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Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

The carrying value of the Company's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. The Company has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 — Unobservable inputs reflect the Company's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.

The following table presents the Company's financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Other(1)		Total
As of September 30, 2023:
Assets:
Commodity derivatives	$	—	$	170	$	12	$	(37)	$	145

Interest rate derivatives	48		66		9		—		123
Mortgage loans held for sale	—		616		—		—		616
Money market mutual funds	1,798		—		—		—		1,798
Debt securities:
U.S. government obligations	866		—		—		—		866

Corporate obligations	—		74		—		—		74
Municipal obligations	—		3		—		—		3

Equity securities:
U.S. companies	380		—		—		—		380
International companies	2,802		—		—		—		2,802
Investment funds	285		—		—		—		285
	$	6,179	$	929	$	21	$	(37)	$	7,092
Liabilities:
Commodity derivatives	$	(4)	$	(45)	$	(96)	$	45	$	(100)
Foreign currency exchange rate derivatives	—		(18)		—		—		(18)
Interest rate derivatives	—		—		(3)		—		(3)
	$	(4)	$	(63)	$	(99)	$	45	$	(121)


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Other(1)		Total
As of December 31, 2022:
Assets:
Commodity derivatives	$	6	$	614	$	51	$	(194)	$	477

Interest rate derivatives	50		54		8		—		112
Mortgage loans held for sale	—		474		—		—		474
Money market mutual funds	1,178		—		—		—		1,178
Debt securities:
U.S. government obligations	2,146		—		—		—		2,146
International government obligations	—		1		—		—		1
Corporate obligations	—		70		—		—		70
Municipal obligations	—		3		—		—		3
Agency, asset and mortgage-backed obligations	—		1		—		—		1
Equity securities:
U.S. companies	360		—		—		—		360
International companies	3,771		—		—		—		3,771
Investment funds	231		—		—		—		231
	$	7,742	$	1,217	$	59	$	(194)	$	8,824
Liabilities:
Commodity derivatives	$	(8)	$	(206)	$	(110)	$	106	$	(218)
Foreign currency exchange rate derivatives	—		(21)		—		—		(21)
Interest rate derivatives	—		(2)		(2)		1		(3)
	$	(8)	$	(229)	$	(112)	$	107	$	(242)

(1)Represents netting under master netting arrangements and a net cash collateral receivable of $8 million as of September 30, 2023 and payable of $87 million as of December 31, 2022.

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which the Company transacts. When quoted prices for identical contracts are not available, the Company uses forward price curves. Forward price curves represent the Company's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. The Company bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent brokers, exchanges, direct communication with market participants and actual transactions executed by the Company. Market price quotations are generally readily obtainable for the applicable term of the Company's outstanding derivative contracts; therefore, the Company's forward price curves reflect observable market quotes. Market price quotations for certain electricity and natural gas trading hubs are not as readily obtainable due to the length of the contract. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, the Company uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of the underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts.

The Company's mortgage loans held for sale are valued based on independent quoted market prices, where available, or the prices of other mortgage whole loans with similar characteristics. As necessary, these prices are adjusted for typical securitization activities, including servicing value, portfolio composition, market conditions and liquidity.

The Company's investments in money market mutual funds and debt and equity securities are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics.

The following table reconciles the beginning and ending balances of the Company's financial assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions). Transfers out of Level 3 occur primarily due to increased price observability.


	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
			Interest				Interest
	Commodity		Rate		Commodity		Rate
	Derivatives		Derivatives		Derivatives		Derivatives
2023:
Beginning balance	$	(174)	$	11	$	(59)	$	6
Changes included in earnings(1)	(1)		(5)		9		—
Changes in fair value recognized in OCI	—		—		(3)		—
Changes in fair value recognized in net regulatory assets	(48)		—		(231)		—

Purchases	1		—		1		—

Settlements	138		—		199		—


Ending balance	$	(84)	$	6	$	(84)	$	6







2022:
Beginning balance	$	(178)	$	21	$	(151)	$	19
Changes included in earnings(1)	(14)		(22)		(96)		(20)
Changes in fair value recognized in OCI	3		—		13		—
Changes in fair value recognized in net regulatory assets	(5)		—		(64)		—
Purchases	1		—		2		—

Settlements	138		—		172		—
Transfers out of Level 3 into Level 2	—		—		69		—
Ending balance	$	(55)	$	(1)	$	(55)	$	(1)

(1)Changes included in earnings for interest rate derivatives are reported net of amounts related to the satisfaction of the associated loan commitment.

The Company's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of the Company's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of the Company's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of the Company's long-term debt (in millions):


	As of September 30, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	52,720	$	45,166	$	51,635	$	46,906

PAC

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements

The carrying value of PacifiCorp's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. PacifiCorp has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that PacifiCorp has the ability to access at the measurement date.

•Level 3 — Unobservable inputs reflect PacifiCorp's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. PacifiCorp develops these inputs based on the best information available, including its own data.

The following table presents PacifiCorp's financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Other(1)		Total
As of September 30, 2023:
Assets:
Commodity derivatives	$	—	$	82	$	—	$	(28)	$	54
Money market mutual funds	120		—		—		—		120
Investment funds	29		—		—		—		29
	$	149	$	82	$	—	$	(28)	$	203

Liabilities - Commodity derivatives	$	—	$	(32)	$	—	$	25	$	(7)

As of December 31, 2022:
Assets:
Commodity derivatives	$	—	$	318	$	—	$	(119)	$	199
Money market mutual funds	649		—		—		—		649
Investment funds	23		—		—		—		23
	$	672	$	318	$	—	$	(119)	$	871

Liabilities - Commodity derivatives	$	—	$	(48)	$	—	$	41	$	(7)

(1)Represents netting under master netting arrangements and a net cash collateral payable of $3 million and $78 million as of September 30, 2023 and December 31, 2022, respectively. As of December 31, 2022, PacifiCorp had an additional $12 million cash collateral payable that was not required to be netted against total derivatives.

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. A discounted cash flow valuation method was used to estimate fair value. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which PacifiCorp transacts. When quoted prices for identical contracts are not available, PacifiCorp uses forward price curves. Forward price curves represent PacifiCorp's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. PacifiCorp bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent energy brokers, exchanges, direct communication with market participants and actual transactions executed by PacifiCorp. Market price quotations for certain major electricity and natural gas trading hubs are generally readily obtainable for the first three years; therefore, PacifiCorp's forward price curves for those locations and periods reflect observable market quotes. Market price quotations for other electricity and natural gas trading hubs are not as readily obtainable for the first three years. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, PacifiCorp uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts. Refer to Note 7 for further discussion regarding PacifiCorp's risk management and hedging activities.

PacifiCorp's investments in money market mutual funds and investment funds are stated at fair value. When available, PacifiCorp uses a readily observable quoted market price or net asset value of an identical security in an active market to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics.

PacifiCorp's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of PacifiCorp's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of PacifiCorp's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of PacifiCorp's long-term debt (in millions):


	As of September 30, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	10,457	$	8,834	$	9,666	$	9,045

MEC

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements

The carrying value of MidAmerican Energy's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. MidAmerican Energy has various financial assets and liabilities that are measured at fair value on the Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that MidAmerican Energy has the ability to access at the measurement date.

•Level 3 — Unobservable inputs reflect MidAmerican Energy's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. MidAmerican Energy develops these inputs based on the best information available, including its own data.

The following table presents MidAmerican Energy's financial assets and liabilities recognized on the Balance Sheets and measured at fair value on a recurring basis (in millions):


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Other(1)		Total
As of September 30, 2023:
Assets:
Commodity derivatives	$	—	$	8	$	2	$	(5)	$	5
Money market mutual funds	707		—		—		—		707
Debt securities:
U.S. government obligations	239		—		—		—		239
International government obligations	—		—		—		—		—
Corporate obligations	—		74		—		—		74
Municipal obligations	—		3		—		—		3

Equity securities:
U.S. companies	380		—		—		—		380
International companies	8		—		—		—		8
Investment funds	22		—		—		—		22
	$	1,356	$	85	$	2	$	(5)	$	1,438

Liabilities - commodity derivatives	$	—	$	(20)	$	(17)	$	17	$	(20)


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Other(1)		Total
As of December 31, 2022:
Assets:
Commodity derivatives	$	1	$	37	$	6	$	(10)	$	34
Money market mutual funds	225		—		—		—		225
Debt securities:
U.S. government obligations	215		—		—		—		215
International government obligations	—		1		—		—		1
Corporate obligations	—		70		—		—		70
Municipal obligations	—		3		—		—		3
Agency, asset and mortgage-backed obligations	—		1		—		—		1
Equity securities:
U.S. companies	360		—		—		—		360
International companies	8		—		—		—		8
Investment funds	16		—		—		—		16
	$	825	$	112	$	6	$	(10)	$	933

Liabilities - commodity derivatives	$	—	$	(12)	$	(1)	$	10	$	(3)

(1)Represents netting under master netting arrangements and a net cash collateral receivable of $12 million and $— million as of September 30, 2023 and December 31, 2022, respectively.

MidAmerican Energy's investments in money market mutual funds and debt and equity securities are stated at fair value, with debt securities accounted for as available-for-sale securities. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics.

The following table reconciles the beginning and ending balances of MidAmerican Energy's commodity derivative assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):


	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2023		2022		2023		2022

Beginning balance	$	(14)	$	26	$	5	$	(5)
Changes in fair value recognized in net regulatory assets	(9)		(2)		(36)		42
Settlements	8		(10)		16		(23)
Ending balance	$	(15)	$	14	$	(15)	$	14

MidAmerican Energy's long-term debt is carried at cost on the Balance Sheets. The fair value of MidAmerican Energy's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of MidAmerican Energy's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of MidAmerican Energy's long-term debt (in millions):


	As of September 30, 2023				As of December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value

Long-term debt	$	8,765	$	7,594	$	7,729	$	6,964

MidAmerican Funding, LLC

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements

Refer to Note 8 of MidAmerican Energy's Notes to Financial Statements. MidAmerican Funding's long-term debt is carried at cost on the Consolidated Financial Statements. The fair value of MidAmerican Funding's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of MidAmerican Funding's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of MidAmerican Funding's long-term debt (in millions):


	As of September 30, 2023				As of December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value

Long-term debt	$	9,005	$	7,844	$	7,969	$	7,219

NPC

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements

The carrying value of Nevada Power's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. Nevada Power has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that Nevada Power has the ability to access at the measurement date.

•Level 3 — Unobservable inputs reflect Nevada Power's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. Nevada Power develops these inputs based on the best information available, including its own data.

The following table presents Nevada Power's financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Total
As of September 30, 2023:
Assets:

Money market mutual funds	$	34	—		—		$	34
Investment funds	4		—		—		4
	$	38	$	—	$	—	$	38

Liabilities - commodity derivatives	$	—	$	—	$	(58)	$	(58)

As of December 31, 2022:
Assets:
Commodity derivatives	$	—	$	—	$	23	$	23
Money market mutual funds	34		—		—		34
Investment funds	3		—		—		3
	$	37	$	—	$	23	$	60

Liabilities - commodity derivatives	$	—	$	—	$	(75)	$	(75)

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which Nevada Power transacts. When quoted prices for identical contracts are not available, Nevada Power uses forward price curves. Forward price curves represent Nevada Power's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. Nevada Power bases its forward price curves upon internally developed models, with internal and external fundamental data inputs. Market price quotations for certain electricity and natural gas trading hubs are not as readily obtainable due to markets that are not active. Given that limited market data exists for these contracts, Nevada Power uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The model incorporates a mid-market pricing convention (the mid‑point price between bid and ask prices) as a practical expedient for valuing its assets and liabilities measured and reported at fair value. The determination of the fair value for derivative contracts not only includes counterparty risk, but also the impact of Nevada Power's nonperformance risk on its liabilities, which as of September 30, 2023 and December 31, 2022, had an immaterial impact to the fair value of its derivative contracts. As such, Nevada Power considers its derivative contracts to be valued using Level 3 inputs.

Nevada Power's investments in money market mutual funds and investment funds are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value.

The following table reconciles the beginning and ending balances of Nevada Power's commodity derivative assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):


	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2023		2022		2023		2022

Beginning balance	$	(126)	$	(175)	$	(52)	$	(113)
Changes in fair value recognized in regulatory assets	(31)		(4)		(150)		(81)

Settlements	99		113		144		128
Ending balance	$	(58)	$	(66)	$	(58)	$	(66)

Nevada Power's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of Nevada Power's long‑term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of Nevada Power's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of Nevada Power's long‑term debt (in millions):


	As of September 30, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	3,391	$	3,146	$	3,195	$	3,114

SPPC

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements

The carrying value of Sierra Pacific's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. Sierra Pacific has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that Sierra Pacific has the ability to access at the measurement date.

•Level 3 — Unobservable inputs reflect Sierra Pacific's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. Sierra Pacific develops these inputs based on the best information available, including its own data.

The following table presents Sierra Pacific's financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Total
As of September 30, 2023:
Assets:

Money market mutual funds	$	38	—		—		$	38
Investment funds	1		—		—		1
	$	39	$	—	$	—	$	39

Liabilities - commodity derivatives	$	—	$	—	$	(12)	$	(12)

As of December 31, 2022:
Assets:
Commodity derivatives	$	—	$	—	$	8	$	8
Money market mutual funds	49		—		—		49
Investment funds	1		—		—		1
	$	50	$	—	$	8	$	58

Liabilities - commodity derivatives	$	—	$	—	$	(21)	$	(21)

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which Sierra Pacific transacts. When quoted prices for identical contracts are not available, Sierra Pacific uses forward price curves. Forward price curves represent Sierra Pacific's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. Sierra Pacific bases its forward price curves upon internally developed models, with internal and external fundamental data inputs. Market price quotations for certain electricity and natural gas trading hubs are not as readily obtainable due to markets that are not active. Given that limited market data exists for these contracts, Sierra Pacific uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The model incorporates a mid-market pricing convention (the mid‑point price between bid and ask prices) as a practical expedient for valuing its assets and liabilities measured and reported at fair value. The determination of the fair value for derivative contracts not only includes counterparty risk, but also the impact of Sierra Pacific's nonperformance risk on its liabilities, which as of September 30, 2023 and December 31, 2022, had an immaterial impact to the fair value of its derivative contracts. As such, Sierra Pacific considers its derivative contracts to be valued using Level 3 inputs.

Sierra Pacific's investments in money market mutual funds and investment funds are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value.

The following table reconciles the beginning and ending balances of Sierra Pacific's commodity derivative assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):


	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2023		2022		2023		2022

Beginning balance	$	(36)	$	(54)	$	(13)	$	(33)
Changes in fair value recognized in regulatory assets	(8)		1		(45)		(25)

Settlements	32		36		46		41
Ending balance	$	(12)	$	(17)	$	(12)	$	(17)

Sierra Pacific's long-term debt is carried at cost on the Consolidated Balance Sheets. The fair value of Sierra Pacific's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of Sierra Pacific's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of Sierra Pacific's long-term debt (in millions):


	As of September 30, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	1,292	$	1,218	$	1,148	$	1,111

EEGH

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements

The carrying value of Eastern Energy Gas' cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. Eastern Energy Gas has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that Eastern Energy Gas has the ability to access at the measurement date.

•Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

•Level 3 - Unobservable inputs reflect Eastern Energy Gas' judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. Eastern Energy Gas develops these inputs based on the best information available, including its own data.

The following table presents Eastern Energy Gas' financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Total
As of September 30, 2023:
Assets:


Money market mutual funds	$	94	$	—	$	—	$	94
Equity securities:
Investment funds	18		—		—		18
	$	112	$	—	$	—	$	112

Liabilities:

Foreign currency exchange rate derivatives	$	—	$	(18)	$	—	$	(18)

	$	—	$	(18)	$	—	$	(18)

As of December 31, 2022:
Assets:
Commodity derivatives	$	—	$	1	$	—	$	1
Money market mutual funds	42		—		—		42
Equity securities:
Investment funds	14		—		—		14
	$	56	$	1	$	—	$	57

Liabilities:

Foreign currency exchange rate derivatives	$	—	$	(20)	$	—	$	(20)

	$	—	$	(20)	$	—	$	(20)

Eastern Energy Gas' investments in money market mutual funds and investment funds are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value.

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchase or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which Eastern Energy Gas transacts. When quoted prices for identical contracts are not available, Eastern Energy Gas uses forward price curves. Forward price curves represent Eastern Energy Gas' estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. Eastern Energy Gas bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent brokers, exchanges, direct communication with market participants and actual transactions executed by Eastern Energy Gas. Market price quotations are generally readily obtainable for the applicable term of Eastern Energy Gas' outstanding derivative contracts; therefore, Eastern Energy Gas' forward price curves reflect observable market quotes. Market price quotations for certain natural gas trading hubs are not as readily obtainable due to the length of the contracts. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, Eastern Energy Gas uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts.

Eastern Energy Gas' long-term debt is carried at cost on the Consolidated Financial Statements. The fair value of Eastern Energy Gas' long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of Eastern Energy Gas' variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of Eastern Energy Gas' long-term debt (in millions):


	As of September 30, 2023				As of December 31, 2022
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	3,642	$	3,200	$	3,892	$	3,510

EGTS

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]

Fair Value Measurements

The carrying value of EGTS' cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. EGTS has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:

•Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that EGTS has the ability to access at the measurement date.

•Level 3 - Unobservable inputs reflect EGTS' judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. EGTS develops these inputs based on the best information available, including its own data.

The following table presents EGTS' financial assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):


	Input Levels for Fair Value Measurements
	Level 1		Level 2		Level 3		Total
As of September 30, 2023:
Assets:

Money market mutual funds	$	12	$	—	$	—	$	12
Equity securities:
Investment funds	18		—		—		18
	$	30	$	—	$	—	$	30







As of December 31, 2022:
Assets:
Commodity derivatives	$	—	$	1	$	—	$	1

Money market mutual funds	8		—		—		8
Equity securities:
Investment funds	14		—		—		14
	$	22	$	1	$	—	$	23

EGTS' investments in money market mutual funds and investment funds are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value.

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at estimated fair value unless they are designated as normal purchase or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which EGTS transacts. When quoted prices for identical contracts are not available, EGTS uses forward price curves. Forward price curves represent EGTS' estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. EGTS bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent brokers, exchanges, direct communication with market participants and actual transactions executed by EGTS. Market price quotations are generally readily obtainable for the applicable term of EGTS' outstanding derivative contracts; therefore, EGTS' forward price curves reflect observable market quotes. Market price quotations for certain natural gas trading hubs are not as readily obtainable due to the length of the contracts. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, EGTS uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, related volatility, counterparty creditworthiness and duration of contracts.

EGTS' long-term debt is carried at cost on the Consolidated Financial Statements. The fair value of EGTS' long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The following table presents the carrying value and estimated fair value of EGTS' long-term debt (in millions):


	As of September 30, 2023				As of December 31, 2022
	Carrying Value		Fair Value		Carrying Value		Fair Value

Long-term debt	$	1,583	$	1,275	$	1,582	$	1,337

- 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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