| Fair value of assets and liabilities that are measured at fair value on a recurring basis |
The following table presents the fair value at December 31, 2016 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | 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, 2016 | Assets | |
| | |
| | |
| | |
| | | | |
| Coal reclamation trust - cash equivalents (b) | $ | 14,521 |
| | $ | — |
| | $ | — |
| | $ | — |
| | | | $ | 14,521 |
| Risk management activities — derivative instruments: | |
| | |
| | |
| | |
| | | | |
| Commodity contracts | — |
| | 43,722 |
| | 11,076 |
| | (35,103 | ) | | (c) | | 19,695 |
| Nuclear decommissioning trust: | |
| | |
| | |
| | | | | | |
| U.S. commingled equity funds | — |
| | — |
| | — |
| | 353,261 |
| | (d) | | 353,261 |
| Fixed income securities: | |
| | |
| | |
| | | | | | |
| Cash and cash equivalent funds | — |
| | — |
| | — |
| | 795 |
| | (e) | | 795 |
| U.S. Treasury | 95,441 |
| | — |
| | — |
| | — |
| | | | 95,441 |
| Corporate debt | — |
| | 111,623 |
| | — |
| | — |
| | | | 111,623 |
| Mortgage-backed securities | — |
| | 115,337 |
| | — |
| | — |
| | | | 115,337 |
| Municipal bonds | — |
| | 80,997 |
| | — |
| | — |
| | | | 80,997 |
| Other | — |
| | 22,132 |
| | — |
| | — |
| | | | 22,132 |
| Subtotal nuclear decommissioning trust | 95,441 |
| | 330,089 |
| | — |
| | 354,056 |
| |
| | 779,586 |
| Total | $ | 109,962 |
| | $ | 373,811 |
| | $ | 11,076 |
| | $ | 318,953 |
| |
| | $ | 813,802 |
| Liabilities | |
| | |
| | |
| | |
| | | | |
| Risk management activities — derivative instruments: | |
| | |
| | |
| | |
| | | | |
| Commodity contracts | $ | — |
| | $ | (45,641 | ) | | $ | (58,482 | ) | | $ | 31,049 |
| | (c) | | $ | (73,074 | ) |
| | (a) | Primarily consists of long-dated electricity contracts. |
| | (b) | Represents investments restricted for coal mine reclamation funding related to Four Corners. These assets are included in the Other Assets line item, reported under the Investments and Other Assets section of our Consolidated Balance Sheets. |
| | (c) | Represents counterparty netting, margin and collateral. See Note 16. |
| | (d) | Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy. |
| | (e) | Represents nuclear decommissioning trust net pending securities sales and purchases. |
The following table presents the fair value at December 31, 2015 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands): | | | | | | | | | | | | | | | | | | | | | | | | 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, 2015 | Assets | |
| | |
| | |
| | |
| | | | |
| Risk management activities — derivative instruments: | |
| | |
| | |
| | |
| | | | |
| Commodity contracts | $ | — |
| | $ | 22,992 |
| | $ | 30,364 |
| | $ | (25,345 | ) | | (b) | | $ | 28,011 |
| Nuclear decommissioning trust: | |
| | |
| | |
| | |
| | | | |
| U.S. commingled equity funds | — |
| | — |
| | — |
| | 314,957 |
| | (c) | | 314,957 |
| Fixed income securities: | |
| | |
| | |
| | |
| | | | |
| Cash and cash equivalent funds | 12,260 |
| | — |
| | — |
| | (335 | ) | | (d) | | 11,925 |
| U.S. Treasury | 117,245 |
| | — |
| | — |
| | — |
| | | | 117,245 |
| Corporate debt | — |
| | 96,243 |
| | — |
| | — |
| | | | 96,243 |
| Mortgage-backed securities | — |
| | 99,065 |
| | — |
| | — |
| | | | 99,065 |
| Municipal bonds | — |
| | 72,206 |
| | — |
| | — |
| | | | 72,206 |
| Other | — |
| | 23,555 |
| | — |
| | — |
| | | | 23,555 |
| Subtotal nuclear decommissioning trust | 129,505 |
| | 291,069 |
| | — |
| | 314,622 |
| |
| | 735,196 |
| Total | $ | 129,505 |
| | $ | 314,061 |
| | $ | 30,364 |
| | $ | 289,277 |
| |
| | $ | 763,207 |
| Liabilities | |
| | |
| | |
| | |
| | | | |
| Risk management activities — derivative instruments: | |
| | |
| | |
| | |
| | | | |
| Commodity contracts | $ | — |
| | $ | (144,044 | ) | | $ | (63,343 | ) | | $ | 39,698 |
| | (b) | | $ | (167,689 | ) |
| | (a) | Primarily consists of heat rate options and other long-dated electricity contracts. |
| | (b) | Represents counterparty netting, margin and collateral. See Note 16. |
| | (c) | Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy. |
| | (d) | 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 |
s. The following tables provide information regarding our significant unobservable inputs used to value our risk management derivative Level 3 instruments at December 31, 2016 and December 31, 2015: | | | | | | | | | | | | | | | | | | | | December 31, 2016
Fair Value (thousands) | | Valuation Technique | | Significant Unobservable Input | | Range | | Weighted-Average | Commodity Contracts | Assets | | Liabilities | | Electricity: | |
| | |
| | | | | | | | |
| Forward Contracts (a) | $ | 10,648 |
| | $ | 32,042 |
| | Discounted cash flows | | Electricity forward price (per MWh) | | $16.43 - $41.07 | | $ | 29.86 |
| Natural Gas: | |
| | |
| | | | | | | | |
| Forward Contracts (a) | 428 |
| | 26,440 |
| | Discounted cash flows | | Natural gas forward price (per MMBtu) | | $2.32 - $3.60 | | $ | 2.81 |
| Total | $ | 11,076 |
| | $ | 58,482 |
| | | | | | | | |
|
| | (a) | Includes swaps and physical and financial contracts. |
| | | | | | | | | | | | | | | | | | | | December 31, 2015
Fair Value (thousands) | | Valuation Technique | | Significant Unobservable Input | | Range | | Weighted-Average | Commodity Contracts | Assets | | Liabilities | | Electricity: | |
| | |
| | | | | | | | |
| Forward Contracts (a) | $ | 24,543 |
| | $ | 54,679 |
| | Discounted cash flows | | Electricity forward price (per MWh) | | $15.92 - $40.73 | | $ | 26.86 |
| Option Contracts (b) | — |
| | 5,628 |
| | Option model | | Electricity forward price (per MWh) | | $23.87 - $44.13 | | $ | 33.91 |
| | |
| | |
| | | | Electricity price volatilities | | 40% - 59% | | 52 | % | | |
| | |
| | | | Natural gas price volatilities | | 32% - 40% | | 35 | % | Natural Gas: | |
| | |
| | | | | | | | |
| Forward Contracts (a) | 5,821 |
| | 3,036 |
| | Discounted cash flows | | Natural gas forward price (per MMBtu) | | $2.18 - $3.14 | | $ | 2.61 |
| Total | $ | 30,364 |
| | $ | 63,343 |
| | | | | | | | |
|
| | (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 volatili |
|
| 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 years ended December 31, 2016 and 2015 (dollars in thousands): | | | | | | | | | | | | Year Ended December 31, | Commodity Contracts | | 2016 | | 2015 | Net derivative balance at beginning of period | | $ | (32,979 | ) | | $ | (41,386 | ) | Total net gains (losses) realized/unrealized: | | |
| | |
| Included in earnings | | — |
| | — |
| Included in OCI | | 88 |
| | (452 | ) | Deferred as a regulatory asset or liability | | (37,543 | ) | | (4,009 | ) | Settlements | | 15,146 |
| | 14,809 |
| Transfers into Level 3 from Level 2 | | 1,900 |
| | (6,256 | ) | Transfers from Level 3 into Level 2 | | 5,982 |
| | 4,315 |
| Net derivative balance at end of period | | $ | (47,406 | ) | | $ | (32,979 | ) | Net unrealized gains included in earnings related to instruments still held at end of period | | $ | — |
| | $ | — |
|
|