FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

9 Months Ended

Sep. 30, 2011

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:

GAAP establishes a hierarchy that prioritizes fair value measurements based on the types of inputs used for the various valuation techniques.  The levels of the hierarchy are described below:

• Level 1:  Observable inputs such as quoted prices in active markets for identical assets or liabilities.

• Level 2:  Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

• Level 3:  Unobservable inputs that reflect the reporting entity’s own assumptions.

Assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy.

For financial assets and financial liabilities measured at fair value on a recurring basis, information about the fair value measurements for each major category is as follows (in thousands):

As of September 30, 2011	Total		Level 1		Level 2		Level 3
Assets
Available-for-Sale Securities (A)	$	6,297	$	19	$	6,278	$	—
Derivatives – Energy Related Assets (B)	36,891		14,513		19,156		3,222
	$	43,188	$	14,532	$	25,434	$	3,222
Liabilities
Derivatives – Energy Related Liabilities (B)	$	39,888	$	11,384	$	24,868	$	3,636
Derivatives – Other (C)	13,783		—		13,783		—
	$	53,671	$	11,384	$	38,651	$	3,636

As of December 31, 2010	Total		Level 1		Level 2		Level 3
Assets
Available-for-Sale Securities (A)	$	6,720	$	6,720	$	—	$	—
Derivatives – Energy Related Assets (B)	51,069		21,204		24,878		4,987
	$	57,789	$	27,924	$	24,878	$	4,987
Liabilities
Derivatives – Energy Related Liabilities (B)	$	50,938	$	19,513	$	23,275	$	8,150
Derivatives – Other (C)	7,404		—		7,404		—
	$	58,342	$	19,513	$	30,679	$	8,150

(A) Available-for-Sale Securities include securities that are traded in active markets and securities that are not traded publicly.  The securities traded in active markets are valued using the quoted principal market close prices that are provided by the trustees and are categorized in Level 1 in the fair value hierarchy.  The remaining securities consist of funds that are not publicly traded.  These funds, which consist of stocks and bonds that are traded individually in active markets, are valued using quoted prices for similar assets and are categorized in Level 2 in the fair value hierarchy.

(B) Derivatives – Energy Related Assets and Liabilities are traded in both exchange-based and non-exchange-based markets. Exchange-based contracts are valued using unadjusted quoted market sources in active markets and are categorized in Level 1 in the fair value hierarchy. Certain non-exchange-based contracts are valued using indicative price quotations available through brokers or over-the-counter, on-line exchanges and are categorized in Level 2. These price quotations reflect the average of the bid-ask mid-point prices and are obtained from sources that management believes provide the most liquid market. For non-exchange-based derivatives that trade in less liquid markets with limited pricing information, model inputs generally would include both observable and unobservable inputs. In instances where observable data is unavailable, management considers the assumptions that market participants would use in valuing the asset or liability. This includes assumptions about market risks such as liquidity, volatility and contract duration. Such instruments are categorized in Level 3 as the model inputs generally are not observable. Management reviews and corroborates the price quotations to ensure the prices are observable which includes consideration of actual transaction volumes, market delivery points, bid-ask spreads and contract duration.

(C) Derivatives – Other are valued using quoted prices on commonly-quoted intervals, which are interpolated for periods different than the quoted intervals, as inputs to a market valuation model. Market inputs can generally be verified and model selection does not involve significant management judgment.

Transfers between different levels of the fair value hierarchy may occur based on the level of observable inputs used to value the instruments from period to period.  During the three and nine months ended September 30, 2011, there were no transfers between levels within the fair value hierarchy, including no transfers in or out of Level 3.

The changes in fair value measurements of Derivatives – Energy Related Assets and Liabilities for the three and nine months ended September 30, 2011, using significant unobservable inputs (Level 3), are as follows (in thousands):

	Three Months Ended September 30, 2011			Nine Months Ended September 30, 2011
Balance at beginning of period	$	1,762		$	(3,163	)
Total gains and (losses) realized/unrealized included in earnings	(1,999		)	(2,585		)
Transfers in and/or out of Level 3, net	—			—
Settlements	(177		)	5,334
Balance at September 30, 2011	$	(414	)	$	(414	)

Total losses for 2011 included in earnings that are attributable to the change in unrealized losses relating to those assets and liabilities still held as of September 30, 2011, is $2.6 million.  These losses are included in Operating Revenues-Nonutility on the condensed consolidated statements of income.