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Fair Value of Financial Assets and Liabilities
3 Months Ended
Mar. 31, 2012
Fair Value of Financial Assets and Liabilities [Abstract]  
Fair Value of Financial Assets and Liabilities
8.
Fair Value of Financial Assets and Liabilities

Fair Value Measurements

The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value.  A hierarchal framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance.  The three levels in the hierarchy are as follows:
 
 
Level 1 -
Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.  The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.
 
 
Level 2 -
 Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date.  The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, or priced with discounted cash flow or option pricing models using highly observable inputs.

 
Level 3 -
 Significant inputs to pricing have little or no observability as of the reporting date.  The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.
 
Specific valuation methods include the following:

Cash equivalents - The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted net asset values.

Investments in equity securities and other funds - Equity securities are valued using quoted prices in active markets.  The fair values for commingled funds, international equity funds, private equity investments and real estate investments are measured using net asset values, which take into consideration the value of underlying fund investments, as well as the other accrued assets and liabilities of a fund, in order to determine a per share market value.  The investments in commingled funds and international equity funds may be redeemed for net asset value.  Private equity investments require approval of the fund for any unscheduled redemption, and such redemptions may be approved or denied by the fund at its sole discretion.  Unscheduled distributions from real estate investments may be redeemed with proper notice; however, withdrawals from real estate investments may be delayed or discounted as a result of fund illiquidity.  Based on NSP-Minnesota's evaluation of its ability to redeem private equity and real estate investments, fair value measurements for private equity and real estate investments have been assigned a Level 3.

Investments in debt securities- Fair values for debt securities are determined by a third party pricing service using recent trades and observable spreads from benchmark interest rates for similar securities, except for asset-backed and mortgage-backed securities, for which the third party service may also consider additional, more subjective inputs.  Since the impact of the use of these less observable inputs can be significant to the valuation of asset-backed and mortgage-backed securities, fair value measurements for these instruments have been assigned a Level 3.  Inputs that may be considered in the valuation of asset-backed and mortgage-backed securities in conjunction with pricing of similar securities in active markets include the use of risk-based discounting and estimated prepayments in a discounted cash flow model.  When these additional inputs and models are utilized, increases in the risk-adjusted discount rates and decreases in the assumed principal prepayment rates each have the impact of reducing reported fair values for these instruments.

Interest rate derivatives- The fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.

Commodity derivatives- The methods used to measure the fair value of commodity derivative forwards and options utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations, and are generally assigned a Level 2.  When contractual settlements extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable forecasts of long-term forward prices and volatilities on a valuation is evaluated, and may result in Level 3 classification.

Electric commodity derivatives held by NSP-Minnesota include financial transmission rights (FTRs) purchased from Midwest Independent Transmission System Operator, Inc. (MISO).  FTRs purchased from MISO are financial instruments that entitle the holder to one year of monthly revenues or charges based on transmission congestion across a given transmission path.  The value of an FTR is derived from, and designed to offset, the cost of that energy congestion, which is caused by overall transmission load and other transmission constraints. Congestion is also influenced by the operating schedules of power plants and the consumption of electricity pertinent to a given transmission path.   Unplanned plant outages, scheduled plant maintenance, changes in the relative costs of fuels used in generation, weather and overall changes in demand for electricity can each impact the operating schedules of the power plants on the transmission grid and the value of an FTR.  NSP-Minnesota's valuation process for FTRs utilizes complex iterative modeling to predict the impacts of forecasted changes in these drivers of transmission system congestion on the historical pricing of FTR purchases.

If forecasted costs of electric transmission congestion increase or decrease for a given FTR path, the value of that particular FTR instrument will likewise increase or decrease.  Given the limited observability of management's forecasts for several of the inputs to this complex valuation model - including expected plant operating schedules and retail and wholesale demand, fair value measurements for FTRs have been assigned a Level 3.  Monthly FTR settlements are included in the fuel clause adjustment, and therefore changes in the fair value of the yet to be settled portions of FTRs are deferred as a regulatory asset or liability.  Given this regulatory treatment and the limited magnitude of NSP-Minnesota's FTRs relative to its electric utility operations, the numerous unobservable quantitative inputs to the complex model used for valuation of FTRs are insignificant to the consolidated financial statements of Xcel Energy.

Xcel Energy continuously monitors the creditworthiness of the counterparties to its interest rate derivatives and commodity derivatives, and assesses each counterparty's ability to perform on the transactions set forth in the contracts.  Given this assessment, as well as an assessment of the impact of Xcel Energy's own credit risk when determining the fair value of derivative liabilities, the impact of considering credit risk was immaterial to the fair value of interest rate derivatives and commodity derivatives presented in the consolidated balance sheets.

Non-Derivative Instruments Fair Value Measurements

The Nuclear Regulatory Commission (NRC) requires NSP-Minnesota to maintain a portfolio of investments to fund the costs of decommissioning its nuclear generating plants.  Together with all accumulated earnings or losses, the assets of the nuclear decommissioning fund are legally restricted for the purpose of decommissioning the Monticello and Prairie Island nuclear generating plants.  The fund contains cash equivalents, debt securities, equity securities and other investments - all classified as available-for-sale.  NSP-Minnesota plans to reinvest matured securities until decommissioning begins.

NSP-Minnesota recognizes the costs of funding the decommissioning of its nuclear generating plants over the lives of the plants, assuming rate recovery of all costs.  Given the purpose and legal restrictions on the use of nuclear decommissioning fund assets, realized and unrealized gains on fund investments over the life of the fund are deferred as an offset of NSP-Minnesota's regulatory asset for nuclear decommissioning costs.  Consequently, any realized and unrealized gains and losses on securities in the nuclear decommissioning fund, including any other-than-temporary impairments, are deferred as a component of the regulatory asset for nuclear decommissioning.

Unrealized gains for the decommissioning fund were $117.1 million and $79.8 million at March 31, 2012 and Dec. 31, 2011, respectively, and unrealized losses and amounts recorded as other-than-temporary impairments were $65.7 million and $87.5 million at March 31, 2012 and Dec. 31, 2011, respectively.

The following tables present the cost and fair value of Xcel Energy's non-derivative instruments with recurring fair value measurements in the nuclear decommissioning fund at March 31, 2012 and Dec. 31, 2011:

 
March 31, 2012
 
 
 
 
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Thousands of Dollars)
 
Cost
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
Nuclear decommissioning fund (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       Cash equivalents
 
$
12,383
 
 
$
8,023
 
 
$
4,360
 
 
$
-
 
 
$
12,383
 
       Commingled funds
 
 
374,523
 
 
 
-
 
 
 
371,078
 
 
 
-
 
 
 
371,078
 
       International equity funds
 
 
65,712
 
 
 
-
 
 
 
67,183
 
 
 
-
 
 
 
67,183
 
       Private equity investments
 
 
19,358
 
 
 
-
 
 
 
-
 
 
 
20,068
 
 
 
20,068
 
       Real estate
 
 
26,265
 
 
 
-
 
 
 
-
 
 
 
27,905
 
 
 
27,905
 
       Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Government securities
 
 
131,152
 
 
 
-
 
 
 
131,401
 
 
 
-
 
 
 
131,401
 
         U.S. corporate bonds
 
 
156,602
 
 
 
-
 
 
 
163,851
 
 
 
-
 
 
 
163,851
 
         International corporate bonds
 
 
25,187
 
 
 
-
 
 
 
26,351
 
 
 
-
 
 
 
26,351
 
         Municipal bonds
 
 
53,895
 
 
 
-
 
 
 
56,862
 
 
 
-
 
 
 
56,862
 
         Asset-backed securities
 
 
16,515
 
 
 
-
 
 
 
-
 
 
 
16,547
 
 
 
16,547
 
         Mortgage-backed securities
 
 
65,803
 
 
 
-
 
 
 
-
 
 
 
68,671
 
 
 
68,671
 
       Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Common stock
 
 
410,729
 
 
 
447,205
 
 
 
-
 
 
 
-
 
 
 
447,205
 
         Total
 
$
1,358,124
 
 
$
455,228
 
 
$
821,086
 
 
$
133,191
 
 
$
1,409,505
 

(a)
Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet, which also includes $92.3 million of equity investments in unconsolidated subsidiaries and $35.7 million of miscellaneous investments.

 
Dec. 31, 2011
 
 
 
 
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Thousands of Dollars)
 
Cost
 
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
Nuclear decommissioning fund (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
       Cash equivalents
 
$
26,123
 
 
$
7,103
 
 
$
19,020
 
 
$
-
 
 
$
26,123
 
       Commingled funds
 
 
320,798
 
 
 
-
 
 
 
311,105
 
 
 
-
 
 
 
311,105
 
       International equity funds
 
 
63,781
 
 
 
-
 
 
 
58,508
 
 
 
-
 
 
 
58,508
 
       Private equity investments
 
 
9,203
 
 
 
-
 
 
 
-
 
 
 
9,203
 
 
 
9,203
 
       Real estate
 
 
24,768
 
 
 
-
 
 
 
-
 
 
 
26,395
 
 
 
26,395
 
       Debt securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Government securities
 
 
116,490
 
 
 
-
 
 
 
117,256
 
 
 
-
 
 
 
117,256
 
         U.S. corporate bonds
 
 
187,083
 
 
 
-
 
 
 
193,516
 
 
 
-
 
 
 
193,516
 
         International corporate bonds
 
 
35,198
 
 
 
-
 
 
 
35,804
 
 
 
-
 
 
 
35,804
 
         Municipal bonds
 
 
60,469
 
 
 
-
 
 
 
64,731
 
 
 
-
 
 
 
64,731
 
         Asset-backed securities
 
 
16,516
 
 
 
-
 
 
 
-
 
 
 
16,501
 
 
 
16,501
 
         Mortgage-backed securities
 
 
75,627
 
 
 
-
 
 
 
-
 
 
 
78,664
 
 
 
78,664
 
       Equity securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
         Common stock
 
 
408,122
 
 
 
398,625
 
 
 
-
 
 
 
-
 
 
 
398,625
 
         Total
 
$
1,344,178
 
 
$
405,728
 
 
$
799,940
 
 
$
130,763
 
 
$
1,336,431
 

(a)
Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet, which also includes $92.7 million of equity investments in unconsolidated subsidiaries and $34.3 million of miscellaneous investments.

The following tables present the changes in Level 3 nuclear decommissioning fund investments:
 
 
(Thousands of Dollars)
 
 
 
Jan. 1, 2012
 
 
 
Purchases
 
 
 
Settlements
 
 
 
Gains (Losses)
 Recognized as
 Regulatory Assets
 and Liabilities
 
 
 
 
March 31, 2012
 
Asset-backed securities
 
 
$
16,501
 
 
$
-
 
 
$
(1
)
 
$
47
 
 
 
$
16,547
 
Mortgage-backed securities
 
 
 
78,664
 
 
 
6,904
 
 
 
(16,728
)
 
 
(169
)
 
 
 
68,671
 
Real estate
 
 
 
26,395
 
 
 
1,636
 
 
 
(1,766
)
 
 
1,640
 
 
 
 
27,905
 
Private equity investments
 
 
 
9,203
 
 
 
10,155
 
 
 
-
 
 
 
710
 
 
 
 
20,068
 
    Total
 
 
$
130,763
 
 
$
18,695
 
 
$
(18,495
)
 
$
2,228
 
 
 
$
133,191
 
 
 
(Thousands of Dollars)
 
 
 
Jan. 1, 2011
 
 
 
Purchases
 
 
 
Settlements
 
 
 
Losses
Recognized as
 Regulatory Assets
 
 
 
March 31, 2011
 
Asset-backed securities
 
 
$
33,174
 
 
$
756
 
 
$
(7,910
)
 
$
-
 
 
$
26,020
 
Mortgage-backed securities
 
 
 
72,589
 
 
 
46,113
 
 
 
(19,873
)
 
 
(462
)
 
 
98,367
 
    Total
 
 
$
105,763
 
 
$
46,869
 
 
$
(27,783
)
 
$
(462
)
 
$
124,387
 
 
The following table summarizes the final contractual maturity dates of the debt securities in the nuclear decommissioning fund, by asset class at March 31, 2012:
 
 
Final Contractual Maturity
 
 
Due in 1
Year or Less
 
 
Due in 1 to 5
Years
 
 
Due in 5 to 10
Years
 
 
Due after 10
Years
 
 
 
 
(Thousands of Dollars)
 
Total
 
Government securities
 
$
113,004
 
 
$
701
 
 
$
17,696
 
 
$
-
 
 
$
131,401
 
U.S. corporate bonds
 
 
-
 
 
 
37,556
 
 
 
112,103
 
 
 
14,192
 
 
 
163,851
 
International corporate bonds
 
 
-
 
 
 
8,162
 
 
 
18,186
 
 
 
3
 
 
 
26,351
 
Municipal bonds
 
 
-
 
 
 
-
 
 
 
27,039
 
 
 
29,823
 
 
 
56,862
 
Asset-backed securities
 
 
-
 
 
 
13,269
 
 
 
3,278
 
 
 
-
 
 
 
16,547
 
Mortgage-backed securities
 
 
-
 
 
 
-
 
 
 
959
 
 
 
67,712
 
 
 
68,671
 
   Debt securities
 
$
113,004
 
 
$
59,688
 
 
$
179,261
 
 
$
111,730
 
 
$
463,683
 
 
Derivative Instruments Fair Value Measurements

Xcel Energy enters into derivative instruments, including forward contracts, futures, swaps and options, for trading purposes and to reduce risk in connection with changes in interest rates, utility commodity prices and vehicle fuel prices, as well as variances in forecasted weather.

Interest Rate Derivatives - Xcel Energy enters into various instruments that effectively fix the interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark interest rate for an anticipated debt issuance for a specific period.  These derivative instruments are generally designated as cash flow hedges for accounting purposes.

At March 31, 2012, accumulated other comprehensive losses related to interest rate derivatives included $0.9 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings.

At March 31, 2012, Xcel Energy had unsettled interest rate swaps outstanding with a notional amount of $475 million.  These interest rate swaps were designated as hedges, and as such, changes in fair value are recorded to OCI.

Short-Term Wholesale and Commodity Trading Risk - Xcel Energy conducts various short-term wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy and energy-related instruments.  Xcel Energy's risk management policy allows management to conduct these activities within guidelines and limitations as approved by its risk management committee, which is made up of management personnel not directly involved in the activities governed by this policy.

Commodity Derivatives - Xcel Energy enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations, as well as for trading purposes.  This could include the purchase or sale of energy or energy-related products, natural gas to generate electric energy, gas for resale and vehicle fuel.

At March 31, 2012, Xcel Energy had various vehicle fuel related contracts designated as cash flow hedges extending through December 2014.  Xcel Energy also enters into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers but are not designated as qualifying hedging transactions.  Changes in the fair value of non-trading commodity derivative instruments are recorded in OCI or deferred as a regulatory asset or liability.  The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.  Xcel Energy recorded immaterial amounts to income related to the ineffectiveness of cash flow hedges for the three months ended March 31, 2012 and 2011.

At March 31, 2012, accumulated OCI related to commodity derivative cash flow hedges included $0.2 million of net gains expected to be reclassified into earnings during the next 12 months as the hedged transactions occur.

Additionally, Xcel Energy enters into commodity derivative instruments for trading purposes not directly related to commodity price risks associated with serving its electric and natural gas customers.  Changes in the fair value of these commodity derivatives are recorded in electric operating revenues, net of amounts credited to customers under margin-sharing mechanisms.

The following table details the gross notional amounts of commodity forwards, options and FTRs at March 31, 2012 and Dec. 31, 2011:

(Amounts in Thousands) (a)(b)
March 31, 2012
Dec. 31, 2011
Megawatt hours (MWh) of electricity
         23,385
         38,822
MMBtu of natural gas
                 -
         40,736
Gallons of vehicle fuel
              550
              600
 
(a)
Amounts are not reflective of net positions in the underlying commodities.
(b)
Notional amounts for options are included on a gross basis, but are weighted for the probability of exercise.

The following tables detail the impact of derivative activity during the three months ended March 31, 2012 and 2011, on OCI, regulatory assets and liabilities, and income:
 
 
 
Three Months Ended March 31, 2012
 
 
Fair Value Changes Recognized
 
 
Pre-Tax Amounts Reclassified into
 
 
 
 
During the Period in:
 
 
 Income During the Period from:
 
 
 
Accumulated
Other
 
 
Regulatory
 
 
Accumulated
Other
 
 
Regulatory
 
Pre-Tax Gains
(Losses) Recognized
 
Comprehensive
 
 
(Assets) and
 
 
Comprehensive
 
 
Assets and
 
During the Period
(Thousands of Dollars)
 
Loss
 
 
Liabilities
 
 
Loss
 
 
(Liabilities)
 
in Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  as cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
 
$
41,704
 
 
$
-
 
 
$
389
 
(a)
 
$
-
 
 
$
-
 
Vehicle fuel and other commodity
 
 
179
 
 
 
-
 
 
 
(52
)
(e)
 
 
-
 
 
 
-
 
        Total
 
$
41,883
 
 
$
-
 
 
$
337
 
 
$
-
 
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading commodity
 
$
-
 
 
$
-
 
 
$
-
 
 
$
-
 
 
$
1,723
 
(b)
Electric commodity
 
 
-
 
 
 
1,582
 
 
 
-
 
 
 
(7,972
)
(c)
 
 
-
 
Natural gas commodity
 
 
-
 
 
 
(10,783
)
 
 
-
 
 
 
80,939
 
(d)
 
 
(109
)
(b)
        Total
 
$
-
 
 
$
(9,201
)
 
$
-
 
 
$
72,967
 
 
$
1,614
 

 
Three Months Ended March 31, 2011
 
Fair Value Changes Recognized
 
 
Pre-Tax Amounts Reclassified into
 
 
 
During the Period in:
 
 
Income During the Period from:
 
 
 
Accumulated
 
 
 
 
 
Accumulated
 
 
 
 
Pre-Tax Gains
 
Other
 
 
Regulatory
 
 
Other
 
 
Regulatory
 
Recognized
 
Comprehensive
 
 
(Assets) and
 
 
Comprehensive
 
 
Assets and
 
During the Period
(Thousands of Dollars)
 
Loss
 
 
Liabilities
 
 
Loss
 
 
(Liabilities)
 
in Income
Derivatives designated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  as cash flow hedges
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate
 
$
-
 
 
$
-
 
 
$
337
 
(a)
 
$
-
 
 
$
-
 
Vehicle fuel and other commodity
 
 
389
 
 
 
-
 
 
 
(32
)
(e)
 
 
-
 
 
 
-
 
        Total
 
$
389
 
 
$
-
 
 
$
305
 
 
$
-
 
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading commodity
 
$
-
 
 
$
-
 
 
$
-
 
 
$
-
 
 
$
5,600
 
(b)
Electric commodity
 
 
-
 
 
 
8,846
 
 
 
-
 
 
 
(8,888
)
(c)
 
 
-
 
Natural gas commodity
 
 
-
 
 
 
(7,615
)
 
 
-
 
 
 
57,387
 
(d)
 
 
-
 
        Total
 
$
-
 
 
$
1,231
 
 
$
-
 
 
$
48,499
 
 
$
5,600
 
 
(a)
Recorded to interest charges.
(b)
Recorded to electric operating revenues.  Portions of these gains and losses are subject to sharing with electric customers through margin-sharing mechanisms and deducted from gross revenue, as appropriate.
(c)
Recorded to electric fuel and purchased power.  These derivative settlement gains and losses are shared with electric customers through fuel and purchased energy cost-recovery mechanisms, and reclassified out of income as regulatory assets or liabilities, as appropriate.
(d)
Recorded to cost of natural gas sold and transported.  These derivative settlement gains and losses are shared with natural gas customers through purchased natural gas cost-recovery mechanisms, and reclassified out of income as regulatory assets or liabilities, as appropriate.
(e)
Recorded to O&M expenses.
 
Xcel Energy had no derivative instruments designated as fair value hedges during the three months ended March 31, 2012 and March 31, 2011.  Therefore, no gains or losses from fair value hedges or related hedged transactions were recognized for these periods.
 
Credit Related Contingent Features- Contract provisions of the derivative instruments that the utility subsidiaries enter into may require the posting of collateral or settlement of the contracts for various reasons, including if the applicable utility subsidiary is unable to maintain its credit ratings.  If the credit ratings of Xcel Energy Inc.'s utility subsidiaries were downgraded below investment grade, contracts underlying $10.8 million and $8.3 million of derivative instruments in a gross liability position at March 31, 2012 and Dec. 31, 2011, respectively, would have required Xcel Energy Inc.'s utility subsidiaries to post collateral or settle applicable contracts, which would have resulted in payments to counterparties of $9.4 million and $9.3 million, respectively.  At March 31, 2012 and Dec. 31, 2011, there was no collateral posted on these specific contracts.

Certain derivative instruments are also subject to contract provisions that contain adequate assurance clauses.  These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that a given utility subsidiary's ability to fulfill its contractual obligations is reasonably expected to be impaired.  Xcel Energy had no collateral posted related to adequate assurance clauses in derivative contracts as of March 31, 2012 and Dec. 31, 2011.

Recurring Fair Value Measurements - The following tables present for each of the hierarchy levels, Xcel Energy's derivative assets and liabilities that are measured at fair value on a recurring basis at March 31, 2012:

 
March 31, 2012
 
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
 
 
Counterparty
 
 
 
 
(Thousands of Dollars)
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
 
Netting (b)
 
 
Total
 
Current derivative assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Interest rate
 
$
-
 
 
$
306
 
 
$
-
 
 
$
306
 
 
$
-
 
 
$
306
 
Vehicle fuel and other commodity
 
 
-
 
 
 
208
 
 
 
-
 
 
 
208
 
 
 
-
 
 
 
208
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Trading commodity
 
 
-
 
 
 
39,483
 
 
 
-
 
 
 
39,483
 
 
 
(16,195
)
 
 
23,288
 
    Electric commodity
 
 
-
 
 
 
-
 
 
 
5,898
 
 
 
5,898
 
 
 
(570
)
 
 
5,328
 
      Total current derivative assets
 
$
-
 
 
$
39,997
 
 
$
5,898
 
 
$
45,895
 
 
$
(16,765
)
 
 
29,130
 
Purchased power agreements (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32,841
 
      Current derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
61,971
 
Noncurrent derivative assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vehicle fuel and other commodity
 
$
-
 
 
$
209
 
 
$
-
 
 
$
209
 
 
$
(115
)
 
$
94
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Trading commodity
 
 
-
 
 
 
38,214
 
 
 
-
 
 
 
38,214
 
 
 
(5,470
)
 
 
32,744
 
      Total noncurrent derivative assets
 
$
-
 
 
$
38,423
 
 
$
-
 
 
$
38,423
 
 
$
(5,585
)
 
 
32,838
 
Purchased power agreements (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
113,600
 
     Noncurrent derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
146,438
 
 
 
March 31, 2012
 
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
 
 
Counterparty
 
 
 
 
(Thousands of Dollars)
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
 
Netting (b)
 
 
Total
 
Current derivative liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 Interest rate
 
$
-
 
 
$
16,352
 
 
$
-
 
 
$
16,352
 
 
$
-
 
 
$
16,352
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Trading commodity
 
 
-
 
 
 
34,130
 
 
 
4
 
 
 
34,134
 
 
 
(17,272
)
 
 
16,862
 
    Electric commodity
 
 
-
 
 
 
-
 
 
 
570
 
 
 
570
 
 
 
(570
)
 
 
-
 
      Total current derivative liabilities
 
$
-
 
 
$
50,482
 
 
$
574
 
 
$
51,056
 
 
$
(17,842
)
 
 
33,214
 
Purchased power agreements (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22,918
 
     Current derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
56,132
 
Noncurrent derivative liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Trading commodity
 
$
-
 
 
$
22,918
 
 
$
-
 
 
$
22,918
 
 
$
(5,585
)
 
$
17,333
 
      Total noncurrent derivative liabilities
 
$
-
 
 
$
22,918
 
 
$
-
 
 
$
22,918
 
 
$
(5,585
)
 
 
17,333
 
Purchased power agreements (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
242,819
 
     Noncurrent derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
260,152
 
 
 (a)
In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, Xcel Energy began recording several long-term purchased power agreements at fair value due to accounting requirements related to underlying price adjustments.  As these purchases are recovered through normal regulatory recovery mechanisms in the respective jurisdictions, the changes in fair value for these contracts were offset by regulatory assets and liabilities.  During 2006, Xcel Energy qualified these contracts under the normal purchase exception.  Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.
(b)
The accounting guidance for derivatives and hedging permits the netting of receivables and payables for derivatives and related collateral amounts when a legally enforceable master netting agreement exists between Xcel Energy and a counterparty.  A master netting agreement is an agreement between two parties who have multiple contracts with each other that provides for the net settlement of all contracts in the event of default on or termination of any one contract.
 
The following tables present for each of the hierarchy levels, Xcel Energy's derivative assets and liabilities that are measured at fair value on a recurring basis at Dec. 31, 2011:
 
 
Dec. 31, 2011
 
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
 
 
Counterparty
 
 
 
 
(Thousands of Dollars)
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
 
Netting (b)
 
 
Total
 
Current derivative assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vehicle fuel and other commodity
 
$
-
 
 
$
169
 
 
$
-
 
 
$
169
 
 
$
(76
)
 
$
93
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Trading commodity
 
 
-
 
 
 
32,682
 
 
 
-
 
 
 
32,682
 
 
 
(13,391
)
 
 
19,291
 
    Electric commodity
 
 
-
 
 
 
-
 
 
 
13,333
 
 
 
13,333
 
 
 
(1,471
)
 
 
11,862
 
      Total current derivative assets
 
$
-
 
 
$
32,851
 
 
$
13,333
 
 
$
46,184
 
 
$
(14,938
)
 
 
31,246
 
Purchased power agreements (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33,094
 
    Current derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
64,340
 
Noncurrent derivative assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vehicle fuel and other commodity
 
$
-
 
 
$
107
 
 
$
-
 
 
$
107
 
 
$
(59
)
 
$
48
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Trading commodity
 
 
-
 
 
 
36,599
 
 
 
-
 
 
 
36,599
 
 
 
(5,540
)
 
 
31,059
 
      Total noncurrent derivative assets
 
$
-
 
 
$
36,706
 
 
$
-
 
 
$
36,706
 
 
$
(5,599
)
 
 
31,107
 
Purchased power agreements (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
121,780
 
    Noncurrent derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
152,887
 

 
Dec. 31, 2011
 
 
Fair Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value
 
 
Counterparty
 
 
 
 
(Thousands of Dollars)
 
Level 1
 
 
Level 2
 
 
Level 3
 
 
Total
 
 
Netting (b)
 
 
Total
 
Current derivative liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Interest rate
 
$
-
 
 
$
57,749
 
 
$
-
 
 
$
57,749
 
 
$
-
 
 
$
57,749
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Trading commodity
 
 
-
 
 
 
27,891
 
 
 
-
 
 
 
27,891
 
 
 
(14,417
)
 
 
13,474
 
    Electric commodity
 
 
-
 
 
 
698
 
 
 
916
 
 
 
1,614
 
 
 
(1,471
)
 
 
143
 
    Natural gas commodity
 
 
418
 
 
 
70,119
 
 
 
-
 
 
 
70,537
 
 
 
(7,486
)
 
 
63,051
 
      Total current derivative liabilities
 
$
418
 
 
$
156,457
 
 
$
916
 
 
$
157,791
 
 
$
(23,374
)
 
 
134,417
 
Purchased power agreements (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
22,997
 
    Current derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
157,414
 
Noncurrent derivative liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Trading commodity
 
$
-
 
 
$
20,966
 
 
$
-
 
 
$
20,966
 
 
$
(5,599
)
 
$
15,367
 
      Total noncurrent derivative liabilities
 
$
-
 
 
$
20,966
 
 
$
-
 
 
$
20,966
 
 
$
(5,599
)
 
 
15,367
 
Purchased power agreements (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
248,539
 
    Noncurrent derivative instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
263,906
 

(a)
In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, Xcel Energy began recording several long-term purchased power agreements at fair value due to accounting requirements related to underlying price adjustments.  As these purchases are recovered through normal regulatory recovery mechanisms in the respective jurisdictions, the changes in fair value for these contracts were offset by regulatory assets and liabilities.  During 2006, Xcel Energy qualified these contracts under the normal purchase exception.  Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.
(b)
The accounting guidance for derivatives and hedging permits the netting of receivables and payables for derivatives and related collateral amounts when a legally enforceable master netting agreement exists between Xcel Energy and a counterparty.  A master netting agreement is an agreement between two parties who have multiple contracts with each other that provides for the net settlement of all contracts in the event of default on or termination of any one contract.

The following table presents the changes in Level 3 commodity derivatives for the three months ended March 31, 2012 and 2011:

 
Three Months Ended March 31
 
(Thousands of Dollars)
 
2012
 
 
2011
 
Balance at Jan. 1
 
$
12,417
 
 
$
2,392
 
    Settlements
 
 
(8,884
)
 
 
(7,790
)
    Net transactions recorded during the period:
 
 
 
 
 
 
 
 
       (Losses) gains recognized in earnings (a)
 
 
(9
)
 
 
68
 
       Gains recognized as regulatory liabilities
 
 
1,800
 
 
 
7,662
 
Balance at March 31
 
$
5,324
 
 
$
2,332
 
 
(a)
These amounts relate to commodity derivatives held at the end of the period.

Xcel Energy recognizes transfers between levels as of the beginning of each period.  There were no transfers of amounts between levels for the three months ended March 31, 2012 and March 31, 2011.
 
Fair Value of Long-Term Debt

As of March 31, 2012 and Dec. 31, 2011, other financial instruments for which the carrying amount did not equal fair value were as follows:
 
 
March 31, 2012
 
 
Dec. 31, 2011
 
 
Carrying
 
 
 
 
 
Carrying
 
 
 
 
(Thousands of Dollars)
 
Amount
 
 
Fair Value
 
 
Amount
 
 
Fair Value
 
Long-term debt, including current portion
 
$
9,908,044
 
 
$
11,414,894
 
 
$
9,908,435
 
 
$
11,734,798
 
 
The fair value of Xcel Energy's long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities.  The fair value estimates are based on information available to management as of March 31, 2012 and Dec. 31, 2011, and given the observability of the inputs to these estimates, the fair values presented for long-term debt have been assigned a Level 2.  These fair value estimates have not been comprehensively revalued for purposes of these consolidated financial statements since those dates and current estimates of fair values may differ significantly.