Derivative Instruments

6 Months Ended

Jun. 30, 2011

Derivative Instruments [Abstract]

Derivative Instruments

10. Derivative Instruments

We use derivative and non-derivative contracts to engage in trading activities and manage risks related to obtaining adequate supplies and the price fluctuations of natural gas, electricity and propane. Our natural gas, electric and propane distribution operations have entered into agreements with suppliers to purchase natural gas, electricity and propane for resale to their customers. Purchases under these contracts either do not meet the definition of derivatives or are considered “normal purchases and sales” and are accounted for on an accrual basis. Our propane distribution operation may also enter into fair value hedges of its inventory in order to mitigate the impact of wholesale price fluctuations. As of June 30, 2011, our natural gas, electric and propane distribution operations did not have any outstanding derivative contracts.

Xeron, our propane wholesale and marketing subsidiary, engages in trading activities using forward and futures contracts. These contracts are considered derivatives and have been accounted for using the mark-to-market method of accounting. Under the mark-to-market method of accounting, the trading contracts are recorded at fair value, and the changes in fair value of those contracts are recognized as unrealized gains or losses in the statement of income in the period of change. As of June 30, 2011, we had the following outstanding trading contracts which we accounted for as derivatives:

	Quantity in		Estimated Market	Weighted Average
At June 30, 2011	Gallons		Prices	Contract Prices
Forward Contracts
Sale		9,240,000	$1.3900 – $1.5700	$	1.5005
Purchase		8,106,000	$1.3344 – $1.5850	$	1.4878

Estimated market prices and weighted average contract prices are in dollars per gallon.

All contracts expire during or prior to the first quarter of 2012.

The following tables present information about the fair value and related gains and losses of our derivative contracts. We did not have any derivative contracts with a credit-risk-related contingency.

Fair values of the derivative contracts recorded in the condensed consolidated balance sheet as of June 30, 2011 and December 31, 2010, are the following:

	Asset Derivatives
		Fair Value
(in thousands)	Balance Sheet Location	June 30, 2011		December 31, 2010
Derivatives not designated as hedging instruments
Forward contracts	Mark-to-market energy assets	$	335	$	1,642
Put option (1)	Mark-to-market energy assets		—		—
Total asset derivatives		$	335	$	1,642

	Liability Derivatives
		Fair Value
(in thousands)	Balance Sheet Location	June 30, 2011		December 31, 2010
Derivatives not designated as hedging instruments
Forward contracts	Mark-to-market energy liabilities	$	216	$	1,492
Total liability derivatives		$	216	$	1,492

(1) We purchased a put option for the Pro-Cap (propane price cap) Plan in October 2010. The put option, which expired in January and February 2011, had a fair value of $0 at December 31, 2010.

The effects of gains and losses from derivative instruments on the condensed consolidated statements of income are the following:

		Amount of Gain (Loss) on Derivatives:
	Location of Gain	For the Three Months Ended June 30,					For the Six Months Ended June 30,
(in thousands)	(Loss) on Derivatives	2011			2010		2011			2010
Derivatives not designated as hedging instruments:
Put Option(1) (2)	Cost of Sales	$	—		$	—	$	—		$	—
Unrealized gain on forward contracts	Revenue		(112	)		160		(30	)		374
Total		$	(112	)	$	160	$	(30	)	$	374

(1)	We purchased a put option for the Pro-Cap Plan in October 2010. The put option, which expired in January and February 2011, had a fair value of $0 at December 31, 2010.
(2)	We purchased a put option for the Pro-Cap Plan in September 2009. The put option, which expired on March 31, 2010, had a fair value of $0 at March 31, 2010.

The effects of trading activities on the condensed consolidated statements of income are the following:

	Location in the	Three months ended June 30,					Six months ended June 30,
(in thousands)	Statement of Income	2011			2010		2011			2010
Realized gains on forward contracts	Revenue	$	647		$	60	$	1,554		$	738
Changes in mark-to-market energy assets	Revenue		(112	)		160		(30	)		374
Total		$	535		$	220	$	1,524		$	1,112