Fair Value of Financial Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2012

Fair Value of Financial Assets and Liabilities [Abstract]

Gross Notional Amounts of Commodity Forwards and Options

The following table details the gross notional amounts of commodity forwards and options at June 30, 2012 and Dec. 31, 2011:

(Amounts in Thousands) (a)(b)	June 30, 2012		Dec. 31, 2011
Megawatt hours (MWh) of electricity		973		1,299
MMBtu of natural gas		6,246		32,053
Gallons of vehicle fuel		225		270

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

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

Impact of Derivative Activity on OCI, Regulatory Assets and Liabilities, and Income

The following tables detail the impact of derivative activity during the three and six months ended June 30, 2012 and 2011, respectively, on OCI, regulatory assets and liabilities, and income:

	Three Months Ended June 30, 2012
	Fair Value Gains (Losses)					Pre-Tax (Gains) Losses Reclassified
	Recognized During the Period in:					into Income During the Period from:
	Accumulated					Accumulated					Pre-Tax Gains
	Other			Regulatory		Other			Regulatory		Recognized
	Comprehensive			(Assets) and		Comprehensive			Assets and		During the Period
(Thousands of Dollars)	Loss			Liabilities		Loss			(Liabilities)		in Income
Derivatives designated as cash flow hedges
Interest rate	$	(30,163	)	$	-	$	(582	)(a)	$	-	$	-
Vehicle fuel and other commodity		(79	)		-		(24	)(c)		-		-
Total	$	(30,242	)	$	-	$	(606	)	$	-	$	-

Other derivative instruments
Trading commodity	$	-		$	-	$	-		$	-	$	1	(b)
Natural gas commodity		-			769		-			-		-
Total	$	-		$	769	$	-		$	-	$	1

	Six Months Ended June 30, 2012
	Fair Value Gains (Losses)							Pre-Tax (Gains) Losses Reclassified
	Recognized During the Period in:							into Income During the Period from:
		Accumulated							Accumulated						Pre-Tax Gains
		Other			Regulatory				Other			Regulatory			(Losses) Recognized
		Comprehensive			(Assets) and				Comprehensive			Assets and			During the Period
(Thousands of Dollars)		Loss			Liabilities				Loss			(Liabilities)			in Income
Derivatives designated as cash flow hedges
Interest rate		$	(9,246	)	$	-			$	(1,165	)(a)	$	-		$	-
Vehicle fuel and other commodity			(4	)		-				(46	)(c)		-			-
Total		$	(9,250	)	$	-			$	(1,211	)	$	-		$	-

Other derivative instruments
Trading commodity		$	-		$	-			$	-		$	-		$	1	(b)
Natural gas commodity			-			(6,946	)			-			61,858	(d)		(109	)(b)
Total		$	-		$	(6,946	)		$	-		$	61,858		$	(108	)

	Three Months Ended June 30, 2011
	Fair Value Gains (Losses)							Pre-Tax (Gains) Losses Reclassified
	Recognized During the Period in:							into Income During the Period from:
		Accumulated							Accumulated						Pre-Tax Losses
		Other			Regulatory				Other			Regulatory			Recognized
		Comprehensive			(Assets) and				Comprehensive			Assets and			During the Period
(Thousands of Dollars)		Income			Liabilities				Income			(Liabilities)			in Income
Derivatives designated as cash flow hedges
Interest rate		$	-		$	-			$	(582	)(a)	$	-		$	-
Vehicle fuel and other commodity			(43	)		-				(27	)(c)		-			-
Total		$	(43	)	$	-			$	(609	)	$	-		$	-

Other derivative instruments
Trading commodity		$	-		$	-			$	-		$	-		$	(150	)(b)
Natural gas commodity			-			(7,792	)			-			738	(d)		-
Total		$	-		$	(7,792	)		$	-		$	738		$	(150	)

	Six Months Ended June 30, 2011
	Fair Value Gains (Losses)					Pre-Tax (Gains) Losses Reclassified
	Recognized During the Period in:					into Income During the Period from:
	Accumulated					Accumulated						Pre-Tax Gains
	Other		Regulatory			Other			Regulatory			Recognized
	Comprehensive		(Assets) and			Comprehensive			Assets and			During the Period
(Thousands of Dollars)	Income		Liabilities			Income			(Liabilities)			in Income
Derivatives designated as cash flow hedges
Interest rate	$	-	$	-		$	(1,159	)(a)	$	-		$	-
Vehicle fuel and other commodity		133		-			(45	)(c)		-			-
Total	$	133	$	-		$	(1,204	)	$	-		$	-

Other derivative instruments
Trading commodity	$	-	$	-		$	-		$	-		$	95	(b)
Natural gas commodity		-		(13,146	)		-			45,220	(d)		-
Total	$	-	$	(13,146	)	$	-		$	45,220		$	95

(a)	Recorded to interest charges.

(b)	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.

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

(d)	Recorded to cost of natural gas sold and transported; these derivative settlement gains and losses are shared with natural gas customers through purchased natural gas cost-recovery mechanisms, and reclassified out of income as regulatory assets and liabilities, as appropriate.

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

The following table presents for each of the hierarchy levels, PSCo's assets and liabilities that are measured at fair value on a recurring basis at June 30, 2012:

	June 30, 2012
	Fair Value
							Fair Value		Counterparty
(Thousands of Dollars)	Level 1		Level 2		Level 3		Total		Netting (b)			Total
Current derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	-	$	40	$	-	$	40	$	-		$	40
Other derivative instruments:
Trading commodity		-		6,483		-		6,483		(3,443	)		3,040
Natural gas commodity		-		806		-		806		(37	)		769
Total current derivative assets	$	-	$	7,329	$	-	$	7,329	$	(3,480	)		3,849
Purchased power agreements (a)													1,716
Current derivative instruments												$	5,565
Noncurrent derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	-	$	26	$	-	$	26	$	-		$	26
Other derivative instruments:
Trading commodity		-		4,624		-		4,624		(1,809	)		2,815
Total noncurrent derivative assets	$	-	$	4,650	$	-	$	4,650	$	(1,809	)		2,841
Purchased power agreements (a)													9,464
Noncurrent derivative instruments												$	12,305

Current derivative liabilities
Derivatives designated as cash flow hedges:
Interest rate	$	-	$	38,876	$	-	$	38,876	$	-		$	38,876
Other derivative instruments:
Trading commodity		-		6,009		-		6,009		(2,737	)		3,272
Natural gas commodity		-		37		-		37		(37	)		-
Total current derivative liabilities	$	-	$	44,922	$	-	$	44,922	$	(2,774	)		42,148
Purchased power agreements (a)													5,428
Current derivative instruments												$	47,576
Noncurrent derivative liabilities
Other derivative instruments:
Trading commodity	$	-	$	4,152	$	-	$	4,152	$	(1,809	)	$	2,343
Total noncurrent derivative liabilities	$	-	$	4,152	$	-	$	4,152	$	(1,809	)		2,343
Purchased power agreements (a)													31,414
Noncurrent derivative instruments												$	33,757

(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)

The accounting guidance for derivatives and hedging permits the netting of receivables and payables for derivatives and related collateral amounts when a legally enforceable master netting agreement exists between PSCo and a counterparty. A master netting agreement is an agreement between two parties who have multiple contracts with each other that provides for the net settlement of all contracts in the event of default on or termination of any one contract.

The following table presents for each of the hierarchy levels, PSCo's assets and liabilities that are measured at fair value on a recurring basis at Dec. 31, 2011:

	Dec. 31, 2011
	Fair Value
							Fair Value		Counterparty
(Thousands of Dollars)	Level 1		Level 2		Level 3		Total		Netting (b)			Total
Current derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	-	$	76	$	-	$	76	$	(76	)	$	-
Other derivative instruments:
Trading commodity		-		6,550		-		6,550		(3,712	)		2,838
Total current derivative assets	$	-	$	6,626	$	-	$	6,626	$	(3,788	)		2,838
Purchased power agreements (a)													2,092
Current derivative instruments												$	4,930
Noncurrent derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	-	$	48	$	-	$	48	$	-		$	48
Other derivative instruments:
Trading commodity		-		8,292		-		8,292		(3,305	)		4,987
Total noncurrent derivative assets	$	-	$	8,340	$	-	$	8,340	$	(3,305	)		5,035
Purchased power agreements (a)													10,322
Noncurrent derivative instruments												$	15,357

Current derivative liabilities
Derivatives designated as cash flow hedges:
Interest rate	$	-	$	29,630	$	-	$	29,630	$	-		$	29,630
Other derivative instruments:
Trading commodity		-		6,076		-		6,076		(2,846	)		3,230
Natural gas commodity		-		54,525		-		54,525		(7,410	)		47,115
Total current derivative liabilities	$	-	$	90,231	$	-	$	90,231	$	(10,256	)		79,975
Purchased power agreements (a)													5,543
Current derivative instruments												$	85,518
Noncurrent derivative liabilities
Other derivative instruments:
Trading commodity	$	-	$	7,502	$	-	$	7,502	$	(3,305	)	$	4,197
Total noncurrent derivative liabilities	$	-	$	7,502	$	-	$	7,502	$	(3,305	)		4,197
Purchased power agreements (a)													34,128
Noncurrent derivative instruments												$	38,325

(a)

(b)

Carrying Amount and Fair Value of Long-term Debt

As of June 30, 2012 and Dec. 31, 2011, other financial instruments for which the carrying amount did not equal fair value were as follows:

	June 30, 2012				Dec. 31, 2011
	Carrying				Carrying
	Amount		Fair Value		Amount		Fair Value
Long-term debt, including current portion	$	3,483,964	$	4,005,198	$	3,486,275	$	4,020,083

- Definition

This element represents the disclosure related to assets and liabilities by class, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring and/or nonrecurring basis in periods after initial recognition (for example, impaired assets). The disclosures that may be required or desired include: (a) the fair value measurements recorded during the period and the reasons for the measurements and (b) the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets or liabilities (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). Where the quoted price in an active market for the identical liability is not available, the Level 1 input is the quoted price of an identical liability when traded as an asset.

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-Name Accounting Standards Codification

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- Definition

Tabular disclosure of the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such certain disclosures about the financial instruments, assets, and liabilities include: (1) the fair value of the required items together with their carrying amounts (as appropriate) and (2) the methodology and assumptions used in developing such estimates of fair value.

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- Definition

Tabular disclosure of the location and amount of gains and losses reported in the statement of financial performance, or when applicable, the statement of financial position. For example, (a) gains and losses recognized in the income statement on derivative instruments designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges and (b) gains and losses initially recognized in other comprehensive income on derivative instruments designated and qualifying as cash flow hedges.

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