APS 2015 Annual Report Download - page 148
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Table of Contents
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
Fair Value (thousands)
Valuation Technique
Significant
Unobservable Input
Range
Weighted-AverageCommodity Contracts Assets
Liabilities
Electricity:
Forward Contracts (a) $ 29,471
$ 55,894
Discounted cash
flows
Electricity forward
price (per MWh)
$19.51 - $56.72
$ 35.27
Option Contracts (b) —
15,035
Option model
Electricity forward
price (per MWh)
$32.14 - $66.09
$ 45.83
Natural gas forward
price (per MMBtu)
$3.18 - $3.29
$ 3.25
Electricity price
volatilities
23% - 63%
41%
Natural gas price
volatilities
23% - 41%
31%
Natural Gas:
Forward Contracts (a) 3,127
3,055
Discounted cash
flows
Natural gas forward
price (per MMBtu)
$2.98 - $4.13
$ 3.45
Total $ 32,598
$ 73,984
(a) Includes swaps and physical and financial contracts.
(b) Electricity and natural gas price volatilities are estimated based on historical forward price movements due to lack of market
quotes for implied volatilities.
The following table shows the changes in fair value for our risk management activities’ assets and liabilities that are measured at
fair value on a recurring basis using Level 3 inputs for the years ended December 31, 2015 and 2014 (dollars in thousands):
Year Ended
December 31,
Commodity Contracts
2015
2014
Net derivative balance at beginning of period
$ (41,386)
$ (49,165)
Total net gains (losses) realized/unrealized:
Included in earnings
—
102
Included in OCI
(452)
(239)
Deferred as a regulatory asset or liability
(4,009)
(482)
Settlements
14,809
12,080
Transfers into Level 3 from Level 2
(6,256)
(2,090)
Transfers from Level 3 into Level 2
4,315
(1,592)
Net derivative balance at end of period
$ (32,979)
$ (41,386)
Net unrealized gains included in earnings related to instruments still held at end of period
$ —
$ —
Amounts included in earnings are recorded in either operating revenues or fuel and purchased power depending on the nature
of the underlying contract.
Transfers reflect the fair market value at the beginning of the period and are triggered by a change in the lowest significant input
as of the end of the period. We had no significant Level 1 transfers to or from any
143