Fair Value of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Gross Notional Amounts of Commodity Forwards and Options

The following table details the gross notional amounts of commodity forwards and options at Sept. 30, 2013 and Dec. 31, 2012:

(Amounts in Thousands)(a)(b)	Sept. 30, 2013	Dec. 31, 2012
Megawatt hours (MWh) of electricity	486	813
Million British thermal units (MMBtu) of natural gas	9,800	646
Gallons of vehicle fuel	239	307

^(a)  Amounts are not reflective of net positions in the underlying commodities.

^(b)  Notional amounts for options are included on a gross basis, but are weighted for the probability of exercise.

Financial Impact of Qualifying Cash Flow Hedges on Accumulated Other Comprehensive Loss

Financial Impact of Qualifying Cash Flow Hedges — The impact of qualifying interest rate and vehicle fuel cash flow hedges on PSCo’s accumulated other comprehensive loss, included as a component of common stockholder’s equity and in the consolidated statement of comprehensive income, is detailed in the following table: 

	Three Months Ended Sept. 30
(Thousands of Dollars)	2013			2012
Accumulated other comprehensive loss related to cash flow hedges at July 1	$	(23,120	)	$	(18,865	)
After-tax net unrealized gains (losses) related to derivatives accounted for as hedges	11			(3,574		)
After-tax net realized gains on derivative transactions reclassified into earnings	(119		)	(304		)
Accumulated other comprehensive loss related to cash flow hedges at Sept. 30	$	(23,228	)	$	(22,743	)

	Nine Months Ended Sept. 30
(Thousands of Dollars)	2013			2012
Accumulated other comprehensive loss related to cash flow hedges at Jan. 1	$	(22,871	)	$	(12,377	)
After-tax net unrealized losses related to derivatives accounted for as hedges	(2		)	(9,311		)
After-tax net realized gains on derivative transactions reclassified into earnings	(355		)	(1,055		)
Accumulated other comprehensive loss related to cash flow hedges at Sept. 30	$	(23,228	)	$	(22,743	)

Impact of Derivative Activity on Accumulated Other Comprehensive Loss, Regulatory Assets and Liabilities, and Income

The following tables detail the impact of derivative activity during the three and nine months ended Sept. 30, 2013 and 2012, on accumulated other comprehensive loss, regulatory assets and liabilities, and income: 

	Three Months Ended Sept. 30, 2013
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:					Pre-Tax (Gains)Losses Reclassified into Income During the Period from:
(Thousands of Dollars)	Accumulated Other Comprehensive Loss		Regulatory (Assets) and Liabilities			Accumulated Other Comprehensive Loss				Regulatory Assets and (Liabilities)		Pre-Tax Gains Recognized During the Period in Income
Derivatives designated as cash flow hedges
Interest rate	$	—	$	—		$	(184	)	(a)	$	—	$	—
Vehicle fuel and other commodity	16		—			(11		)	(b)	—		—
Total	$	16	$	—		$	(195	)		$	—	$	—
Other derivative instruments
Natural gas commodity	$	—	$	(1,727	)	$	—			$	—	$	13	(d)
Total	$	—	$	(1,727	)	$	—			$	—	$	13

	Nine Months Ended Sept. 30, 2013
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:						Pre-Tax (Gains) Losses Reclassified into Income During the Period from:
(Thousands of Dollars)	Accumulated Other Comprehensive Loss			Regulatory (Assets) and Liabilities			Accumulated Other Comprehensive Loss				Regulatory Assets and (Liabilities)			Pre-Tax Losses Recognized During the Period in Income
Derivatives designated as cash flow hedges
Interest rate	$	—		$	—		$	(546	)	(a)	$	—		$	—
Vehicle fuel and other commodity	(4		)	—			(30		)	(b)	—			—
Total	$	(4	)	$	—		$	(576	)		$	—		$	—
Other derivative instruments
Natural gas commodity	$	—		$	(4,896	)	$	—			$	7	(e)	$	(216	)	(d)
Total	$	—		$	(4,896	)	$	—			$	7		$	(216	)

	Three Months Ended Sept. 30, 2012
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:					Pre-Tax (Gains)Losses Reclassified into Income During the Period from:
(Thousands of Dollars)	Accumulated Other Comprehensive Loss			Regulatory (Assets) and Liabilities		Accumulated Other Comprehensive Loss				Regulatory Assets and (Liabilities)		Pre-Tax Gains Recognized During the Period in Income
Derivatives designated as cash flow hedges
Interest rate	$	(5,836	)	$	—	$	(470	)	(a)	$	—	$	—
Vehicle fuel and other commodity	65			—		(20		)	(b)	—		—
Total	$	(5,771	)	$	—	$	(490	)		$	—	$	—
Other derivative instruments
Commodity trading	$	—		$	—	$	—			$	—	$	1	(c)
Natural gas commodity	—			1,109		—				—		—
Total	$	—		$	1,109	$	—			$	—	$	1

	Nine Months Ended Sept. 30, 2012
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:						Pre-Tax (Gains) Losses Reclassified into Income During the Period from:
(Thousands of Dollars)	Accumulated Other Comprehensive Loss			Regulatory (Assets) and Liabilities			Accumulated Other Comprehensive Loss				Regulatory Assets and (Liabilities)			Pre-Tax Gains (Losses) Recognized During the Period in Income
Derivatives designated as cash flow hedges
Interest rate	$	(15,082	)	$	—		$	(1,635	)	(a)	$	—		$	—
Vehicle fuel and other commodity	61			—			(66		)	(b)	—			—
Total	$	(15,021	)	$	—		$	(1,701	)		$	—		$	—
Other derivative instruments
Commodity trading	$	—		$	—		$	—			$	—		$	2		(c)
Natural gas commodity	—			(5,837		)	—				61,858		(e)	(109		)	(d)
Total	$	—		$	(5,837	)	$	—			$	61,858		$	(107	)

^(a)   Recorded to interest charges.

^(b)   Recorded to operating and maintenance (O&M) expenses.

^(c)   Recorded to electric operating revenues. Portions of these gains and losses are shared with electric customers through margin-sharing mechanisms and deducted from gross revenue, as appropriate.

^(d)   Amounts are recorded to electric fuel and purchased power.

^(e)   Amounts for the nine months ended Sept. 30, 2012 included $5.0 million of settlement losses on derivatives entered to mitigate natural gas price risk for electric generation, recorded to electric fuel and purchased power, subject to cost-recovery mechanisms and reclassified to a regulatory asset, as appropriate.  Such losses for the nine months ended Sept. 30, 2013 were immaterial.  The remaining settlement losses for the nine months ended Sept. 30, 2013 and 2012 relate to natural gas operations and are recorded to cost of natural gas sold and transported.  These losses are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset, as appropriate.

Derivative Assets and Liabilities Measured at Fair Value on a Recurring Basis by Hierarchy Level

Recurring Fair Value Measurements—The following table presents, for each of the fair value hierarchy levels, PSCo’s assets and liabilities measured at fair value on a recurring basis at Sept. 30, 2013:

	Sept. 30, 2013
	Fair Value
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting(b)			Total
Current derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	33	$	—	$	33	$	—		$	33
Other derivative instruments:
Commodity trading	—		5,318		—		5,318		(2,507		)	2,811
Natural gas commodity	—		3,622		—		3,622		—			3,622
Total current derivative assets	$	—	$	8,973	$	—	$	8,973	$	(2,507	)	6,466
Purchased power agreements (a)												1,715
Current derivative instruments												$	8,181
Noncurrent derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	12	$	—	$	12	$	—		$	12
Total noncurrent derivative assets	$	—	$	12	$	—	$	12	$	—		12
Purchased power agreements (a)												7,321
Noncurrent derivative instruments												$	7,333
Current derivative liabilities
Derivatives designated as cash flow hedges:
Other derivative instruments:
Commodity trading	$	—	$	4,844	$	—	$	4,844	$	(2,155	)	$	2,689
Total current derivative liabilities	$	—	$	4,844	$	—	$	4,844	$	(2,155	)	2,689
Purchased power agreements (a)												5,395
Current derivative instruments												$	8,084
Noncurrent derivative liabilities
Purchased power agreements (a)												24,663
Noncurrent derivative instruments												$	24,663

^(a)  In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, PSCo began recording several long-term purchased power agreements at fair value due to accounting requirements related to underlying price adjustments.  As these purchases are recovered through normal regulatory recovery mechanisms, the changes in fair value for these contracts were offset by regulatory assets and liabilities.  During 2006, PSCo qualified these contracts under the normal purchase exception.  Based onthis qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

^(b)  PSCo nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Sept. 30, 2013. At Sept. 30, 2013, derivative assets and liabilities include obligations to return cash collateral of $0.4 million and no rights to reclaim cash collateral. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

The following table presents, for each of the fair value hierarchy levels, PSCo’s assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2012:

	Dec. 31, 2012
	Fair Value
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting(b)			Total
Current derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	43	$	—	$	43	$	—		$	43
Other derivative instruments:
Commodity trading	—		6,432		—		6,432		(3,301		)	3,131
Natural gas commodity	—		7		—		7		(7		)	—
Total current derivative assets	$	—	$	6,482	$	—	$	6,482	$	(3,308	)	3,174
Purchased power agreements (a)												1,715
Current derivative instruments												$	4,889
Noncurrent derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	39	$	—	$	39	$	—		$	39
Other derivative instruments:
Commodity trading	—		3,768		—		3,768		(1,546		)	2,222
Total noncurrent derivative assets	$	—	$	3,807	$	—	$	3,807	$	(1,546	)	2,261
Purchased power agreements (a)												8,607
Noncurrent derivative instruments												$	10,868
Current derivative liabilities
Other derivative instruments:
Commodity trading	$	—	$	5,958	$	—	$	5,958	$	(2,712	)	$	3,246
Natural gas commodity	—		85		—		85		(7		)	78
Total current derivative liabilities	$	—	$	6,043	$	—	$	6,043	$	(2,719	)	3,324
Purchased power agreements (a)												5,429
Current derivative instruments												$	8,753
Noncurrent derivative liabilities
Other derivative instruments:
Commodity trading	$	—	$	3,450	$	—	$	3,450	$	(1,546	)	$	1,904
Total noncurrent derivative liabilities	$	—	$	3,450	$	—	$	3,450	$	(1,546	)	1,904
Purchased power agreements (a)												28,701
Noncurrent derivative instruments												$	30,605

^(a)  In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, PSCo began recording several long-term purchased power agreements at fair value due to accounting requirements related to underlying price adjustments.  As these purchases are recovered through normal regulatory recovery mechanisms, the changes in fair value for these contracts were offset by regulatory assets and liabilities.  During 2006, PSCo qualified these contracts under the normal purchase exception.  Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

^(b)  PSCo nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Dec. 31, 2012.  At Dec. 31, 2012, derivative assets and liabilities include obligations to return cash collateral of $0.6 million and no rights to reclaim cash collateral. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

Carrying Amount and Fair Value of Long-term Debt

As of Sept. 30, 2013 and Dec. 31, 2012, other financial instruments for which the carrying amount did not equal fair value were as follows: 

	Sept. 30, 2013				Dec. 31, 2012
(Thousands of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	3,874,022	$	4,059,661	$	3,630,773	$	4,131,866