Our Networks and Renewables activities are exposed to certain risks, which are managed by using derivative instruments. All derivative instruments are recognized as either assets or liabilities at fair value on our condensed consolidated balance sheets in accordance with the accounting requirements concerning derivative instruments and hedging activities.

The tables below present Networks' derivative positions as of September 30, 2020 and December 31, 2019, respectively, including those subject to master netting agreements and the location of the net derivative positions on our condensed consolidated balance sheets:


As of September 30, 2020	Current Assets		Noncurrent Assets		Current Liabilities		Noncurrent Liabilities
(Millions)
Not designated as hedging instruments
Derivative assets	$	11	$	3	$	7	$	1
Derivative liabilities	(7)		(1)		(26)		(83)
	4		2		(19)		(82)
Designated as hedging instruments
Derivative assets	—		—		—		—
Derivative liabilities	—		—		(1)		—
	—		—		(1)		—
Total derivatives before offset of cash collateral	4		2		(20)		(82)
Cash collateral receivable	—		—		6		3
Total derivatives as presented in the balance sheet	$	4	$	2	$	(14)	$	(79)


As of December 31, 2019	Current Assets		Noncurrent Assets		Current Liabilities		Noncurrent Liabilities
(Millions)
Not designated as hedging instruments
Derivative assets	$	1	$	4	$	1	$	2
Derivative liabilities	(1)		(2)		(39)		(86)
	—		2		(38)		(84)
Designated as hedging instruments
Derivative assets	—		—		—		—
Derivative liabilities	—		—		(1)		(1)
	—		—		(1)		(1)
Total derivatives before offset of cash collateral	—		2		(39)		(85)
Cash collateral receivable	—		—		27		1
Total derivatives as presented in the balance sheet	$	—	$	2	$	(12)	$	(84)

NYSEG and RG&E have an electric commodity charge that passes costs for the market price of electricity through rates. We use electricity contracts, both physical and financial, to manage fluctuations in electricity commodity prices in order to provide price stability to customers. We include the cost or benefit of those contracts in the amount expensed for electricity purchased when the related electricity is sold. We record changes in the fair value of electric hedge contracts to derivative assets and/or liabilities with an offset to regulatory assets and/or regulatory liabilities, in accordance with the accounting requirements concerning regulated operations.

NYSEG and RG&E have purchased gas adjustment clauses that allow us to recover through rates any changes in the market price of purchased natural gas, substantially eliminating their exposure to natural gas price risk. NYSEG and RG&E use natural gas futures and forwards to manage fluctuations in natural gas commodity prices to provide price stability to customers. We include the cost or benefit of natural gas futures and forwards in the commodity cost that is passed on to customers when the related sales commitments are fulfilled. We record changes in the fair value of natural gas hedge contracts to derivative assets and/or liabilities with an offset to regulatory assets and/or regulatory liabilities in accordance with the accounting requirements for regulated operations.

The amounts for electricity hedge contracts and natural gas hedge contracts recognized in regulatory liabilities and assets as of September 30, 2020 and December 31, 2019 and amounts reclassified from regulatory assets and liabilities into income for the three and nine months ended September 30, 2020 and 2019 are as follows:


(Millions)	Loss or Gain Recognized in Regulatory Assets/Liabilities				Location of Loss Reclassified from Regulatory Assets/Liabilities into Income	Loss Reclassified from Regulatory Assets/Liabilities into Income
As of						Three Months Ended September 30,				Nine Months Ended September 30,
September 30, 2020	Electricity		Natural Gas		2020	Electricity		Natural Gas		Electricity		Natural Gas
Regulatory assets	$	9	$	—	Purchased power, natural gas and fuel used	$	8	$	—	$	41	$	5
Regulatory liabilities	$	—	$	(4)

December 31, 2019					2019
Regulatory assets	$	24	$	4	Purchased power, natural gas and fuel used	$	6	$	—	$	16	$	—

Pursuant to a PURA order, UI and Connecticut’s other electric utility, The Connecticut Light and Power Company (CL&P), each executed two long-term CfDs with certain incremental capacity resources, each of which specifies a capacity quantity and a monthly settlement that reflects the difference between a forward market price and the contract price. The costs or benefits of each contract will be paid by or allocated to customers and will be subject to a cost-sharing agreement between UI and CL&P pursuant to which approximately 20% of the cost or benefit is borne by or allocated to UI customers and approximately 80% is borne by or allocated to CL&P customers.

PURA has determined that costs associated with these CfDs will be fully recoverable by UI and CL&P through electric rates, and UI has deferred recognition of costs (a regulatory asset) or obligations (a regulatory liability), including carrying costs. For those CfDs signed by CL&P, UI records its approximate 20% portion pursuant to the cost-sharing agreement noted above. As of September 30, 2020, UI has recorded a gross derivative asset of $2 million ($0 of which is related to UI’s portion of the CfD signed by CL&P), a regulatory asset of $90 million, a gross derivative liability of $92 million ($89 million of which is related to UI’s portion of the CfD signed by CL&P) and a regulatory liability of $0. As of December 31, 2019, UI had recorded a gross derivative asset of $2 million ($0 of which is related to UI’s portion of the CfD signed by CL&P), a regulatory asset of $92 million, a gross derivative liability of $94 million ($92 million of which is related to UI’s portion of the CfD signed by CL&P) and a regulatory liability of $0.

Certain foreign currency exchange contracts are not designated as hedging instruments. For both the three and nine months ended September 30, 2020, we recorded a gain of $3 million related to our foreign currency contracts not designated as hedging instruments, included in "Other income" in our condensed consolidated statements of income. No amounts were recorded for both the three and nine months ended September 30, 2019.


Three Months Ended September 30,	(Loss) Recognized in OCI on Derivatives (a)		Location of Loss (Gain) Reclassified from Accumulated OCI into Income	Loss (Gain) Reclassified from Accumulated OCI into Income		Total amount per Income Statement
(Millions)
2020
Interest rate contracts	$	—	Interest expense	$	1	$	86
Commodity contracts	(1)		Purchased power, natural gas and fuel used	—		259
Foreign currency exchange contracts	—			—
Total	$	(1)		$	1
2019
Interest rate contracts	$	—	Interest expense	$	1	$	72
Commodity contracts	—		Purchased power, natural gas and fuel used	(1)		279
Foreign currency exchange contracts	(5)			—
Total	$	(5)		$	—


Nine Months Ended September 30,	(Loss) Gain Recognized in OCI on Derivatives (a)		Location of Loss Reclassified from Accumulated OCI into Income	Loss (Gain) Reclassified from Accumulated OCI into Income		Total amount per Income Statement
(Millions)
2020
Interest rate contracts	$	—	Interest expense	$	3	$	251
Commodity contracts	(2)		Purchased power, natural gas and fuel used	1		999
Foreign currency exchange contracts	(2)			—
Total	$	(4)		$	4
2019
Interest rate contracts	$	—	Interest expense	$	5	$	226
Commodity contracts	—		Purchased power, natural gas and fuel used	(1)		1,101
Foreign currency exchange contracts	(4)			—
Total	$	(4)		$	4

The net loss in accumulated OCI related to previously settled forward starting swaps and accumulated amortization is $52 million and $55 million as of September 30, 2020 and December 31, 2019, respectively. We recorded $1 million and $3 million in net derivative losses related to discontinued cash flow hedges for the three and nine months ended September 30, 2020, respectively and $1 million and $5 million for the three and nine months ended September 30, 2019, respectively. We will amortize approximately $1 million of discontinued cash flow hedges for the remainder of 2020.

Unrealized losses of $1 million on hedge derivatives are reported in OCI because the forecasted transactions are considered to be probable as of September 30, 2020. We expect that $1 million of those losses will be reclassified into earnings within the next twelve months. The maximum length of time over which we are hedging our exposure to the variability in future cash flows for forecasted fleet fuel transactions is 12 months.

We sell fixed-price gas and power forwards to hedge our merchant wind assets from declining commodity prices for our Renewables business. We also purchase fixed-price gas and basis swaps and sell fixed-price power in the forward market to hedge the spark spread or heat rate of our merchant thermal assets. We also enter into tolling arrangements to sell the output of our thermal generation facilities.

Renewables has proprietary trading operations that enter into fixed-price power and gas forwards in addition to basis swaps. The intent is to speculate on fixed-price commodity and basis volatility in the U.S. commodity markets.

Renewables will periodically designate derivative contracts as cash flow hedges for both its thermal and wind portfolios. The fair value changes are recorded in OCI. For thermal operations, Renewables will periodically designate both fixed-price NYMEX gas contracts and natural gas basis swaps that hedge the fuel requirements of its Klamath Plant in Klamath, Oregon. Renewables will also designate fixed-price power swaps at various locations in the U.S. market to hedge future power sales from its Klamath facility and various wind farms.


	September 30,	December 31,
As of	2020	2019
(MWh/Dth in millions)
Wholesale electricity purchase contracts	3	4
Wholesale electricity sales contracts	8	9
Natural gas and other fuel purchase contracts	29	29
Financial power contracts	12	10
Basis swaps – purchases	40	42
Basis swaps – sales	—	1


	September 30,		December 31,
As of	2020		2019
(Millions)
Wholesale electricity purchase contracts	$	8	$	10
Wholesale electricity sales contracts	1		4
Natural gas and other fuel purchase contracts	6		(2)
Financial power contracts	62		73
Basis swaps – purchases	12		—

Total	$	89	$	85

The tables below present Renewables' derivative positions as of September 30, 2020 and December 31, 2019, respectively, including those subject to master netting agreements and the location of the net derivative position on our condensed consolidated balance sheets:


As of September 30, 2020	Current Assets		Noncurrent Assets		Current Liabilities		Noncurrent Liabilities
(Millions)
Not designated as hedging instruments
Derivative assets	$	49	$	111	$	1	$	2
Derivative liabilities	(26)		(13)		(3)		(2)
	23		98		(2)		—
Designated as hedging instruments
Derivative assets	5		20		2		1
Derivative liabilities	(7)		(15)		(5)		(3)
	(2)		5		(3)		(2)
Total derivatives before offset of cash collateral	21		103		(5)		(2)
Cash collateral payable	(8)		(20)		—		—
Total derivatives as presented in the balance sheet	$	13	$	83	$	(5)	$	(2)


As of December 31, 2019	Current Assets		Noncurrent Assets		Current Liabilities		Noncurrent Liabilities
(Millions)
Not designated as hedging instruments
Derivative assets	$	23	$	110	$	42	$	13
Derivative liabilities	(1)		(7)		(48)		(18)
	22		103		(6)		(5)
Designated as hedging instruments
Derivative assets	—		18		5		4
Derivative liabilities	—		(9)		(13)		(6)
	—		9		(8)		(2)
Total derivatives before offset of cash collateral	22		112		(14)		(7)
Cash collateral (payable) receivable	(11)		(30)		7		6
Total derivatives as presented in the balance sheet	$	11	$	82	$	(7)	$	(1)


	Three Months Ended						Nine Months Ended
	September 30, 2020						September 30, 2020
	Trading		Non-trading		Total amount per income statement		Trading		Non-trading		Total amount per income statement
(Millions)
Operating Revenues
Wholesale electricity purchase contracts	$	3	$	—			$	1	$	—
Wholesale electricity sales contracts	(7)		(11)				(1)		4
Financial power contracts	4		(12)				1		2
Financial and natural gas contracts	—		(8)				—		(13)
Total (loss) gain included in operating revenues	$	—	$	(31)	$	1,470	$	1	$	(7)	$	4,651

Purchased power, natural gas and fuel used
Wholesale electricity purchase contracts	$	—	$	9			$	—	$	(2)
Wholesale electricity sales contracts	—		1				—		—

Financial and natural gas contracts	—		16				—		19
Total gain included in purchased power, natural gas and fuel used	$	—	$	26	$	259	$	—	$	17	$	999

Total (Loss) Gain	$	—	$	(5)			$	1	$	10


	Three Months Ended						Nine Months Ended
	September 30, 2019						September 30, 2019
	Trading		Non-trading		Total amount per income statement		Trading		Non-trading		Total amount per income statement
(Millions)
Operating Revenues
Wholesale electricity purchase contracts	$	(1)	$	—			$	(2)	$	—
Wholesale electricity sales contracts	—		42				2		37
Financial power contracts	—		13				—		22
Financial and natural gas contracts	—		1				(1)		1
Total (loss) gain included in operating revenues	$	(1)	$	56	$	1,487	$	(1)	$	60	$	4,729

Purchased power, natural gas and fuel used
Wholesale electricity purchase contracts	$	—	$	(19)			$	—	$	(2)

Financial power contracts	—		—				—		(2)
Financial and natural gas contracts	—		6				—		10
Total (loss) gain included in purchased power, natural gas and fuel used	$	—	$	(13)	$	279	$	—	$	6	$	1,101

Total (Loss) Gain	$	(1)	$	43			$	(1)	$	66


Three Months Ended September 30,	(Loss) Gain Recognized in OCI on Derivatives (a)		Location of Loss Reclassified from Accumulated OCI into Income	Loss Reclassified from Accumulated OCI into Income		Total amount per Income Statement
(Millions)
2020
Commodity contracts	$	(17)	Operating revenues	$	5	$	1,470

2019
Commodity contracts	$	13	Operating revenues	$	3	$	1,487


Nine Months Ended September 30,	(Loss) Recognized in OCI on Derivatives (a)		Location of Loss Reclassified from Accumulated OCI into Income	Loss Reclassified from Accumulated OCI into Income		Total amount per Income Statement
(Millions)
2020
Commodity contracts	$	(9)	Operating revenues	$	4	$	4,651

2019
Commodity contracts	$	(2)	Operating revenues	$	3	$	4,729

Amounts are reclassified from accumulated OCI into income in the period during which the transaction being hedged affects earnings or when it becomes probable that a forecasted transaction being hedged would not occur. Notwithstanding future changes in prices, approximately $4 million of losses included in accumulated OCI at September 30, 2020, are expected to be reclassified into earnings within the next twelve months. We did not record any net derivative losses related to discontinued cash flow hedges for both the three and nine months ended September 30, 2020 and 2019.

On January 31, 2020, AVANGRID entered into two treasury locks, with a total notional amount of $600 million, to hedge the issuance of forecasted fixed rate debt. The treasury locks were designated and qualified as cash flow hedges and were settled upon the second quarter debt issuance described in Note 15. The $27 million loss on the treasury locks is reported as a component of accumulated OCI and is being reclassified into earnings during the periods in which the related interest expense of the forecasted debt is incurred.

The net loss in accumulated OCI related to previously settled interest rate contracts is $59 million and $38 million as of September 30, 2020 and December 31, 2019, respectively. We amortized into income $2 million and $5 million of the loss related to the settled interest rate contracts for the three and nine months ended September 30, 2020, respectively, and $1 million for the three and nine months ended September 30, 2019. We will amortize approximately $2 million of the net loss on the interest rate contracts for the remainder of 2020.


Three Months Ended September 30,	Gain (Loss) Recognized in OCI on Derivatives (a)		Location of Loss Reclassified from Accumulated OCI into Income	Loss Reclassified from Accumulated OCI into Income		Total amount per Income Statement
(Millions)
2020
Interest rate contracts	$	—	Interest expense	$	2	$	86

2019
Interest rate contracts	$	—	Interest expense	$	1	$	72


Nine Months Ended September 30,	(Loss) Recognized in OCI on Derivatives (a)		Location of Loss Reclassified from Accumulated OCI into Income	Loss Reclassified from Accumulated OCI into Income		Total amount per Income Statement
(Millions)
2020
Interest rate contracts	$	(27)	Interest expense	$	5	$	251

2019
Interest rate contracts	$	(24)	Interest expense	$	1	$	226

NYSEG and RG&E face risks related to counterparty performance on hedging contracts due to counterparty credit default. We have developed a matrix of unsecured credit thresholds that are applicable based on the respective counterparty’s or the counterparty guarantor’s credit rating, as provided by Moody’s or Standard & Poor’s. When our exposure to risk for a counterparty exceeds the unsecured credit threshold, the counterparty is required to post additional collateral or we will no longer transact with the counterparty until the exposure drops below the unsecured credit threshold.

The wholesale power supply agreements of UI contain default provisions that include required performance assurance, including certain collateral obligations, in the event that UI’s credit rating on senior debt were to fall below investment grade. If such an event had occurred as of September 30, 2020, UI would have had to post an aggregate of approximately $13 million in collateral.

We have various master netting arrangements in the form of multiple contracts with various single counterparties that are subject to contractual agreements that provide for the net settlement of all contracts through a single payment. Those arrangements reduce our exposure to a counterparty in the event of a default on or termination of any single contract. For financial statement presentation purposes, we offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement. The amounts of cash collateral under master netting arrangements that have not been offset against net derivative positions were $23 million and $21 million as of September 30, 2020 and December 31, 2019, respectively. Derivative instruments settlements and collateral payments are included throughout the “Changes in operating assets and liabilities” section of operating activities in our condensed consolidated statements of cash flows.

Certain of our derivative instruments contain provisions that require us to maintain an investment grade credit rating on our debt from each of the major credit rating agencies. If our debt were to fall below investment grade, we would be in violation of those provisions and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit risk related contingent features that are in a liability position as of September 30, 2020 is $9 million, for which we have posted collateral.