Fair Value Measurements:

3 Months Ended

Mar. 31, 2019

FAIR VALUE MEASUREMENTS

Derivative Financial Instruments

The accounting guidance for fair value measurements requires certain disclosures about assets and liabilities measured at fair value. This guidance establishes a hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement within the fair value hierarchy levels. We record transfers, if necessary, between levels at the end of the reporting period for all of our financial instruments. For additional information, see Notes 1, 9, 10 and 11 to the Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K filed with the SEC.

Transfers into Level 3, if any, occur when significant inputs used to value the derivative instruments become less observable such as a significant decrease in the frequency and volume in which the instrument is traded, negatively impacting the availability of observable pricing inputs. Transfers out of Level 3, if any, occur when the significant inputs become more observable, such as when the time between the valuation date and the delivery date of a transaction becomes shorter, positively impacting the availability of observable pricing inputs.

Valuation Methodologies for Derivatives

The commodity contracts for our Utilities Segments, are valued using the market approach and include exchange-traded futures, options, basis swaps and over-the-counter swaps and options (Level 2) for natural gas contracts. For exchange-traded futures, options and basis swap assets and liabilities, fair value was derived using broker quotes validated by the exchange settlement pricing for the applicable contract. For over-the-counter instruments, the fair value is obtained by utilizing a nationally recognized service that obtains observable inputs to compute the fair value, which we validate by comparing our valuation with the counterparty. The fair value of these swaps includes a CVA component based on the credit spreads of the counterparties when we are in an unrealized gain position or on our own credit spread when we are in an unrealized loss position.

Recurring Fair Value Measurements



	As of March 31, 2019
	Level 1		Level 2		Level 3		Cash Collateral and Counterparty Netting			Total
	(in thousands)
Assets:
Commodity derivatives — Utilities	$	—	$	1,375	$	—	$	(388	)	$	987
Total	$	—	$	1,375	$	—	$	(388	)	$	987

Liabilities:
Commodity derivatives — Utilities	$	—	$	4,122	$	—	$	(4,009	)	$	113
Total	$	—	$	4,122	$	—	$	(4,009	)	$	113



	As of December 31, 2018
	Level 1		Level 2		Level 3		Cash Collateral and Counterparty Netting			Total
	(in thousands)
Assets:
Commodity derivatives — Utilities	$	—	$	2,927	$	—	$	(1,408	)	$	1,519
Total	$	—	$	2,927	$	—	$	(1,408	)	$	1,519

Liabilities:
Commodity derivatives — Utilities	$	—	$	6,801	$	—	$	(5,794	)	$	1,007
Total	$	—	$	6,801	$	—	$	(5,794	)	$	1,007



	As of March 31, 2018
	Level 1		Level 2		Level 3		Cash Collateral and Counterparty Netting			Total
	(in thousands)
Assets:
Commodity derivatives — Utilities	$	—	$	414	$	—	$	(119	)	$	295
Total	$	—	$	414	$	—	$	(119	)	$	295

Liabilities:
Commodity derivatives — Utilities	$	—	$	12,259	$	—	$	(11,175	)	$	1,084
Total	$	—	$	12,259	$	—	$	(11,175	)	$	1,084

Fair Value Measures by Balance Sheet Classification

As required by accounting standards for derivatives and hedges, fair values within the following tables are presented on a gross basis aside from the netting of asset and liability positions permitted in accordance with accounting standards for offsetting and under terms of our master netting agreements and the impact of legally enforceable master netting agreements that allow us to settle positive and negative positions.

The following table presents the fair value and balance sheet classification of our derivative instruments (in thousands) as of:



	Balance Sheet Location	March 31, 2019			December 31, 2018			March 31, 2018
Derivatives designated as hedges:
Asset derivative instruments:
Current commodity derivatives	Derivative assets — current	$	131		$	415		$	—
Noncurrent commodity derivatives	Other assets, non-current	9			18			—
Liability derivative instruments:
Current commodity derivatives	Derivative liabilities — current	(11		)	(114		)	(394		)
Noncurrent commodity derivatives	Other deferred credits and other liabilities	—			(4		)	(29		)
Total derivatives designated as hedges		$	129		$	315		$	(423	)

Derivatives not designated as hedges:
Asset derivative instruments:
Current commodity derivatives	Derivative assets — current	$	801		$	1,085		$	295
Noncurrent commodity derivatives	Other assets, non-current	46			1			—
Liability derivative instruments:
Current commodity derivatives	Derivative liabilities — current	(84		)	(833		)	(497		)
Noncurrent commodity derivatives	Other deferred credits and other liabilities	(18		)	(56		)	(164		)
Total derivatives not designated as hedges		$	745		$	197		$	(366	)

Fair value measurements also apply to the valuation of our pension and postretirement plan assets. Current accounting guidance requires employers to annually disclose information about the fair value measurements of their assets of a defined benefit pension or other postretirement plan. The fair value of these assets is presented in Note 18 to the Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K.