Fair Value Measurements

We report certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). We record cash and cash equivalents, accounts receivable and accounts payable at carrying value, which substantially approximates fair value due to the short-term nature of these assets and liabilities. For other financial assets and liabilities, we primarily use quoted market prices and other observable market pricing information to minimize the use of unobservable pricing inputs in our measurements when determining fair value. The methods used to determine fair value for our assets and liabilities are fully described in Note 2 to the financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. During the six months ended March 31, 2015, there were no changes in these methods.

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 fair value measurements of the assets of a defined benefit pension or other postretirement plan. The fair value of these assets is presented in Note 6 to the financial statements in our Annual Report on Form 10-K for the fiscal year ending September 30, 2014.

Quantitative Disclosures

Financial Instruments

The classification of our fair value measurements requires judgment regarding the degree to which market data is observable or corroborated by observable market data. Authoritative accounting literature establishes a fair value hierarchy that prioritizes the inputs used to measure fair value based on observable and unobservable data. The hierarchy categorizes the inputs into three levels, with the highest priority given to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1), with the lowest priority given to unobservable inputs (Level 3). The following tables summarize, by level within the fair value hierarchy, our assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2015 and September 30, 2014. Assets and liabilities are categorized in their entirety based on the lowest level of input that is significant to the fair value measurement.



	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)⁽¹⁾		Significant Other Unobservable Inputs (Level 3)		Netting and Cash Collateral⁽²⁾			March 31, 2015
	(In thousands)
Assets:
Financial instruments
Regulated distribution segment	$	—	$	364	$	—	$	—		$	364
Nonregulated segment	7		158,181		—		(141,605		)	16,583
Total financial instruments	7		158,545		—		(141,605		)	16,947
Hedged portion of gas stored underground	36,237		—		—		—			36,237
Available-for-sale securities
Money market funds	—		151		—		—			151
Registered investment companies	46,491		—		—		—			46,491
Bonds	—		33,220		—		—			33,220
Total available-for-sale securities	46,491		33,371		—		—			79,862
Total assets	$	82,735	$	191,916	$	—	$	(141,605	)	$	133,046
Liabilities:
Financial instruments
Regulated distribution segment	$	—	$	138,074	$	—	$	—		$	138,074
Nonregulated segment	7		194,321		—		(194,328		)	—
Total liabilities	$	7	$	332,395	$	—	$	(194,328	)	$	138,074



	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)⁽¹⁾		Significant Other Unobservable Inputs (Level 3)		Netting and Cash Collateral⁽³⁾			September 30, 2014
	(In thousands)
Assets:
Financial instruments
Regulated distribution segment	$	—	$	36,140	$	—	$	—		$	36,140
Nonregulated segment	25		68,998		—		(46,298		)	22,725
Total financial instruments	25		105,138		—		(46,298		)	58,865
Hedged portion of gas stored underground	40,492		—		—		—			40,492
Available-for-sale securities
Money market funds	—		2,185		—		—			2,185
Registered investment companies	44,014		—		—		—			44,014
Bonds	—		33,414		—		—			33,414
Total available-for-sale securities	44,014		35,599		—		—			79,613
Total assets	$	84,531	$	140,737	$	—	$	(46,298	)	$	178,970
Liabilities:
Financial instruments
Regulated distribution segment	$	—	$	21,856	$	—	$	—		$	21,856
Nonregulated segment	12		72,044		—		(72,056		)	—
Total liabilities	$	12	$	93,900	$	—	$	(72,056	)	$	21,856

⁽¹⁾

Our Level 2 measurements consist of over-the-counter options and swaps which are valued using a market-based approach in which observable market prices are adjusted for criteria specific to each instrument, such as the strike price, notional amount or basis differences, municipal and corporate bonds which are valued based on the most recent available quoted market prices and money market funds which are valued at cost.

⁽²⁾

This column reflects adjustments to our gross financial instrument assets and liabilities to reflect netting permitted under our master netting agreements and the relevant authoritative accounting literature. In addition, as of March 31, 2015, we had $52.7 million of cash held in margin accounts to collateralize certain financial instruments. Of this amount, $36.1 million was used to offset current and noncurrent risk management liabilities under master netting arrangements and the remaining $16.6 million is classified as current risk management assets.

⁽³⁾

This column reflects adjustments to our gross financial instrument assets and liabilities to reflect netting permitted under our master netting agreements and the relevant authoritative accounting literature. In addition, as of September 30, 2014 we had $25.8 million of cash held in margin accounts to collateralize certain financial instruments. Of this amount, $3.1 million was used to offset current and noncurrent risk management liabilities under master netting arrangements and the remaining $22.7 million is classified as current risk management assets.

Available-for-sale securities are comprised of the following:



	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
	(In thousands)
As of March 31, 2015
Domestic equity mutual funds	$	29,275	$	9,998	$	(76	)	$	39,197
Foreign equity mutual funds	5,512		1,782		—			7,294
Bonds	33,086		141		(7		)	33,220
Money market funds	151		—		—			151
	$	68,024	$	11,921	$	(83	)	$	79,862
As of September 30, 2014
Domestic equity mutual funds	$	26,633	$	10,136	$	—		$	36,769
Foreign equity mutual funds	5,382		1,863		—			7,245
Bonds	33,266		161		(13		)	33,414
Money market funds	2,185		—		—			2,185
	$	67,466	$	12,160	$	(13	)	$	79,613

At March 31, 2015 and September 30, 2014, our available-for-sale securities included $46.6 million and $46.2 million related to assets held in separate rabbi trusts for our supplemental executive benefit plans. At March 31, 2015, we maintained investments in bonds that have contractual maturity dates ranging from June 2015 through September 2020.

These securities are reported at market value with unrealized gains and losses shown as a component of accumulated other comprehensive income (loss). We regularly evaluate the performance of these investments on a fund by fund basis for impairment, taking into consideration the fund’s purpose, volatility and current returns. If a determination is made that a decline in fair value is other than temporary, the related fund is written down to its estimated fair value and the other-than-temporary impairment is recognized in the income statement.

Other Fair Value Measures

Our debt is recorded at carrying value. The fair value of our debt is determined using third party market value quotations, which are considered Level 1 fair value measurements for debt instruments with a recent, observable trade or Level 2 fair value measurements for debt instruments where fair value is determined using the most recent available quoted market price. The following table presents the carrying value and fair value of our debt as of March 31, 2015 and September 30, 2014:



	March 31, 2015		September 30, 2014
	(In thousands)
Carrying Amount	$	2,460,000	$	2,460,000
Fair Value	$	2,885,149	$	2,769,541