(B) Fair Value. Authoritative guidance regarding fair value measurements for financial and non-financial assets and liabilities defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements.

The guidance establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

Level 1. Quoted prices from active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Quoted prices in active markets provide the most reliable evidence of fair value and are used to measure fair value whenever available. Level 1 primarily consists of financial instruments that are exchange-traded.

Level 2. Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Level 2 primarily consists of financial instruments that are non-exchange-traded but have significant observable inputs.

Level 3. Pricing inputs that include significant inputs which are generally less observable from objective sources. These inputs may include internally developed methodologies that result in management's best estimate of fair value. Level 3 financial instruments are those whose fair value is based on significant unobservable inputs.

As required by the guidance, assets and liabilities measured at fair value are based on one or more of the following three valuation techniques:

1. Market approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business) and deriving fair value based on these inputs.

2. Income approach. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts.

3. Cost approach. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (often referred to as current replacement cost). This approach assumes that the fair value would not exceed what it would cost a market participant to acquire or construct a substitute asset or comparable utility, adjusted for obsolescence.

The tables below detail assets and liabilities measured at fair value on a recurring basis at March 31, 2017 and December 31, 2016.


	Fair Value Measurements at Reporting Date Using
		March 31, 2017			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)

		(dollars in thousands)
Nuclear decommissioning trust funds:
Domestic equity	$	128,483		$	128,483	$	—		$	—
International equity trust		70,815			—		70,815			—
Corporate bonds		67,336			—		67,336			—
US Treasury and government agency securities		68,026			68,026		—			—
Agency mortgage and asset backed securities		18,157			—		18,157			—
Mutual funds		44,172			44,172		—			—
Municipal bonds		313			—		313			—
Other		2,720			2,720		—			—
Long-term investments:
International equity trust		16,895			—		16,895			—
Corporate bonds		14,145			—		14,145			—
US Treasury and government agency securities		11,849			11,849		—			—
Agency mortgage and asset backed securities		1,386			—		1,386			—
Mutual funds		62,169			62,169		—			—
Natural gas swaps		(4,968	)		—		(4,968	)		—


	Fair Value Measurements at Reporting Date Using
		December 31, 2016			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)

		(dollars in thousands)
Nuclear decommissioning trust funds:
Domestic equity	$	170,408		$	170,408	$	—		$	—
International equity trust		66,861			—		66,861			—
Corporate bonds		60,019			—		60,019			—
US Treasury and government agency securities		65,725			65,725		—			—
Agency mortgage and asset backed securities		17,410			—		17,410			—
Municipal bonds		943			—		943
Other		4,663			4,663		—			—
Long-term investments:
Corporate bonds		11,853			—		11,853			—
US Treasury and government agency securities		12,187			12,187		—			—
Agency mortgage and asset backed securities		1,651			—		1,651			—
International equity trust		15,946			—		15,946			—
Mutual funds		57,932			57,932		—			—
Other		305			305		—			—
Natural gas swaps		(15,090	)		—		(15,090	)		—

The estimated fair values of our long-term debt, including current maturities at March 31, 2017 and December 31, 2016 were as follows (in thousands):


		2017				2016

		Carrying Value		Fair Value		Carrying Value		Fair Value

Long-term debt	$	8,123,581	$	8,858,128	$	8,304,523	$	9,043,029

The estimated fair value of long-term debt is classified as Level 2 and is estimated based on observed or quoted market prices for the same or similar issues or on current rates offered to us for debt of similar maturities. The primary sources of our long-term debt consist of first mortgage bonds, pollution control revenue bonds and long-term debt issued by the Federal Financing Bank that is guaranteed by the Rural Utilities Service or the U.S. Department of Energy. We also have small amounts of long-term debt provided by National Rural Utilities Cooperative Finance Corporation (CFC) and by CoBank, ACB. The valuations for the first mortgage bonds and the pollution control revenue bonds were obtained from a third party data reporting service, and are based on secondary market trading of our debt. Valuations for debt issued by the Federal Financing Bank are based on U.S. Treasury rates as of March 31, 2017 plus an applicable spread, which reflects our borrowing rate for new loans of this type from the Federal Financing Bank. The rates on the CFC debt are fixed and the valuation is based on rate quotes provided by CFC. We use an interest rate quote sheet provided by CoBank for valuation of the CoBank debt, which reflects current rates for similar loans.

For cash and cash equivalents, and receivables, the carrying amount approximates fair value because of the short-term maturity of those instruments. Restricted investments consist of funds on deposit with the Rural Utilities Service in the Cushion of Credit Account. The carrying amount approximates fair value because of the liquid nature of the deposits with the U.S. Treasury.