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, 2015. During the nine months ended June 30, 2016, 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, 2015.

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 June 30, 2016 and September 30, 2015. 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⁾			June 30, 2016
	(In thousands)
Assets:
Financial instruments
Regulated distribution segment	$	—	$	4,401	$	—	$	—		$	4,401
Nonregulated segment	—		52,119		—		(47,164		)	4,955
Total financial instruments	—		56,520		—		(47,164		)	9,356
Hedged portion of gas stored underground	97,860		—		—		—			97,860
Available-for-sale securities
Money market funds	—		1,358		—		—			1,358
Registered investment companies	39,068		—		—		—			39,068
Bonds	—		31,319		—		—			31,319
Total available-for-sale securities	39,068		32,677		—		—			71,745
Total assets	$	136,928	$	89,197	$	—	$	(47,164	)	$	178,961
Liabilities:
Financial instruments
Regulated distribution segment	$	—	$	249,704	$	—	$	(16,330	)	$	233,374
Nonregulated segment	—		69,901		—		(69,901		)	—
Total liabilities	$	—	$	319,605	$	—	$	(86,231	)	$	233,374



	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, 2015
	(In thousands)
Assets:
Financial instruments
Regulated distribution segment	$	—	$	746	$	—	$	—		$	746
Nonregulated segment	—		91,363		—		(82,509		)	8,854
Total financial instruments	—		92,109		—		(82,509		)	9,600
Hedged portion of gas stored underground	43,901		—		—		—			43,901
Available-for-sale securities
Money market funds	—		1,072		—		—			1,072
Registered investment companies	40,619		—		—		—			40,619
Bonds	—		32,509		—		—			32,509
Total available-for-sale securities	40,619		33,581		—		—			74,200
Total assets	$	84,520	$	125,690	$	—	$	(82,509	)	$	127,701
Liabilities:
Financial instruments
Regulated distribution segment	$	—	$	120,107	$	—	$	—		$	120,107
Nonregulated segment	—		125,983		—		(125,983		)	—
Total liabilities	$	—	$	246,090	$	—	$	(125,983	)	$	120,107

⁽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 June 30, 2016, we had $16.3 million of cash held in margin accounts to collateralize certain regulated distribution financial instruments, which were used to offset current and noncurrent risk management liabilities. As of June 30, 2016, we also had $22.7 million of cash held in margin accounts to collateralize certain nonregulated financial instruments. Of this amount, $18.7 million was used to offset current and noncurrent risk management liabilities under master netting arrangements with the remaining $4.0 million 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, 2015, we had $43.5 million of cash held in margin accounts to collateralize certain nonregulated financial instruments. Of this amount, $34.6 million was used to offset current and noncurrent risk management liabilities under master netting arrangements with the remaining $8.9 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 June 30, 2016
Domestic equity mutual funds	$	28,377	$	5,549	$	(962	)	$	32,964
Foreign equity mutual funds	5,357		747		—			6,104
Bonds	31,147		175		(3		)	31,319
Money market funds	1,358		—		—			1,358
	$	66,239	$	6,471	$	(965	)	$	71,745
As of September 30, 2015
Domestic equity mutual funds	$	27,643	$	7,332	$	(456	)	$	34,519
Foreign equity mutual funds	5,261		905		(66		)	6,100
Bonds	32,423		106		(20		)	32,509
Money market funds	1,072		—		—			1,072
	$	66,399	$	8,343	$	(542	)	$	74,200

At June 30, 2016 and September 30, 2015, our available-for-sale securities included $40.4 million and $41.7 million related to assets held in separate rabbi trusts for our supplemental executive benefit plans. At June 30, 2016, we maintained investments in bonds that have contractual maturity dates ranging from July 2016 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 June 30, 2016 and September 30, 2015:



	June 30, 2016		September 30, 2015
	(In thousands)
Carrying Amount	$	2,460,000	$	2,460,000
Fair Value	$	2,858,540	$	2,669,323