Derivatives And Hedging

3 Months Ended

Mar. 31, 2022

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 2021 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. 

Outstanding derivative instruments, excluding contracts accounted for as normal purchase/normal sale, were as follows:

		Quantity
		As of March 31,		As of December 31,
Commodity	Unit of Measure	2022		2021
Natural gas	MMBTU		62,260,000		58,640,000
Purchased power - financial transmission rights	MWh		6,256,711		9,156,789

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	2022		2021
		(in thousands)
Derivatives in an asset position:
Natural gas futures contracts	Other assets	$	105,306	$	35,783
Financial transmission rights	Other assets		8,474		15,010
Total derivatives in an asset position		$	113,780	$	50,793
Derivatives in a liability position:
Natural gas futures contracts	Other liabilities	$	1,801	$	4,291
Total derivatives in a liability position		$	1,801	$	4,291

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Revenues, Expenses, and Patronage Capital for the Three Months Ended March 31, 2022 and 2021

						Amount of Gain (Loss) Reclassified
	Amount of Gain (Loss) Recognized				Location of Gain (Loss)	from Regulatory Asset/Liability
	in Regulatory				Reclassified	into Income for the
Derivatives	Asset/Liability for				from Regulatory	Three Months
Accounted for Utilizing	Derivatives as of				Asset/Liability	Ended
Regulatory Accounting	March 31,				into Income	March 31,
	2022		2021			2022		2021
	(in thousands)					(in thousands)
Natural gas futures contracts	$	116,238	$	3,711	Fuel	$	20,422	$	(4,365	)
Purchased power		8,474		88	Purchased power		1,931		3,612
Total	$	124,712	$	3,799		$	22,353	$	(753	)

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.