Fair Value of Financial Instruments and Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2017

The financial instruments measured at fair value as of March 31, 2017 and December 31, 2016, respectively, consisted of:

As of March 31, 2017	Level 1			Level 2			Level 3			Netting			Total
(Millions)
Securities portfolio (available for sale)	$	40		$	—		$	—		$	—		$	40
Derivative assets
Derivative financial instruments - power		7			66			70			(57	)	86
Derivative financial instruments - gas		90			16			89			(165	)	30
Contracts for differences		—			—			17			—		17
Total	97			82			176				(222	)	133
Derivative liabilities
Derivative financial instruments - power		(27	)		(26	)		(5	)		53			(5	)
Derivative financial instruments - gas		(94	)		(18	)		(39	)		125			(26	)
Contracts for differences		—			—			(98	)		—			(98	)
Derivative financial instruments - other		—			—			(1	)		—			(1	)
Total	$	(121	)	$	(44	)	$	(143	)	$	178		$	(130	)

As of December 31, 2016	Level 1			Level 2			Level 3			Netting			Total
(Millions)
Securities portfolio (available for sale)	$	40		$	—		$	—		$	—		$	40
Derivative assets
Derivative financial instruments - power		11			48			58			(42	)		75
Derivative financial instruments - gas		180			32			104			(239	)		77
Contracts for differences		—			—			20			—			20
Total		191			80			182			(281	)		172
Derivative liabilities
Derivative financial instruments - power		(24	)		(27	)		(3	)		39			(15	)
Derivative financial instruments - gas		(213	)		(34	)		(53	)		257			(43	)
Contracts for differences		—			—			(95	)		—			(95	)
Total	$	(237	)	$	(61	)	$	(151	)	$	296		$	(153	)

Fair Value, Financial instrument Based on Level 3 Reconciliation

The reconciliation of changes in the fair value of financial instruments based on Level 3 inputs for the three months ended March 31, 2017 and 2016, respectively, is as follows:

	Three Months Ended
	March 31,
(Millions)	2017			2016
Fair Value Beginning of Period,	$	31		$	(19	)
Gains recognized in operating revenues		12			9
(Losses) recognized in operating revenues		(2	)		(6	)
Total gains recognized in operating revenues		10			3
Gains recognized in OCI		1			1
(Losses) recognized in OCI		(1	)		—
Total gains recognized in OCI		—			1
Net change recognized in regulatory assets and liabilities		(5	)		(25	)
Purchases		3			—
Settlements		(6	)		(5	)
Fair Value as of March 31,	$	33		$	(45	)
Gains for the period included in operating revenues attributable to the change in unrealized gains relating to financial instruments still held at the reporting date	$	10		$	3

Additional quantitative information about Level 3 fair value measurements of the CfDs is as follows:

		Range at
Unobservable Input		March 31, 2017
Risk of non-performance		0.58% - 0.66%
Discount rate		1.50% - 2.40%
Forward pricing ($ per MW)		$3.15 - $9.55

Fair Value, Assets and Liabilities Level 3 Measurement, Valuation Techniques

As of March 31, 2017

Instruments

Instrument

Description

Valuation

Technique

Valuation

Inputs

Index

Avg.

Max.

Min.

Fixed price power

and gas swaps

Transactions with

delivery periods

Transactions are

valued against

forward

market prices

Observable and

extrapolated

forward gas and

power prices

not all of which

can be

NYMEX ($/MMBtu)

$ 4.15

$ 7.37

$ 1.64

with delivery

exceeding two

on a

corroborated by

SP15 ($/MWh)

$ 42.70

$80.28

$14.25

period > two

years

discounted

market data for

Mid C ($/MWh)

$ 34.04

$83.93

$ (0.50)

years

basis

identical or

Cinergy ($/MWh)

$ 35.91

$77.49

$18.53