We maintain brokerage accounts to facilitate transactions that support our gas cost hedging plans. The accounting guidance related to derivatives and hedging requires that we use a gross presentation, based on our election, for the fair value amounts of our derivative instruments and the fair value of the right to reclaim cash collateral. We use long position gas purchase options to provide some level of protection for our customers in the event of significant commodity price increases. As of October 31, 2011 and 2010, we had long gas purchase options providing total coverage of 38.1 million dekatherms and 33.5 million dekatherms, respectively. The long gas purchase options held at October 31, 2011 are for the period from December 2011 through October 2012.

We use financial instruments to mitigate commodity price risk for our customers. We also have marketable securities that are held in a rabbi trust established for certain of our deferred compensation plans. In developing our fair value measurements of these financial instruments, we utilize market data or assumptions about risk and the risks inherent in the inputs to the valuation technique. Fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the entity transacts. We classify fair value balances based on the observance of those inputs into the fair value hierarchy levels as set forth in the fair value accounting guidance and fully described in “Fair Value Measurements” in Note 1 to the consolidated financial statements.

The following table sets forth, by level of the fair value hierarchy, our financial assets and liabilities that were accounted for at fair value on a recurring basis as of October 31, 2011 and 2010. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their consideration within the fair value hierarchy levels. We have had no transfers between any level during the years ended October 31, 2011 and 2010.

Recurring Fair Value Measurements as of October 31, 2011

				Significant
		Quoted Prices		Other		Significant
		in Active		Observable		Unobservable		Total
		Markets		Inputs		Inputs		Carrying
In thousands		(Level 1)		(Level 2)		(Level 3)		Value

Assets:
Derivatives held for distribution operations	$	2,772	$	-	$	-	$	2,772
Debt and equity securities held as trading securities:
Money markets		217		-		-		217
Mutual funds		1,274		-		-		1,274
Total fair value assets	$	4,263	$	-	$	-	$	4,263

Recurring Fair Value Measurements as of October 31, 2010

				Significant
		Quoted Prices		Other		Significant
		in Active		Observable		Unobservable		Total
		Markets		Inputs		Inputs		Carrying
In thousands		(Level 1)		(Level 2)		(Level 3)		Value

Assets:
Derivatives held for distribution operations	$	2,819	$	-	$	-	$	2,819
Debt and equity securities held as trading securities:
Money markets		254		-		-		254
Mutual funds		748		-		-		748
Total fair value assets	$	3,821	$	-	$	-	$	3,821

Our utility segment derivative instruments are used in accordance with programs filed with or approved by the NCUC, the PSCSC and the TRA to hedge the impact of market fluctuations in natural gas prices. These derivative instruments are accounted for at fair value each reporting period. In accordance with regulatory requirements, the net costs and the gains and losses related to these derivatives are reflected in purchased gas costs and ultimately passed through to customers through our PGA procedures. In accordance with accounting provisions for rate-regulated activities, the unrecovered amounts related to these instruments are reflected as a regulatory asset or liability, as appropriate, in “Amounts due to customers” or “Amounts due from customers” in the consolidated balance sheets. These derivative instruments reflect exchange-traded derivative contracts. Exchange-traded contracts are generally based on unadjusted quoted prices in active markets and are classified within Level 1.

Trading securities include assets in a rabbi trust established for our deferred compensation plans and are included in “Marketable securities, at fair value” in the consolidated balance sheets. Securities classified within Level 1 include funds held in money market and mutual funds which are highly liquid and are actively traded on the exchanges.

In developing the fair value of our long-term debt, we use a discounted cash flow technique, consistently applied, that incorporates a developed discount rate using long-term debt similarly rated by credit rating agencies combined with the U.S. Treasury bench mark with consideration given to maturities, redemption terms and credit ratings similar to our debt issuances. The carrying amount and fair value of our long-term debt, including the current portion, are shown below.

		Carrying
In thousands		Amount		Fair Value

As of October 31, 2011	$	675,000	$	831,323
As of October 31, 2010		731,922		890,277

The costs of our financial price hedging options for natural gas and all other costs related to hedging activities of our regulated gas costs are recorded in accordance with our regulatory tariffs approved by our state regulatory commissions, and thus are not accounted for as hedging instruments under derivative accounting standards. As required by the accounting guidance, the fair value amounts are presented on a gross basis and do not reflect any netting of asset and liability amounts or cash collateral amounts under master netting arrangements.

The following table presents the fair value and balance sheet classification of our financial options for natural gas as of October 31, 2011 and 2010.

Fair Value of Derivative Instruments

Fair Value

In thousands

October 31, 2011

October 31, 2010

Derivatives Not Designated as Hedging Instruments under Derivative Accounting Standards:

Asset Financial Instruments

Current Assets - Gas purchase derivative assets (December 2011 - October 2012)

2,772

Current Assets - Gas purchase derivative assets (December 2010 - November 2011)

2,819

We purchase natural gas for our regulated operations for resale under tariffs approved by state regulatory commissions. We recover the cost of gas purchased for regulated operations through PGA procedures. Our risk management policies allow us to use financial instruments to hedge commodity price risks, but not for speculative trading. The strategy and objective of our hedging programs is to use these financial instruments to provide some level of protection against significant price increases. Accordingly, the operation of the hedging programs on the regulated utility segment as a result of the use of these financial derivatives generally has no earnings impact.

The following table presents the impact that financial instruments not designated as hedging instruments under derivative accounting standards would have had on our consolidated statements of income for the twelve months ended October 31, 2011 and 2010, absent the regulatory treatment under our approved PGA procedures.

									Location of Loss
	Amount of Loss Recognized				Amount of Loss Deferred				Recognized through
In thousands	on Derivative Instruments				Under PGA Procedures				PGA Procedures

		Twelve Months Ended				Twelve Months Ended
		October 31				October 31
		2011		2010		2011		2010

Gas purchase options	$	10	$	62,516	$	10	$	62,516	Cost of Gas

In Tennessee, the cost of gas purchase options and all other costs related to hedging activities up to 1% of total annual gas costs are approved for recovery under the terms and conditions of our TIP approved by the TRA. In South Carolina, the costs of gas purchase options are subject to the terms and conditions of our gas hedging plan approved by the PSCSC. In North Carolina, costs associated with our hedging program are treated as gas costs subject to an annual cost review proceeding by the NCUC.

Our financial derivative instruments do not contain material credit-risk-related or other contingent features that could require us to make accelerated payments.

We seek to identify, assess, monitor and manage risk in accordance with defined policies and procedures under an Enterprise Risk Management program. In addition, we have an Energy Price Risk Management Committee that monitors compliance with our hedging programs, policies and procedures.