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Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2016
Fair Value Disclosures [Abstract]  
Fair value of assets and liabilities that are measured at fair value on a recurring basis
The following table presents the fair value at September 30, 2016, of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs (a)
(Level 3)
 
Other
 
 
 
Balance at
September 30,
2016
Assets
 

 
 

 
 

 
 

 
 
 
 

Cash equivalents
$
40,075


$
—

 
$
—

 
$
—

 
 
 
$
40,075

Coal reclamation trust - Cash equivalents (b)
14,749

 
—

 
—

 
—

 
 
 
14,749

Risk management activities — derivative instruments:
 

 
 

 
 

 
 

 
 
 
 

Commodity contracts
—

 
14,198

 
14,835

 
(22,798
)
 
(c)
 
6,235

Nuclear decommissioning trust:
 

 
 

 
 

 
 

 
 
 
 

U.S. commingled equity funds
—

 
—

 
—

 
340,436

 
(d)
 
340,436

Fixed income securities:
 

 
 

 
 

 
 

 
 
 
 

Cash and cash equivalent funds
—

 
—

 
—

 
5,032

 
(e)
 
5,032

U.S. Treasury
101,394

 
—

 
—

 
—

 
 
 
101,394

Corporate debt
—

 
112,923

 
—

 
—

 
 
 
112,923

Mortgage-backed securities
—

 
112,485

 
—

 
—

 
 
 
112,485

Municipal bonds
—

 
82,371

 
—

 
—

 
 
 
82,371

Other
—

 
25,112

 
—

 
—

 
 
 
25,112

Subtotal nuclear decommissioning trust
101,394

 
332,891

 
—

 
345,468

 
 
 
779,753

Total
$
156,218

 
$
347,089

 
$
14,835

 
$
322,670

 
 
 
$
840,812

Liabilities
 

 
 

 
 

 
 

 
 
 
 

Risk management activities — derivative instruments:
 

 
 

 
 

 
 

 
 
 
 

Commodity contracts
$
—

 
$
(67,692
)
 
$
(54,377
)
 
$
18,551

 
(c)
 
$
(103,518
)

(a)
Primarily consists of long-dated electricity contracts.
(b)
Represents investments restricted for coal mine reclamation funding related to Four Corners. These assets are included in the Other Assets line item, reported under the Investments and Other Assets section of our Condensed Consolidated Balance Sheets.
(c)
Represents counterparty netting, margin and collateral. See Note 6.
(d)
Valued using NAV as a practical expedient, and therefore not classified in the fair value hierarchy.
(e)
Represents nuclear decommissioning trust net pending securities sales and purchases.


The following table presents the fair value at December 31, 2015, of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):
 
 
Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs (a)
(Level 3)
 
Other
 
 
 
Balance at
December 31,
2015
Assets
 

 
 

 
 

 
 

 
 
 
 

Risk management activities — derivative instruments:
 

 
 

 
 

 
 

 
 
 
 

Commodity contracts
$
—

 
$
22,992

 
$
30,364

 
$
(25,345
)
 
(b)
 
$
28,011

Nuclear decommissioning trust:
 

 
 

 
 

 
 

 
 
 
 

U.S. commingled equity funds
—

 
—

 
—

 
314,957

 
(c)
 
314,957

Fixed income securities:
 

 
 

 
 

 
 

 
 
 
 

Cash and cash equivalent funds
12,260

 
—

 
—

 
(335
)
 
(d)
 
11,925

U.S. Treasury
117,245

 
—

 
—

 
—

 
 
 
117,245

Corporate debt
—

 
96,243

 
—

 
—

 
 
 
96,243

Mortgage-backed securities
—

 
99,065

 
—

 
—

 
 
 
99,065

Municipal bonds
—

 
72,206

 
—

 
—

 
 
 
72,206

Other
—

 
23,555

 
—

 
—

 
 
 
23,555

Subtotal nuclear decommissioning trust
129,505

 
291,069

 
—

 
314,622

 
 
 
735,196

Total
$
129,505

 
$
314,061

 
$
30,364

 
$
289,277

 
 
 
$
763,207

Liabilities
 

 
 

 
 

 
 

 
 
 
 

Risk management activities — derivative instruments:
 

 
 

 
 

 
 

 
 
 
 

Commodity contracts
$
—

 
$
(144,044
)
 
$
(63,343
)
 
$
39,698

 
(b)
 
$
(167,689
)

(a)
Primarily consists of heat rate options and other long-dated electricity contracts.
(b)
Represents counterparty netting, margin and collateral. See Note 6.
(c)
Valued using NAV as a practical expedient, and therefore not classified in the fair value hierarchy.
(d)
Represents nuclear decommissioning trust net pending securities sales and purchases
Information regarding the entity's internally developed significant unobservable inputs used to value its level 3 instruments
The following tables provide information regarding our significant unobservable inputs used to value our risk management derivative Level 3 instruments at September 30, 2016 and December 31, 2015:
 
 
September 30, 2016
Fair Value (thousands)
 
Valuation Technique
 
Significant Unobservable Input
 
 
 
Weighted-Average
Commodity Contracts
Assets
 
Liabilities
 
 
 
Range
 
Electricity:
 

 
 

 
 
 
 
 
 
 
 

Forward Contracts (a)
$
13,726

 
$
36,438

 
Discounted cash flows
 
Electricity forward price (per MWh)
 
$18.84 - $39.44
 
$
29.30

Option Contracts (b)
—

 
1,153

 
Option model
 
Electricity forward price (per MWh)
 
$30.40
 
$
30.40

 
 

 
 

 
 
 
Electricity price volatilities
 
86%
 
86
%
 
 

 
 

 
 
 
Natural gas price volatilities
 
42%
 
42
%
Natural Gas:
 

 
 

 
 
 
 
 
 
 
 

Forward Contracts (a)
1,109

 
16,786

 
Discounted cash flows
 
Natural gas forward price (per MMBtu)
 
$2.43 - $3.22
 
$
2.73

Total
$
14,835

 
$
54,377

 
 
 
 
 
 
 
 


(a)
Includes swaps and physical and financial contracts.
(b)
The remaining option contract expired on October 1, 2016; therefore there are no ranges for price and volatilities.

 
December 31, 2015
Fair Value (thousands)
 
Valuation Technique
 
Significant Unobservable Input
 
 
 
Weighted-Average
Commodity Contracts
Assets
 
Liabilities
 
 
 
Range
 
Electricity:
 

 
 

 
 
 
 
 
 
 
 

Forward Contracts (a)
$
24,543

 
$
54,679

 
Discounted cash flows
 
Electricity forward price (per MWh)
 
$15.92 - $40.73
 
$
26.86

Option Contracts (b)
—

 
5,628

 
Option model
 
Electricity forward price (per MWh)
 
$23.87 - $44.13
 
$
33.91

 
 

 
 

 
 
 
Electricity price volatilities
 
40% - 59%
 
52
%
 
 

 
 

 
 
 
Natural gas price volatilities
 
32% - 40%
 
35
%
Natural Gas:
 

 
 

 
 
 
 
 
 
 
 

Forward Contracts (a)
5,821

 
3,036

 
Discounted cash flows
 
Natural gas forward price (per MMBtu)
 
$2.18 - $3.14
 
$
2.61

Total
$
30,364

 
$
63,343

 
 
 
 
 
 
 
 


(a)
Includes swaps and physical and financial contracts.
(b)
Electricity and natural gas price volatilities are estimated based on historical forward price movements due to lack of market quotes for implied volatilities.
Changes in fair value for assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs
The following table shows the changes in fair value for our risk management activities' assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs for the three and nine months ended September 30, 2016 and 2015 (dollars in thousands):
 
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
Commodity Contracts
 
2016
 
2015
 
2016
 
2015
Net derivative balance at beginning of period
 
$
(32,380
)
 
$
(42,945
)
 
$
(32,979
)
 
$
(41,386
)
Total net gains (losses) realized/unrealized:
 
 

 
 

 
 

 
 

Included in OCI
 
(10
)
 
(207
)
 
94

 
(444
)
Deferred as a regulatory asset or liability
 
(13,499
)
 
(5,837
)
 
(21,103
)
 
(10,771
)
Settlements
 
5,424

 
7,572

 
11,691

 
12,424

Transfers into Level 3 from Level 2
 
1,343

 
(526
)
 
1,725

 
(4,494
)
Transfers from Level 3 into Level 2
 
(420
)
 
1,305

 
1,030

 
4,033

Net derivative balance at end of period
 
$
(39,542
)
 
$
(40,638
)
 
$
(39,542
)
 
$
(40,638
)
 
 
 
 
 
 
 
 
 
Net unrealized gains included in earnings related to instruments still held at end of period
 
$
—

 
$
—

 
$
—

 
$
—