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Fair Value of Financial Instruments (Notes) | 6 Months Ended
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Jun. 30, 2016
Fair Value of Financial Instruments [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 June 30, 2016 and December 31, 2015, and then classifies these financial assets and liabilities based on a fair value hierarchy that is applied to prioritize the inputs to the valuation techniques used to measure fair value. The three levels of the fair value hierarchy 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. Pursuant to the adoption of ASU 2015-07, Fair Value Measurement (Topic 820), Disclosures for Investments in Certain Entities that Calculate Net Asset Value per share (or Its Equivalent), as disclosed in Note 1, Basis of Presentation, assets measured at fair value using net asset value (NAV) as a practical expedient are not categorized in the fair value hierarchy. These assets are listed in the totals of the fair value hierarchy to permit the reconciliation to amounts presented in the financial statements, and prior period amounts have been retrospectively reclassified to conform to current presentation. PGE recognizes transfers between levels in the fair value hierarchy as of the end of the reporting period for all its financial instruments. 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 during the three and six month periods ended June 30, 2016 and 2015, except those transfers from Level 3 to Level 2 presented in this note. The Company’s financial assets and liabilities whose values were recognized at fair value are as follows by level within the fair value hierarchy (in millions):
| As of June 30, 2016
| Level 1 |  | Level 2 |  | Level 3 |  | Other(2) |  | Total
Assets: |  |  |  |  |  |  |  |  |
Nuclear decommissioning trust: (1) |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |
Domestic government | $ | 4 |  |  | $ | 9 |  |  | $ | — |  |  | $ | — |  |  | $ | 13 |
Corporate credit | — |  |  | 9 |  |  | — |  |  | — |  |  | 9 |
Money market funds measured at NAV(2) | — |  |  | — |  |  | — |  |  | 19 |  |  | 19 |
Non-qualified benefit plan trust: (3) |  |  |  |  |  |  |  |  |
Equity securities—domestic | 3 |  |  | — |  |  | — |  |  | — |  |  | 3 |
Debt securities—domestic government | 1 |  |  | — |  |  | — |  |  | — |  |  | 1 |
Money market funds measured at NAV(2) | — |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Collective trust—domestic equity measured at NAV(2) | — |  |  | — |  |  | — |  |  | 2 |  |  | 2 |
Assets from price risk management activities: (1) (4) |  |  |  |  |  |  |  |  |
Electricity | — |  |  | 8 |  |  | 1 |  |  | — |  |  | 9 |
Natural gas | — |  |  | 8 |  |  | — |  |  | — |  |  | 8 |
| $ | 8 |  |  | $ | 34 |  |  | $ | 1 |  |  | $ | 22 |  |  | $ | 65 |
Liabilities from price risk management activities: (1) (4) |  |  |  |  |  |  |  |  |
Electricity | $ | — |  |  | $ | 7 |  |  | $ | 145 |  |  | $ | — |  |  | $ | 152 |
Natural gas | — |  |  | 86 |  |  | 14 |  |  | — |  |  | 100 |
| $ | — |  |  | $ | 93 |  |  | $ | 159 |  |  | $ | — |  |  | $ | 252 |
(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) | Assets are measured at NAV as a practical expedient and not subject to hierarchy level classification disclosure.
(3) | Excludes insurance policies of $26 million, which are recorded at cash surrender value.
(4) | For further information, see Note 4, Price Risk Management.
| As of December 31, 2015
| Level 1 |  | Level 2 |  | Level 3 |  | Other(2) |  | Total
Assets: |  |  |  |  |  |  |  |  |
Nuclear decommissioning trust: (1) |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |
Domestic government | $ | 6 |  |  | $ | 8 |  |  | $ | — |  |  | $ | — |  |  | $ | 14 |
Corporate credit | — |  |  | 8 |  |  | — |  |  | — |  |  | 8 |
Money market funds measured at NAV(2) | — |  |  | — |  |  | — |  |  | 18 |  |  | 18 |
Non-qualified benefit plan trust: (3) |  |  |  |  |  |  |  |  |
Equity securities—domestic | 3 |  |  | — |  |  | — |  |  | — |  |  | 3 |
Debt securities—domestic government | 1 |  |  | — |  |  | — |  |  | — |  |  | 1 |
Money market funds measured at NAV(2) | — |  |  | — |  |  | — |  |  | 1 |  |  | 1 |
Collective trust—domestic equity measured at NAV(2) | — |  |  | — |  |  | — |  |  | 2 |  |  | 2 |
Assets from price risk management activities: (1) (4) |  |  |  |  |  |  |  |  |
Electricity | — |  |  | 7 |  |  | — |  |  | — |  |  | 7 |
Natural gas | — |  |  | 3 |  |  | — |  |  | — |  |  | 3 |
| $ | 10 |  |  | $ | 26 |  |  | $ | — |  |  | $ | 21 |  |  | $ | 57 |
Liabilities from price risk management activities: (1) (4) |  |  |  |  |  |  |  |  |
Electricity | $ | — |  |  | $ | 28 |  |  | $ | 105 |  |  | $ | — |  |  | $ | 133 |
Natural gas | — |  |  | 144 |  |  | 14 |  |  | — |  |  | 158 |
| $ | — |  |  | $ | 172 |  |  | $ | 119 |  |  | $ | — |  |  | $ | 291 |
(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) | Assets are measured at NAV as a practical expedient and not subject to hierarchy level classification disclosure, and have been retrospectively reclassified pursuant to the implementation of ASU 2015-07. For further information see Note 1, Basis of Presentation.
(3) | Excludes insurance policies of $26 million, which are recorded at cash surrender value.
(4) | 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 condensed consolidated balance sheets and invested in securities that are exposed to interest rate, credit, and market volatility risks. These assets are classified within Level 1, 2, or 3 based on the following factors: 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 yields 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. 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 are not classified in the fair value hierarchy since they are valued at NAV as a practical expedient. The Company believes the redemption value of these funds is likely to be the fair value, which is represented by the net asset value. Redemption is permitted daily without written notice. Common and collective trust funds—PGE invests in common and collective trust funds that invests in equity securities. The Company believes the redemption value of these funds is likely to be the fair value, which is represented by the net asset value as a practical expedient. A majority of the funds provide for daily liquidity with appropriate written notice. One fund allows for withdrawal from all accounts as of the last day on each calendar month, with at least 10 days’ prior written notice, and provides for a 95% payment to be made within 30 days, and the balance paid after the annual fund audit is complete. Common and collective trusts are not classified in the fair value hierarchy as they are valued at NAV as a practical expedient. Assets and liabilities from price risk management activities are recorded at fair value in PGE’s condensed consolidated balance sheets and consist of derivative instruments entered into by the Company to manage its exposure to commodity price risk and foreign currency exchange rate risk, and reduce volatility in net variable power costs (NVPC) 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 forward commodity prices and interest rates. Substantially all of these inputs 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 commodity forwards, futures, 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 commodity forwards and swaps. Quantitative information regarding the significant, unobservable inputs used in the measurement of Level 3 assets and liabilities from price risk management activities is presented below:
|  | Fair Value |  | Valuation Technique |  | Significant Unobservable Input |  | Price per Unit
Commodity Contracts |  | Assets |  | Liabilities |  |  |  | Low |  | High |  | Weighted Average
|  | (in millions) |  |  |  |  |  |  |  |  |  |
As of June 30, 2016: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Electricity physical forwards |  | $ | — |  |  | $ | 144 |  |  | Discounted cash flow |  | Electricity forward price (per MWh) |  | $ | 10.75 |  |  | $ | 53.80 |  |  | $ | 28.67 |
Natural gas financial swaps |  | — |  |  | 14 |  |  | Discounted cash flow |  | Natural gas forward price (per Decatherm) |  | 2.02 |  |  | 3.66 |  |  | 2.54 |
Electricity financial futures |  | 1 |  |  | 1 |  |  | Discounted cash flow |  | Electricity forward price (per MWh) |  | 19.61 |  |  | 34.25 |  |  | 28.15 |
|  | $ | 1 |  |  | $ | 159 |  |  |  |  |  |  |  |  |  |  |
As of December 31, 2015: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Electricity physical forwards |  | $ | — |  |  | $ | 105 |  |  | Discounted cash flow |  | Electricity forward price (per MWh) |  | $ | 8.50 |  |  | $ | 84.47 |  |  | $ | 30.69 |
Natural gas financial swaps |  | — |  |  | 14 |  |  | Discounted cash flow |  | Natural gas forward price (per Decatherm) |  | 2.06 |  |  | 3.70 |  |  | 2.54 |
Electricity financial futures |  | — |  |  | — |  |  | Discounted cash flow |  | Electricity forward price (per MWh) |  | 9.98 |  |  | 27.36 |  |  | 19.26 |
|  | $ | — |  |  | $ | 119 |  |  |  |  |  |  |  |  |  |  |
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. For shorter term contracts, the Company employs the mid-point of the bid-ask spread of the market and these inputs are derived using observed transactions in active markets, as well as historical experience as a participant in those markets. These price inputs are validated against independent market data from multiple sources. For certain long-term contracts, observable, liquid market transactions are not available for the duration of the delivery period. In such instances, the Company uses internally-developed price curves, which derive longer term prices and utilize observable data when available. When not available, regression techniques are used to estimate unobservable future prices. In addition, changes in the fair value measurement of price risk management assets and liabilities are analyzed and reviewed on a monthly basis by the Company. The Company’s Level 3 assets and liabilities from price risk management activities are sensitive to market price changes in the respective underlying 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. Sensitivity of the fair value measurements to changes in the significant unobservable inputs is as follows:
Significant Unobservable Input |  | Position |  | Change to Input |  | Impact on Fair Value Measurement
Market price |  | Buy |  | Increase (decrease) |  | Gain (loss)
Market price |  | Sell |  | Increase (decrease) |  | Loss (gain)
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 June 30, |  | Six Months Ended June 30,
| 2016 |  | 2015 |  | 2016 |  | 2015
Balance as of the beginning of the period | $ | 131 |  |  | 148 |  |  | $ | 119 |  |  | $ | 100 |
Net realized and unrealized losses* | 28 |  |  | 20 |  |  | 40 |  |  | 70 |
Transfers out of Level 3 to Level 2 | (1 | ) |  | — |  |  | (1 | ) |  | (2 | )
Balance as of the end of the period | $ | 158 |  |  | $ | 168 |  |  | $ | 158 |  |  | $ | 168 |
* | Both realized and unrealized losses, of which the unrealized portion is fully offset by the effects of regulatory accounting until settlement of the underlying transactions, are recorded in Purchased power and fuel expense in the condensed consolidated statements of income.
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 three and six months ended June 30, 2016 and 2015, there were no minal 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 derivative 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 condensed consolidated balance sheets. The fair value of the Company’s FMBs and Pollution Control Revenue Bonds is classified as a Level 2 fair value measurement and is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to PGE for debt of similar remaining maturities. The fair value of PGE’s unsecured term bank loans was classified as Level 3 in the fair value hierarchy and was estimated based on the terms of the loans and the Company’s creditworthiness. The significant unobservable inputs to the Level 3 fair value measurement included the interest rate and the length of the loan. The estimated fair value of the Company’s unsecured term bank loans approximated their carrying value. As of June 30, 2016, the carrying amount of PGE’s long-term debt was $2,324 million, net of $12 million of unamortized debt expense, and its estimated aggregate fair value was $2,908 million, classified as Level 2 in the fair value hierarchy. As of December 31, 2015, the carrying amount of PGE’s long-term debt was $2,193 million, net of $11 million of unamortized debt expense, and its estimated aggregate fair value was $2,455 million classified as Level 2 in the fair value hierarchy.

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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 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=36462937&loc=d3e19207-110258 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14172-108612 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 28 -URI http://asc.fasb.org/extlink&oid=6957238&loc=d3e14064-108612 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=49121117&loc=d3e13537-108611 Reference 5: 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=49121117&loc=d3e13504-108611 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=49121117&loc=d3e13433-108611 + Details
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