, and December 31, 2011.


						Fair Value Measurements Using

Description	June 30 2012		Netting(d)			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
KCP&L	(millions)
Assets
Nuclear decommissioning trust (b)
Equity securities	$	91.3	$	-		$	91.3	$	-	$	-
Debt securities
U.S. Treasury		16.2		-			16.2		-		-
U.S. Agency		4.3		-			-		4.3		-
State and local obligations		2.7		-			-		2.7		-
Corporate bonds		26.9		-			-		26.9		-
Foreign governments		0.7		-			-		0.7		-
Other		0.5		-			-		0.5		-
Total nuclear decommissioning trust		142.6		-			107.5		35.1		-
Total		142.6		-			107.5		35.1		-
Liabilities
Derivative instruments (a)		-		(0.5	)		0.5		-		-
Total	$	-	$	(0.5	)	$	0.5	$	-	$	-
Other Great Plains Energy
Assets
Derivative instruments (a)	$	6.7	$	-		$	-	$	4.5	$	2.2
SERP rabbi trust (c)
Equity securities		0.2		-			0.2		-		-
Debt securities		0.1		-			-		0.1		-
Total SERP rabbi trust		0.3		-			0.2		0.1		-
Total		7.0		-			0.2		4.6		2.2
Liabilities
Derivative instruments (a)		-		(3.0	)		3.0		-		-
Total	$	-	$	(3.0	)	$	3.0	$	-	$	-
Great Plains Energy
Assets
Derivative instruments (a)	$	6.7	$	-		$	-	$	4.5	$	2.2
Nuclear decommissioning trust (b)		142.6		-			107.5		35.1		-
SERP rabbi trust (c)		0.3		-			0.2		0.1		-
Total		149.6		-			107.7		39.7		2.2
Liabilities
Derivative instruments (a)		-		(3.5	)		3.5		-		-
Total	$	-	$	(3.5	)	$	3.5	$	-	$	-


							Fair Value Measurements Using

Description	December 31 2011			Netting(d)			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
KCP&L	(millions)
Assets
Nuclear decommissioning trust (b)
Equity securities	$	84.3		$	-		$	84.3	$	-		$	-
Debt securities
U.S. Treasury		15.3			-			15.3		-			-
U.S. Agency		3.6			-			-		3.6			-
State and local obligations		2.6			-			-		2.6			-
Corporate bonds		26.4			-			-		26.4			-
Foreign governments		0.7			-			-		0.7			-
Other		(0.6	)		-			-		(0.6	)		-
Total nuclear decommissioning trust		132.3			-			99.6		32.7			-
Total		132.3			-			99.6		32.7			-
Liabilities
Derivative instruments (a)		-			(0.5	)		0.5		-			-
Total	$	-		$	(0.5	)	$	0.5	$	-		$	-
Other Great Plains Energy
Assets
Derivative instruments (a)	$	7.8		$	-		$	-	$	4.7		$	3.1
SERP rabbi trust (c)
Equity securities		0.2			-			0.2		-			-
Debt securities		0.1			-			-		0.1			-
Total SERP rabbi trust		0.3			-			0.2		0.1			-
Total		8.1			-			0.2		4.8			3.1
Liabilities
Derivative instruments (a)		-			(5.0	)		5.0		-			-
Total	$	-		$	(5.0	)	$	5.0	$	-		$	-
Great Plains Energy
Assets
Derivative instruments (a)	$	7.8		$	-		$	-	$	4.7		$	3.1
Nuclear decommissioning trust (b)		132.3			-			99.6		32.7			-
SERP rabbi trust (c)		0.3			-			0.2		0.1			-
Total		140.4			-			99.8		37.5			3.1
Liabilities
Derivative instruments (a)		-			(5.5	)		5.5		-			-
Total	$	-		$	(5.5	)	$	5.5	$	-		$	-

(a)	The fair value of derivative instruments is estimated using market quotes, over-the-counter forward price and volatility curves and correlations among fuel prices, net of estimated credit risk.

(b)

Fair value is based on quoted market prices of the investments held by the fund and/or valuation models. The total does not include $2.3 million and $3.0 million at June 30, 2012, and December 31, 2011, respectively, of cash and cash equivalents, which are not subject to the fair value requirements.

(c)

Fair value is based on quoted market prices of the investments held by the fund and/or valuation models. The total does not include $20.2 million and $20.3 million at June 30, 2012, and December 31, 2011, respectively, of cash and cash equivalents, which are not subject to the fair value requirements.

(d)

Represents the difference between derivative contracts in an asset or liability position presented on a net basis by counterparty on the consolidated balance sheet where a master netting agreement exists between the Company and the counterparty. At June 30, 2012, and December 31, 2011, Great Plains Energy netted $3.4 million and $5.5 million, respectively, of cash collateral posted with counterparties.

The following tables reconcile the beginning and ending balances for all Level 3 assets and liabilities, net measured at fair value on a recurring basis for the three months ended and year to date June 30, 2012 and 2011.


Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	2012			2011
	Derivative
	Instruments
	(millions)
Balance at April 1	$	2.4		$	5.7
Total realized/unrealized gains
included in non-operating income		0.9			2.1
Settlements		(1.1	)		(2.9	)
Balance at June 30	$	2.2		$	4.9

Total unrealized gains and (losses) included in non-operating
income relating to assets and liabilities still on the
consolidated balance sheet at June 30	$	(0.1	)	$	(0.6	)


Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	2012			2011
	Derivative
	Instruments
	(millions)
Balance at January 1	$	3.1		$	3.7
Total realized/unrealized gains
included in non-operating income		1.1			7.1
Settlements		(2.0	)		(5.9	)
Balance at June 30	$	2.2		$	4.9

Total unrealized gains and (losses) included in non-operating
income relating to assets and liabilities still on the
consolidated balance sheet at June 30	$	(0.7	)	$	1.5

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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