Derivatives and Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Notional Amounts Under Swaps Contracts

The differential is calculated based on the notional amounts under the contracts, which are detailed in the table below (thousands of dekatherms):

	September 30, 2012		December 31, 2011
Swaps contracts		13,806		10,827

Amount Of Gain Or (Loss) Recognized In Income On Derivative

Gains (losses) recognized in income for derivatives not designated as hedging instruments:

(Thousands of dollars)

		Three Months Ended						Nine Months Ended						Twelve Months Ended
	Location of Gain or (Loss)	September 30						September 30						September 30
Instrument	Recognized in Income on Derivative	2012			2011			2012			2011			2012			2011
Swaps	Net cost of gas sold	$	3,617		$	(7,570	)	$	(945	)	$	(9,539	)	$	(9,607	)	$	(7,216	)
Swaps	Net cost of gas sold		(3,617	)*		7,570	*		945	*		9,539	*		9,607	*		7,216	*
Total		$	-		$	-		$	-		$	-		$	-		$	-

^* Represents the impact of regulatory deferral accounting treatment under U.S. GAAP for rate-regulated entities.

Gains (Losses) On Derivatives In Cash Flow Hedging

Gains (losses) recognized in other comprehensive income for derivatives designated as cash flow hedging instruments:

(Thousands of dollars)

	Three Months Ended					Nine Months Ended					Twelve Months Ended
	September 30					September 30					September 30
	2012		2011			2012		2011			2012		2011
Amount of gain/(loss) realized/unrealized on FSIRS recognized in other comprehensive income on derivative	$	-	$	(13,237	)	$	2,959	$	(16,382	)	$	1,383	$	(2,288	)

Fair Values Of Swaps And FSIRS In Balance Sheet Location

The following table sets forth the fair values of the Company’s Swaps and FSIRS and their location in the balance sheets (thousands of dollars):

Fair values of derivatives not designated as hedging instruments:

September 30, 2012		Asset		Liability
Instrument	Balance Sheet Location	Derivatives		Derivatives			Net Total
Swaps	Deferred charges and other assets	$	662	$	-		$	662
Swaps	Prepaids and other current assets		1,783		(880	)		903
Swaps	Other current liabilities		429		(738	)		(309	)
Swaps	Other deferred credits		87		(235	)		(148	)
Total		$	2,961	$	(1,853	)	$	1,108
December 31, 2011		Asset		Liability
Instrument	Balance Sheet Location	Derivatives		Derivatives			Net Total
Swaps	Other current liabilities	$	-	$	(11,122	)	$	(11,122	)
Swaps	Other deferred credits		-		(621	)		(621	)
Total		$	-	$	(11,743	)	$	(11,743	)
Fair values of derivatives designated as hedging instruments:
December 31, 2011		Asset		Liability
Instrument	Balance Sheet Location	Derivatives		Derivatives			Net Total
FSIRS	Other current liabilities	$	-	$	(24,713	)	$	(24,713	)

Paid To And Received From Counterparties For Settlements Of Matured Swaps

The following table shows the amounts Southwest paid to counterparties for settlements of matured Swaps.

(Thousands of dollars)	Three Months Ended September 30, 2012		Nine Months Ended September 30, 2012		Twelve Months Ended September 30, 2012
Paid to counterparties	$	2,628	$	13,797	$	19,385

Regulatory Assets/Liabilities Offsetting Derivatives At Fair Value In The Balance Sheet

The following table details the regulatory assets/(liabilities) offsetting the derivatives at fair value in the balance sheets (thousands of dollars).

September 30, 2012
Instrument	Balance Sheet Location	Net Total
Swaps	Other deferred credits	$	(662	)
Swaps	Other current liabilities		(903	)
Swaps	Prepaids and other current assets		309
Swaps	Deferred charges and other assets		148
December 31, 2011
Instrument	Balance Sheet Location	Net Total
Swaps	Prepaids and other current assets	$	11,122
Swaps	Deferred charges and other assets		621

Significant Other Observable Inputs

The following table sets forth the Company’s Level 2 financial assets and liabilities recorded at fair value:

(Thousands of dollars)	September 30, 2012			December 31, 2011
Assets at fair value:
Prepaids and other current assets - Swaps	$	903		$	-
Deferred charges and other assets - Swaps		662			-
Liabilities at fair value:
Other current liabilities - Swaps		(309	)		(11,122	)
Other deferred credits - Swaps		(148	)		(621	)
Other current liabilities - FSIRS		-			(24,713	)
Net Assets (Liabilities)	$	1,108		$	(36,456	)