Fair Value of Financial Assets and Liabilities (Tables)

12 Months Ended

Dec. 31, 2015

Gross Notional Amounts of Commodity Forwards and Options

The following table details the gross notional amounts of commodity forwards and options at Dec. 31:


^(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 in the consolidated statements of common stockholder’s equity and in the consolidated statements of comprehensive income, is detailed in the following table:



(Thousands of Dollars)	2015			2014			2013
Accumulated other comprehensive loss related to cash flow hedges at Jan. 1	$	(23,878	)	$	(23,338	)	$	(22,871	)
After-tax net unrealized (losses) gains related to derivatives accounted for as hedges	(30		)	(72		)	9
After-tax net realized losses (gains) on derivative transactions reclassified into earnings	72			(468		)	(476		)
Accumulated other comprehensive loss related to cash flow hedges at Dec. 31	$	(23,836	)	$	(23,878	)	$	(23,338	)

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 years ended Dec. 31, 2015, 2014 and 2013, on accumulated other comprehensive loss, regulatory assets and liabilities, and income:



	Year Ended Dec. 31, 2015
	Pre-Tax Fair Value Losses Recognized During the Period in:						Pre-Tax 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	$	—		$	—		$	54	^(a)	$	—		$	—
Vehicle fuel and other commodity	(50		)	—			57		^(b)	—			—
Total	$	(50	)	$	—		$	111		$	—		$	—
Other derivative instruments
Commodity trading	$	—		$	—		$	—		$	—		$	364		^(c)
Natural gas commodity	—			(10,635		)	—			10,158		^(e)	(7,620		)	^(e)
Total	$	—		$	(10,635	)	$	—		$	10,158		$	(7,256	)



	Year Ended Dec. 31, 2014
	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:					Pre-Tax Gains 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	$	—		$	—	$	(730	)	^(a)	$	—			$	—
Vehicle fuel and other commodity	(115		)	—		(25		)	^(b)	—				—
Total	$	(115	)	$	—	$	(755	)		$	—			$	—
Other derivative instruments
Natural gas commodity	$	—		$	451	$	—			$	(4,631	)	^(e)	$	(9,850	)	^(e)
Total	$	—		$	451	$	—			$	(4,631	)		$	(9,850	)



	Year Ended Dec. 31, 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	$	—	$	—		$	(730	)	^(a)	$	—		$	—
Vehicle fuel and other commodity	14		—			(40		)	^(b)	—			—
Total	$	14	$	—		$	(770	)		$	—		$	—
Other derivative instruments
Natural gas commodity	—		(4,001		)	—				4,340		^(e)	(5,850		)	^(d)
Total	$	—	$	(4,001	)	$	—			$	4,340		$	(5,850	)


^(a)	Amounts are recorded to interest charges.


^(b)	Amounts are recorded to O&M expenses.


^(c)	Amounts are recorded to electric operating revenues. Portions of these gains and losses are subject to sharing 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 year ended Dec. 31, 2015 included $1.1 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 years ended Dec. 31, 2014 and 2013 were immaterial. The remaining settlement losses for the years ended Dec. 31, 2015, 2014 and 2013 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 derivative assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2015:



	Dec. 31, 2015
	Fair Value
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting ^(b)			Total
Current derivative assets
Other derivative instruments:
Commodity trading	$	137	$	351	$	—	$	488	$	(324	)	$	164
Natural gas commodity	—		352		—		352		(286		)	66
Total current derivative assets	$	137	$	703	$	—	$	840	$	(610	)	230
PPAs ^(a)												1,715
Current derivative instruments												$	1,945
Noncurrent derivative assets
Other derivative instruments:
Commodity trading	$	—	$	16	$	—	$	16	$	—		$	16
Total noncurrent derivative assets	$	—	$	16	$	—	$	16	$	—		16
PPAs ^(a)												3,462
Noncurrent derivative instruments												$	3,478
Current derivative liabilities
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	92	$	—	$	92	$	—		$	92
Other derivative instruments:
Commodity trading	34		325		—		359		(324		)	35
Natural gas commodity	—		3,850		—		3,850		(286		)	3,564
Total current derivative liabilities	$	34	$	4,267	$	—	$	4,301	$	(610	)	3,691
PPAs ^(a)												5,190
Current derivative instruments												$	8,881
Noncurrent derivative liabilities
Other derivative instruments:
Commodity trading	$	—	$	33	$	—	$	33	$	—		$	33
Total noncurrent derivative liabilities	$	—	$	33	$	—	$	33	$	—		33
PPAs ^(a)												12,987
Noncurrent derivative instruments												$	13,020

^(a)

In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, PSCo began recording several long-term PPAs 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 Dec. 31, 2015. At Dec. 31, 2015, derivative assets and liabilities include no obligations to return cash collateral or 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 derivative assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2014:



	Dec. 31, 2014
	Fair Value
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting ^(b)			Total
Current derivative assets
Other derivative instruments:
Natural gas commodity	$	—	$	33	$	—	$	33	$	(18	)	$	15
Total current derivative assets	$	—	$	33	$	—	$	33	$	(18	)	15
PPAs ^(a)												1,716
Current derivative instruments												$	1,731
Noncurrent derivative assets
PPAs ^(a)												5,176
Noncurrent derivative instruments												$	5,176
Current derivative liabilities
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	53	$	—	$	53	$	—		$	53
Other derivative instruments:
Natural gas commodity	—		548		—		548		(18		)	530
Total current derivative liabilities	$	—	$	601	$	—	$	601	$	(18	)	583
PPAs ^(a)												5,191
Current derivative instruments												$	5,774
Noncurrent derivative liabilities
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	—	$	46	$	—	$	46	$	—		$	46
Other derivative instruments:
Natural gas commodity	—		35		—		35		—			35
Total noncurrent derivative liabilities	$	—	$	81	$	—	$	81	$	—		81
PPAs ^(a)												18,176
Noncurrent derivative instruments												$	18,257

^(a)

In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, PSCo began recording several long-term PPAs 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, 2014. At Dec. 31, 2014, derivative assets and liabilities include no obligations to return cash collateral of or 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 Dec. 31, 2015 and 2014, other financial instruments for which the carrying amount did not equal fair value were as follows:



	2015				2014
(Thousands of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	4,132,191	$	4,376,875	$	3,890,229	$	4,328,968

(Amounts in Thousands) ^(a)(b)

MWh of electricity

MMBtu of natural gas

Gallons of vehicle fuel