Derivatives And Hedging

9 Months Ended

Sep. 30, 2011

Derivatives And Hedging [Abstract]

Derivatives And Hedging

4.Derivatives and Hedging:

We are exposed to market purchases of power and natural gas to meet the power supply needs of our member distribution cooperatives that are not met by our owned generation.To manage this exposure, we utilize derivative contracts.See Note 1 of the Notes to Consolidated Financial Statements in our 2010 Annual Report on Form 10-K.

Changes in the fair value of our derivative instruments are recorded as a regulatory asset or regulatory liability.The change in these accounts is included in the operating section of our statement of cash flows.

Excluding contracts accounted for as normal purchase/normal sale, we had the following outstanding derivative instruments:

		As of September 30, 2011	As of December 31, 2010
Commodity	Unit of Measure	Quantity	Quantity
Natural gas	MMBTU	3,410,000	4,610,000
Purchased power	MWh	-	161,632
Renewable energy credits	REC	-	40,000
Interest rate hedge	US Dollars	-	300,000,000

The fair value of our derivative instruments, excluding contracts accounted for as normal purchase/normal sale, was as follows:

Fair Value of Derivative Instruments
		Fair Value
	Balance Sheet Location	As of September 30, 2011		As of December 31, 2010
		(in thousands)
Derivatives in an asset position:
Renewable energy credit sales	Prepayments and other		$          -		$     257
Total derivatives in an asset position			$          -		$     257
Derivatives in a liability position:
Natural gas futures contracts	Deferred credits and other liabilities – other		$  3,530		$  6,831
Purchased power contracts	Deferred credits and other liabilities – other		-		73
Interest rate hedge	Interest rate hedge		-		10,944
Total derivatives in a liability position			$  3,530		$ 17,848

The Effect of Derivative Instruments on the Statement of Revenues, Expenses, and Patronage Capital

for the Three and Nine Months Ended September 30, 2011 and 2010

Derivatives Accounted for Utilizing  Regulatory Accounting

Amount of

Gain (Loss)

Recognized in Regulatory

Asset/Liability of September 30,

Location of Gain (Loss) Reclassified from Regulatory Asset/Liability into Income

Amount of Gain (Loss) Reclassified from Regulatory Asset/Liability into Income for the Three Months Ended September 30,

Amount of Gain (Loss) Reclassified from Regulatory Asset/Liability into Income for the Nine Months Ended

September

30,

2011

2010

2011

2010

2011

2010

(in thousands)

(in thousands)

(in thousands)

Natural gas futures contracts ⁽¹⁾

$(3,574

)

$(8,853

)

Fuel/Purchased power

$(2,435

)

$(2,164

)

$ (5,989

)

$(3,604

)

Renewable energy credit sales

-

357

Operating revenues

-

-

-

-

Purchased power contracts

-

-

Purchased power

-

-

539

(365

)

Purchased power – excess sales

-

-

Operating revenues

-

(669

)

-

(669

)

Interest rate hedge

-

(30,392

)

Interest charges, net

-

-

-

-

   Total

$(3,574

)

$(38,888

)

$  (2,435

)

$  (2,833

)

$  (5,450

)

$  (4,638

)

(1)

For 2011, includes $44.5 thousand of loss on natural gas futures contracts designated for October 2011 that were physically sold in September 2011 and the impact on the Condensed Consolidated Statements of Revenues, Expenses, and Patronage Capital has been deferred until October 2011.

Our hedging activities expose us to credit-related risks.We use hedging instruments, including forwards, futures, financial transmission rights, and options, to manage our power market price risks.Because we rely substantially on the use of hedging instruments, we are exposed to the risk that counterparties will default in performance of their obligations to us.Although we assess the creditworthiness of counterparties and other credit issues related to these purchases, and we may require our counterparties to post collateral with us, defaults may still occur.Defaults may take the form of failure to physically deliver the purchased energy or failure to pay.If this occurs, we may be forced to enter into alternative contractual arrangements or purchase energy in the forward, short-term or spot markets at then-current market prices that may be more or less than the prices previously agreed upon with the defaulting counterparty.