6.1a2 ERMUSR 05-09-2023 - Laserfiche WebLink

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Minnesota Municipal Power Agency Notes to Financial Statements December 31, 2022 and 2021 Note 6: Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities Level Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Level 3 Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities The Agency's investment in money market accounts are carried at cost and thus are not included within the fair value hierarchy. Valuation Methodologies U.S. Government Securities: The fair value of U. S. government securities is derived from quoted prices on similar assets in active or non -active markets, from other observable inputs such as interest rates, yield curves, or credit spreads, and inputs that are derived from or corroborated by observable market data. U.S. treasury and other federal agency securities are included as Level 2 assets. Derivative Instruments: Energy financial futures contracts uses the market approach based on monthly quoted prices from an independent external pricing service using market quotes. The market is not active to the point where identical contracts are available on a regular basis. These derivative instruments are included as Level 2 liabilities. Note 7: Power Acquisition Expense Power acquisition expense consists primarily of power purchases, production fuel, and related expenses. The Agency sells substantially all of the power and energy produced by its generating facilities into the MISO market and purchases substantially all of its power and energy needs for sales to members and others from the MISO market. The Agency reports its purchases from and sales to MISO on a net basis. The components of power acquisition expense are as follows: Power purchases Production fuel Total power acquisition expense 2022 2021 $ 52,413,418 $ 42,624,643 34,730,166 22,696,418 $ 87,143,584 $ 65,321,061 165 27