XML 45 R13.htm IDEA: XBRL DOCUMENT v3.20.1
Derivative Instruments
 3 Months Ended
Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
6. Derivative Instruments

We are exposed to the impact of market fluctuations in the price of electricity and natural gas, basis differences in the price of natural gas, storage charges, renewable energy credits ("RECs"), and capacity charges from independent system operators. We use derivative instruments in an effort to manage our cash flow exposure to these risks. These instruments are not designated as hedges for accounting purposes, and, accordingly, changes in the market value of these derivative instruments are recorded in the cost of revenues. As part of our strategy to optimize pricing in our natural gas related activities, we also manage a portfolio of commodity derivative instruments held for trading purposes. Our commodity trading activities are subject to limits within our Risk Management Policy. For these derivative instruments, changes in the fair value are recognized currently in earnings in net asset optimization revenues.
Derivative assets and liabilities are presented net in our condensed consolidated balance sheets when the derivative instruments are executed with the same counterparty under a master netting arrangement. Our derivative contracts include transactions that are executed both on an exchange and centrally cleared, as well as over-the-counter, bilateral contracts that are transacted directly with third parties. To the extent we have paid or received collateral related to the derivative assets or liabilities, such amounts would be presented net against the related derivative asset or liability’s fair value. As of March 31, 2020 and December 31, 2019, we had paid $1.6 million and $1.7 million, respectively, in collateral. The specific types of derivative instruments we may execute to manage the commodity price risk include the following:

•
Forward contracts, which commit us to purchase or sell energy commodities in the future;
•
Futures contracts, which are exchange-traded standardized commitments to purchase or sell a commodity or financial instrument;
•
Swap agreements, which require payments to or from counterparties based upon the differential between two prices for a predetermined notional quantity; and
•
Option contracts, which convey to the option holder the right but not the obligation to purchase or sell a commodity.

The Company has entered into other energy-related contracts that do not meet the definition of a derivative instrument or for which we made a normal purchase, normal sale election and are therefore not accounted for at fair value including the following:

•
Forward electricity and natural gas purchase contracts for retail customer load;
•
Renewable energy credits; and
•
Natural gas transportation contracts and storage agreements.


Volumes Underlying Derivative Transactions
The following table summarizes the net notional volumes of our open derivative financial instruments accounted for at fair value by commodity. Positive amounts represent net buys while bracketed amounts are net sell transactions (in thousands):
Non-trading 
Commodity
Notional

March 31, 2020

December 31, 2019
Natural Gas
MMBtu

4,510


6,130

Natural Gas Basis
MMBtu

5


42

Electricity
MWh

4,678


6,015

Trading
Commodity
Notional

March 31, 2020

December 31, 2019
Natural Gas
MMBtu

154


204

Natural Gas Basis
MMBtu

—


—



Gains (Losses) on Derivative Instruments
Gains (losses) on derivative instruments, net and current period settlements on derivative instruments were as follows for the periods indicated (in thousands):
 
 
 
 


Three Months Ended March 31,
  
2020

2019
Loss on non-trading derivatives, net
$
(24,533
)

$
(19,803
)
 (Loss) gain on trading derivatives, net
(54
)

262

Loss on derivatives, net
(24,587
)

(19,541
)
Current period settlements on non-trading derivatives (1)
16,609


8,125

Current period settlements on trading derivatives
(1
)

(100
)
Total current period settlements on derivatives
$
16,608


$
8,025



(1) Excludes settlements of $(0.3) million and $(0.9) million, respectively, for the three months ended March 31, 2020 and 2019 related to power call options.
Gains (losses) on trading derivative instruments are recorded in net asset optimization revenues and gains (losses) on non-trading derivative instruments are recorded in retail cost of revenues on the condensed consolidated statements of operations.
Fair Value of Derivative Instruments
The following tables summarize the fair value and offsetting amounts of our derivative instruments by counterparty and collateral received or paid (in thousands):
  
March 31, 2020
Description
Gross Assets

Gross
Amounts
Offset

Net Assets

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
2,647


$
(2,632
)

$
15


$
—


$
15

Trading commodity derivatives
2


(2
)

—


—


—

Total Current Derivative Assets
2,649


(2,634
)

15


—


15

Non-trading commodity derivatives
—


—


—


—


—

Trading commodity derivatives
—


—


—


—


—

Total Non-current Derivative Assets
—


—


—


—


—

Total Derivative Assets
$
2,649


$
(2,634
)

$
15


$
—


$
15




March 31, 2020
Description
Gross 
Liabilities

Gross
Amounts
Offset

Net
Liabilities

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
(39,814
)

$
11,809


$
(28,005
)

$
1,555


$
(26,450
)
Trading commodity derivatives
(126
)

126


—


—


—

Total Current Derivative Liabilities
(39,940
)

11,935


(28,005
)

1,555


(26,450
)
Non-trading commodity derivatives
(2,634
)

796


(1,838
)

6


(1,832
)
Trading commodity derivatives
—


—


—


—


—

Total Non-current Derivative Liabilities
(2,634
)

796


(1,838
)

6


(1,832
)
Total Derivative Liabilities
$
(42,574
)

$
12,731


$
(29,843
)

$
1,561


$
(28,282
)


  
December 31, 2019
Description
Gross Assets

Gross
Amounts
Offset

Net Assets

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
570


$
(275
)

$
295


$
—


$
295

Trading commodity derivatives
170


(1
)

169


—


169

Total Current Derivative Assets
740


(276
)

464


—


464

Non-trading commodity derivatives
333


(227
)

106


—


106

Trading commodity derivatives
—


—


—


—


—

Total Non-current Derivative Assets
333


(227
)

106


—


106

Total Derivative Assets
$
1,073


$
(503
)

$
570


$
—


$
570




December 31, 2019
Description
Gross 
Liabilities

Gross
Amounts
Offset

Net
Liabilities

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
(34,434
)

$
12,859


$
(21,575
)

$
1,632


$
(19,943
)
Trading commodity derivatives
(194
)

194


—


—


—

Total Current Derivative Liabilities
(34,628
)

13,053


(21,575
)

1,632


(19,943
)
Non-trading commodity derivatives
(1,951
)

1,422


(529
)

34


(495
)
Trading commodity derivatives
—


—


—


—


—

Total Non-current Derivative Liabilities
(1,951
)

1,422


(529
)

34


(495
)
Total Derivative Liabilities
$
(36,579
)

$
14,475


$
(22,104
)

$
1,666


$
(20,438
)