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Fair Value Measurements
6 Months Ended
Jun. 30, 2018
Fair Value Measurements
FAIR VALUE MEASUREMENTS

The disclosures in this note apply to all Registrants except AEPTCo unless indicated otherwise.

Fair Value Hierarchy and Valuation Techniques

The accounting guidance for “Fair Value Measurements and Disclosures” establishes a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).  Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2.  When quoted market prices are not available, pricing may be completed using comparable securities, dealer values, operating data and general market conditions to determine fair value.  Valuation models utilize various inputs such as commodity, interest rate and, to a lesser degree, volatility and credit that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, market corroborated inputs (i.e. inputs derived principally from, or correlated to, observable market data) and other observable inputs for the asset or liability.

For commercial activities, exchange traded derivatives, namely futures contracts, are generally fair valued based on unadjusted quoted prices in active markets and are classified as Level 1.  Level 2 inputs primarily consist of OTC broker quotes in moderately active or less active markets, as well as exchange traded contracts where there is insufficient market liquidity to warrant inclusion in Level 1.  Management verifies price curves using these broker quotes and classifies these fair values within Level 2 when substantially all of the fair value can be corroborated.  Management typically obtains multiple broker quotes, which are nonbinding in nature but are based on recent trades in the marketplace.  When multiple broker quotes are obtained, the quoted bid and ask prices are averaged.  In certain circumstances, a broker quote may be discarded if it is a clear outlier.  Management uses a historical correlation analysis between the broker quoted location and the illiquid locations.  If the points are highly correlated, these locations are included within Level 2 as well.  Certain OTC and bilaterally executed derivative instruments are executed in less active markets with a lower availability of pricing information.  Illiquid transactions, complex structured transactions, FTRs and counterparty credit risk may require nonmarket based inputs.  Some of these inputs may be internally developed or extrapolated and utilized to estimate fair value.  When such inputs have a significant impact on the measurement of fair value, the instrument is categorized as Level 3.  The main driver of contracts being classified as Level 3 is the inability to substantiate energy price curves in the market.  A portion of the Level 3 instruments have been economically hedged which limits potential earnings volatility.

AEP utilizes its trustee’s external pricing service to estimate the fair value of the underlying investments held in the benefit plan and nuclear trusts.  AEP’s investment managers review and validate the prices utilized by the trustee to determine fair value.  AEP’s management performs its own valuation testing to verify the fair values of the securities.  AEP receives audit reports of the trustee’s operating controls and valuation processes.  The trustee uses multiple pricing vendors for the assets held in the trusts.

Assets in the nuclear trusts, cash and cash equivalents, other temporary investments and restricted cash for securitized funding are classified using the following methods. Equities are classified as Level 1 holdings if they are actively traded on exchanges. Items classified as Level 1 are investments in money market funds, fixed income and equity mutual funds and domestic equity securities. They are valued based on observable inputs, primarily unadjusted quoted prices in active markets for identical assets. Items classified as Level 2 are primarily investments in individual fixed income securities. Fixed income securities generally do not trade on exchanges and do not have an official closing price but their valuation inputs are based on observable market data. Pricing vendors calculate bond valuations using financial models and matrices. The models use observable inputs including yields on benchmark securities, quotes by securities brokers, rating agency actions, discounts or premiums on securities compared to par prices, changes in yields for U.S. Treasury securities, corporate actions by bond issuers, prepayment schedules and histories, economic events and, for certain securities, adjustments to yields to reflect changes in the rate of inflation. Other securities with model-derived valuation inputs that are observable are also classified as Level 2 investments. Investments with unobservable valuation inputs are classified as Level 3 investments.
Fair Value Measurements of Long-term Debt (Applies to all Registrants)

The fair values of Long-term Debt are based on quoted market prices, without credit enhancements, for the same or similar issues and the current interest rates offered for instruments with similar maturities classified as Level 2 measurement inputs.  These instruments are not marked-to-market.  The estimates presented are not necessarily indicative of the amounts that could be realized in a current market exchange.

The book values and fair values of Long-term Debt are summarized in the following table:
 
 
June 30, 2018
 
December 31, 2017
Company
 
Book Value
 
Fair Value
 
Book Value
 
Fair Value
 
 
(in millions)
AEP
 
$
22,032.0

 
$
23,320.6

 
$
21,173.3

 
$
23,649.6

AEP Texas
 
3,991.3

 
4,148.5

 
3,649.3

 
3,964.8

AEPTCo
 
2,550.9

 
2,586.3

 
2,550.4

 
2,782.9

APCo
 
4,073.7

 
4,593.9

 
3,980.1

 
4,782.6

I&M
 
3,096.8

 
3,234.6

 
2,745.1

 
3,014.7

OPCo
 
1,740.0

 
2,000.0

 
1,719.3

 
2,064.3

PSO
 
1,286.8

 
1,390.9

 
1,286.5

 
1,457.1

SWEPCo
 
2,503.7

 
2,543.7

 
2,441.9

 
2,645.9



Fair Value Measurements of Other Temporary Investments (Applies to AEP)

Other Temporary Investments include marketable securities that management intends to hold for less than one year and investments by AEP’s protected cell of EIS.

The following is a summary of Other Temporary Investments:
 
 
June 30, 2018
 
 
 
 
Gross
 
Gross
 
 
 
 
 
 
Unrealized
 
Unrealized
 
Fair
Other Temporary Investments
 
Cost
 
Gains
 
Losses
 
Value
 
 
(in millions)
Restricted Cash and Other Cash Deposits (a)
 
$
198.7

 
$

 
$

 
$
198.7

Fixed Income Securities – Mutual Funds (b)
 
105.4

 

 
(2.4
)
 
103.0

Equity Securities  Mutual Funds
 
17.4

 
20.1

 

 
37.5

Total Other Temporary Investments
 
$
321.5

 
$
20.1

 
$
(2.4
)
 
$
339.2

 
 
December 31, 2017
 
 
 
 
Gross
 
Gross
 
 
 
 
 
 
Unrealized
 
Unrealized
 
Fair
Other Temporary Investments
 
Cost
 
Gains
 
Losses
 
Value
 
 
(in millions)
Restricted Cash and Other Cash Deposits (a)
 
$
220.1

 
$

 
$

 
$
220.1

Fixed Income Securities  Mutual Funds (b)
 
104.3

 

 
(1.4
)
 
102.9

Equity Securities  Mutual Funds
 
17.0

 
19.7

 

 
36.7

Total Other Temporary Investments
 
$
341.4

 
$
19.7

 
$
(1.4
)
 
$
359.7


(a)
Primarily represents amounts held for the repayment of debt.
(b)
Primarily short and intermediate maturities which may be sold and do not contain maturity dates.

The following table provides the activity for fixed income and equity securities within Other Temporary Investments:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(in millions)
Proceeds from Investment Sales
$

 
$

 
$

 
$

Purchases of Investments
0.8

 
0.5

 
1.4

 
1.0

Gross Realized Gains on Investment Sales

 

 

 

Gross Realized Losses on Investment Sales

 

 

 



For details of the reasons for changes in Securities Available for Sale included in Accumulated Other Comprehensive Income (Loss) for the three and six months ended June 30, 2017, see Note 3 - Comprehensive Income.

Fair Value Measurements of Trust Assets for Decommissioning and SNF Disposal (Applies to AEP and I&M)

Nuclear decommissioning and spent nuclear fuel trust funds represent funds that regulatory commissions allow I&M to collect through rates to fund future decommissioning and spent nuclear fuel disposal liabilities.  By rules or orders, the IURC, the MPSC and the FERC established investment limitations and general risk management guidelines.  In general, limitations include:

Acceptable investments (rated investment grade or above when purchased).
Maximum percentage invested in a specific type of investment.
Prohibition of investment in obligations of AEP, I&M or their affiliates.
Withdrawals permitted only for payment of decommissioning costs and trust expenses.

I&M maintains trust funds for each regulatory jurisdiction.  Regulatory approval is required to withdraw decommissioning funds. These funds are managed by external investment managers who must comply with the guidelines and rules of the applicable regulatory authorities.  The trust assets are invested to optimize the net of tax earnings of the trust giving consideration to liquidity, risk, diversification and other prudent investment objectives.

I&M records securities held in these trust funds in Spent Nuclear Fuel and Decommissioning Trusts on its balance sheets. I&M records these securities at fair value. I&M classifies securities in the trust funds as available-for-sale due to their long-term purpose. Upon adoption of ASU 2016-01 in first quarter 2018, equity securities are now recorded with changes in fair value recognized in earnings. Effective January 2018 available for sale classification only applies to investment in debt securities. Other-than-temporary impairments for investments in debt securities are considered realized losses as a result of securities being managed by an external investment management firm. The external investment management firm makes specific investment decisions regarding the debt and equity investments held in these trusts and generally intends to sell debt securities in an unrealized loss position as part of a tax optimization strategy. Impairments reduce the cost basis of the securities which will affect any future unrealized gain or realized gain or loss due to the adjusted cost of investment. I&M records unrealized gains, unrealized losses and other-than-temporary impairments from securities in these trust funds as adjustments to the regulatory liability account for the nuclear decommissioning trust funds and to regulatory assets or liabilities for the SNF disposal trust funds in accordance with their treatment in rates. Consequently, changes in fair value of trust assets do not affect earnings or AOCI.

The following is a summary of nuclear trust fund investments:
 
June 30, 2018
 
December 31, 2017
 
 
 
Gross
 
Other-Than-
 
 
 
Gross
 
Other-Than-
 
Fair
 
Unrealized
 
Temporary
 
Fair
 
Unrealized
 
Temporary
 
Value
 
Gains
 
Impairments
 
Value
 
Gains
 
Impairments
 
(in millions)
Cash and Cash Equivalents
$
21.8

 
$

 
$

 
$
17.2

 
$

 
$

Fixed Income Securities:
 

 
 

 
 

 
 

 
 

 
 

United States Government
958.4

 
19.3

 
(6.0
)
 
981.2

 
29.7

 
(3.6
)
Corporate Debt
53.8

 
1.4

 
(1.8
)
 
58.7

 
3.8

 
(1.2
)
State and Local Government
26.6

 
0.6

 
(0.2
)
 
8.8

 
0.8

 
(0.2
)
Subtotal Fixed Income Securities
1,038.8

 
21.3

 
(8.0
)
 
1,048.7

 
34.3

 
(5.0
)
Equity Securities - Domestic (a)
1,494.3

 
882.9

 

 
1,461.7

 
868.2

 
(75.5
)
Spent Nuclear Fuel and Decommissioning Trusts
$
2,554.9

 
$
904.2

 
$
(8.0
)
 
$
2,527.6

 
$
902.5

 
$
(80.5
)


(a)
Amount reported as Gross Unrealized Gains includes unrealized gains of $887.4 million and unrealized losses of $4.5 million. AEP adopted ASU 2016-01 during the first quarter of 2018 by means of a modified retrospective approach. Due to the adoption of the ASU, Other-Than-Temporary Impairments are no longer applicable to Equity Securities with readily determinable fair values.

The following table provides the securities activity within the decommissioning and SNF trusts:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
(in millions)
Proceeds from Investment Sales
 
$
529.2

 
$
801.2

 
$
1,037.8

 
$
1,289.1

Purchases of Investments
 
542.5

 
811.7

 
1,067.8

 
1,317.2

Gross Realized Gains on Investment Sales
 
11.8

 
177.0

 
23.8

 
188.3

Gross Realized Losses on Investment Sales
 
7.8

 
132.1

 
18.7

 
140.2



The base cost of fixed income securities was $1 billion and $1 billion as of June 30, 2018 and December 31, 2017, respectively.  The base cost of equity securities was $611 million and $594 million as of June 30, 2018 and December 31, 2017, respectively.

The fair value of fixed income securities held in the nuclear trust funds, summarized by contractual maturities, as of June 30, 2018 was as follows:
 
Fair Value of Fixed Income Securities
 
(in millions)
Within 1 year
$
353.1

After 1 year through 5 years
335.4

After 5 years through 10 years
168.3

After 10 years
182.0

Total
$
1,038.8


Fair Value Measurements of Financial Assets and Liabilities

The following tables set forth, by level within the fair value hierarchy, the Registrants’ financial assets and liabilities that were accounted for at fair value on a recurring basis.  As required by the accounting guidance for “Fair Value Measurements and Disclosures,” financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.  There have not been any significant changes in management’s valuation techniques.

AEP

Assets and Liabilities Measured at Fair Value on a Recurring Basis
June 30, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Other Temporary Investments
 
 
 
 
 
 
 
 
 
 
Restricted Cash and Other Cash Deposits (a)
 
$
161.2

 
$
26.5

 
$

 
$
11.0

 
$
198.7

Fixed Income Securities  Mutual Funds
 
103.0

 

 

 

 
103.0

Equity Securities  Mutual Funds (b)
 
37.5

 

 

 

 
37.5

Total Other Temporary Investments
 
301.7

 
26.5

 

 
11.0

 
339.2

 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (d)
 
1.4

 
259.4

 
362.2

 
(191.2
)
 
431.8

Cash Flow Hedges:
 
 

 
 

 
 

 
 

 
 

Commodity Hedges (c)
 

 
18.2

 
6.3

 
2.8

 
27.3

Total Risk Management Assets
 
1.4

 
277.6

 
368.5

 
(188.4
)
 
459.1

 
 
 
 
 
 
 
 
 
 
 
Spent Nuclear Fuel and Decommissioning Trusts
 
 

 
 

 
 

 
 

 
 

Cash and Cash Equivalents (e)
 
14.1

 

 

 
7.7

 
21.8

Fixed Income Securities:
 
 

 
 

 
 

 
 

 
 

United States Government
 

 
958.4

 

 

 
958.4

Corporate Debt
 

 
53.8

 

 

 
53.8

State and Local Government
 

 
26.6

 

 

 
26.6

Subtotal Fixed Income Securities
 

 
1,038.8

 

 

 
1,038.8

Equity Securities  Domestic (b)
 
1,494.3

 

 

 

 
1,494.3

Total Spent Nuclear Fuel and Decommissioning Trusts
 
1,508.4

 
1,038.8

 

 
7.7

 
2,554.9

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
1,811.5

 
$
1,342.9

 
$
368.5

 
$
(169.7
)
 
$
3,353.2

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (d)
 
$
1.1

 
$
269.0

 
$
162.4

 
$
(187.9
)
 
$
244.6

Cash Flow Hedges:
 
 

 
 

 
 

 
 

 
 

Commodity Hedges (c)
 

 
24.5

 
33.8

 
2.8

 
61.1

Fair Value Hedges
 

 
27.9

 

 

 
27.9

Total Risk Management Liabilities
 
$
1.1

 
$
321.4

 
$
196.2

 
$
(185.1
)
 
$
333.6

AEP

Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2017
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Other Temporary Investments
 
 
 
 
 
 
 
 
 
 
Restricted Cash and Other Cash Deposits (a)
 
$
183.2

 
$

 
$

 
$
36.9

 
$
220.1

Fixed Income Securities  Mutual Funds
 
102.9

 

 

 

 
102.9

Equity Securities  Mutual Funds (b)
 
36.7

 

 

 

 
36.7

Total Other Temporary Investments
 
322.8

 

 

 
36.9

 
359.7

 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (f)
 
3.9

 
391.2

 
274.1

 
(285.4
)
 
383.8

Cash Flow Hedges:
 
 

 
 

 
 

 
 

 
 

Commodity Hedges (c)
 

 
17.3

 
4.7

 

 
22.0

Fair Value Hedges
 

 
2.5

 

 

 
2.5

Total Risk Management Assets
 
3.9

 
411.0

 
278.8

 
(285.4
)
 
408.3

 
 
 
 
 
 
 
 
 
 
 
Spent Nuclear Fuel and Decommissioning Trusts
 
 

 
 

 
 

 
 

 
 

Cash and Cash Equivalents (e)
 
7.5

 

 

 
9.7

 
17.2

Fixed Income Securities:
 
 

 
 

 
 

 
 

 
 

United States Government
 

 
981.2

 

 

 
981.2

Corporate Debt
 

 
58.7

 

 

 
58.7

State and Local Government
 

 
8.8

 

 

 
8.8

Subtotal Fixed Income Securities
 

 
1,048.7

 

 

 
1,048.7

Equity Securities  Domestic (b)
 
1,461.7

 

 

 

 
1,461.7

Total Spent Nuclear Fuel and Decommissioning Trusts
 
1,469.2

 
1,048.7

 

 
9.7

 
2,527.6

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
1,795.9

 
$
1,459.7

 
$
278.8

 
$
(238.8
)
 
$
3,295.6

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (f)
 
$
5.1

 
$
392.5

 
$
196.9

 
$
(285.0
)
 
$
309.5

Cash Flow Hedges:
 
 

 
 

 
 

 
 

 
 

Commodity Hedges (c)
 

 
23.9

 
41.6

 

 
65.5

Fair Value Hedges
 

 
8.6

 

 

 
8.6

Total Risk Management Liabilities
 
$
5.1

 
$
425.0

 
$
238.5

 
$
(285.0
)
 
$
383.6




AEP Texas

Assets and Liabilities Measured at Fair Value on a Recurring Basis
June 30, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Restricted Cash for Securitized Funding
 
$
131.9

 
$

 
$

 
$

 
$
131.9

 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c)
 

 
0.6

 

 
(0.1
)
 
0.5

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
131.9

 
$
0.6

 
$

 
$
(0.1
)
 
$
132.4



AEP Texas

Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2017
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Restricted Cash for Securitized Funding
 
$
155.2

 
$

 
$

 
$

 
$
155.2

 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c)
 

 
0.5

 

 

 
0.5

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
155.2

 
$
0.5

 
$

 
$

 
$
155.7





APCo

Assets and Liabilities Measured at Fair Value on a Recurring Basis
June 30, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Restricted Cash for Securitized Funding
 
$
17.7

 
$

 
$

 
$

 
$
17.7

 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
0.2

 
37.7

 
61.0

 
(36.4
)
 
62.5

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
17.9

 
$
37.7

 
$
61.0

 
$
(36.4
)
 
$
80.2

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
36.5

 
$
1.0

 
$
(35.6
)
 
$
1.9



APCo

Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2017
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Restricted Cash for Securitized Funding
 
$
16.3

 
$

 
$

 
$

 
$
16.3

 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 

 
52.5

 
25.1

 
(51.6
)
 
26.0

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
16.3

 
$
52.5

 
$
25.1

 
$
(51.6
)
 
$
42.3

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
51.2

 
$
0.4

 
$
(50.1
)
 
$
1.5


I&M

Assets and Liabilities Measured at Fair Value on a Recurring Basis
June 30, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$
0.1

 
$
24.1

 
$
15.6

 
$
(24.2
)
 
$
15.6

 
 
 
 
 
 
 
 
 
 
 
Spent Nuclear Fuel and Decommissioning Trusts
 
 

 
 

 
 

 
 

 
 

Cash and Cash Equivalents (e)
 
14.1

 

 

 
7.7

 
21.8

Fixed Income Securities:
 
 

 
 

 
 

 
 

 
 

United States Government
 

 
958.4

 

 

 
958.4

Corporate Debt
 

 
53.8

 

 

 
53.8

State and Local Government
 

 
26.6

 

 

 
26.6

Subtotal Fixed Income Securities
 

 
1,038.8

 

 

 
1,038.8

Equity Securities - Domestic (b)
 
1,494.3

 

 

 

 
1,494.3

Total Spent Nuclear Fuel and Decommissioning Trusts
 
1,508.4

 
1,038.8

 

 
7.7

 
2,554.9

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
1,508.5

 
$
1,062.9

 
$
15.6

 
$
(16.5
)
 
$
2,570.5

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
27.0

 
$
2.4

 
$
(23.7
)
 
$
5.7



I&M

Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2017
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
39.4

 
$
9.1

 
$
(40.2
)
 
$
8.3

 
 
 
 
 
 
 
 
 
 
 
Spent Nuclear Fuel and Decommissioning Trusts
 
 

 
 

 
 

 
 

 
 

Cash and Cash Equivalents (e)
 
7.5

 

 

 
9.7

 
17.2

Fixed Income Securities:
 
 

 
 

 
 

 
 

 


United States Government
 

 
981.2

 

 

 
981.2

Corporate Debt
 

 
58.7

 

 

 
58.7

State and Local Government
 

 
8.8

 

 

 
8.8

Subtotal Fixed Income Securities
 

 
1,048.7

 

 

 
1,048.7

Equity Securities - Domestic (b)
 
1,461.7

 

 

 

 
1,461.7

Total Spent Nuclear Fuel and Decommissioning Trusts
 
1,469.2

 
1,048.7

 

 
9.7

 
2,527.6

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
1,469.2

 
$
1,088.1

 
$
9.1

 
$
(30.5
)
 
$
2,535.9

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
47.6

 
$
1.5

 
$
(45.5
)
 
$
3.6


OPCo

Assets and Liabilities Measured at Fair Value on a Recurring Basis
June 30, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Restricted Cash for Securitized Funding
 
$

 
$
26.5

 
$

 
$

 
$
26.5

 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 

 
0.7

 

 
(0.2
)
 
0.5

 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$

 
$
27.2

 
$

 
$
(0.2
)
 
$
27.0

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 
 
 
 
 
 
 
 
 
Risk Management Commodity Contracts (c) (g)
 
$

 
$

 
$
86.9

 
$
(0.1
)
 
$
86.8



OPCo

Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2017
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
0.6

 
$

 
$

 
$
0.6

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$

 
$
132.4

 
$

 
$
132.4



PSO

Assets and Liabilities Measured at Fair Value on a Recurring Basis
June 30, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
0.3

 
$
24.6

 
$
(0.4
)
 
$
24.5

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$

 
$
0.3

 
$
(0.3
)
 
$



PSO

Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2017
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
0.2

 
$
6.4

 
$
(0.2
)
 
$
6.4

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$

 
$
0.2

 
$
(0.2
)
 
$



SWEPCo

Assets and Liabilities Measured at Fair Value on a Recurring Basis
June 30, 2018
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
0.3

 
$
9.5

 
$
(2.4
)
 
$
7.4

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$

 
$
4.6

 
$
(2.3
)
 
$
2.3



SWEPCo

Assets and Liabilities Measured at Fair Value on a Recurring Basis
December 31, 2017
 
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
Assets:
 
(in millions)
 
 
 
 
 
 
 
 
 
 
 
Risk Management Assets
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$
0.3

 
$
6.7

 
$
(0.6
)
 
$
6.4

 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
Risk Management Liabilities
 
 

 
 

 
 

 
 

 
 

Risk Management Commodity Contracts (c) (g)
 
$

 
$

 
$
0.8

 
$
(0.6
)
 
$
0.2


(a)
Amounts in “Other’’ column primarily represent cash deposits in bank accounts with financial institutions or with third parties.  Level 1 and Level 2 amounts primarily represent investments in money market funds.
(b)
Amounts represent publicly traded equity securities and equity-based mutual funds.
(c)
Amounts in “Other’’ column primarily represent counterparty netting of risk management and hedging contracts and associated cash collateral under the accounting guidance for “Derivatives and Hedging.’’
(d)
The June 30, 2018 maturity of the net fair value of risk management contracts prior to cash collateral, assets/(liabilities), is as follows: Level 2 matures $(5) million in 2018 and $(7) million in periods 2019-2021 and $3 million in periods 2022-2023;  Level 3 matures $77 million in 2018, $97 million in periods 2019-2021, $22 million in periods 2022-2023 and $3 million in periods 2024-2032.  Risk management commodity contracts are substantially comprised of power contracts.
(e)
Amounts in “Other’’ column primarily represent accrued interest receivables from financial institutions.  Level 1 amounts primarily represent investments in money market funds.
(f)
The December 31, 2017 maturity of the net fair value of risk management contracts prior to cash collateral, assets/(liabilities), is as follows: Level 1 matures $(1) million in 2018; Level 2 matures $(3) million in 2018 and $2 million in periods 2022-2023; Level 3 matures $59 million in 2018, $33 million in periods 2019-2021, $14 million in periods 2022-2023 and $(29) million in periods 2024-2032.  Risk management commodity contracts are substantially comprised of power contracts.
(g)
Substantially comprised of power contracts for the Registrant Subsidiaries.

There were no transfers between Level 1 and Level 2 during the three and six months ended June 30, 2018 and 2017.
The following tables set forth a reconciliation of changes in the fair value of net trading derivatives classified as Level 3 in the fair value hierarchy:
Three Months Ended June 30, 2018
 
AEP
 
APCo
 
I&M
 
OPCo
 
PSO
 
SWEPCo
 
 
(in millions)
Balance as of March 31, 2018
 
$
62.0

 
$
9.1

 
$
2.9

 
$
(98.5
)
 
$
2.8

 
$
0.9

Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)
 
55.0

 
36.0

 
11.8

 
0.2

 
6.1

 
(4.0
)
Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)
 
5.9

 

 

 

 

 

Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income
 
(10.3
)
 

 

 

 

 

Settlements
 
(75.8
)
 
(43.2
)
 
(14.6
)
 
1.3

 
(8.9
)
 
2.6

Transfers into Level 3 (c) (d)
 
12.6

 

 

 

 

 

Transfers out of Level 3 (d)
 
0.4

 

 

 

 

 

Changes in Fair Value Allocated to Regulated Jurisdictions (e)
 
122.5

 
58.1

 
13.1

 
10.1

 
24.3

 
5.4

Balance as of June 30, 2018
 
$
172.3

 
$
60.0

 
$
13.2

 
$
(86.9
)
 
$
24.3

 
$
4.9

Three Months Ended June 30, 2017
 
AEP
 
APCo
 
I&M
 
OPCo
 
PSO
 
SWEPCo
 
 
(in millions)
Balance as of March 31, 2017
 
$
(18.5
)
 
$
(5.8
)
 
$
2.0

 
$
(124.6
)
 
$
0.4

 
$
0.5

Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)
 
17.1

 
12.2

 
0.6

 
(0.1
)
 
0.8

 
1.4

Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)
 
8.7

 

 

 

 

 

Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income
 
12.1

 

 

 

 

 

Settlements
 
(16.1
)
 
(6.4
)
 
(2.7
)
 
1.9

 
(1.3
)
 
(1.9
)
Transfers into Level 3 (c) (d)
 
6.2

 

 

 

 

 

Transfers out of Level 3 (d)
 
(1.1
)
 

 

 

 

 

Changes in Fair Value Allocated to Regulated Jurisdictions (e)
 
78.9

 
41.3

 
15.6

 
(7.7
)
 
9.6

 
12.4

Balance as of June 30, 2017
 
$
87.3

 
$
41.3

 
$
15.5

 
$
(130.5
)
 
$
9.5

 
$
12.4


Six Months Ended June 30, 2018
 
AEP
 
APCo
 
I&M
 
OPCo
 
PSO
 
SWEPCo
 
 
(in millions)
Balance as of December 31, 2017
 
$
40.3

 
$
24.7

 
$
7.6

 
$
(132.4
)
 
$
6.2

 
$
5.9

Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)
 
152.6

 
104.7

 
15.1

 
0.9

 
18.1

 
(4.8
)
Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)
 
8.0

 

 

 

 

 

Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income
 
7.6

 

 

 

 

 

Settlements
 
(204.6
)
 
(128.4
)
 
(22.1
)
 
2.5

 
(24.3
)
 
(1.3
)
Transfers into Level 3 (c) (d)
 
14.7

 

 

 

 

 

Transfers out of Level 3 (d)
 
(1.5
)
 

 
(0.3
)
 

 

 

Changes in Fair Value Allocated to Regulated Jurisdictions (e)
 
155.2

 
59.0

 
12.9

 
42.1

 
24.3

 
5.1

Balance as of June 30, 2018
 
$
172.3

 
$
60.0

 
$
13.2

 
$
(86.9
)
 
$
24.3

 
$
4.9

Six Months Ended June 30, 2017
 
AEP
 
APCo
 
I&M
 
OPCo
 
PSO
 
SWEPCo
 
 
(in millions)
Balance as of December 31, 2016
 
$
2.5

 
$
1.4

 
$
2.8

 
$
(119.0
)
 
$
0.7

 
$
0.7

Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)
 
32.0

 
16.9

 
3.9

 
(4.3
)
 
3.1

 
6.0

Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)
 
25.2

 

 

 

 

 

Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income
 
(5.1
)
 

 

 

 

 

Settlements
 
(44.3
)
 
(18.6
)
 
(6.9
)
 
4.1

 
(3.8
)
 
(6.8
)
Transfers into Level 3 (c) (d)
 
10.7

 

 

 

 

 

Transfers out of Level 3 (d)
 
(9.4
)
 

 

 

 

 

Changes in Fair Value Allocated to Regulated Jurisdictions (e)
 
75.7

 
41.6

 
15.7

 
(11.3
)
 
9.5

 
12.5

Balance as of June 30, 2017
 
$
87.3

 
$
41.3

 
$
15.5

 
$
(130.5
)
 
$
9.5

 
$
12.4


(a)
Included in revenues on the statements of income.
(b)
Represents the change in fair value between the beginning of the reporting period and the settlement of the risk management commodity contract.
(c)
Represents existing assets or liabilities that were previously categorized as Level 2.
(d)
Transfers are recognized based on their value at the beginning of the reporting period that the transfer occurred.
(e)
Relates to the net gains (losses) of those contracts that are not reflected on the statements of income.  These net gains (losses) are recorded as regulatory liabilities/assets or accounts payable.

The following tables quantify the significant unobservable inputs used in developing the fair value of Level 3 positions:

Significant Unobservable Inputs
June 30, 2018
AEP
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Energy Contracts
$
240.8

 
$
187.1

 
Discounted Cash Flow 
 
Forward Market Price (a) 
 
$
5.28

 
$
145.99

 
$
34.31

 
 
 
 
 
 
 
Counterparty Credit Risk (b) 
 
13

 
442

 
173

Natural Gas Contracts

 
2.3

 
Discounted Cash Flow 
 
Forward Market Price (c) 
 
2.22

 
2.88

 
2.49

FTRs
127.7

 
6.8

 
Discounted Cash Flow 
 
Forward Market Price (a) 
 
(9.40
)
 
10.30

 
0.52

Total
$
368.5

 
$
196.2

 
 
 
 
 
 

 
 

 
 


Significant Unobservable Inputs
December 31, 2017
AEP
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Energy Contracts
$
225.1

 
$
233.7

 
Discounted Cash Flow 
 
Forward Market Price (a) 
 
$
(0.05
)
 
$
263.00

 
$
36.32

 
 
 
 
 
 
 
Counterparty Credit Risk (b) 
 
8

 
456

 
180

Natural Gas Contracts

 
0.2

 
Discounted Cash Flow 
 
Forward Market Price (c) 
 
2.37

 
2.96

 
2.62

FTRs
53.7

 
4.6

 
Discounted Cash Flow 
 
Forward Market Price (a) 
 
(55.62
)
 
54.88

 
0.41

Total
$
278.8

 
$
238.5

 
 
 
 
 
 

 
 

 
 

Significant Unobservable Inputs
June 30, 2018
APCo
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input (a)
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Energy Contracts
$
1.5

 
$
0.5

 
Discounted Cash Flow 
 
Forward Market Price 
 
$
14.72

 
$
63.75

 
$
34.64

FTRs
59.5

 
0.5

 
Discounted Cash Flow 
 
Forward Market Price 
 
0.01

 
8.30

 
1.57

Total
$
61.0

 
$
1.0

 
 
 
 
 
 

 
 

 
 

Significant Unobservable Inputs
December 31, 2017
APCo
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input (a)
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Energy Contracts
$
0.8

 
$
0.4

 
Discounted Cash Flow 
 
Forward Market Price 
 
$
20.52

 
$
195.00

 
$
33.80

FTRs
24.3

 

 
Discounted Cash Flow 
 
Forward Market Price 
 
(0.36
)
 
7.15

 
1.62

Total
$
25.1

 
$
0.4

 
 
 
 
 
 

 
 

 
 

Significant Unobservable Inputs
June 30, 2018
I&M
 
 
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input (a)
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Energy Contracts
$
0.3

 
$
0.5

 
Discounted Cash Flow 
 
Forward Market Price 
 
$
14.72

 
$
63.75

 
$
34.64

FTRs
15.3

 
1.9

 
Discounted Cash Flow 
 
Forward Market Price 
 
(1.50
)
 
5.97

 
0.77

Total
$
15.6

 
$
2.4

 
 
 
 
 
 

 
 

 
 

Significant Unobservable Inputs
December 31, 2017
I&M
 
 
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input (a)
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Energy Contracts
$
0.5

 
$
0.3

 
Discounted Cash Flow 
 
Forward Market Price 
 
$
20.52

 
$
195.00

 
$
33.80

FTRs
8.6

 
1.2

 
Discounted Cash Flow 
 
Forward Market Price 
 
(0.36
)
 
5.75

 
0.86

Total
$
9.1

 
$
1.5

 
 
 
 
 
 

 
 

 
 
Significant Unobservable Inputs
June 30, 2018
OPCo
 
 
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Energy Contracts
$

 
$
86.9

 
Discounted Cash Flow 
 
Forward Market Price (a)
 
$
31.56

 
$
73.69

 
$
47.11

 
 
 
 
 
 
 
Counterparty Credit Risk (b)
 
13

 
197

 
151

Total
$

 
$
86.9

 
 
 
 
 
 
 
 
 
 

Significant Unobservable Inputs
December 31, 2017
OPCo
 
 
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Energy Contracts
$

 
$
132.4

 
Discounted Cash Flow 
 
Forward Market Price (a)
 
$
30.52

 
$
170.43

 
$
44.62

 


 


 
 
 
Counterparty Credit Risk (b)
 
8

 
190

 
136

Total
$

 
$
132.4

 
 
 
 
 
 
 
 
 
 

Significant Unobservable Inputs
June 30, 2018
PSO
 
 
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input (a)
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
FTRs
$
24.6

 
$
0.3

 
Discounted Cash Flow 
 
Forward Market Price 
 
$
(9.40
)
 
$
10.30

 
$
(1.23
)

Significant Unobservable Inputs
December 31, 2017
PSO
 
 
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input (a)
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
FTRs
$
6.4

 
$
0.2

 
Discounted Cash Flow 
 
Forward Market Price 
 
$
(6.62
)
 
$
1.41

 
$
(0.76
)
Significant Unobservable Inputs
June 30, 2018
SWEPCo
 
 
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Natural Gas Contracts
$

 
$
2.3

 
Discounted Cash Flow 
 
Forward Market Price (c)
 
$
2.22

 
$
2.88

 
$
2.49

FTRs
9.5

 
2.3

 
Discounted Cash Flow 
 
Forward Market Price (a)
 
(9.40
)
 
10.30

 
(1.23
)
Total
$
9.5

 
$
4.6

 
 
 
 
 
 
 
 
 
 

Significant Unobservable Inputs
December 31, 2017
SWEPCo
 
 
 
 
 
 
 
Significant
 
Input/Range
 
Fair Value
 
Valuation
 
Unobservable
 
 
 
 
 
Weighted
 
Assets
 
Liabilities
 
Technique
 
Input
 
Low
 
High
 
Average
 
(in millions)
 
 
 
 
 
 
 
 
 
 
Natural Gas Contracts
$

 
$
0.2

 
Discounted Cash Flow 
 
Forward Market Price (c)
 
$
2.37

 
$
2.96

 
$
2.62

FTRs
6.7

 
0.6

 
Discounted Cash Flow 
 
Forward Market Price (a)
 
(6.62
)
 
1.41

 
(0.76
)
Total
$
6.7

 
$
0.8

 
 
 
 
 
 
 
 
 
 

(a)
Represents market prices in dollars per MWh.
(b)
Represents prices of credit default swaps used to calculate counterparty credit risk, reported in basis points.
(c)
Represents market prices in dollars per MMBtu.

The following table provides sensitivity of fair value measurements to increases (decreases) in significant unobservable inputs related to Energy Contracts, Natural Gas Contracts and FTRs for the Registrants as of June 30, 2018 and December 31, 2017:

Sensitivity of Fair Value Measurements
Significant Unobservable Input
 
Position
 
Change in Input
 
Impact on Fair Value
Measurement
Forward Market Price
 
Buy
 
Increase (Decrease)
 
Higher (Lower)
Forward Market Price
 
Sell
 
Increase (Decrease)
 
Lower (Higher)
Counterparty Credit Risk
 
Loss
 
Increase (Decrease)
 
Higher (Lower)
Counterparty Credit Risk
 
Gain
 
Increase (Decrease)
 
Lower (Higher)