DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2021

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We use derivatives as part of our risk management program to manage the risks associated with the price volatility of purchased power, generation, and natural gas costs for the benefit of our customers. Our approach is non-speculative and designed to mitigate risk. Our regulated hedging programs are approved by the PSCW.

We record derivative instruments on our balance sheets as an asset or liability measured at fair value unless they qualify for the normal purchases and sales exception and are so designated. We continually assess our contracts designated as normal and will discontinue the treatment of these contracts as normal if the required criteria are no longer met. Changes in the derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met or we receive regulatory treatment for the derivative. For most energy-related physical and financial contracts in our regulated operations that qualify as derivatives, the PSCW allows the effects of fair value accounting to be offset to regulatory assets and liabilities.

None of our derivatives are designated as hedging instruments. On our balance sheets, we classify derivative assets and liabilities as current or long-term based on the maturities of the underlying contracts. Derivative assets and liabilities not shown separately on our balance sheets are included in the other current and other long-term line items. The following table shows our derivative assets and derivative liabilities.


	September 30, 2021				December 31, 2020
(in millions)	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Current
Natural gas contracts	$	59.3	$	0.4	$	3.7	$	3.2
FTRs	1.6		—		1.1		—
Coal contracts	24.6		—		1.4		0.5
Total current	85.5		0.4		6.2		3.7

Long-term
Natural gas contracts	4.7		—		0.1		0.3
Coal contracts	4.2		—		—		0.1
Total long-term	8.9		—		0.1		0.4
Total	$	94.4	$	0.4	$	6.3	$	4.1

Realized gains (losses) on derivatives are primarily recorded in cost of sales on the income statements. Our estimated notional sales volumes and realized gains (losses) were as follows:


	Three Months Ended September 30, 2021			Three Months Ended September 30, 2020
(in millions)	Volumes	Gains		Volumes	Gains (Losses)
Natural gas contracts	15.9 Dth	$	16.2	12.7 Dth	$	(4.1)
FTRs	5.4 MWh	1.1		5.8 MWh	0.8
Total		$	17.3		$	(3.3)

	Nine Months Ended September 30, 2021			Nine Months Ended September 30, 2020
(in millions)	Volumes	Gains		Volumes	Gains (Losses)
Natural gas contracts	51.5 Dth	$	14.6	45.8 Dth	$	(15.4)
FTRs	16.5 MWh	7.6		16.0 MWh	2.1
Total		$	22.2		$	(13.3)

On our balance sheets, the amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against the fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. At September 30, 2021 and December 31, 2020, we had posted cash collateral of $4.0 million and $6.7 million, respectively. These amounts were recorded on our balance sheets in other current assets. At September 30, 2021, we had also received cash collateral of $38.8 million. This amount was recorded on our balance sheet in other current liabilities.

The following table shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on our balance sheets:


	September 30, 2021					December 31, 2020
(in millions)	Derivative Assets			Derivative Liabilities		Derivative Assets		Derivative Liabilities
Gross amount recognized on the balance sheet	$	94.4		$	0.4	$	6.3	$	4.1
Gross amount not offset on the balance sheet	(38.9)		(1)	(0.1)		(2.9)		(2.9)
Net amount	$	55.5		$	0.3	$	3.4	$	1.2

(1) Includes cash collateral received of $38.8 million.