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Fair Value Measurements (Tables) | 12 Months Ended
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Dec. 31, 2019
14. Fair Value Measurements |
Classification of the methodology used by the Company to fair value its derivatives |
As at |  | December 31, 2019
millions of Canadian dollars |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |
Regulatory deferral |  |  |  |  |  |  |  |
Commodity swaps and forwards |  |  |  |  |  |  |  |
Power purchases |  | 23 |  | - |  | - |  | 23
Natural gas purchases and sales |  | - |  | 2 |  | - |  | 2
Heavy fuel oil purchases |  | - |  | 1 |  | - |  | 1
Foreign exchange forwards |  | - |  | 2 |  | - |  | 2
|  | 23 |  | 5 |  | - |  | 28
HFT derivatives |  |  |  |  |  |  |  |
Power swaps and physical contracts |  | 1 |  | 3 |  | 1 |  | 5
Natural gas swaps, futures, forwards, physical contracts and related transportation |  | (7) |  | 46 |  | 14 |  | 53
|  | (6) |  | 49 |  | 15 |  | 58
Other derivatives |  |  |  |  |  |  |  |
Equity derivatives |  | 1 |  | - |  | - |  | 1
|  | 1 |  | - |  | - |  | 1
Total assets |  | 18 |  | 54 |  | 15 |  | 87
Liabilities |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |
Foreign exchange forwards |  | - |  | 1 |  | - |  | 1
|  | - |  | 1 |  | - |  | 1
Regulatory deferral |  |  |  |  |  |  |  |
Commodity swaps and forwards |  |  |  |  |  |  |  |
Coal purchases |  | - |  | 31 |  | - |  | 31
Power purchases |  | 36 |  | - |  | - |  | 36
Natural gas purchases and sales |  | 3 |  | 2 |  | - |  | 5
Foreign exchange forwards |  | - |  | 6 |  | - |  | 6
|  | 39 |  | 39 |  | - |  | 78
HFT derivatives |  |  |  |  |  |  |  |
Power swaps and physical contracts |  | 5 |  | 2 |  | - |  | 7
Natural gas swaps, futures, forwards and physical contracts |  | 2 |  | 33 |  | 249 |  | 284
|  | 7 |  | 35 |  | 249 |  | 291
Total liabilities |  | 46 |  | 75 |  | 249 |  | 370
Net assets (liabilities) | $ | (28) | $ | (21) | $ | (234) | $ | (283)
As at |  | December 31, 2018
millions of Canadian dollars |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |
Regulatory deferral |  |  |  |  |  |  |  |
Commodity swaps and forwards |  |  |  |  |  |  |  |
Coal purchases |  | - |  | 70 |  | - |  | 70
Power purchases |  | 2 |  | - |  | - |  | 2
Natural gas purchases and sales |  | - |  | 2 |  | - |  | 2
Heavy fuel oil purchases |  | - |  | 1 |  | - |  | 1
Foreign exchange forwards |  | - |  | 29 |  | - |  | 29
|  | 2 |  | 102 |  | - |  | 104
HFT derivatives |  |  |  |  |  |  |  |
Power swaps and physical contracts |  | 2 |  | 2 |  | 3 |  | 7
Natural gas swaps, futures, forwards, physical contracts and related transportation |  | 1 |  | 36 |  | 18 |  | 55
|  | 3 |  | 38 |  | 21 |  | 62
Other derivatives |  |  |  |  |  |  |  |
Interest rate swap |  | - |  | 1 |  | - |  | 1
|  | - |  | 1 |  | - |  | 1
Total assets |  | 5 |  | 141 |  | 21 |  | 167
Liabilities |  |  |  |  |  |  |  |
Cash flow hedges |  |  |  |  |  |  |  |
Foreign exchange forwards |  | - |  | 5 |  | - |  | 5
|  | - |  | 5 |  | - |  | 5
Regulatory deferral |  |  |  |  |  |  |  |
Commodity swaps and forwards |  |  |  |  |  |  |  |
Coal purchases |  | - |  | 1 |  | - |  | 1
Power purchases |  | 1 |  | - |  | - |  | 1
Heavy fuel oil purchases |  | - |  | 1 |  | - |  | 1
Natural gas purchases and sales |  | 3 |  | - |  | - |  | 3
|  | 4 |  | 2 |  | - |  | 6
HFT derivatives |  |  |  |  |  |  |  |
Power swaps and physical contracts |  | 14 |  | 6 |  | 1 |  | 21
Natural gas swaps, futures, forwards and physical contracts |  | - |  | 28 |  | 305 |  | 333
|  | 14 |  | 34 |  | 306 |  | 354
Total liabilities |  | 18 |  | 41 |  | 306 |  | 365
Net assets (liabilities) | $ | (13) | $ | 100 | $ | (285) | $ | (198)
Quantitative information about the significant unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy |
The change in the fair value of the Level 3 financial assets for the year ended December 31, 2019 was as follows:
| HFT Derivatives
millions of Canadian dollars | Power | Natural gas | Total
Balance, January 1, 2019 | $ | 3 | $ | 18 | $ | 21
Total realized and unrealized gains (losses) included in non-regulated operating revenues |  | (2) |  | (4) |  | (6)
Balance, December 31, 2019 | $ | 1 | $ | 14 | $ | 15
The change in the fair value of the Level 3 financial liabilities for the year ended December 31, 2019 was as follows:
| HFT Derivatives
millions of Canadian dollars | Power | Natural gas | Total
Balance, January 1, 2019 | $ | 1 | $ | 305 | $ | 306
Total realized and unrealized gains (losses) included in non-regulated operating revenues |  | (1) |  | (56) |  | (57)
Balance, December 31, 2019 | $ | - | $ | 249 | $ | 249
As at |  | December 31, 2019
millions of Canadian dollars |  | Fair Value | Valuation Technique | Unobservable Input | Range | Weighted average
Assets |  |  |  |  |  |
HFT derivatives – | $ | 1 | Modelled pricing | Third-party pricing | $21.40-$74.05 | $35.03
Power swaps and |  |  |  | Probability of default | 0.01%-1.14% | 0.21%
physical contracts |  |  |  | Discount rate | 0.15%-6.65% | 2.78%
HFT derivatives – |  | 9 | Modelled pricing | Third-party pricing | $1.63-$7.45 | $2.37
Natural gas swaps, futures, |  |  |  | Probability of default | 0.01%-2.31% | 0.09%
forwards, physical contracts |  |  |  | Discount rate | 0.01%-20.93% | 1.55%
|  | 5 | Modelled pricing | Third-party pricing | $1.33-$8.76 | $5.05
|  |  |  | Basis adjustment | $0.00-$1.31 | $0.76
|  |  |  | Probability of default | 0.01%-3.33% | 0.28%
|  |  |  | Discount rate | 0.01%-4.71% | 0.91%
Total assets | $ | 15 |  |  |  |
Liabilities |  |  |  |  |  |
HFT derivatives – |  | 228 | Modelled pricing | Third-party pricing | $1.54-$7.45 | $4.07
Natural gas swaps, futures, |  |  |  | Own credit risk | 0.01%-2.31% | 0.12%
forwards and physical contracts |  |  |  | Discount rate | 0.01%-18.63% | 1.89%
|  | 21 | Modelled pricing | Third-party pricing | $1.36-$9.75 | $5.45
|  |  |  | Basis adjustment | $0.00-$1.31 | $0.91
|  |  |  | Own credit risk | 0.01%-3.33% | 0.06%
|  |  |  | Discount rate | 0.01%-3.76% | 0.81%
Total liabilities | $ | 249 |  |  |  |
Net assets (liabilities) | $ | (234) |  |  |  |
As at |  | December 31, 2018
millions of Canadian dollars |  | Fair Value | Valuation Technique | Unobservable Input | Range | Weighted average
Assets |  |  |  |  |  |
HFT derivatives – | $ | 3 | Modelled pricing | Third-party pricing | $24.31 - $50.29 | $31.43
Power swaps and |  |  |  | Probability of default | 0.03% - 0.13% | 0.13%
physical contracts |  |  |  | Discount rate | 0.03% - 2.19% | 1.45%
|  |  |  | Correlation factor | 84.98% - 84.98% | 84.98%
HFT derivatives – |  | 8 | Modelled pricing | Third-party pricing | $1.80 - $12.21 | $4.75
Natural gas swaps, |  |  |  | Probability of default | 0.01% - 2.94% | 0.24%
futures, forwards, |  |  |  | Discount rate | 0.01% - 30.62% | 4.25%
physical contracts |  | 10 | Modelled pricing | Third-party pricing | $1.95 - $12.90 | $8.68
and related transportation |  |  |  | Basis adjustment | $0.07 - $3.43 | $1.88
|  |  |  | Probability of default | 0.01% - 3.20% | 0.57%
|  |  |  | Discount rate | 0.01% - 7.61% | 0.42%
Total assets | $ | 21 |  |  |  |
Liabilities |  |  |  |  |  |
HFT derivatives – |  | 1 | Modelled pricing | Third-party pricing | $20.80 - $50.29 | $26.38
Power swaps and |  |  |  | Correlation factor | 84.98% - 84.98% | 84.98%
physical contracts |  |  |  | Probability of default | 0.08% - 0.29% | 0.15%
|  |  |  | Discount rate | 0.03% - 2.99% | 1.65%
HFT derivatives – |  | 286 | Modelled pricing | Third-party pricing | $1.48 - $12.90 | $5.75
Natural gas swaps, futures, |  |  |  | Own credit risk | 0.01% - 2.94% | 0.09%
forwards and physical contracts |  |  |  | Discount rate | 0.01% - 11.96% | 2.35%
|  | 19 | Modelled pricing | Third-party pricing | $2.15 - $13.18 | $7.54
|  |  |  | Basis adjustment | $0.07 - $3.43 | $2.67
|  |  |  | Own credit risk | 0.01% - 2.76% | 0.10%
|  |  |  | Discount rate | 0.01% - 7.61% | 1.38%
Total liabilities | $ | 306 |  |  |  |
Net assets (liabilities) | $ | (285) |  |  |  |
Financial assets and liabilities included on the Consolidated Balance Sheets that are not measured at fair value |
The financial liabilities included on the Consolidated Balance Sheets that are not measured at fair value consisted of long-term debt, as follows:
As at |  |
millions of Canadian dollars |  | Carrying Amount |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
December 31, 2019 | $ | 14,180 | $ | 16,049 | $ | - | $ | 15,598 | $ | 451 | $ | 16,049
December 31, 2018 | $ | 15,411 | $ | 15,908 | $ | - | $ | 14,991 | $ | 917 | $ | 15,908

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- Definition Tabular disclosure of assets and liabilities, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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