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Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2013
Fair Value Measurements  
Fair value of assets and liabilities that are measured at fair value on a recurring basis

The following table presents the fair value at September 30, 2013 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in millions):

 

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs (a)
(Level 3)

 

Other

 

Balance at
September 30,
2013

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Risk management activities — derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

Commodity Contracts

 

$

—

 

$

12

 

$

48

 

$

(11

)(b)

$

49

 

Nuclear decommissioning trust:

 

 

 

 

 

 

 

 

 

 

 

U.S. commingled equity funds

 

—

 

245

 

—

 

—

 

245

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

109

 

—

 

—

 

—

 

109

 

Cash and cash equivalent funds

 

—

 

13

 

—

 

(3

)(c)

10

 

Corporate debt

 

—

 

83

 

—

 

—

 

83

 

Mortgage-backed securities

 

—

 

82

 

—

 

—

 

82

 

Municipality bonds

 

—

 

71

 

—

 

—

 

71

 

Other

 

—

 

13

 

—

 

—

 

13

 

Subtotal nuclear decommissioning trust

 

109

 

507

 

—

 

(3

)

613

 

Total

 

$

109

 

$

519

 

$

48

 

$

(14

)

$

662

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Risk management activities — derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

—

 

$

(49

)

$

(92

)

$

20

(b)

$

(121

)

 

 

(a)                                 Primarily consists of heat rate options and long-dated electricity contracts.

(b)                                 Primarily represents counterparty netting, margin and collateral (see Note 7).

(c)                                  Represents nuclear decommissioning trust net pending securities sales and purchases.

 

The following table presents the fair value at December 31, 2012 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in millions):

 

 

 

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs (a)
(Level 3)

 

Other

 

Balance at
December 31,
2012

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

16

 

$

—

 

$

—

 

$

—

 

$

16

 

Risk management activities — derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

Commodity Contracts

 

—

 

22

 

62

 

(22

)(b)

62

 

Nuclear decommissioning trust:

 

 

 

 

 

 

 

 

 

 

 

U.S. commingled equity funds

 

—

 

204

 

—

 

—

 

204

 

Fixed income securities:

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury

 

104

 

—

 

—

 

—

 

104

 

Cash and cash equivalent funds

 

6

 

13

 

—

 

(4

)(c)

15

 

Corporate debt

 

—

 

80

 

—

 

—

 

80

 

Mortgage-backed securities

 

—

 

83

 

—

 

—

 

83

 

Municipality bonds

 

—

 

74

 

—

 

—

 

74

 

Other

 

—

 

11

 

—

 

—

 

11

 

Subtotal nuclear decommissioning trust

 

110

 

465

 

—

 

(4

)

571

 

Total

 

$

126

 

$

487

 

$

62

 

$

(26

)

$

649

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Risk management activities — derivative instruments:

 

 

 

 

 

 

 

 

 

 

 

Commodity contracts

 

$

—

 

$

(96

)

$

(110

)

$

47

(b)

$

(159

)

 

 

(a)                                 Primarily consists of heat rate options and long-dated electricity contracts.

(b)                                 Represents counterparty netting, margin and collateral (see Note 7).

(c)                                  Represents nuclear decommissioning trust net pending securities sales and purchases.

 
Information regarding the entity's internally developed significant unobservable inputs used to value its level 3 instruments

 

 

 

September 30, 2013
Fair Value (millions)

 

Valuation

 

Significant

 

 

 

Weighted-

 

Commodity Contracts

 

Assets

 

Liabilities

 

Technique

 

Unobservable Input

 

Range

 

Average

 

Electricity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Contracts (a)

 

$

47

 

$

74

 

Discounted cash flows

 

Electricity forward price (per MWh)

 

$24.55 – $60.97

 

$

40.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Contracts (b)

 

—

 

16

 

Option model

 

Electricity forward price (per MWh)

 

$38.56 – $82.07

 

$

55.74

 

 

 

 

 

 

 

 

 

Electricity price volatilities

 

51% – 106%

 

74

%

 

 

 

 

 

 

 

 

Natural gas forward price

 

$3.82 – $3.96

 

$

3.91

 

 

 

 

 

 

 

 

 

Natural gas price volatilities

 

24% – 51%

 

31

%

Natural Gas:

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Contracts (a)

 

1

 

2

 

Discounted cash flows

 

Natural gas forward price (per mmbtu)

 

$3.31 – $4.25

 

$

3.97

 

Total

 

$

48

 

$

92

 

 

 

 

 

 

 

 

 

 

 

(a)                                 Includes swaps and physical and financial contracts.

(b)                                 Electricity and natural gas price volatilities are estimated based on historical forward price movements due to lack of market quotes for implied volatilities.

 

 

 

December 31, 2012
Fair Value (millions)

 

Valuation

 

Significant

 

 

 

Weighted-

 

Commodity Contracts

 

Assets

 

Liabilities

 

Technique

 

Unobservable Input

 

Range

 

Average

 

Electricity:

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Contracts (a)

 

$

57

 

$

82

 

Discounted cash flows

 

Electricity forward price (per MWh)

 

$23.06 – $64.20

 

$

43.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Contracts

 

—

 

27

 

Option model

 

Electricity forward price (per MWh)

 

$36.66 – $92.19

 

$

60.97

 

 

 

 

 

 

 

 

 

Natural gas forward price (per mmbtu)

 

$4.10 – $4.25

 

$

4.20

 

 

 

 

 

 

 

 

 

Implied electricity price volatilities

 

15% – 66%

 

39

%

 

 

 

 

 

 

 

 

Implied natural gas price volatilities

 

17% – 36%

 

23

%

Natural Gas:

 

 

 

 

 

 

 

 

 

 

 

 

 

Forward Contracts (a)

 

5

 

1

 

Discounted cash flows

 

Natural gas forward price (per mmbtu)

 

$3.25 – $4.44

 

$

3.93

 

Total

 

$

62

 

$

110

 

 

 

 

 

 

 

 

 

 

 

(a)                                 Includes swaps and physical and financial contracts.
Changes in fair value for assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs

The following table shows the changes in fair value for our risk management activities’ assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs for the three and nine months ended September 30, 2013 and 2012 (dollars in millions):

 

Commodity Contracts

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Net derivative balance at beginning of period

 

$

(53

)

$

(45

)

$

(48

)

$

(51

)

Total net gains (losses) realized/unrealized:

 

 

 

 

 

 

 

 

 

Included in earnings

 

—

 

—

 

—

 

2

 

Included in OCI

 

—

 

—

 

—

 

(2

)

Deferred as a regulatory asset or liability

 

4

 

(3

)

(2

)

4

 

Settlements

 

6

 

(1

)

8

 

(1

)

Transfers into Level 3 from Level 2

 

(1

)

(4

)

(1

)

(2

)

Transfers from Level 3 into Level 2

 

—

 

3

 

(1

)

—

 

Net derivative balance at end of period

 

$

(44

)

$

(50

)

$

(44

)

$

(50

)

 

 

 

 

 

 

 

 

 

 

Net unrealized gains included in earnings related to instruments still held at end of period

 

$

—

 

$

—

 

$

—

 

$

—