APS 2013 Annual Report Download - page 140
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Table of Contents
PINNACLE WEST CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the fair value at December 31, 2012 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,
2012
Assets
Cash equivalents $16 $ — $ — $ — $ 16
Risk management activities — derivative instruments:
Commodity Contracts — 22 62 (22) (b) 62
Nuclear decommissioning trust:
U.S. commingled equity funds —204 — — 204
Fixed income securities:
U.S. Treasury 104 — — — 104
Cash and cash equivalent funds 613 —(4) (c) 15
Corporate debt —80 — — 80
Mortgage-backed securities —83 — — 83
Municipality bonds —74 — — 74
Other —11 — — 11
Subtotal nuclear decommissioning trust 110 465 —(4)571
Total $126 $487 $62 $ (26) $ 649
Liabilities
Risk management activities — derivative instruments:
Commodity contracts $ — $ (96)$(110)$47(b) $(159)
(a) Primarily consists of heat rate options and other long-dated electricity contracts.
(b) Represents counterparty netting, margin and collateral. See Note 17.
(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).
Because our forward commodity contracts classified as Level 3 are currently in a net purchase position, we would expect price increases of the
underlying commodity to result in increases in the net
136