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Note 3 - Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Fair Value Disclosures [Text Block]

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 unaudited Consolidated Statements of Financial Position as of the dates presented. See Note 4 for additional derivative instrument information.

		Recurring fair values - Derivative instruments
		June 30, 2013								December 31, 2012								June 30, 2012
In millions		Assets (1)				Liabilities				Assets (1)				Liabilities				Assets (1)				Liabilities
Natural gas derivatives
Quoted prices in active markets (Level 1)		$	4			$	(51	)		$	8			$	(45	)		$	9			$	(103	)
Significant other observable inputs (Level 2)			78				(35	)			96				(30	)			148				(48	)
Netting of cash collateral			47				47				33				36				52				85
Total carrying value (2) (3)		$	129			$	(39	)		$	137			$	(39	)		$	209			$	(66	)
Interest rate derivatives
Significant other observable inputs (Level 2)		$	-			$	-			$	3			$	-			$	17			$	-

(1)

Balances of $1 million of premium at June 30, 2013 and $4 million at December 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 dates presented.

(3)

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

Money Market Funds

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

In millions

At June 30,

2013

At December 31,

2012

At June 30,

2012

Money market funds (1)

$

48

$

66

$

76

(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 of Nicor Gas’ first mortgage bonds is being amortized over the lives 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 dates.

In millions

June 30,

2013

December 31,

2012

June 30,

2012

Long-term debt amortized cost

$

3,819

$

3,553

$

3,565

Long-term debt fair value (1)

4,070

4,057

4,043

(1)

Fair value determined using Level 2 inputs.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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