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Fair Value of Financial Instruments (Notes) | 9 Months Ended
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Sep. 30, 2012
Fair Value of Financial Instruments Note [Abstract] |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS PGE determines the fair value of financial instruments, both assets and liabilities recognized and not recognized in the Company’s condensed consolidated balance sheets, for which it is practicable to estimate fair value as of September 30, 2012 and December 31, 2011, and then classifies these financial assets and liabilities based on a fair value hierarchy. The fair value hierarchy, which contains three broad classification levels, is used to prioritize the inputs to the valuation techniques used to measure fair value. The levels and application to the Company are discussed below.
Level 1 | Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.
Level 2 | Pricing inputs include those that are directly or indirectly observable in the marketplace as of the reporting date.
Level 3 | Pricing inputs include significant inputs that are unobservable for the asset or liability.
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy. PGE recognizes any transfers between levels in the fair value hierarchy as of the end of the reporting period. Changes to market liquidity conditions, the availability of observable inputs, or changes in the economic structure of a security marketplace may require transfer of the securities between levels. There were no significant transfers between levels, except those transfers out of Level 3 to Level 2 presented in this note, during the three and nine month periods ended September 30, 2012 and 2011. The Company’s financial assets and liabilities recognized at fair value are as follows by level within the fair value hierarchy (in millions):
| As of September 30, 2012
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Nuclear decommissioning trust: (1) |  |  |  |  |  |  |
Money market funds | $ | — |  |  | $ | 14 |  |  | $ | — |  |  | $ | 14 |
Debt securities: |  |  |  |  |  |  |
Domestic government | 5 |  |  | 10 |  |  | — |  |  | 15 |
Corporate credit | — |  |  | 8 |  |  | — |  |  | 8 |
Non-qualified benefit plan trust: (2) |  |  |  |  |  |  |
Equity Securities: |  |  |  |  |  |  |
Domestic | 3 |  |  | 2 |  |  | — |  |  | 5 |
International | 1 |  |  | — |  |  | — |  |  | 1 |
Debt securities—Domestic government | 3 |  |  | — |  |  | — |  |  | 3 |
Assets from price risk management activities: (1) (3) |  |  |  |  |  |  |
Electricity | — |  |  | 1 |  |  | 1 |  |  | 2 |
Natural gas | — |  |  | 4 |  |  | 4 |  |  | 8 |
| $ | 12 |  |  | $ | 39 |  |  | $ | 5 |  |  | $ | 56 |
Liabilities from price risk management activities: (1) (3) |  |  |  |  |  |  |
Electricity | $ | — |  |  | $ | 63 |  |  | $ | 33 |  |  | $ | 96 |
Natural gas | — |  |  | 90 |  |  | 51 |  |  | 141 |
| $ | — |  |  | $ | 153 |  |  | $ | 84 |  |  | $ | 237 |
(1) | Activities are subject to regulation, with certain gains and losses deferred pursuant to regulatory accounting and included in Regulatory assets or Regulatory liabilities as appropriate.
(2) | Excludes insurance policies of $23 million, which are recorded at cash surrender value.
(3) | For further information, see Note 4, Price Risk Management.
| As of December 31, 2011
| Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Nuclear decommissioning trust: (1) |  |  |  |  |  |  |
Money market funds | $ | — |  |  | $ | 14 |  |  | $ | — |  |  | $ | 14 |
Debt securities: |  |  |  |  |  |  |
Domestic government | 3 |  |  | 9 |  |  | — |  |  | 12 |
Corporate credit | — |  |  | 11 |  |  | — |  |  | 11 |
Non-qualified benefit plan trust: (2) |  |  |  |  |  |  |
Equity securities: |  |  |  |  |  |  |
Domestic | 7 |  |  | 2 |  |  | — |  |  | 9 |
International | 1 |  |  | — |  |  | — |  |  | 1 |
Debt securities—Domestic government | 3 |  |  | — |  |  | — |  |  | 3 |
Assets from price risk management activities: (1) (3) |  |  |  |  |  |  |
Electricity | — |  |  | 2 |  |  | — |  |  | 2 |
Natural gas | — |  |  | 17 |  |  | — |  |  | 17 |
| $ | 14 |  |  | $ | 55 |  |  | $ | — |  |  | $ | 69 |
Liabilities from price risk management activities: (1) (3) |  |  |  |  |  |  |
Electricity | $ | — |  |  | $ | 108 |  |  | $ | 29 |  |  | $ | 137 |
Natural gas | — |  |  | 201 |  |  | 50 |  |  | 251 |
| $ | — |  |  | $ | 309 |  |  | $ | 79 |  |  | $ | 388 |
(1) | Activities are subject to regulation, with certain gains and losses deferred pursuant to regulatory accounting and included in Regulatory assets or Regulatory liabilities as appropriate.
(2) | Excludes insurance policies of $23 million, which are recorded at cash surrender value.
(3) | For further information, see Note 4, Price Risk Management.
Trust assets held in the Nuclear decommissioning and Non-qualified benefit plan trusts are recorded at fair value in PGE’s consolidated balance sheets and allocated to securities that are exposed to interest rate, credit and market volatility risks. These assets are classified within the fair value hierarchy based on the following factors: Money market funds — PGE invests in money market funds that seek to maintain a stable net asset value. These funds invest in high-quality, short-term, diversified money market instruments, short-term treasury bills, federal agency securities, certificates of deposits, and commercial paper. Money market funds held in the Nuclear decommissioning trust are classified as Level 2 in the fair value hierarchy as the securities are traded in active markets of similar securities but are not directly valued using quoted market prices. Debt securities — PGE invests in highly-liquid United States treasury securities to support the investment objectives of the trusts. These domestic government securities are classified as Level 1 in the fair value hierarchy due to the availability of quoted prices for identical assets in an active market as of the reporting date. Assets classified as Level 2 in the fair value hierarchy include domestic government debt securities, such as municipal debt, and corporate credit securities. Prices are determined by evaluating pricing data such as broker quotes for similar securities and adjusted for observable differences. Significant inputs used in valuation models generally include benchmark yield and issuer spreads. The external credit rating, coupon rate, and maturity of each security are considered in the valuation as applicable. Equity securities — Equity mutual fund and common stock securities are primarily classified as Level 1 in the fair value hierarchy due to the availability of quoted prices for identical assets in an active market as of the reporting date. Principal markets for equity prices include published exchanges such as NASDAQ and the New York Stock Exchange (NYSE). Certain mutual fund assets included in commingled trusts or separately managed accounts are classified as Level 2 in the fair value hierarchy as pricing inputs are directly or indirectly observable in the marketplace as of the reporting date. Assets and liabilities from price risk management activities are recorded at fair value in PGE’s consolidated balance sheets and consist of derivative instruments entered into by the Company to manage exposure to commodity price risk and foreign currency exchange rate risk, and reduce volatility in net power costs for the Company’s retail customers. For additional information regarding these assets and liabilities, see Note 4, Price Risk Management. For those assets and liabilities from price risk management activities classified as Level 2, fair value is derived using present value formulas that utilize inputs such as quoted forward prices for commodities and interest rates. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data, or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category include over-the-counter forwards and swaps. Assets and liabilities from price risk management activities classified as Level 3 consist of instruments for which fair value is derived using one or more significant inputs that are not observable for the entire term of the instrument. These instruments consist of longer term over-the-counter swap derivatives. Commodity option contracts whose fair value is derived using standardized valuation techniques, such as Black-Scholes, are also classified as Level 3 and represent an immaterial portion of the Company’s Level 3 fair value measurements. Inputs into the valuation of commodity option contracts include forward commodity prices, forward interest rates, and historic volatility and correlation factors. Quantitative information regarding the significant, unobservable inputs used in the measurement of Level 3 assets and liabilities from price risk management activities as of September 30, 2012 is presented below:
|  |  | Range and Weighted Average Price per Unit
| Fair Value (1) |  | Low |  | High |  | Weighted Average |  | Unit
Assets from price risk management activities: (2) | (in millions) |  |  |  |  |  |  |  |
Natural gas financial swaps | $ | 4 |  |  | $ | 3.70 |  |  | $ | 5.41 |  |  | $ | 4.33 |  |  | Dth
Liabilities from price risk management activities: |  |  |  |  |  |  |  |  |
Electricity financial swaps | 33 |  |  | 6.05 |  |  | 51.68 |  |  | 39.44 |  |  | MWh
Natural gas financial swaps | 51 |  |  | 3.29 |  |  | 4.94 |  |  | 4.03 |  | Dth
(1) | Determined using a discounted cash flow technique in which long-term quoted forward prices are unobservable inputs.
(2) | Assets from price risk management activities related to commodity option contracts are considered immaterial for this disclosure.
The significant unobservable inputs used in the Company’s fair value measurement of price risk management assets and liabilities are long-term forward prices for commodity derivatives. These inputs employ the mid-point of the market’s bid-ask spread and are derived using observed transactions in active markets, as well as historical experience as a participant in those markets. These inputs are validated against nonbinding quotes from brokers with whom the Company transacts. In addition, changes in the fair value measurement from price risk management assets and liabilities are analyzed and reviewed on a monthly basis by the Company’s Risk Management group. This process includes analytical review of changes in commodity prices as well as procedures to analyze and identify the reasons for the changes over specific reporting periods. The Company’s assets and liabilities from price risk management activities are sensitive to changes in the underlying market prices of the related commodities. The significance of the impact is dependent upon the magnitude of the price change and the Company’s position as either the buyer or seller of the contract. As the buyer of a commodity financial swap, an increase in the underlying commodity price would result in a favorable change to the Company’s fair value measurement. Conversely, a decrease in the underlying commodity price to buy a commodity financial swap would result in an unfavorable change to the Company’s fair value measurement. As the seller of a commodity financial swap, the Company’s fair value measurements are sensitive to price changes in a manner opposite to the buy side relationship discussed above. Changes in the fair value of net liabilities from price risk management activities (net of assets from price risk management activities) classified as Level 3 in the fair value hierarchy were as follows (in millions):
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2012 |  | 2011 |  | 2012 |  | 2011
Balance as of the beginning of the period | $ | 88 |  |  | $ | 127 |  |  | $ | 79 |  |  | $ | 120 |
Net realized and unrealized (gains) losses (1) |  | (7 | ) |  | 21 |  |  | 4 |  |  | 29 |
Purchases |  | (2 | ) |  | 1 |  |  | (2 | ) |  | 1 |
Issues |  | — |  |  | — |  |  | (1 | ) |  | — |
Settlements |  | — |  |  | — |  |  | — |  |  | (1 | )
Transfers out of Level 3 to Level 2 |  | — |  |  | — |  |  | (1 | ) |  | — |
Balance as of the end of the period | $ | 79 |  |  | $ | 149 |  |  | $ | 79 |  |  | $ | 149 |
(1) | Contains nominal amounts of realized (gains) losses, net. Both realized and unrealized (gains) losses are recorded in Purchased power and fuel expense in the condensed consolidated statements of income of which the unrealized portion is fully offset by the effects of regulatory accounting until settlement of the underlying transactions.
Transfers into Level 3 occur when significant inputs used to value the Company’s derivative instruments become less observable, such as a delivery location becoming significantly less liquid. During the nine month period ended September 30, 2012, there were no transfers into Level 3 from Level 2. Transfers out of Level 3 occur when the significant inputs become more observable, such as when the time between the valuation date and the delivery term of a transaction becomes shorter. PGE records transfers in and transfers out of Level 3 at the end of the reporting period for all of its financial instruments. Transfers from Level 2 to Level 1 for the Company’s price risk management assets and liabilities do not occur as quoted prices are not available for identical instruments. As such, the Company’s assets and liabilities from price risk management activities mature and settle as Level 2 fair value measurements. Long-term debt is recorded at amortized cost in PGE’s consolidated balance sheets. The fair value of long-term debt is classified as a Level 2 fair value measurement and is estimated based on the quoted market prices for similar issues or on the current rates offered to PGE for debt of similar remaining maturities. As of September 30, 2012, the estimated aggregate fair value of PGE’s long-term debt was $2,059 million, compared to its $1,736 million carrying amount. As of December 31, 2011, the estimated aggregate fair value of PGE’s long-term debt was $2,091 million, compared to its $1,735 million carrying amount.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 3, 10, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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