Note 3 - Fair Value Measurements

3 Months Ended

Mar. 31, 2013

Fair Value Disclosures [Text Block]

Note 3 - Fair Value Measurements

The methods used to determine the fair values of our assets and liabilities are described within Note 2.

Derivative Instruments

The following table summarizes, by level within the fair value hierarchy, our derivative assets and liabilities that were carried at fair value on a recurring basis in our Consolidated Statements of Financial Position as of the periods presented. See Note 4 for additional derivative instrument information.

	Recurring fair values - Derivative instruments
	March 31, 2013					December 31, 2012					March 31, 2012
In millions	Assets (1)		Liabilities			Assets (1)		Liabilities			Assets (1)		Liabilities
Natural gas derivatives
Quoted prices in active markets (Level 1)	$	14	$	(38	)	$	8	$	(45	)	$	7	$	(187	)
Significant other observable inputs (Level 2)		49		(23	)		96		(30	)		203		(68	)
Netting of cash collateral		40		37			33		36			47		162
Total carrying value (2) (3)	$	103	$	(24	)	$	137	$	(39	)	$	257	$	(93	)
Interest rate derivatives
Significant other observable inputs (Level 2)	$	6	$	-		$	3	$	-		$	9	$	(10	)

(1) $2 million of premium at March 31, 2013, $4 million at December 31, 2012 and less than $1 million at March 31, 2012 associated with weather derivatives have been excluded, as they are not material and some are accounted for based on intrinsic value.

(2) There were no material unobservable inputs (Level 3) for any of the periods presented.

(3) There were no material transfers between Level 1, Level 2 or Level 3 for any of the periods presented.

Money Market Funds

The fair values of our money market funds were recorded within short-term and long-term investments as follows:

In millions	At March 31, 2013		At December 31, 2012		At March 31, 2012
Money market funds (1)	$	48	$	66	$	68

(1) Carried at fair value and classified as Level 1 within the fair value hierarchy.

Debt

Our long-term debt is recorded at amortized cost, with the exception of Nicor Gas’ first mortgage bonds, which were recorded at their acquisition date fair value. The fair value adjustment is being amortized over the life of the bonds. We estimate the fair value of our debt using a discounted cash flow technique that incorporates a market interest yield curve with adjustments for duration, optionality and risk profile. The following table presents the amortized cost and fair value of our long-term debt as of the following periods.

In millions	March 31, 2013		December 31, 2012		March 31, 2012
Long-term debt amortized cost	$	3,550	$	3,553	$	3,575
Long-term debt fair value (1)	$	4,006	$	4,057	$	3,922

(1) Fair value determined using Level 2 inputs.