15. 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.

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.

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.

Great Plains Energy and KCP&L record cash and cash equivalents and short-term borrowings on the balance sheet at cost, which approximates fair value due to the short-term nature of these instruments.

Great Plains Energy and KCP&L record long-term debt on the balance sheet at amortized cost. The fair value of long-term debt is measured as a Level 2 liability and is based on quoted market prices, with the incremental borrowing rate for similar debt used to determine fair value if quoted market prices are not available. At March 31, 2014, the book value and fair value of Great Plains Energy's long-term debt, including current maturities, were $3.5 billion and $3.8 billion, respectively. At December 31, 2013, the book value and fair value of Great Plains Energy's long-term debt, including current maturities, were $3.5 billion and $3.7 billion, respectively. At March 31, 2014, and December 31, 2013, the book value and fair value of KCP&L's long-term debt, including current maturities, were $2.3 billion and $2.5 billion, respectively.

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 March 31, 2014, and December 31, 2013.



Description	March 31 2014			Netting^(e)				Level 1			Level 2			Level 3
KCP&L		(millions)
Assets
Nuclear decommissioning trust ^(a)
Equity securities		$	129.3		$	—			$	129.3		$	—		$	—
Debt securities
U.S. Treasury		22.0			—				22.0			—			—
U.S. Agency		3.3			—				—			3.3			—
State and local obligations		4.0			—				—			4.0			—
Corporate bonds		24.2			—				—			24.2			—
Foreign governments		0.5			—				—			0.5			—
Cash equivalents		3.7			—				3.7			—			—
Other		0.4			—				—			0.4			—
Total nuclear decommissioning trust		187.4			—				155.0			32.4			—
Self-insured health plan trust ^(b)
Equity securities		1.2			—				1.2			—			—
Debt securities		9.2			—				—			9.2			—
Cash and cash equivalents		5.8			—				5.8			—			—
Total self-insured health plan trust		16.2			—				7.0			9.2			—
Derivative instruments ^(c)		4.1			(1.7		)		0.2			—			5.6
Total		207.7			(1.7		)		162.2			41.6			5.6
Liabilities
Derivative instruments ^(c)		0.2			(2.0		)		0.5			—			1.7
Total		$	0.2		$	(2.0	)		$	0.5		$	—		$	1.7
Other Great Plains Energy
Assets
Derivative instruments ^(c)		$	7.8		$	(1.0	)		$	0.5		$	4.6		$	3.7
SERP rabbi trusts ^(d)
Equity securities		0.1			—				0.1			—			—
Fixed income funds		18.3			—				—			18.3			—
Total SERP rabbi trusts		18.4			—				0.1			18.3			—
Total		26.2			(1.0		)		0.6			22.9			3.7
Liabilities
Derivative instruments ^(c)		—			(1.0		)		0.3			—			0.7
Total		$	—		$	(1.0	)		$	0.3		$	—		$	0.7
Great Plains Energy
Assets
Nuclear decommissioning trust ^(a)		$	187.4		$	—			$	155.0		$	32.4		$	—
Self-insured health plan trust ^(b)		16.2			—				7.0			9.2			—
Derivative instruments ^(c)		11.9			(2.7		)		0.7			4.6			9.3
SERP rabbi trusts ^(d)		18.4			—				0.1			18.3			—
Total		233.9			(2.7		)		162.8			64.5			9.3
Liabilities
Derivative instruments ^(c)		0.2			(3.0		)		0.8			—			2.4
Total		$	0.2		$	(3.0	)		$	0.8		$	—		$	2.4



Description	December 31 2013				Netting^(e)				Level 1			Level 2				Level 3
KCP&L		(millions)
Assets
Nuclear decommissioning trust ^(a)
Equity securities		$	127.7			$	—			$	127.7		$	—			$	—
Debt securities
U.S. Treasury		21.2				—				21.2			—				—
U.S. Agency		2.8				—				—			2.8				—
State and local obligations		3.9				—				—			3.9				—
Corporate bonds		24.4				—				—			24.4				—
Foreign governments		0.5				—				—			0.5				—
Cash equivalents		3.8				—				3.8			—				—
Other		(0.4		)		—				—			(0.4		)		—
Total nuclear decommissioning trust		183.9				—				152.7			31.2				—
Self-insured health plan trust ^(b)
Equity securities		0.9				—				0.9			—				—
Debt securities		9.3				—				0.5			8.8				—
Cash and cash equivalents		3.4				—				3.4			—				—
Other		1.2				—				—			1.2				—
Total self-insured health plan trust		14.8				—				4.8			10.0				—
Derivative instruments ^(c)		1.1				(0.1		)		0.1			—				1.1
Total		199.8				(0.1		)		157.6			41.2				1.1
Liabilities
Derivative instruments ^(c)		—				(0.3		)		0.3			—				—
Total		$	—			$	(0.3	)		$	0.3		$	—			$	—
Other Great Plains Energy
Assets
Derivative instruments ^(c)		$	6.7			$	(0.6	)		$	0.2		$	4.9			$	2.2
SERP rabbi trusts ^(d)
Equity securities		0.1				—				0.1			—				—
Fixed income funds		18.6				—				—			18.6				—
Total SERP rabbi trusts		18.7				—				0.1			18.6				—
Total		25.4				(0.6		)		0.3			23.5				2.2
Liabilities
Derivative instruments ^(c)		0.1				(0.6		)		0.6			0.1				—
Total		$	0.1			$	(0.6	)		$	0.6		$	0.1			$	—
Great Plains Energy
Assets
Nuclear decommissioning trust ^(a)		$	183.9			$	—			$	152.7		$	31.2			$	—
Self-insured health plan trust ^(b)		14.8				—				4.8			10.0				—
Derivative instruments ^(c)		7.8				(0.7		)		0.3			4.9				3.3
SERP rabbi trusts ^(d)		18.7				—				0.1			18.6				—
Total		225.2				(0.7		)		157.9			64.7				3.3
Liabilities
Derivative instruments ^(c)		0.1				(0.9		)		0.9			0.1				—
Total		$	0.1			$	(0.9	)		$	0.9		$	0.1			$	—


^(a)	Fair value is based on quoted market prices of the investments held by the fund and/or valuation models.


^(b)	Fair value is based on quoted market prices of the investments held by the trust. Debt securities classified as Level 1 are comprised of U.S. Treasury securities. Debt securities classified as Level 2 are comprised of corporate bonds, U.S. Agency, state and local obligations, and other asset-backed securities.

^(c)

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. Derivative instruments classified as Level 1 represent exchange traded derivative instruments. Derivative instruments classified as Level 2 represent non-exchange traded derivative instruments traded in over-the-counter markets. Derivative instruments classified as Level 3 represent non-exchange traded derivatives traded in over-the-counter markets for which observable market data is not available to corroborate the valuation inputs and TCRs valued at the most recent auction price in the SPP Integrated Marketplace.


^(d)	Fair value is based on quoted market prices and/or valuation models for equity securities and Net Asset Value (NAV) per share for fixed income funds.

^(e)

Represents the difference between derivative contracts in an asset or liability position presented on a net basis by counterparty on the consolidated balance sheets where a master netting agreement exists between the Company and the counterparty. At March 31, 2014, and December 31, 2013, Great Plains Energy netted $0.3 million and $0.2 million, respectively, of cash collateral posted with counterparties.

The following tables reconcile the beginning and ending balances for all Level 3 assets measured at fair value on a recurring basis.



Great Plains Energy
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Derivative Instruments
	2014			2013
	(millions)
Net asset at January 1	$	3.3		$	2.3
Total realized/unrealized gains (losses):
included in purchased power expense	1.3			—
included in non-operating income	7.1			2.4
Purchases	6.1			—
Settlements	(10.9		)	(2.3		)
Net asset at March 31	$	6.9		$	2.4
Total unrealized gains (losses) relating to assets still on the consolidated balance sheet at March 31:
included in purchased power expense	$	(0.1	)	$	—
included in non-operating income	$	0.1		$	0.2



KCP&L
Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Derivative Instruments
		2014
		(millions)
Net asset at January 1		$	1.1
Total realized/unrealized gains (losses):
included in purchased power expense		0.9
included in regulatory asset or liability		(0.1		)
Purchases		5.1
Settlements		(3.1		)
Net asset at March 31		$	3.9
Total unrealized losses relating to assets still on the consolidated balance sheet at March 31:
included in purchased power expense		$	(0.1	)
included in regulatory asset or liability		$	(0.1	)