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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value by Level

The following table sets forth assets and liabilities that were accounted for at fair value by level within the fair value hierarchy:

	September 30, 2012
(in millions)	Level 1				Level 2				Level 3				Netting and Collateral1				Total
Assets at Fair Value
Money market funds2	$	28			$	—			$	—			$	—			$	28
Derivative contracts:
Electricity	—				1				9				(3		)		7
CRRs	—				—				100				—				100
Tolling	—				—				4				—				4
Subtotal of derivative contracts	—				1				113				(3		)		111
Long-term disability plan	8				—				—				—				8
Nuclear decommissioning trusts:
Stocks3	2,227				—				—				—				2,227
Municipal bonds	—				654				—				—				654
U.S. government and agency securities	467				122				—				—				589
Corporate bonds4	—				374				—				—				374
Short-term investments, primarily cash equivalents5	—				145				—				—				145
Subtotal of nuclear decommissioning trusts	2,694				1,295				—				—				3,989
Total assets6	2,730				1,296				113				(3		)		4,136
Liabilities at Fair Value
Derivative contracts:
Electricity	—				—				9				—				9
Natural gas	—				115				6				(47		)		74
Tolling	—				—				1,028				—				1,028
Subtotal of derivative contracts	—				115				1,043				(47		)		1,111
Total liabilities	—				115				1,043				(47		)		1,111
Net assets (liabilities)	$	2,730			$	1,181			$	(930	)		$	44			$	3,025

	December 31, 2011
(in millions)	Level 1				Level 2				Level 3				Netting and Collateral1				Total
Assets at Fair Value
Money market funds2	$	21			$	—			$	—			$	—			$	21
Derivative contracts:
Electricity	—				—				1				—				1
Natural gas	—				5				—				(3		)		2
CRRs	—				—				122				—				122
Tolling	—				—				10				—				10
Subtotal of derivative contracts	—				5				133				(3		)		135
Long-term disability plan	8				—				—				—				8
Nuclear decommissioning trusts:
Stocks3	1,899				—				—				—				1,899
Municipal bonds	—				756				—				—				756
U.S. government and agency securities	433				147				—				—				580
Corporate bonds4	—				317				—				—				317
Short-term investments, primarily cash equivalents5	—				15				—				—				15
Subtotal of nuclear decommissioning trusts	2,332				1,235				—				—				3,567
Total assets6	2,361				1,240				133				(3		)		3,731
Liabilities at Fair Value
Derivative contracts:
Electricity	—				5				65				(2		)		68
Natural gas	—				234				23				(53		)		204
Tolling	—				—				799				—				799
Subtotal of derivative contracts	—				239				887				(55		)		1,071
Total liabilities	—				239				887				(55		)		1,071
Net assets (liabilities)	$	2,361			$	1,001			$	(754	)		$	52			$	2,660

¹  Represents the netting of assets and liabilities under master netting agreements and cash collateral across the levels of the fair value hierarchy. Netting among positions classified within the same level is included in that level.

²  Money market funds are included in cash and cash equivalents on SCE's consolidated balance sheets.

³  Approximately 67% and 70% of the equity investments were located in the United States at September 30, 2012 and December 31, 2011, respectively.

⁴  At September 30, 2012 and December 31, 2011, corporate bonds were diversified and included collateralized mortgage obligations and other asset backed securities of $42 million and $22 million, respectively.

⁵  Excludes net receivables of $8 million and $25 million at September 30, 2012 and December 31, 2011, respectively, of interest and dividend receivables as well as receivables and payables related to pending securities sales and purchases.

⁶  Excludes other investments of $70 million and $81 million at September 30, 2012 and December 31, 2011, respectively, primarily related to the cash surrender value of company owned life insurance investments which are used to fund certain executive benefits including deferred compensation.

Summary of Changes in Fair Value of Level 3 Assets and Liabilities

The following table sets forth a summary of changes in the fair value of Level 3 net derivative assets and liabilities:

	Three months ended September 30,								Nine months ended September 30,
(in millions)	2012				2011				2012				2011
Fair value of net assets (liabilities) at beginning of period	$	(739	)		$	(359	)		$	(754	)		$	6
Total realized/unrealized gains (losses), net:
Included in regulatory assets1	(180		)		(128		)		(203		)		(510		)
Purchases	33				19				84				35
Settlements	(44		)		(2		)		(57		)		(1		)
Transfers into Level 3	—				—				—				—
Transfers out of Level 3	—				—				—				—
Fair value of net liabilities at end of period	$	(930	)		$	(470	)		$	(930	)		$	(470	)
Change during the period in unrealized gains (losses) related to assets and liabilities held at the end of the period	$	(222	)		$	(135	)		$	(244	)		$	(502	)

¹  Due to regulatory mechanisms, SCE's realized and unrealized gains and losses are recorded as regulatory assets and liabilities.

Valuation Techniques and Significant Unobservable Inputs Used to Determine Fair Value for Level 3 Assets and Liabilities

The following table sets forth the valuation techniques and significant unobservable inputs used to determine fair value for Level 3 assets and liabilities at September 30, 2012:

	Fair Value (in millions)								Significant	Range
	Assets				Liabilities			Valuation Technique(s)	Unobservable Input	(Weighted Average)
Electricity:
Options	$	23			$	26		Option model	Volatility of gas prices	23% - 41% (31%)
									Volatility of power prices	28% - 60% (39%)
									Power prices	$38.10 - $58.80 ($45.30)
Forwards	3				1			Discounted cash flow	Power prices	$22.10 - $64.50 ($32.50)
Gas Options	—				6			Option model	Volatility of gas prices	24% - 41% (35%)
CRRs	100				—			Market simulation model	Load forecast	7,597 MW - 26,612 MW
									Power prices	$(13.90) - $226.75
									Gas prices	$2.95 - $7.78
Tolling	5				1,028			Option model	Volatility of gas prices	17% - 41% (21%)
									Volatility of power prices	26% - 60% (28%)
									Power prices	$33.20 - $100.80 ($56.10)
Netting	(18		)		(18		)
Total derivative contracts	$	113			$	1,043

Carrying Amounts and Fair Values of Long-Term Debt, Including Current Portion

The carrying value and fair value of long-term debt are:

	September 30, 2012								December 31, 2011
(in millions)	Carrying Value				Fair Value				Carrying Value				Fair Value
Long-term debt, including current portion	$	8,828			$	10,604			$	8,431			$	10,129

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- Definition

Tabular disclosure of the fair value measurement of assets and liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets and liabilities) and gains or losses recognized in other comprehensive income, and a description of where those gains or losses included in earnings (or changes in net assets and liabilities) are reported in the statement of income (or activities); (2) purchases, sales, issuances, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset and liabilities.

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Tabular disclosure of the inputs and valuation techniques used to measure fair value, and a discussion of changes in valuation techniques and related inputs, if any, applied during the period to each separate class of assets, liabilities, and financial instruments classified in shareholders' equity that are measured on a recurring and/or nonrecurring basis.

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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).

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