Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

3.  Fair Value Measurements

NextEra Energy and FPL use several different valuation techniques to measure the fair value of assets and liabilities, relying primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities for those assets and liabilities that are measured at fair value on a recurring basis.  NextEra Energy's and FPL's assessment of the significance of any particular input to the fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.  Non-performance risk is also considered in the determination of fair value for all assets and liabilities measured at fair value, including the consideration of a credit valuation adjustment.

Cash Equivalents - Cash equivalents consist of short-term, highly liquid investments with original maturities of three months or less.  NextEra Energy and FPL primarily hold investments in money market funds.  The fair value of these funds is calculated using current market prices.

Special Use Funds and Other Investments - NextEra Energy and FPL hold primarily debt and equity securities directly, as well as indirectly through commingled funds.  Substantially all directly held equity securities are valued at their quoted market prices.  For directly held debt securities, multiple prices and price types are obtained from pricing vendors whenever possible, which enables cross-provider validations.  A primary price source is identified based on asset type, class or issue of each security.  Commingled funds, which are similar to mutual funds, are maintained by banks or investment companies and hold certain investments in accordance with a stated set of objectives.  The fair value of commingled funds is primarily derived from the quoted prices in active markets of the underlying securities.  Because the fund shares are offered to a limited group of investors, they are not considered to be traded in an active market.

Derivative Instruments - NextEra Energy and FPL measure the fair value of commodity contracts on a daily basis using prices observed on commodities exchanges and in the OTC markets, or through the use of industry-standard valuation techniques, such as option modeling or discounted cash flows techniques, incorporating both observable and unobservable valuation inputs.  The resulting measurements are the best estimate of fair value as represented by the transfer of the asset or liability through an orderly transaction in the marketplace at the measurement date.

Exchange-traded derivative assets and liabilities are valued directly using unadjusted quoted prices.  For exchange-traded derivative assets and liabilities where the principal market is deemed to be inactive based on average daily volumes and open interest, the measurement is established using settlement prices from the exchanges, and therefore considered to be valued using significant other observable inputs.

NextEra Energy and FPL also enter into OTC commodity contract derivatives.  The majority of these contracts are transacted at liquid trading points, and the prices for these contracts are verified using quoted prices in active markets from exchanges, brokers or pricing services for similar contracts.  In instances where the reference exchange markets are deemed to be inactive or do not have a similar contract that trades on an exchange, the derivative assets and liabilities may be valued using significant other observable inputs and potentially significant unobservable inputs.  In such instances, the valuation for these contracts is established using techniques including extrapolation from or interpolation between actively traded contracts, or estimated basis adjustments from liquid trading points.

NextEra Energy, through NextEra Energy Resources, also enters into full requirements contracts, which, in many cases, meet the definition of derivatives and are measured at fair value.  These contracts typically have one or more inputs that are not observable and are significant to the valuation of the contract.  In addition, certain exchange and non-exchange traded derivative options at NextEra Energy have one or more significant inputs that are not observable, and are valued using industry-standard option models.

In all cases where NextEra Energy and FPL use significant unobservable inputs for the valuation of a commodity contract, consideration is given to the assumptions that market participants would use in valuing the asset or liability.  This includes, but is not limited to, assumptions about market liquidity, volatility and contract duration.

NextEra Energy uses interest rate and foreign currency swaps to mitigate and adjust interest rate and foreign currency exposure related to certain outstanding and forecasted debt issuances and borrowings.  NextEra Energy estimates the fair value of these derivatives using a discounted cash flows valuation technique based on the net amount of estimated future cash inflows and outflows related to the swap agreements.

NextEra Energy's and FPL's financial assets and liabilities and other fair value measurements made on a recurring basis by fair value hierarchy level are as follows:

	June 30, 2011
	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting(a)			Total
	(millions)
Assets:
Cash equivalents:
NextEra Energy - equity securities	$	-	$	76		$	-	$	-		$	76
Special use funds:
NextEra Energy:
Equity securities	$	769	$	1,276	(b)	$	-	$	-		$	2,045
U.S. Government and municipal bonds	$	517	$	106		$	-	$	-		$	623
Corporate debt securities	$	-	$	463		$	-	$	-		$	463
Mortgage-backed securities	$	-	$	529		$	-	$	-		$	529
Other debt securities	$	-	$	121		$	-	$	-		$	121
FPL:
Equity securities	$	135	$	1,118	(b)	$	-	$	-		$	1,253
U.S. Government and municipal bonds	$	462	$	95		$	-	$	-		$	557
Corporate debt securities	$	-	$	327		$	-	$	-		$	327
Mortgage-backed securities	$	-	$	441		$	-	$	-		$	441
Other debt securities	$	-	$	44		$	-	$	-		$	44
Other investments:
NextEra Energy:
Equity securities	$	3	$	2		$	-	$	-		$	5
U.S. Government and municipal bonds	$	13	$	-		$	-	$	-		$	13
Corporate debt securities	$	-	$	52		$	-	$	-		$	52
Mortgage-backed securities	$	-	$	36		$	-	$	-		$	36
Other	$	5	$	18		$	-	$	-		$	23
Derivatives:
NextEra Energy:
Commodity contracts	$	1,432	$	1,433		$	707	$	(2,849	)	$	723	(c)
Interest rate swaps	$	-	$	65		$	-	$	-		$	65	(c)
Foreign currency swaps	$	-	$	7		$	-	$	-		$	7	(c)
FPL - commodity contracts	$	-	$	23		$	7	$	(19	)	$	11	(c)
Liabilities:
Derivatives:
NextEra Energy:
Commodity contracts	$	1,475	$	1,294		$	552	$	(2,861	)	$	460	(c)
Interest rate swaps	$	-	$	157		$	-	$	-		$	157	(c)
Foreign currency swaps	$	-	$	7		$	-	$	-		$	7	(c)
FPL - commodity contracts	$	-	$	168		$	2	$	(19	)	$	151	(c)

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(a)	Includes the effect of the contractual ability to settle contracts under master netting arrangements and margin cash collateral payments and receipts.
(b)	At NextEra Energy, approximately $1,147 million ($1,036 million at FPL) are invested in commingled funds whose underlying investments would be Level 1 if those investments were held directly by NextEra Energy or FPL.
(c)	See Note 2 for a reconciliation of net derivatives to NextEra Energy's and FPL's condensed consolidated balance sheets.

	December 31, 2010
	Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Netting(a)			Total
	(millions)
Assets:
Cash equivalents:
NextEra Energy - equity securities	$	-	$	122		$	-	$	-		$	122
FPL - equity securities	$	-	$	7		$	-	$	-		$	7
Special use funds:
NextEra Energy:
Equity securities	$	741	$	1,245	(b)	$	-	$	-		$	1,986
U.S. Government and municipal bonds	$	495	$	127		$	-	$	-		$	622
Corporate debt securities	$	-	$	486		$	-	$	-		$	486
Mortgage-backed securities	$	-	$	447		$	-	$	-		$	447
Other debt securities	$	-	$	108		$	-	$	-		$	108
FPL:
Equity securities	$	125	$	1,082	(b)	$	-	$	-		$	1,207
U.S. Government and municipal bonds	$	458	$	111		$	-	$	-		$	569
Corporate debt securities	$	-	$	334		$	-	$	-		$	334
Mortgage-backed securities	$	-	$	381		$	-	$	-		$	381
Other debt securities	$	-	$	41		$	-	$	-		$	41
Other investments:
NextEra Energy:
Equity securities	$	3	$	1		$	-	$	-		$	4
U.S. Government and municipal bonds	$	8	$	4		$	-	$	-		$	12
Corporate debt securities	$	-	$	32		$	-	$	-		$	32
Mortgage-backed securities	$	-	$	58		$	-	$	-		$	58
Other	$	5	$	10		$	-	$	-		$	15
Derivatives:
NextEra Energy:
Commodity contracts	$	1,755	$	1,538		$	824	$	(3,177	)	$	940	(c)
Interest rate swaps	$	-	$	107		$	-	$	-		$	107	(c)
Foreign currency swaps	$	-	$	48		$	-	$	-		$	48	(c)
FPL - commodity contracts	$	-	$	14		$	8	$	(13	)	$	9	(c)
Liabilities:
Derivatives:
NextEra Energy:
Commodity contracts	$	1,821	$	1,509		$	528	$	(3,206	)	$	652	(c)
Interest rate swaps	$	-	$	123		$	-	$	-		$	123	(c)
Foreign currency swaps	$	-	$	4		$	-	$	-		$	4	(c)
FPL - commodity contracts	$	-	$	257		$	1	$	(13	)	$	245	(c)

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(a)	Includes the effect of the contractual ability to settle contracts under master netting arrangements and margin cash collateral payments and receipts.
(b)	At NextEra Energy, approximately $1,084 million ($980 million at FPL) are invested in commingled funds whose underlying investments would be Level 1 if those investments were held directly by NextEra Energy or FPL.
(c)	See Note 2 for a reconciliation of net derivatives to NextEra Energy's and FPL's condensed consolidated balance sheets.

The reconciliation of changes in the fair value of derivatives that are based on significant unobservable inputs is as follows:

	Three Months Ended June 30, 2011						Six Months Ended June 30, 2011
	NextEra Energy			FPL			NextEra Energy			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at March 31 and December 31 of prior period	$	104		$	5		$	296		$	7
Realized and unrealized gains (losses):
Included in earnings(a)		95			-			13			-
Included in regulatory assets and liabilities		2			2			2			2
Purchases		53			-			141			-
Settlements		(58	)		(2	)		(103	)		(4	)
Issuances		(38	)		-			(190	)		-
Transfers in(b)		1			-			2			-
Transfers out(b)		(4	)		-			(6	)		-
Fair value of net derivatives based on significant unobservable inputs at June 30	$	155		$	5		$	155		$	5
The amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to derivatives still held at the reporting date(c)	$	89		$	-		$	8		$	-

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(a)	For the three and six months ended June 30, 2011, $92 million and less than $1 million, respectively, of realized and unrealized gains (losses) are reflected in operating revenues in the condensed consolidated statements of income.  For the three and six months ended June 30, 2011, $3 million and $13 million, respectively, of realized and unrealized gains (losses) are reflected in fuel, purchased power and interchange in the condensed consolidated statements of income.
(b)	For the three and six months ended June 30, 2011, transfers into Level 3 were a result of decreased observability of market data and transfers from Level 3 to Level 2 were a result of increased observability of market data.  NextEra Energy's and FPL's policy is to recognize all transfers at the beginning of the reporting period.
(c)	For the three and six months ended June 30, 2011, $89 million and $3 million, respectively, of unrealized gains (losses) are reflected in operating revenues in the condensed consolidated statements of income.  For the three and six months ended June 30, 2011, less than $1 million and $5 million, respectively, of unrealized gains (losses) are reflected in fuel, purchased power and interchange in the condensed consolidated statements of income.

	Three Months Ended June 30, 2010						Six Months Ended June 30, 2010
	NextEra Energy			FPL			NextEra Energy			FPL
	(millions)
Fair value of net derivatives based on significant unobservable inputs at March 31 and December 31 of prior period	$	549		$	10		$	364		$	11
Realized and unrealized gains (losses):
Included in earnings(a)		(110	)		-			350			-
Included in regulatory assets and liabilities		(1	)		(1	)		(1	)		(1	)
Purchases, sales, settlements and issuances		(69	)		(2	)		(338	)		(3	)
Transfers in(b)		1			-			2			-
Transfers out(b)		(23	)		-			(30	)		-
Fair value of net derivatives based on significant unobservable inputs at June 30	$	347		$	7		$	347		$	7
The amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to derivatives still held at the reporting date(c)	$	(99	)	$	-		$	237		$	-

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(a)	For the three and six months ended June 30, 2010, $(109) million and $343 million, respectively, of realized and unrealized gains (losses) are reflected in operating revenues in the condensed consolidated statements of income.  For the three and six months ended June 30, 2010, $(1) million and $7 million, respectively, of realized and unrealized gains (losses) are reflected in fuel, purchased power and interchange in the condensed consolidated statements of income.
(b)	For the three and six months ended June 30, 2010, transfers into Level 3 were a result of decreased observability of market data and transfers from Level 3 to Level 2 were a result of increased observability of market data.  NextEra Energy's and FPL's policy is to recognize all transfers at the beginning of the reporting period.
(c)	For the three and six months ended June 30, 2010, $(98) million and $233 million, respectively, of unrealized gains (losses) are reflected in operating revenues in the condensed consolidated statements of income.  For the three and six months ended June 30, 2010, $(1) million and $4 million, respectively, of unrealized gains (losses) are reflected in fuel, purchased power and interchange in the condensed consolidated statements of income.

NextEra Energy tests long-lived assets for recoverability whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  In the second quarter of 2011, recent market value indications and the impact of newly proposed environmental regulations suggested that the carrying value of certain NextEra Energy Resources' assets, primarily wind assets in West Texas and oil-fired assets in Maine, may be impaired.  NextEra Energy Resources performed a fair value analysis and concluded that an impairment charge related to the long-lived assets, primarily property, plant and equipment, was necessary.  The fair value analysis was primarily based on the income approach using significant unobservable inputs (Level 3) including revenue and generation forecasts, projected capital and maintenance expenditures and discount rates.  As a result, long-lived assets held and used with a carrying amount of approximately $79 million were written down to their fair value of $28 million, resulting in an impairment charge of $51 million ($31 million after-tax), which is recorded as a separate line item in NextEra Energy's condensed consolidated statements of income for the three and six months ended June 30, 2011.