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Financial Instruments
 12 Months Ended
Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments
Financial Instruments
We use financial instruments to mitigate commodity price risk and interest rate risk. Our financial instruments do not contain any credit-risk-related or other contingent features that could cause accelerated payments when our financial instruments are in net liability positions.
As discussed in Note 2 and Note 15, we report our financial instruments as risk management assets and liabilities, each of which is classified as current or noncurrent based upon the anticipated settlement date of the underlying financial instrument. The following table shows the fair values of our risk management assets and liabilities at September 30, 2018 and 2017.
 
September 30
 
2018
 
2017
 
(In thousands)
Assets from risk management activities, current
$
1,369

 
$
2,436

Assets from risk management activities, noncurrent
250

 
803

Liabilities from risk management activities, current
(56,734
)
 
(322
)
Liabilities from risk management activities, noncurrent
(103
)
 
(112,076
)
Net assets (liabilities)
$
(55,218
)
 
$
(109,159
)

Commodity Risk Management Activities
Our purchased gas cost adjustment mechanisms essentially insulate our distribution segment from commodity price risk; however, our customers are exposed to the effects of volatile natural gas prices. We manage this exposure through a combination of physical storage, fixed-price forward contracts and financial instruments, primarily over-the-counter swap and option contracts, in an effort to minimize the impact of natural gas price volatility on our customers during the winter heating season.
Our distribution gas supply department is responsible for executing this segment’s commodity risk management activities in conformity with regulatory requirements. In jurisdictions where we are permitted to mitigate commodity price risk through financial instruments, the relevant regulatory authorities may establish the level of heating season gas purchases that can be hedged. Historically, if the regulatory authority does not establish this level, we seek to hedge between 25 and 50 percent of anticipated heating season gas purchases using financial instruments. For the 2017-2018 heating season (generally October through March), in the jurisdictions where we are permitted to utilize financial instruments, we hedged approximately 26 percent, or approximately 15.0 Bcf of the winter flowing gas requirements at a weighted average cost of approximately $3.20 per Mcf. We have not designated these financial instruments as hedges for accounting purposes.
Interest Rate Risk Management Activities
We currently manage interest rate risk through the use of forward starting interest rate swaps to fix the Treasury yield component of the interest cost associated with anticipated financings.
In October 2012, we entered into forward starting interest rate swaps to fix the Treasury yield component associated with $210 million of the then anticipated issuance of $250 million unsecured senior notes in fiscal 2017. These notes were issued as planned in June 2017 and we settled swaps with the payment of $37.0 million. Because the swaps were effective, the realized loss was recorded as a component of accumulated other comprehensive income (loss) and is being recognized as a component of interest expense over the 27-year life of the senior notes.
Additionally, in fiscal 2014 and 2015, we entered into forward starting interest rate swaps to effectively fix the Treasury yield component associated with $450 million of the anticipated issuance of $450 million unsecured senior notes in fiscal 2019. We designated all of these swaps as cash flow hedges at the time the agreements were executed. Accordingly, unrealized gains and losses associated with the forward starting interest rate swaps will be recorded as a component of accumulated other comprehensive income (loss). When the forward starting interest rate swaps settle, the realized gain or loss will be recorded as a component of accumulated other comprehensive income (loss) and recognized as a component of interest expense over the life of the related financing arrangement. Hedge ineffectiveness to the extent incurred, will be reported as a component of interest expense.
Prior to fiscal 2012, we entered into several interest rate agreements to fix the Treasury yield component of the interest cost of financing for various issuances of long-term debt and senior notes. The gains and losses realized upon settlement of these interest rate agreements were recorded as a component of accumulated other comprehensive income (loss) when they were settled and are being recognized as a component of interest expense over the life of the associated notes from the date of settlement. The remaining amortization periods for the settled interest rate agreements extend through fiscal 2045.
Quantitative Disclosures Related to Financial Instruments
The following tables present detailed information concerning the impact of financial instruments on our consolidated balance sheet and income statements.
As of September 30, 2018, our financial instruments were comprised of both long and short commodity positions. A long position is a contract to purchase the commodity, while a short position is a contract to sell the commodity. As of September 30, 2018, we had 22,874 MMcf of net long commodity contracts outstanding. These contracts have not been designated as hedges.

Financial Instruments on the Balance Sheet
The following tables present the fair value and balance sheet classification of our financial instruments as of September 30, 2018 and 2017. The gross amounts of recognized assets and liabilities are netted within our Consolidated Balance Sheets to the extent that we have netting arrangements with the counterparties.
 
 
 
 
 
Balance Sheet Location
 
Assets
 
Liabilities
 
 
 
 (In thousands)
September 30, 2018
 
 
 
 
 
Designated As Hedges:
 
 
 
 
 
Interest rate swap agreements
Other current assets /
Other current liabilities
 
$
—

 
$
(56,499
)
Total
 
 
—

 
(56,499
)
Not Designated As Hedges:
 
 
 
 
 
Commodity contracts
Other current assets /
Other current liabilities
 
1,369

 
(235
)
Commodity contracts
Deferred charges and other assets /
Deferred credits and other liabilities
 
250

 
(103
)
Total
 
 
1,619

 
(338
)
Gross Financial Instruments
 
 
1,619

 
(56,837
)
Gross Amounts Offset on Consolidated Balance Sheet:
 
 
 
 
 
Contract netting
 
 
—

 
—

Net Financial Instruments
 
 
1,619

 
(56,837
)
Cash collateral
 
 
—

 
—

Net Assets/Liabilities from Risk Management Activities
 
 
$
1,619

 
$
(56,837
)

 
 
 
 
 
 
Balance Sheet Location
 
Assets
 
Liabilities
 
 
 
 (In thousands)
September 30, 2017
 
 
 
 
 
Designated As Hedges:
 
 
 
 
 
Interest rate swap agreements
Deferred charges and other assets /
Deferred credits and other liabilities
 
$
—

 
$
(112,076
)
Total
 
 
—

 
(112,076
)
Not Designated As Hedges:
 
 
 
 
 
Commodity contracts
Other current assets /
Other current liabilities
 
2,436

 
(322
)
Commodity contracts
Deferred charges and other assets /
Deferred credits and other liabilities
 
803

 
—

Total
 
 
3,239

 
(322
)
Gross Financial Instruments
 
 
3,239

 
(112,398
)
Gross Amounts Offset on Consolidated Balance Sheet:
 
 
 
 
 
Contract netting
 
 
—

 
—

Net Financial Instruments
 
 
3,239

 
(112,398
)
Cash collateral
 
 
—

 
—

Net Assets/Liabilities from Risk Management Activities
 
 
$
3,239

 
$
(112,398
)

Impact of Financial Instruments on the Income Statement
Cash Flow Hedges
As discussed above, our distribution segment has interest rate swap agreements, which we designated as a cash flow hedge at the time the swaps were executed. The net loss on settled interest rate agreements reclassified from AOCI into interest charges on our consolidated income statements for the years ended September 30, 2018, 2017 and 2016 was $(2.4) million, $(1.0) million and $(0.5) million.
The following table summarizes the gains and losses arising from hedging transactions that were recognized as a component of other comprehensive income (loss), net of taxes, for the years ended September 30, 2018 and 2017. The amounts included in the table below exclude gains and losses arising from ineffectiveness because these amounts are immediately recognized in the income statement as incurred.
 
Fiscal Year Ended
September 30
 
2018
 
2017
 
(In thousands)
Increase in fair value:
 
 
 
Interest rate agreements
$
43,184

 
$
74,560

Forward commodity contracts(1)
—

 
9,847

Recognition of (gains) losses in earnings due to settlements:
 
 
 
Interest rate agreements
1,752

 
662

Forward commodity contracts(1)
—

 
(4,865
)
Total other comprehensive income from hedging, net of tax(2)
$
44,936

 
$
80,204


 
(1)
Due to the sale of AEM, these amounts are included in income from discontinued operations
(2)
Utilizing an income tax rate of approximately 23 percent for fiscal 2018 and an income tax rate ranging from approximately 37 percent to 39 percent for fiscal 2017 based on the effective rates in each taxing jurisdiction.

Deferred gains (losses) recorded in AOCI associated with our interest rate agreements are recognized in earnings as they are amortized. The following amounts, net of deferred taxes, represent the expected recognition in earnings of the deferred gains (losses) recorded in AOCI associated with our financial instruments, based upon the fair values of these financial instruments as of September 30, 2018. However, the table below does not include the expected recognition in earnings of our outstanding interest rate agreements as those financial instruments have not yet settled.
 
Interest Rate
Agreements
 
(In thousands)
2019
$
(1,863
)
2020
(1,893
)
2021
(1,893
)
2022
(1,893
)
2023
(1,893
)
Thereafter
(38,729
)
Total(1) 
$
(48,164
)

 
(1)
Utilizing an income tax rate of approximately 23 percent.
Financial Instruments Not Designated as Hedges
As discussed above, financial instruments used in our distribution segment are not designated as hedges. However, there is no earnings impact on our distribution segment as a result of the use of these financial instruments because the gains and losses arising from the use of these financial instruments are recognized in the consolidated statement of income as a component of purchased gas cost when the related costs are recovered through our rates and recognized in revenue. Accordingly, the impact of these financial instruments is excluded from this presentation.