Fair Value of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2015

Gross Notional Amounts of Commodity FTRs

The following table details the gross notional amounts of commodity FTRs at Sept. 30, 2015 and Dec. 31, 2014:


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

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 fair value hierarchy levels, SPS’ derivative assets and liabilities measured at fair value on a recurring basis at Sept. 30, 2015:



	Sept. 30, 2015
	Fair Value						Fair Value Total		Counterparty Netting ^(b)
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting ^(b)			Total
Current derivative assets
Other derivative instruments:
Electric commodity	$	—	$	—	$	13,594	$	13,594	$	(6,234	)	$	7,360
Total current derivative assets	$	—	$	—	$	13,594	$	13,594	$	(6,234	)	7,360
PPAs ^(a)												7,892
Current derivative instruments												$	15,252
Noncurrent derivative assets
PPAs ^(a)												$	27,245
Noncurrent derivative instruments												$	27,245
Current derivative liabilities
Other derivative instruments:
Electric commodity	$	—	$	—	$	6,234	$	6,234	$	(6,234	)	$	—
Total current derivative liabilities	$	—	$	—	$	6,234	$	6,234	$	(6,234	)	—
PPAs ^(a)												3,565
Current derivative instruments												$	3,565
Noncurrent derivative liabilities
PPAs ^(a)												$	27,969
Noncurrent derivative instruments												$	27,969

^(a)

In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, SPS began recording several long-term PPAs at fair value due to accounting requirements related to underlying price adjustments. As these purchases are recovered through normal regulatory recovery mechanisms in the respective jurisdictions, the changes in fair value for these contracts were offset by regulatory assets and liabilities. During 2006, SPS 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)

SPS nets derivative instruments and related collateral in its balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Sept. 30, 2015. At Sept. 30, 2015, derivative assets and liabilities include no obligations to return cash collateral or rights to reclaim cash collateral. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

The following table presents for each of the fair value hierarchy levels, SPS’ derivative assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2014:



	Dec. 31, 2014
	Fair Value						Fair Value Total		Counterparty Netting ^(b)
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting ^(b)			Total
Current derivative assets
Other derivative instruments:
Electric commodity	$	—	$	—	$	25,774	$	25,774	$	(9,890	)	$	15,884
Total current derivative assets	$	—	$	—	$	25,774	$	25,774	$	(9,890	)	15,884
PPAs ^(a)												7,892
Current derivative instruments												$	23,776
Noncurrent derivative assets
PPAs ^(a)												$	33,164
Noncurrent derivative instruments												$	33,164
Current derivative liabilities
Other derivative instruments:
Electric commodity	$	—	$	—	$	9,890	$	9,890	$	(9,890	)	$	—
Total current derivative liabilities	$	—	$	—	$	9,890	$	9,890	$	(9,890	)	—
PPAs ^(a)												3,565
Current derivative instruments												$	3,565
Noncurrent derivative liabilities
PPAs ^(a)												$	30,643
Noncurrent derivative instruments												$	30,643

^(a)

^(b)

SPS nets derivative instruments and related collateral in its balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Dec. 31, 2014. At Dec. 31, 2014, derivative assets and liabilities include no obligations to return cash collateral or rights to reclaim cash collateral. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

Changes in Level 3 Commodity Derivatives

The following table presents the changes in Level 3 commodity derivatives for the three and nine months ended Sept. 30, 2015 and 2014:



	Three Months Ended Sept. 30
(Thousands of Dollars)	2015			2014
Balance at July 1	$	11,463		$	33,942
Purchases	408			4,429
Settlements	(7,409		)	(8,346		)
Net transactions recorded during the period:
Gains (losses) recognized as regulatory assets and liabilities	2,898			(7,785		)
Balance at Sept. 30	$	7,360		$	22,240



	Nine Months Ended Sept. 30
(Thousands of Dollars)	2015			2014
Balance at Jan. 1	$	15,884		$	9,933
Purchases	22,621			43,904
Settlements	(25,810		)	(23,001		)
Net transactions recorded during the period:
Losses recognized as regulatory assets and liabilities	(5,335		)	(8,596		)
Balance at Sept. 30	$	7,360		$	22,240

Carrying Amount and Fair Value of Long-term Debt

As of Sept. 30, 2015 and Dec. 31, 2014, other financial instruments for which the carrying amount did not equal fair value were as follows:



	Sept. 30, 2015				Dec. 31, 2014
(Thousands of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	1,550,537	$	1,713,069	$	1,349,691	$	1,572,414

(Amounts in Thousands) ^(a)

Sept. 30, 2015

Dec. 31, 2014

Megawatt hours of electricity