Fair Value Disclosures (Tables)

3 Months Ended

Mar. 31, 2012

Fair Value Of Financial Assets And Liabilities Measured On A Recurring Basis


	Fair Value Measurements at March 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	*(millions of dollars)*
ASSETS
Derivative instruments (b)
Electricity (c)	$	3	$	—	$	3	$	—
Cash equivalents
Treasury fund		70		70		—		—
Executive deferred compensation plan assets
Money market funds		16		16		—		—
Life insurance contracts		61		—		43		18

	$	150	$	86	$	46	$	18

LIABILITIES
Derivative instruments (b)
Electricity (c)	$	31	$	—	$	31	$	—
Natural gas (d)		56		42		—		14
Executive deferred compensation plan liabilities
Life insurance contracts		28		—		28		—

	$	115	$	42	$	59	$	14

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories.

(b)	The fair value of derivative assets and liabilities reflect netting by counterparty before the impact of collateral.

(c)	Represents wholesale electricity futures and swaps that are used mainly as part of Pepco Energy Services' retail energy supply business.

(d)

Level 1 instruments represent wholesale gas futures and swaps that are used mainly as part of Pepco Energy Services' retail energy supply business and level 3 instruments represent natural gas options purchased by DPL as part of a natural gas hedging program approved by the DPSC, as well as Pepco Energy Services physical basis contracts.


	Fair Value Measurements at December 31, 2011
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1) (a)		Significant Other Observable Inputs (Level 2) (a)		Significant Unobservable Inputs (Level 3)
	*(millions of dollars)*
ASSETS
Cash equivalents
Treasury fund	$	114	$	114	$	—	$	—
Executive deferred compensation plan assets
Money market funds		18		18		—		—
Life insurance contracts		60		—		43		17

	$	192	$	132	$	43	$	17

LIABILITIES
Derivative instruments (b)
Electricity (c)	$	32	$	—	$	32	$	—
Natural gas (d)		67		50		—		17
Capacity		1		—		1		—
Executive deferred compensation plan liabilities
Life insurance contracts		28		—		28		—

	$	128	$	50	$	61	$	17

(a)	There were no transfers of instruments between level 1 and level 2 valuation categories.

(b)	The fair value of derivative liabilities reflect netting by counterparty before the impact of collateral.

(c)	Represents wholesale electricity futures and swaps that are used mainly as part of Pepco Energy Service's retail energy supply business.

(d)	Level 1 instruments represent wholesale gas futures and swaps that are used mainly as part of Pepco Energy Services' retail energy supply business and level 3 instruments represent natural gas options purchased by DPL as part of a natural gas hedging program approved by the DPSC.

Fair Value Of Financial Instruments Using Unobservable Inputs (Level 3)

Type of Instrument

Fair Value at
March 31, 2012

Valuation Technique

Unobservable Input

Range

(millions of dollars)

Natural Gas Options

Option model

Volatility Factor

0.60 – 2.03

Natural Gas Physical Basis Contracts

Market comparable

Congestion adder

0.02 – $0.43

Reconciliations Of Fair Value Measurements Using Significant Unobservable Inputs (Level 3)


	Three Months Ended March 31, 2012
	Natural Gas			Life Insurance Contracts
	*(millions of dollars)*
Beginning balance as of January 1	$	(17	)	$	17
Total gains (losses) (realized and unrealized)
Included in income		—			1
Included in accumulated other comprehensive loss		—			—
Included in regulatory assets		(3	)		—
Purchases		—			—
Issuances		—			—
Settlements		6			—
Transfers in (out) of level 3		—			—

Ending balance as of March 31	$	(14	)	$	18


	Three Months Ended March 31, 2011
	Natural Gas			Life Insurance Contracts
	*(millions of dollars)*
Beginning balance as of January 1	$	(23	)	$	19
Total gains (losses) (realized and unrealized)
Included in income		—			3
Included in accumulated other comprehensive loss		—			—
Included in regulatory assets		(1	)		—
Purchases		—			—
Issuances		—			(1	)
Settlements		5			(4	)
Transfers in (out) of level 3		—			—

Ending balance as of March 31	$	(19	)	$	17

Gains Or (Losses) On Level 3 Instruments Included In Income


	Three Months Ended March 31,
	2012		2011
	*(millions of dollars)*
Total net gains included in income for the period	$	1	$	3

Change in unrealized gains relating to assets still held at reporting date	$	1	$	1

Fair Value Of Financial Liabilities Measured On A Recurring Basis


	Fair Value Measurements at March 31, 2012
Description	Total		Quoted Prices in Active Markets for Identical Instruments (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	*(millions of dollars)*
LIABILITIES
Debt instruments
Long-term debt (a)	$	4,569	$	408	$	3,681	$	480
Transition Bonds issued by ACE Funding (b)		370		—		370		—
Long-term project funding		15		—		—		15

	$	4,954	$	408	$	4,051	$	495

(a)	The carrying amount for Long-term debt is $3,868 million as of March 31, 2012.

(b)	The carrying amount for Transition Bonds issued by ACE Funding, including amounts due within one year, is $323 million as of March 31, 2012.

Estimated Fair Values Of Debt And Equity Instruments


	December 31, 2011
	Carrying Amount		Fair Value
	*(millions of dollars)*
Long-term debt	$	3,867	$	4,577
Transition Bonds issued by ACE Funding		332		380
Long-term project funding		15		15

- Definition

Tabular disclosure of the total amount of gains or losses for the period which are included in earnings or resulted in a change to net assets which gains or losses have arisen from the use of significant unobservable inputs (Level 3) to measure the fair value of assets and liabilities. Such gains or losses are attributable to the change in unrealized gains or losses relating to those assets and liabilities so valued which are still held at the reporting date and which change are also considered for disclosure; it may be expected that a description of where those unrealized gains or losses are reported in the statement of income or the statement of financial position would also be disclosed.

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- Definition

Tabular disclosure of liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by 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 (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 measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

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- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

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