Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements

Fair Value Measurements

5.     Fair Value Measurements

        Our cash and cash equivalents, short-term investments and other investments consist of the following:

	September 30, 2012									December 31, 2011
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value		Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
Cash	$	41.4	$	—	$	—		$	41.4	$	99.8	$	—	$	—		$	99.8
U.S. and Canadian government obligations		2,172.4		—		—			2,172.4		515.0		—		—			515.0
Other debt securities		7.5		—		—			7.5		592.2		—		—			592.2
Total cash and cash equivalents	$	2,221.3	$	—	$	—		$	2,221.3	$	1,207.0	$	—	$	—		$	1,207.0
Investments in auction rate securities		44.6		—		(2.9	)		41.7		75.6		—		(4.7	)		70.9
Asset retirement obligation funds		147.6		—		—			147.6		145.4		—		—			145.4
Nonqualified employee benefit trusts		21.3		0.6		—			21.9		20.3		—		(0.1	)		20.2

        Under our short-term investment policy, we may invest our cash balances, either directly or through mutual funds, in several types of investment-grade securities, including notes and bonds issued by governmental entities or corporations. Securities issued by governmental entities include those issued directly by the Federal government; those issued by state, local or other governmental entities; and those guaranteed by entities affiliated with governmental entities.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

        The following tables present assets and liabilities included in our consolidated balance sheets at September 30, 2012 and December 31, 2011 that are recognized at fair value on a recurring basis, and indicates the fair value hierarchy utilized to determine such fair value:

	September 30, 2012
	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash and cash equivalents	$	2,221.3	$	2,221.3	$	—	$	—
Unrealized gains on natural gas derivatives		0.9		—		0.9		—
Asset retirement obligation funds		147.6		147.6		—		—
Investments in auction rate securities		41.7		—		—		41.7
Nonqualified employee benefit trusts		21.9		21.9		—		—
Total assets at fair value	$	2,433.4	$	2,390.8	$	0.9	$	41.7
Unrealized losses on natural gas derivatives	$	13.6	$	—	$	13.6	$	—
Total liabilities at fair value	$	13.6	$	—	$	13.6	$	—

	December 31, 2011
	Total Fair Value		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(in millions)
Cash and cash equivalents	$	1,207.0	$	1,207.0	$	—	$	—
Unrealized gains on natural gas derivatives		0.5		—		0.5		—
Asset retirement obligation funds		145.4		145.4		—		—
Investments in auction rate securities		70.9		—		—		70.9
Nonqualified employee benefit trusts		20.2		20.2		—		—
Total assets at fair value	$	1,444.0	$	1,372.6	$	0.5	$	70.9
Unrealized losses on natural gas derivatives	$	74.7	$	—	$	74.7	$	—
Total liabilities at fair value	$	74.7	$	—	$	74.7	$	—

        Following is a summary of the valuation techniques for assets and liabilities recorded on our consolidated balance sheets at fair value on a recurring basis:

Cash and Cash Equivalents

        At September 30, 2012 and December 31, 2011, our cash and cash equivalents consisted primarily of U.S. and Canadian government obligations and money market mutual funds that invest in U.S. government obligations and other investment-grade securities.

Natural Gas Derivatives

        The derivative instruments that we currently use are natural gas swap contracts. These contracts settle using primarily a NYMEX futures price index, which represents the basis for fair value at any given time. The contracts are traded in months forward and settlements are scheduled to coincide with anticipated gas purchases during those future periods. The observable inputs used to determine the fair value of these instruments are quoted market prices for similar instruments. See Note 17—Derivative Financial Instruments, for additional information.

Asset Retirement Obligation Funds

        In order to meet financial assurance requirements associated with certain asset retirement obligations (AROs) in Florida, we maintain investments in an escrow account established for the benefit of the Florida Department of Environmental Protection (FDEP) and a trust established to comply with a 2010 Consent Decree with the U.S. Environmental Protection Agency (EPA) and the FDEP. The investments in the trust and escrow account are accounted for as available-for-sale securities. The fair values of these investments are based upon daily quoted prices representing the Net Asset Value (NAV) of the investments. See Note 9—Asset Retirement Obligations, for additional information regarding the trust and escrow accounts. The fair values of the ARO funds approximate their cost bases.

Investments in Auction Rate Securities

        Our investments in Auction Rate Securities (ARS) are accounted for as available-for-sale securities and are included on our consolidated balance sheets in other assets. They are classified as noncurrent assets as a result of the continuing market illiquidity and our judgment regarding the period of time that may elapse until the traditional auction process resumes or other effective market trading mechanisms develop. These ARS have maturities that range up to 35 years, with 77% of the carrying value maturing in 20 to 30 years.

        We currently intend to hold our ARS until a market recovery occurs and, based on our current liquidity position, we do not believe it is likely that we will need to sell these securities prior to their recovery in value. Therefore, we expect to recover our amortized cost basis in the investments. As a result, our unrealized holding loss on these securities is classified as a temporary impairment and is reported in other comprehensive income (loss). During the third quarter of 2012, $15.0 million of our ARS were redeemed at par.

        We are unable to use significant observable (Level 1 or Level 2) inputs to value these investments and they are therefore classified as Level 3 for purposes of the fair value disclosure requirements. To determine the fair value of our ARS, we use a mark-to-model approach that relies on discounted cash flows, market data and inputs derived from similar instruments to arrive at the fair value of these instruments. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset. It is reasonably possible that a change in the estimated fair value for these instruments measured using Level 3 inputs could occur in the future. The following table provides a reconciliation of changes in these Level 3 assets.

	Investments in auction rate securities
	(in millions)
Fair value, December 31, 2011	$	70.9
Sales and redemptions		(31.0	)
Unrealized loss included in other comprehensive loss		1.8
Fair value, September 30, 2012	$	41.7

Nonqualified Employee Benefit Trusts

        We maintain trusts associated with certain deferred compensation related to nonqualified employee benefits. The investments are accounted for as available-for-sale securities. The fair values of the trusts are based on daily quoted prices representing the NAV of the investments. These trusts are included on our consolidated balance sheet in other assets.