Xcel Energy 2010 Annual Report Download - page 129

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119
Credit Related Contingent Features — Contract provisions of the derivative instruments that the utility subsidiaries enter into
may require the posting of collateral or settlement of the contracts for various reasons, including if the applicable utility
subsidiary is unable to maintain its credit ratings. If the credit ratings of PSCo were downgraded below investment grade,
contracts underlying $5.6 million and $0.6 million of derivative instruments in a gross liability position at Dec. 31, 2010 and Dec.
31, 2009, respectively, would have required Xcel Energy to post collateral or settle applicable contracts, which would have
resulted in payments to counterparties of $9.8 million and $3.4 million, respectively. At Dec. 31, 2010 and Dec. 31, 2009, there
was no collateral posted on these specific contracts.
Certain of the utility subsidiaries’ derivative instruments are also subject to contract provisions that contain adequate assurance
clauses. These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that a given
utility subsidiary’ s ability to fulfill its contractual obligations is reasonably expected to be impaired. Xcel Energy’ s utility
subsidiaries had no collateral posted related to adequate assurance clauses in derivative contracts as of Dec. 31, 2010 and Dec. 31,
2009.
Fair Value Measurements
The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires
enhanced disclosures about assets and liabilities measured at fair value. A hierarchal framework for disclosing the observability
of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three Levels in the
hierarchy are as follows:
Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The
types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.
Level 2 — Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as
of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively
traded securities or contracts, or priced with discounted cash flow or option pricing models using highly observable
inputs.
Level 3 — Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and
liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.
Recurring Fair Value Measurements
The following table presents for each of the hierarchy Levels, Xcel Energy’ s assets and liabilities that are measured at fair value
on a recurring basis at Dec. 31, 2010:
Dec. 31, 2010
Fair Value
(Thousands of Dollars) Level 1 Level 2 Level 3
Fair Value
Total
Counterparty
Netting (c) Total
Current derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity . .. .. ........ $
—
$ 126 $
—
$ 126 $
—
$ 126
Other derivative instruments:
Trading commodity . .. .. .... ..... ......... .. 487 37,019
—
37,506 (21,352) 16,154
Electric commodity ... .. .. .. .......... ......
—
—
3,619 3,619 (1,226) 2,393
Natural gas commodity . .. .. .......... ..... ..
—
1,595
—
1,595 (1,219) 376
Total current derivative assets . .. .. .. ..... .. . $ 487 $ 38,740 $ 3,619 $ 42,846 $ (23,797) 19,049
Purchased power agreements
(b)
.. .. .. .... .... .. . 35,030
Current derivative instruments .. .. .......... $ 54,079
N
oncurrent derivative assets
Derivatives designated as cash flow hedges:
Vehicle fuel and other commodity . .. .. ........ $
—
$ 150 $
—
$ 150 $
—
$ 150
Other derivative instruments:
Trading commodity . .. .. .... ..... ......... ..
—
32,621
—
32,621 (4,595) 28,026
Natural gas commodity . .. .. .......... ..... ..
—
1,246
—
1,246 (269) 977
Total noncurrent derivative assets . .. .. ...... $
—
$ 34,017 $
—
$ 34,017 $ (4,864) 29,153
Purchased power agreements
(b)
. .. .. .. ..... ..... 154,873
Noncurrent derivative instruments ... ..... ..... $ 184,026