Derivatives And Hedging

3 Months Ended

Mar. 31, 2017

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives And Hedging

3. Derivatives and Hedging

We are exposed to market price risk by purchasing power to supply the power requirements of our member distribution cooperatives that are not met by our owned generation.  In addition, the purchase of fuel to operate our generating facilities also exposes us to market price risk.  To manage this exposure, we utilize derivative instruments.  See Note 1 of the Notes to Consolidated Financial Statements in our 2016 Annual Report on Form 10-K.

Changes in the fair value of our derivative instruments accounted for at fair value are recorded as a regulatory asset or regulatory liability.  The change in these accounts is included in the operating activities section of our Condensed Consolidated Statements of Cash Flows.

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

		As of		As of
		March 31, 2017		December 31, 2016
Commodity	Unit of Measure	Quantity		Quantity
Natural Gas	MMBTU		15,180,000		14,250,000

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

		Fair Value
		As of March 31,		As of December 31,
	Balance Sheet Location	2017		2016
		(in thousands)
Derivatives in an asset position:
Natural gas futures contracts	Deferred charges-other	$	4,554	$	6,968
Total derivatives in an asset position		$	4,554	$	6,968

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Revenues, Expenses, and Patronage Capital for the Three Months Ended March 31, 2017 and 2016

							Amount of Gain
	Amount of Gain					Location of	(Loss) Reclassified
	(Loss) Recognized					Gain (Loss)	from Regulatory
	in Regulatory					Reclassified	Asset/Liability
	Asset/Liability for					from Regulatory	into Income for
Derivatives Accounted for	Derivatives as of					Asset/Liability	the Three Months
Utilizing Regulatory Accounting	March 31,					into Income	Ended March 31,
	2017		2016				2017			2016
	(in thousands)						(in thousands)
Natural gas futures contracts	$	4,519	$	(5,575	)	Fuel	$	(131	)	$	(1,023	)
Total	$	4,519	$	(5,575	)		$	(131	)	$	(1,023	)

Our hedging activities expose us to credit-related risks.  We use hedging instruments, including forwards, futures, financial transmission rights, and options, to mitigate 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 hedging instruments, 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 purchased energy or failure to pay.  If a default 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 exceed the prices previously agreed upon with the defaulting counterparty.