Fair Value of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 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 Sept. 30, 2012 and Dec. 31, 2011:

(Amounts in Thousands) (a)(b)	Sept. 30, 2012		Dec. 31, 2011
Megawatt hours (MWh) of electricity		973		1,299
MMBtu of natural gas		6,932		32,053
Gallons of vehicle fuel		329		270

(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)	2012			2011
Accumulated other comprehensive (loss) income related to cash flow hedges at July 1	$	(18,865	)	$	6,793
After-tax net unrealized losses related to derivatives accounted for as hedges		(3,574	)		(14,428	)
After-tax net realized gains on derivative transactions reclassified into earnings		(304	)		(381	)
Accumulated other comprehensive loss related to cash flow hedges at Sept. 30	$	(22,743	)	$	(8,016	)

	Nine Months Ended Sept. 30
(Thousands of Dollars)	2012			2011
Accumulated other comprehensive (loss) income related to cash flow hedges at Jan. 1	$	(12,377	)	$	7,457
After-tax net unrealized losses related to derivatives accounted for as hedges		(9,311	)		(14,346	)
After-tax net realized gains on derivative transactions reclassified into earnings		(1,055	)		(1,127	)
Accumulated other comprehensive loss related to cash flow hedges at Sept. 30	$	(22,743	)	$	(8,016	)

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, 2012 and 2011, on accumulated other comprehensive loss, regulatory assets and liabilities, and income:

	Three Months Ended Sept. 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	$	(5,836	)	$	-	$	(470	)	(a)	$	-	$	-
Vehicle fuel and other commodity		65			-		(20	)	(e)		-		-
Total	$	(5,771	)	$	-	$	(490	)		$	-	$	-

Other derivative instruments
Trading commodity	$	-		$	-	$	-			$	-	$	1	(b)
Natural gas commodity		-			1,109		-				-		-
Total	$	-		$	1,109	$	-			$	-	$	1

	Nine Months Ended Sept. 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	$	(15,082	)	$	-		$	(1,635	)	(a)	$	-		$	-
Vehicle fuel and other commodity		61			-			(66	)	(e)		-			-
Total	$	(15,021	)	$	-		$	(1,701	)		$	-		$	-

Other derivative instruments
Trading commodity	$	-		$	-		$	-			$	-		$	2		(b)
Natural gas commodity		-			(5,837	)		-				61,858	(d)		(109	)	(c)
Total	$	-		$	(5,837	)	$	-			$	61,858		$	(107	)

	Three Months Ended Sept. 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	$	(23,178	)	$	-		$	(589	)	(a)	$	-		$	-
Vehicle fuel and other commodity		(89	)		-			(25	)	(e)		-			-
Total	$	(23,267	)	$	-		$	(614	)		$	-		$	-

Other derivative instruments
Trading commodity	$	-		$	-		$	-			$	-		$	(12	)	(b)
Natural gas commodity		-			(31,802	)		-				308	(d)		(126	)	(c)
Total	$	-		$	(31,802	)	$	-			$	308		$	(138	)

	Nine Months Ended Sept. 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	$	(23,178	)	$	-		$	(1,748	)	(a)	$	-		$	-
Vehicle fuel and other commodity		44			-			(70	)	(e)		-			-
Total	$	(23,134	)	$	-		$	(1,818	)		$	-		$	-

Other derivative instruments
Trading commodity	$	-		$	-		$	-			$	-		$	83		(b)
Natural gas commodity		-			(44,948	)		-				45,527	(d)		(126	)	(c)
Total	$	-		$	(44,948	)	$	-			$	45,527		$	(43	)

(a)	Amounts are recorded to interest charges.

(b)	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.

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

(d)

Amounts for the nine months ended Sept. 30, 2012 and 2011 include $5.0 million and $9.9 million of settlement losses, respectively, on derivatives utilized 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. The remaining settlement losses for the nine months ended Sept. 30, 2012 and 2011, and all settlement losses for the three months ended Sept. 30, 2012 and 2011, 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 to a regulatory asset, as appropriate.

(e)	Amounts are recorded to operating and maintenance (O&M) expenses.

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 hierarchy levels, PSCo's assets and liabilities that are measured at fair value on a recurring basis at Sept. 30, 2012:

	Sept. 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	$	-	$	60	$	-	$	60	$	-		$	60
Other derivative instruments:
Trading commodity		-		5,899		-		5,899		(3,150	)		2,749
Natural gas commodity		-		1,878		-		1,878		-			1,878
Total current derivative assets	$	-	$	7,837	$	-	$	7,837	$	(3,150	)		4,687
Purchased power agreements (a)													1,716
Current derivative instruments												$	6,403
Noncurrent derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity	$	-	$	62	$	-	$	62	$	-		$	62
Other derivative instruments:
Trading commodity		-		4,710		-		4,710		(1,852	)		2,858
Total noncurrent derivative assets	$	-	$	4,772	$	-	$	4,772	$	(1,852	)		2,920
Purchased power agreements (a)													9,037
Noncurrent derivative instruments												$	11,957
Current derivative liabilities
Derivatives designated as cash flow hedges:
Other derivative instruments:
Trading commodity	$	-	$	5,425	$	-	$	5,425	$	(2,445	)	$	2,980
Total current derivative liabilities	$	-	$	5,425	$	-	$	5,425	$	(2,445	)		2,980
Purchased power agreements (a)													5,428
Current derivative instruments												$	8,408
Noncurrent derivative liabilities
Other derivative instruments:
Trading commodity	$	-	$	4,237	$	-	$	4,237	$	(1,852	)	$	2,385
Total noncurrent derivative liabilities	$	-	$	4,237	$	-	$	4,237	$	(1,852	)		2,385
Purchased power agreements (a)													30,058
Noncurrent derivative instruments												$	32,443

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

	Sept. 30, 2012				Dec. 31, 2011
	Carrying				Carrying
(Thousands of Dollars)	Amount		Fair Value		Amount		Fair Value
Long-term debt, including current portion	$	4,280,745	$	4,825,506	$	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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- 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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