Derivative Instruments

9 Months Ended

Sep. 30, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

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 and shareholders. Our approach is non-speculative and designed to mitigate risk. Regulated hedging programs are approved by our state regulators.

We record derivative instruments on the balance sheet as an asset or liability measured at fair value. 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, our regulators allow the effects of fair value accounting to be offset to regulatory assets and liabilities.

The following table shows our derivative assets and derivative liabilities:

		September 30, 2015				December 31, 2014
(in millions)	Balance Sheet Presentation	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Natural gas	Other current	$	6.1	$	33.0	$	5.0	$	11.5
Natural gas	Other long-term	0.4		3.5		—		0.8
Petroleum products	Other current	0.2		1.7		—		—
Petroleum products	Other long-term	0.2		0.4		—		—
FTRs	Other current	5.8		—		7.0		—
Coal	Other current	0.8		5.2		2.7		0.2
Coal	Other long-term	—		2.7		0.6		—
	Other current	12.9		39.9		14.7		11.7
	Other long-term	0.6		6.6		0.6		0.8
Total		$	13.5	$	46.5	$	15.3	$	12.5

Gains (losses) on derivative instruments are primarily included in cost of sales on the condensed consolidated income statements. Our estimated notional sales volumes and gains (losses) were as follows:

	Three Months Ended September 30, 2015				Three Months Ended September 30, 2014
(in millions)	Volume	Gains (Losses)			Volume	Gains (Losses)
Natural gas	24.2 Dth	$	(13.2	)	6.3 Dth	$	(0.8	)
Petroleum products	2.8 gallons	(0.9		)	2.6 gallons	—
FTRs	8.6 MWh	3.1			6.6 MWh	2.0
Total		$	(11.0	)		$	1.2

	Nine Months Ended September 30, 2015				Nine Months Ended September 30, 2014
(in millions)	Volume	Gains (Losses)			Volume	Gains
Natural gas	47.5 Dth	$	(26.2	)	31.1 Dth	$	9.3
Petroleum products	4.5 gallons	(0.9		)	7.0 gallons	0.6
FTRs	20.7 MWh	6.0			19.7 MWh	11.6
Total		$	(21.1	)		$	21.5

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, 2015, and December 31, 2014, we had posted collateral of $35.7 million and $11.2 million, respectively, in our margin accounts. These amounts were recorded on the condensed consolidated balance sheets in other current assets.

The following table shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on the condensed consolidated balance sheet:

	September 30, 2015						December 31, 2014
	Derivative			Derivative			Derivative			Derivative
(in millions)	Assets			Liabilities			Assets			Liabilities
Gross amount recognized on the balance sheet	$	13.5		$	46.5		$	15.3		$	12.5
Gross amount not offset on balance sheet *	(5.0		)	(19.2		)	(0.4		)	(11.5		)
Net Amount	$	8.5		$	27.3		$	14.9		$	1.0

* Includes cash collateral posted of $14.2 million and $10.3 million as of September 30, 2015, and December 31, 2014, respectively.

Certain of our derivative and nonderivative commodity instruments contain provisions that could require "adequate assurance" in the event of a material change in our creditworthiness, or the posting of additional collateral for instruments in net liability positions, if triggered by a decrease in credit ratings. The aggregate fair value of all derivative instruments with specific credit risk-related contingent features that were in a liability position was $20.9 million at September 30, 2015, and zero at December 31, 2014. At September 30, 2015, and December 31, 2014, we had not posted any cash collateral related to the credit risk-related contingent features of these commodity instruments. If all of the credit risk-related contingent features contained in commodity instruments (including derivatives, nonderivatives, normal purchase and normal sales contracts, and applicable payables and receivables) had been triggered at September 30, 2015, we would have been required to post collateral of $19.6 million. No collateral would have been required at December 31, 2014.

During the second quarter of 2015, we settled several forward interest rate swap agreements entered into earlier in the quarter to mitigate interest risk associated with the issuance of $1.2 billion of long-term debt related to the acquisition of Integrys. As these agreements qualified for cash flow hedging accounting treatment, the payments of $19.0 million received upon settlement of these agreements were deferred in accumulated other comprehensive income and are being amortized as a decrease to interest expense over the periods in which the interest costs are recognized in earnings.

During the nine months ended September 30, 2015, we reclassified $0.4 million of forward interest rate swap agreement settlements deferred in accumulated other comprehensive income as a reduction to interest expense. We estimate that during the next twelve months, $1.3 million will be reclassified from accumulated other comprehensive income as a reduction to interest expense.