Fair Value of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2018

Gross Notional Amounts of Commodity FTRs

The following table details the gross notional amounts of commodity FTRs as of Sept. 30, 2018 and Dec. 31, 2017:


^(a)	Amounts are not reflective of net positions in the underlying commodities.

Derivative Assets and Liabilities Measured at Fair Value on a Recurring Basis by Hierarchy Level

Recurring Fair Value Measurements — The following table presents for each of the fair value hierarchy levels, SPS’ derivative assets and liabilities measured at fair value on a recurring basis as of Sept. 30, 2018:



	Sept. 30, 2018
	Fair Value						Fair Value Total		Counterparty Netting ^(b)
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting ^(b)			Total
Current derivative assets
Other derivative instruments:
Electric commodity	$	—	$	—	$	25,666	$	25,666	$	(389	)	$	25,277
Total current derivative assets	$	—	$	—	$	25,666	$	25,666	$	(389	)	25,277
PPAs ^(a)												3,159
Current derivative instruments												$	28,436
Noncurrent derivative assets
PPAs ^(a)												$	16,584
Noncurrent derivative instruments												$	16,584
Current derivative liabilities
Other derivative instruments:
Electric commodity	$	—	$	—	$	389	$	389	$	(389	)	$	—
Total current derivative liabilities	$	—	$	—	$	389	$	389	$	(389	)	—
PPAs ^(a)												3,565
Current derivative instruments												$	3,565
Noncurrent derivative liabilities
PPAs ^(a)												$	17,275
Noncurrent derivative instruments												$	17,275


^(a)	During 2006, SPS qualified these contracts under the normal purchase exception. Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts is being amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

^(b)

SPS nets derivative instruments and related collateral in its balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Sept. 30, 2018. At Sept. 30, 2018, derivative assets and liabilities include no obligations to return cash collateral or rights to reclaim cash collateral. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

The following table presents for each of the fair value hierarchy levels, SPS’ derivative assets and liabilities measured at fair value on a recurring basis as of Dec. 31, 2017:



	Dec. 31, 2017
	Fair Value						Fair Value Total		Counterparty Netting ^(b)
(Thousands of Dollars)	Level 1		Level 2		Level 3		Fair Value Total		Counterparty Netting ^(b)			Total
Current derivative assets
Other derivative instruments:
Electric commodity	$	—	$	—	$	14,717	$	14,717	$	(1,994	)	$	12,723
Total current derivative assets	$	—	$	—	$	14,717	$	14,717	$	(1,994	)	12,723
PPAs ^(a)												3,159
Current derivative instruments												$	15,882
Noncurrent derivative assets
PPAs ^(a)												$	18,954
Noncurrent derivative instruments												$	18,954
Current derivative liabilities
Other derivative instruments:
Electric commodity	$	—	$	—	$	1,994	$	1,994	$	(1,994	)	$	—
Total current derivative liabilities	$	—	$	—	$	1,994	$	1,994	$	(1,994	)	—
PPAs ^(a)												3,565
Current derivative instruments												$	3,565
Noncurrent derivative liabilities
PPAs ^(a)												$	19,949
Noncurrent derivative instruments												$	19,949


^(a)	During 2006, SPS qualified these contracts under the normal purchase exception. Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts is being amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

^(b)

SPS nets derivative instruments and related collateral in its balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Dec. 31, 2017. At Dec. 31, 2017, derivative assets and liabilities include no obligations to return cash collateral or rights to reclaim cash collateral. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

Changes in Level 3 Commodity Derivatives

The following table presents the changes in Level 3 commodity derivatives for the three and nine months ended Sept. 30, 2018 and 2017:




	Three Months Ended Sept. 30,
(Thousands of Dollars)	2018			2017
Balance at July 1	$	35,389		$	28,665
Purchases	3,169			43
Settlements	(10,068		)	(9,939		)
Net transactions recorded during the period:
Net (losses) gains recognized as regulatory assets and liabilities	(3,213		)	1,669
Balance at Sept. 30	$	25,277		$	20,438




	Nine Months Ended Sept. 30,
(Thousands of Dollars)	2018			2017
Balance at Jan. 1	$	12,723		$	1,955
Purchases	22,517			39,376
Settlements	(35,305		)	(40,437		)
Net transactions recorded during the period:
Net gains recognized as regulatory assets and liabilities	25,342			19,544
Balance at Sept. 30	$	25,277		$	20,438

Carrying Amount and Fair Value of Long-term Debt

As of Sept. 30, 2018 and Dec. 31, 2017, other financial instruments for which the carrying amount did not equal fair value were as follows:



	Sept. 30, 2018				Dec. 31, 2017
(Thousands of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	1,830,796	$	1,832,158	$	1,829,941	$	2,001,992

(Amounts in Thousands) ^(a)

Sept. 30, 2018

Dec. 31, 2017

Megawatt hours of electricity