APS 2012 Annual Report Download - page 160
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PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
135
The following table presents the fair value at December 31, 2011 of our assets and liabilities that
are measured at fair value on a recurring basis (dollars in millions):
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,
2011
Assets
Risk management
activities-derivative
instruments:
Commodity contracts
$ --
$ 70
$ 74
$ (64) (b)
$ 80
Nuclear decommissioning
trust:
U.S. commingled
equity funds
--
175
--
--
175
Fixed income securities:
U.S. Treasury
69
--
--
--
69
Cash and cash
equivalent funds
--
9
--
(1) (c)
8
Corporate debt
--
73
--
--
73
Mortgage-backed
securities
--
78
--
--
78
Municipality bonds
--
90
--
--
90
Other
--
21
--
--
21
Subtotal nuclear
decommissioning trust
69
446
--
(1)
514
Total
$ 69 $ 516 $ 74 $ (65) $ 594
Liabilities
Risk management activities
– derivative instruments:
Commodity contracts
$ --
$ (241)
$ (125)
$ 229 (b)
$ (137)
(a) Primarily consists of heat rate options and other long-dated electricity contracts.
(b) Represents counterparty netting, margin and collateral. See Note 18.
(c) Represents nuclear decommissioning trust net pending securities sales and purchases.
Fair Value Measurements Classified as Level 3
The significant unobservable inputs used in the fair value measurement of our energy derivative
contracts include broker quotes that cannot be validated as an observable input primarily due to the long
term nature of the quote and option model inputs. Significant changes in these inputs in isolation would
result in significantly higher or lower fair value measurements. Changes in our derivative contract fair
values, including changes relating to unobservable inputs, typically will not impact net income due to
regulatory accounting treatment (see Note 3).