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Derivative Instruments
 12 Months Ended
Dec. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivatives Instruments Derivative Instruments
In July 2023, the CPUC approved a new power purchase agreement between BVES and a third party to procure renewable portfolio standard eligible energy and renewable energy credits as a bundled product. BVES began taking power under this long-term contract during the fourth quarter of 2024 replacing expired long-term fixed price purchase power contracts over three- and five-year terms. The expired contracts were subject to the accounting guidance for derivatives and required mark-to-market derivative accounting. The new contract provides for the purchase of electricity during a delivery period from November 1, 2024 through December 31, 2035. Under this contract, there is an embedded derivative that also requires mark-to-market accounting.
The CPUC authorized the use of a regulatory asset and liability memorandum account to offset the mark-to-market entries required by the accounting guidance. Accordingly, all unrealized gains and losses generated from derivative instruments in purchase power contracts are deferred on a monthly basis into a non-interest-bearing regulatory memorandum account that tracks the changes in fair value of the derivative throughout the terms of the contracts. As a result, these unrealized gains and losses do not impact Registrant’s earnings. As of December 31, 2024, the fair value of the derivative liability was $8.8 million for the purchase power contract, with a corresponding regulatory asset recorded in the derivative instrument memorandum account as a result of overall fixed prices under BVES’s purchase power contract being higher than future energy prices. The notional volume of obligations remaining under the long-term contract as of December 31, 2024 was 578,448 megawatt hours.
Registrant’s valuation model utilizes various inputs that include quoted market prices for energy over the duration of the contracts. The market prices used to determine the fair value for these derivative instruments were estimated based on independent sources such as broker quotes and publications that are not observable in or corroborated by the market. When such inputs have a significant impact on the measurement of fair value, the instrument is categorized as Level 3 as described in Note 1. Accordingly, the valuation of the derivatives on Registrant’s purchase power contracts have been classified as Level 3 for all periods presented.
The change in fair value was due to the change in market energy prices for the years 2024 and 2023. The following table presents changes in the fair value of the Level 3 derivatives for the years 2024 and 2023:
(dollars in thousands)20242023
Fair value at beginning of the period$(2,360)$11,847 
Unrealized (losses) gains on purchase power contracts
(6,463)(14,207)
Fair value at end of the period$(8,823)$(2,360)