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Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2018
Fair Value Disclosures [Abstract]  
Fair value of assets and liabilities that are measured at fair value on a recurring basis
The following table presents the fair value at June 30, 2018 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 June 30, 2018
Assets
 

 
 

 
 

 
 

 
 
 
 

Risk management activities — derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts
$

 
$
5,215

 
$
2,071

 
$
(3,970
)
 
(b)
 
$
3,316

Nuclear decommissioning trust:
 
 
 
 
 
 
 
 
 
 
 
Equity securities
6,041

 

 

 
625

 
(c)
 
6,666

U.S. commingled equity funds

 

 

 
426,574

 
(d)
 
426,574

U.S. Treasury debt
137,960

 

 

 

 
 
 
137,960

Corporate debt

 
107,225

 

 

 
 
 
107,225

Mortgage-backed debt securities

 
107,008

 

 

 
 
 
107,008

Municipal bonds

 
79,195

 

 

 
 
 
79,195

Other fixed income

 
9,015

 

 

 
 
 
9,015

Subtotal nuclear decommissioning trust
144,001

 
302,443

 

 
427,199

 
 
 
873,643

 
 
 
 
 
 
 
 
 
 
 
 
Other special use funds:
 
 
 
 
 
 
 
 
 
 
 
Equity securities
14,310

 

 

 
1,260

 
(c)
 
15,570

U.S. Treasury debt
178,160

 

 

 

 

 
178,160

Municipal bonds

 
24,810

 

 

 
 
 
24,810

Subtotal other special use funds (e)
192,470

 
24,810

 

 
1,260

 
 
 
218,540

 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
$
336,471

 
$
332,468

 
$
2,071

 
$
424,489

 
 
 
$
1,095,499

Liabilities
 

 
 

 
 

 
 

 
 
 
 

Risk management activities — derivative instruments:
 

 
 

 
 

 
 

 
 
 
 

Commodity contracts
$

 
$
(86,766
)
 
$
(11,429
)
 
$
2,752

 
(b)
 
$
(95,443
)

(a)
Primarily consists of long-dated electricity contracts.
(b)
Represents counterparty netting, margin and collateral. See Note 7.
(c)
Represents net pending securities sales and purchases.
(d)
Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.
(e)
Other special use funds related to 4CA totaling approximately $2 million were reclassified to Assets Held For Sale on the Condensed Consolidated Balance Sheet. See Note 8 for discussion on the 4CA Matter.

The following table presents the fair value at December 31, 2017 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, 2017
Assets
 

 
 

 
 

 
 

 
 
 
 

Cash equivalents
$
10,630

 
$

 
$

 
$

 
 
 
$
10,630

Risk management activities — derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
Commodity contracts

 
5,683

 
1,036

 
(4,737
)
 
(b)
 
1,982

Nuclear decommissioning trust:
 

 
 

 
 

 
 

 
 
 
 

Cash and cash equivalents
7,224

 

 

 
109

 
(d)
 
7,333

U.S. commingled equity funds

 

 

 
417,390

 
(e)
 
417,390

U.S. Treasury debt
127,662

 

 

 

 
 
 
127,662

Corporate debt

 
114,007

 

 

 
 
 
114,007

Mortgage-backed debt securities

 
111,874

 

 

 
 
 
111,874

Municipal bonds

 
79,049

 

 

 
 
 
79,049

Other fixed income

 
13,685

 

 

 
 
 
13,685

Subtotal nuclear decommissioning trust
134,886

 
318,615

 

 
417,499

 
 
 
871,000

 
 
 
 
 
 
 
 
 
 
 
 
Other special use funds (c):
455

 
31,562

 

 
525

 
 
 
32,542

 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
$
145,971

 
$
355,860

 
$
1,036

 
$
413,287

 
 
 
$
916,154

Liabilities
 

 
 

 
 

 
 

 
 
 
 

Risk management activities — derivative instruments:
 

 
 

 
 

 
 

 
 
 
 

Commodity contracts
$

 
$
(78,646
)
 
$
(19,292
)
 
$
1,516

 
(b)
 
$
(96,422
)

(a)
Primarily consists of long-dated electricity contracts.
(b)
Represents counterparty netting, margin, and collateral. See Note 7.
(c)
Primarily consists of fixed income municipal bonds. Presented as coal reclamation escrow in 2017.
(d)
Represents nuclear decommissioning trust net pending securities sales and purchases.
(e)
Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.
Information regarding the entity's internally developed significant unobservable inputs used to value its level 3 instruments
The following tables provide information regarding our significant unobservable inputs used to value our risk management derivative Level 3 instruments at June 30, 2018 and December 31, 2017:
 
 
June 30, 2018
Fair Value (thousands)
 
Valuation Technique
 
Significant Unobservable Input
 
 
 
Weighted-Average
Commodity Contracts
Assets
 
Liabilities
 
 
 
Range
 
Electricity:
 

 
 

 
 
 
 
 
 
 
 

Forward Contracts (a)
$

 
$
1,928

 
Discounted cash flows
 
Electricity forward price (per MWh)
 
$20.43 - $63.14
 
$
60.68

Option Contracts (b)
1,410

 
203

 
Option model
 
Electricity price volatilities
 
93% - 110%
 
101
%
 
 
 
 
 
 
 

 

 


Natural Gas:
 

 
 

 
 
 
 
 
 
 
 

Forward Contracts (a)
661

 
9,298

 
Discounted cash flows
 
Natural gas forward price (per MMBtu)
 
$1.65 - $2.82
 
$
2.32

Total
$
2,071

 
$
11,429

 
 
 
 
 
 
 
 


(a)
Includes swaps and physical and financial contracts.
(b)
Electricity price volatilities are estimated based on historical forward price movements due to lack of market quotes for implied volatilities.

 
December 31, 2017
Fair Value (thousands)
 
Valuation Technique
 
Significant Unobservable Input
 
 
 
Weighted-Average
Commodity Contracts
Assets
 
Liabilities
 
 
 
Range
 
Electricity:
 

 
 

 
 
 
 
 
 
 
 

Forward Contracts (a)
$
21

 
$
15,485

 
Discounted cash flows
 
Electricity forward price (per MWh)
 
$18.51 - $38.75
 
$
27.89

Natural Gas:
 

 
 

 
 
 
 
 
 
 
 

Forward Contracts (a)
1,015

 
3,807

 
Discounted cash flows
 
Natural gas forward price (per MMBtu)
 
$2.33 - $3.11
 
$
2.71

Total
$
1,036

 
$
19,292

 
 
 
 
 
 
 
 


(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 six months ended June 30, 2018 and 2017 (dollars in thousands):
 
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
Commodity Contracts
 
2018
 
2017
 
2018
 
2017
Net derivative balance at beginning of period
 
$
(19,754
)
 
$
(41,685
)
 
$
(18,256
)
 
$
(47,406
)
Total net gains (losses) realized/unrealized:
 
 

 
 

 
 
 
 
Included in OCI
 

 
(6
)
 

 
(6
)
Deferred as a regulatory asset or liability
 
(989
)
 
4,252

 
(3,311
)
 
(7,503
)
Settlements
 
494

 
1,699

 
1,276

 
3,122

Transfers into Level 3 from Level 2
 
(2,534
)
 
(4,350
)
 
(4,979
)
 
(4,388
)
Transfers from Level 3 into Level 2
 
13,425

 
3,845

 
15,912

 
19,936

Net derivative balance at end of period
 
$
(9,358
)
 
$
(36,245
)
 
$
(9,358
)
 
$
(36,245
)
 
 
 
 
 
 
 
 
 
Net unrealized gains included in earnings related to instruments still held at end of period
 
$

 
$

 
$

 
$