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105
Level 3 Measurements and Sensitivity Analysis
The Utility’s market and credit risk management function, which reports to the Chief Risk Officer of the Utility, is
responsible for determining the fair value of the Utility’s price risk management derivatives. The Utility’s finance and risk
management functions collaborate to determine the appropriate fair value methodologies and classification for each derivative.
Inputs used and the fair value of Level 3 instruments are reviewed period-over-period and compared with market conditions to
determine reasonableness.
Significant increases or decreases in any of those inputs would result in a significantly higher or lower fair value,
respectively. All reasonable costs related to Level 3 instruments are expected to be recoverable through customer rates; therefore,
there is no impact to net income resulting from changes in the fair value of these instruments. (See Note 9 above.)
Fair Value at
(in millions) December 31, 2014
Fair Value Measurement Assets Liabilities Valuation Technique Unobservable Input Range (1)
Congestion revenue rights $ 232 $ 63 Market approach CRR auction prices $ (15.97) - 8.17
Power purchase agreements $ - $ 100 Discounted cash ow Forward prices $ 16.04 - 56.21
(1) Represents price per megawatt-hour
Fair Value at
(in millions) December 31, 2013
Fair Value Measurement Assets Liabilities Valuation Technique Unobservable Input Range (1)
Congestion revenue rights $ 107 $ 32 Market approach CRR auction prices $ (6.47) - 12.04
Power purchase agreements $ - $ 105 Discounted cash ow Forward prices $ 23.43 - 51.75
(1) Represents price per megawatt-hour
Level 3 Reconciliation
The following table presents the reconciliation for Level 3 price risk management instruments for the years ended
December 31, 2014 and 2013, respectively:
Price Risk Management Instruments
(in millions) 2014 2013
Liability balance as of January 1 $ (30) $ (79)
Realized and unrealized gains:
Included in regulatory assets and liabilities or balancing accounts (1) 99 49
Asset (liability) balance as of December 31 $ 69 $ (30)
(1) The costs related to price risk management activities are recoverable through customer rates, therefore, balancing account revenue is recorded for amounts
settled and purchased and there is no impact to net income. Unrealized gains and losses are deferred in regulatory liabilities and assets.