Fair Value of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Gross Notional Amounts of Commodity FTRs

The following table details the gross notional amounts of commodity FTRs at Sept. 30, 2016 and Dec. 31, 2015:

(Amounts in Thousands) (a)	Sept. 30, 2016	Dec. 31, 2015
Megawatt hours of electricity	3,650	6,192

^(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, 2016:

	Sept. 30, 2016
	Fair Value						Fair Value Total		Counterparty Netting (b)
(Thousands of Dollars)	Level 1		Level 2		Level 3							Total
Current derivative assets
Other derivative instruments:
Electric commodity	$	—	$	—	$	2,598	$	2,598	$	(2,462	)	$	136
Total current derivative assets	$	—	$	—	$	2,598	$	2,598	$	(2,462	)	136
PPAs (a)												4,342
Current derivative instruments												$	4,478
Noncurrent derivative assets
PPAs (a)												$	22,902
Noncurrent derivative instruments												$	22,902
Current derivative liabilities
Other derivative instruments:
Electric commodity	$	—	$	—	$	2,462	$	2,462	$	(2,462	)	$	—
Total current derivative liabilities	$	—	$	—	$	2,462	$	2,462	$	(2,462	)	—
PPAs (a)												3,565
Current derivative instruments												$	3,565
Noncurrent derivative liabilities
PPAs (a)												$	24,404
Noncurrent derivative instruments												$	24,404

^(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, 2016. At Sept. 30, 2016, 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, 2015:

	Dec. 31, 2015
	Fair Value						Fair Value Total		Counterparty Netting (b)
(Thousands of Dollars)	Level 1		Level 2		Level 3							Total
Current derivative assets
Other derivative instruments:
Electric commodity	$	—	$	—	$	8,980	$	8,980	$	(3,920	)	$	5,060
Total current derivative assets	$	—	$	—	$	8,980	$	8,980	$	(3,920	)	5,060
PPAs (a)												7,892
Current derivative instruments												$	12,952
Noncurrent derivative assets
PPAs (a)												$	25,272
Noncurrent derivative instruments												$	25,272
Current derivative liabilities
Other derivative instruments:
Electric commodity	$	—	$	—	$	3,920	$	3,920	$	(3,920	)	$	—
Total current derivative liabilities	$	—	$	—	$	3,920	$	3,920	$	(3,920	)	—
PPAs (a)												3,565
Current derivative instruments												$	3,565
Noncurrent derivative liabilities
PPAs (a)												$	27,078
Noncurrent derivative instruments												$	27,078

^(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 Dec. 31, 2015. At Dec. 31, 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.

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, 2016 and 2015:

	Three Months Ended Sept. 30
(Thousands of Dollars)	2016			2015
Balance at July 1	$	1,070		$	11,463
Purchases	274			408
Settlements	(7,822		)	(7,409		)
Net transactions recorded during the period:
Gains recognized as regulatory assets and liabilities	6,614			2,898
Balance at Sept. 30	$	136		$	7,360

	Nine Months Ended Sept. 30
(Thousands of Dollars)	2016			2015
Balance at Jan. 1	$	5,060		$	15,884
Purchases	5,426			22,621
Settlements	(22,438		)	(25,810		)
Net transactions recorded during the period:
Gains (losses) recognized as regulatory assets and liabilities	12,088			(5,335		)
Balance at Sept. 30	$	136		$	7,360

Carrying Amount and Fair Value of Long-term Debt

As of Sept. 30, 2016 and Dec. 31, 2015, other financial instruments for which the carrying amount did not equal fair value were as follows:

	Sept. 30, 2016				Dec. 31, 2015
(Thousands of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion (a)	$	1,835,687	$	2,065,982	$	1,538,522	$	1,678,673

^(a)  Amounts reflect the classification of debt issuance costs as a deduction from the carrying amount of the related debt. See Note 2, Accounting Pronouncements for more information on the adoption of ASU 2015-03.