FAIR VALUE MEASUREMENTS
The following tables summarize our financial assets and liabilities that were accounted for at fair value on a recurring basis, categorized by level within the fair value hierarchy: | | | | | | | | | | | | | | | | | | | | December 31, 2016 | (in millions) | | Level 1 | | Level 2 | | Level 3 | | Total | Derivative assets | | | | | | | | | Natural gas contracts | | $ | 10.1 |
| | $ | 24.2 |
| | $ | — |
| | $ | 34.3 |
| Petroleum products contracts | | 0.2 |
| | — |
| | — |
| | 0.2 |
| FTRs | | — |
| | — |
| | 5.1 |
| | 5.1 |
| Coal contracts | | — |
| | 2.0 |
| | — |
| | 2.0 |
| Total derivative assets | | $ | 10.3 |
| | $ | 26.2 |
| | $ | 5.1 |
| | $ | 41.6 |
| | | | | | | | | | Investments held in rabbi trust | | $ | 103.9 |
| | $ | — |
| | $ | — |
| | $ | 103.9 |
| | | | | | | | | | Derivative liabilities | | | | | | | | | Natural gas contracts | | $ | 0.2 |
| | $ | 0.2 |
| | $ | — |
| | $ | 0.4 |
| Petroleum products contracts | | 0.1 |
| | — |
| | — |
| | 0.1 |
| Coal contracts | | — |
| | 1.9 |
| | — |
| | 1.9 |
| Total derivative liabilities | | $ | 0.3 |
| | $ | 2.1 |
| | $ | — |
| | $ | 2.4 |
|
| | | | | | | | | | | | | | | | | | | | December 31, 2015 | (in millions) | | Level 1 | | Level 2 | | Level 3 | | Total | Derivative assets | | | | | | | | | Natural gas contracts | | $ | 1.6 |
| | $ | 1.5 |
| | $ | — |
| | $ | 3.1 |
| Petroleum products contracts | | 1.2 |
| | — |
| | — |
| | 1.2 |
| FTRs | | — |
| | — |
| | 3.6 |
| | 3.6 |
| Coal contracts | | — |
| | 2.0 |
| | — |
| | 2.0 |
| Total derivative assets | | $ | 2.8 |
| | $ | 3.5 |
| | $ | 3.6 |
| | $ | 9.9 |
| | | | | | | | | | Investments held in rabbi trust | | $ | 39.8 |
| | $ | — |
| | $ | — |
| | $ | 39.8 |
| | | | | | | | | | Derivative liabilities | | | | | | | | | Natural gas contracts | | $ | 16.5 |
| | $ | 25.3 |
| | $ | — |
| | $ | 41.8 |
| Petroleum products contracts | | 4.9 |
| | — |
| | — |
| | 4.9 |
| Coal contracts | | — |
| | 12.3 |
| | — |
| | 12.3 |
| Total derivative liabilities | | $ | 21.4 |
| | $ | 37.6 |
| | $ | — |
| | $ | 59.0 |
|
The derivative assets and liabilities listed in the tables above include options, swaps, futures, physical commodity contracts, and other instruments used to manage market risks related to changes in commodity prices. They also include FTRs, which are used to manage electric transmission congestion costs in the MISO Energy Markets. See Note 20, Derivative Instruments, for more information.
The following table summarizes the changes to derivatives classified as Level 3 in the fair value hierarchy at December 31: | | | | | | | | | | | | | | (in millions) | | 2016 | | 2015 | | 2014 | Balance at the beginning of the period | | $ | 3.6 |
| | $ | 7.0 |
| | $ | 3.5 |
| Realized and unrealized (losses) gains | | (0.2 | ) | | 1.3 |
| | — |
| Purchases | | 15.2 |
| | 3.9 |
| | 15.6 |
| Sales | | (0.2 | ) | | (0.1 | ) | | — |
| Settlements | | (13.3 | ) | | (11.9 | ) | | (12.1 | ) | Acquisition of Integrys | | — |
| | (1.3 | ) | | — |
| Transfers out of level 3 | | — |
| | 4.7 |
| | — |
| Balance at the end of the period | | $ | 5.1 |
| | $ | 3.6 |
| | $ | 7.0 |
|
Unrealized gains and losses on Level 3 derivatives are deferred as regulatory assets or liabilities. Therefore, these fair value measurements have no impact on earnings. Realized gains and losses on these instruments flow through cost of sales on the income statements.
Fair Value of Financial Instruments
The following table shows the financial instruments included on our balance sheets that are not recorded at fair value at December 31: | | | | | | | | | | | | | | | | | | | | 2016 | | 2015 | (in millions) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | Preferred stock | | $ | 30.4 |
| | $ | 28.8 |
| | $ | 30.4 |
| | $ | 27.3 |
| Long-term debt, including current portion * | | $ | 9,285.8 |
| | $ | 9,818.2 |
| | $ | 9,221.9 |
| | $ | 9,681.0 |
|
| | * | The carrying amount of long-term debt excludes capital lease obligations of $29.6 million and $59.9 million at December 31, 2016 and |
December 31, 2015, respectively. |