Fair Value Measurements	12 Months Ended
Fair Value Measurements	Dec. 31, 2022
16. Fair Value Measurements
Fair Value Measurements	16. FAIR VALUE MEASUREMENTS The Company is required to determine the fair value of all derivatives except those which qualify for the NPNS exemption (see note 1) and uses a market approach to do so. The three levels of the fair value hierarchy are defined as follows: Level 1 - Where possible, the Company bases the fair valuation of its financial assets and liabilities on quoted prices in active markets (“quoted prices”) for identical assets and liabilities. Level 2 - Where quoted prices for identical assets and liabilities are not available, the valuation of certain contracts must be based on quoted prices for similar assets and liabilities with an adjustment related to location differences. Also, certain derivatives are valued using quotes from over-the-counter clearing houses. Level 3 - Where the information required for a Level 1 or Level 2 valuation is not available, derivatives must be valued using unobservable or internally-developed inputs. The primary reasons for a Level 3 classification are as follows: ● While valuations were based on quoted prices, significant assumptions were necessary to reflect seasonal or monthly shaping and locational basis differentials. ● The term of certain transactions extends beyond the period when quoted prices are available and, accordingly, assumptions were made to extrapolate prices from the last quoted period through the end of the transaction term. ● The valuations of certain transactions were based on internal models, although quoted prices were utilized in the valuations. Derivative assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following tables set out the classification of the methodology used by the Company to fair value its derivatives As at December 31, 2022 millions of dollars Level 1 Level 2 Level 3 Total Assets Regulatory deferral: Commodity swaps and forwards $ 120 $ 48 $ - $ 168 FX forwards - 18 - 18 Physical natural gas purchases - - 52 52 120 66 52 238 HFT derivatives: Power swaps and physical contracts 9 31 4 44 Natural gas swaps, futures, forwards, physical contracts and related transportation 3 72 34 109 12 103 38 153 Other derivatives: FX forwards - 5 - 5 Total assets 132 174 90 396 Liabilities Regulatory deferral: Commodity swaps and forwards 15 9 - 24 FX forwards - 1 - 1 15 10 - 25 HFT derivatives: Power swaps and physical contracts 2 28 1 31 Natural gas swaps, futures, forwards and physical contracts 51 118 825 994 53 146 826 1,025 Other derivatives: FX forwards - 23 - 23 Equity derivatives 5 - - 5 5 23 - 28 Total liabilities 73 179 826 1,078 Net assets (liabilities) $ 59 $ (5) $ (736) $ (682) As at December 31, 2021 millions of dollars Level 1 Level 2 Level 3 Total Assets Regulatory deferral: Commodity swaps and forwards $ 101 $ 41 $ - $ 142 FX forwards - 7 - 7 Physical natural gas purchases and sales - - 88 88 101 48 88 237 HFT derivatives: Power swaps and physical contracts 4 5 4 13 Natural gas swaps, futures, forwards, physical contracts and related transportation (1) 29 12 40 3 34 16 53 Other derivatives: Equity derivatives 11 - - 11 Total assets 115 82 104 301 Liabilities Regulatory deferral: Commodity swaps and forwards 7 5 - 12 FX forwards - 8 - 8 7 13 - 20 HFT derivatives: Power swaps and physical contracts 4 5 3 12 Natural gas swaps, futures, forwards and physical contracts 13 122 515 650 17 127 518 662 Total liabilities 24 140 518 682 Net assets (liabilities) $ 91 $ (58) $ (414) $ (381) The change in the fair value of the Level 3 financial assets for the year ended December 31, 2022 was as follows: Regulatory Deferral HFT Derivatives Physical natural Natural millions of dollars gas purchases Power gas Total Balance, January 1, 2022 $ 88 $ 4 $ 12 $ 104 Realized gains included in fuel for generation and purchased power (64) - - (64) Unrealized gains included in regulatory liabilities 28 - - 28 Total realized and unrealized gains included in non- regulated operating revenues - - 22 22 Balance, December 31, 2022 $ 52 $ 4 $ 34 $ 90 The change in the fair value of the Level 3 financial liabilities for the year ended December 31, 2022 was as follows: HFT Derivatives Natural millions of dollars Power gas Total Balance, January 1, 2022 $ 3 $ 515 $ 518 Total realized and unrealized gains (losses) included in non-regulated operating revenues (2) 310 308 Balance, December 31, 2022 $ 1 $ 825 $ 826 Significant unobservable inputs used in the fair value measurement of Emera’s natural gas and power derivatives include third-party sourced pricing for instruments based on illiquid markets. Significant increases (decreases) in any of these inputs in isolation would result in a significantly lower (higher) fair value measurement. Other unobservable inputs used include internally developed correlation factors and basis differentials; own credit risk; and discount rates. Internally developed correlations and basis differentials are reviewed on a quarterly basis based on statistical analysis of the spot markets in the various illiquid term markets. Discount rates may include a risk premium for those long-term forward contracts with illiquid future price points to incorporate the inherent uncertainty of these points. Any risk premiums for long-term contracts are evaluated by observing similar industry practices and in discussion with industry peers. The Company uses a modelled pricing valuation technique for determining the fair value of Level 3 derivative instruments. The following table outlines quantitative information about the significant unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy: December 31, 2022 As at Significant Weighted millions of dollars Fair Value Unobservable Input Low High average (1) Assets Liabilities Regulatory deferral – Physical $ 52 $ - Third-party pricing $5.79 $31.85 $12.27 natural gas purchases HFT derivatives – Power 4 1 Third-party pricing $43.24 $269.10 $138.79 swaps and physical contracts HFT derivatives – Natural 34 825 Third-party pricing $2.45 $33.88 $12.01 gas swaps, futures, forwards and physical contracts Total $ 90 $ 826 Net liability $ 736 (1) Unobservable inputs were weighted by the relative fair value of the instruments. December 31, 2021 As at Significant Weighted millions of dollars Fair Value Unobservable Input Low High average (1) Assets Liabilities Regulatory deferral – Physical $ 88 $ - Third-party pricing $4.51 $26.09 $9.74 natural gas purchases HFT derivatives – Power 4 3 Third-party pricing $37.05 $213.00 $99.34 swaps and physical contracts HFT derivatives – Natural 12 515 Third-party pricing $1.90 $21.53 $8.80 gas swaps, futures, forwards and physical contracts Total $ 104 $ 518 Net liability $ 414 (1) Unobservable inputs were weighted by the relative fair value of the instruments. Long-term debt is a financial liability not measured at fair value on the Consolidated Balance Sheets. The balance consisted of the following: As at Carrying millions of dollars Amount Fair Value Level 1 Level 2 Level 3 Total December 31, 2022 $ 16,318 $ 14,670 $ - $ 14,284 $ 386 $ 14,670 December 31, 2021 $ 14,658 $ 16,775 $ - $ 16,308 $ 467 $ 16,775 The Company has designated $ 1.2 billion USD denominated Hybrid Notes as a hedge of the foreign currency exposure of its ne t investment in USD denominated operations. The Company’s Hybrid Notes are contingently convertible into preferred shares in the event of bankruptcy or other related events. A redemption option on or after June 15, 2026 is available and at the control of the Company. The Hybrid Notes are classified as Level 2 financial assets. As at December 31, 2022, the fair value of the Hybrid Notes was $ 1.1 billion (2021 – $ 1.7 billion). An after-tax foreign currency loss of $ 97 million was recorded in AOCI for the year ended December 31, 2022 (2021 – $ 5 million after-tax gain).

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.