Fair Value

3 Months Ended

Mar. 31, 2024

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 of comparable utility, adjusted for obsolescence.

The tables below detail assets and liabilities measured at fair value on a recurring basis at March 31, 2024 and December 31, 2023.


	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	March 31, 2024		(Level 1)		(Level 2)		(Level 3)
	(dollars in thousands)
Nuclear decommissioning trust funds:
Domestic equity	$	259,404	$	259,404	$	—	$	—
International equity trust	141,293		—		141,293		—
Corporate bonds and debt	64,861		—		64,772		89
US Treasury securities	42,814		42,814		—		—
Mortgage backed securities	56,607		—		56,607		—
Domestic mutual funds	92,626		92,626		—		—
Municipal bonds	303		—		303		—
Federal agency securities	8,231		—		8,231		—
International mutual funds	2,449		—		2,449		—
Non-US Gov't bonds & private placements	3,708		—		3,708		—
Other	7,002		7,002		—		—
Long-term investments:
International equity trust	46,098		—		46,098		—
Corporate bonds and debt	14,949		—		14,949		—
US Treasury securities	14,783		14,783		—		—
Mortgage backed securities	17,068		—		17,068		—
Domestic mutual funds	387,897		387,897		—		—

Treasury STRIPS	226,643		—		226,643		—
Non-US Gov't bonds & private placements	1,775		—		1,775		—
Other	602		602		—		—
Short-term investments: Treasury STRIPS	135,341		—		135,341		—
Natural gas swaps	10,381		—		10,381		—


	Fair Value Measurements at Reporting Date Using
			Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2023		(Level 1)		(Level 2)		(Level 3)
	(dollars in thousands)
Nuclear decommissioning trust funds:
Domestic equity	$	234,979	$	234,979	$	—	$	—
International equity trust	134,911		—		134,911		—
Corporate bonds and debt	67,986		—		67,900		86
US Treasury securities	43,917		43,917		—		—
Mortgage backed securities	58,763		—		58,763		—
Domestic mutual funds	85,481		85,481		—		—
Municipal bonds	303		—		303		—
Federal agency securities	7,256		—		7,256		—
Non-US Gov't bonds & private placements	2,717		—		2,717		—
International mutual funds	2,012		—		2,012		—
Other	2,914		2,914		—		—
Long-term investments:
International equity trust	43,202		—		43,202		—
Corporate bonds and debt	14,151		—		14,151		—
US Treasury securities	17,243		17,243		—		—
Mortgage backed securities	15,024		—		15,024		—
Domestic mutual funds	378,387		378,387		—		—

Treasury STRIPS	220,765		—		220,765		—
Non-US Gov't bonds & private placements	1,568		—		1,568		—
Other	392		392		—		—
Short-term investments: Treasury STRIPS	143,931		—		143,931		—
Natural gas swaps	13,445		—		13,445		—

The Level 2 investments above may not be exchange traded. The fair value measurements for these investments are based on a market approach, including the use of observable inputs at or near the valuation date. Common inputs include reported trades and broker/dealer bid/ask prices. The fair value of the Level 2 investments above in international equity trust are calculated based on the net asset value per share of the fund. There are no unfunded commitments for the international equity trust and redemption may occur daily with a 3-day redemption notice period.

The Level 3 investments above in corporate bonds and debt consist of investments in bank loans which are not exchange traded. Although these securities may be liquid and priced daily, their inputs are not observable.

The estimated fair values of our long-term debt, including current maturities at March 31, 2024 and December 31, 2023 were as follows:


	2024				2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
	(in thousands)
Long-term debt	$	11,966,572	$	10,233,768	$	12,096,552	$	10,638,749

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. 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, 2024 and December 31, 2023 plus an applicable spread, which reflects our borrowing rate for new loans of this type from the Federal Financing Bank.

For cash and cash equivalents and receivables, the carrying amount approximates fair value because of the short-term maturity of those instruments.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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