XML 35 R20.htm IDEA: XBRL DOCUMENT v3.21.2
DERIVATIVE INSTRUMENTS
 9 Months Ended
Sep. 30, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS DERIVATIVE INSTRUMENTS:Certain SJI subsidiaries, including SJG, are involved in buying, selling, transporting and storing natural gas and buying and selling retail electricity for their own accounts as well as managing these activities for third parties. These subsidiaries are subject to market risk on expected future purchases and sales due to commodity price fluctuations. SJI and SJG use a variety of derivative instruments to limit this exposure to market risk in accordance with strict corporate guidelines. These derivative instruments include forward contracts, swap agreements, options contracts and futures contracts.
As of September 30, 2021, SJI and SJG had outstanding derivative contracts as follows: 
SJI ConsolidatedSJG
Derivative contracts intended to limit exposure to market risk to:
    Expected future purchases of natural gas (in MMdts)72.8 12.5 
    Expected future sales of natural gas (in MMdts)116.8 0.4 
Basis and Index related net purchase contracts (in MMdts)82.6 1.3 

The expected future purchases and sales of electricity are not material.

These contracts, which have not been designated as hedging instruments under GAAP, are measured at fair value and recorded in Derivatives - Energy Related Assets or Derivatives - Energy Related Liabilities on the condensed consolidated balance sheets of SJI and SJG. For SJE and SJRG contracts, the net unrealized pre-tax gains (losses) for these energy-related commodity contracts are included with realized gains (losses) in Operating Revenues – Nonutility on the condensed consolidated statements of (loss)/income for SJI. These unrealized pre-tax (losses) were $(19.8) million and $(6.2) million for the three months ended September 30, 2021 and 2020, respectively, and $(35.1) million and $(7.8) million for the nine months ended September 30, 2021 and 2020, respectively. For ETG's and SJG's contracts, the costs or benefits are recoverable through the BGSS clause, subject to BPU approval. As a result, the net unrealized pre-tax gains (losses) for SJG and ETG energy-related commodity contracts are included with realized gains and losses in Regulatory Assets or Regulatory Liabilities on the condensed consolidated balance sheets of SJI (ETG and SJG) and SJG. As of September 30, 2021 and December 31, 2020, SJI had $68.2 million and $2.4 million, respectively, and SJG had $29.4 million and $1.1 million, respectively, of unrealized gains included in its BGSS related to energy-related commodity contracts.

SJG has interest rate derivatives to mitigate exposure to increasing interest rates and the impact of those rates on cash flows of variable-rate debt. These interest rate derivatives are measured at fair value and recorded in Derivatives - Other on the condensed consolidated balance sheets. For SJG interest rate derivatives, the fair value represents the amount SJG would have to pay the counterparty to terminate these contracts as of those dates.

As of September 30, 2021, SJG’s active interest rate swaps were as follows:
Notional AmountFixed Interest RateStart DateMaturity
$12,500,000 3.530%12/1/20062/1/2036
$12,500,000 3.430%12/1/20062/1/2036

For the unrealized gains and losses on interest rate derivatives at SJG, management believes that, subject to BPU approval, the market value upon termination can be recovered in rates and, therefore, these unrealized gains (losses) have been included in Other Regulatory Assets in the condensed consolidated balance sheets.
The fair values of all derivative instruments, as reflected in the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, are as follows (in thousands):
SJI (includes SJG and all other consolidated subsidiaries):
Derivatives not designated as hedging instruments under GAAPSeptember 30, 2021December 31, 2020
 AssetsLiabilitiesAssetsLiabilities
Energy-related commodity contracts:    
Derivatives - Energy Related - Current$141,690 $106,244 $41,439 $27,006 
Derivatives - Energy Related - Non-Current37,307 25,124 6,935 4,947 
Interest rate contracts:    
Derivatives - Other - Current— 560 — 659 
Derivatives - Other - Noncurrent— 7,467 — 9,279 
Total derivatives not designated as hedging instruments under GAAP$178,997 $139,395 $48,374 $41,891 
Total Derivatives$178,997 $139,395 $48,374 $41,891 

SJG:
Derivatives not designated as hedging instruments under GAAPSeptember 30, 2021December 31, 2020
AssetsLiabilitiesAssetsLiabilities
Energy-related commodity contracts:    
Derivatives – Energy Related – Current$30,758 $2,834 $4,053 $2,868 
Derivatives – Energy Related – Non-Current1,458 — 87 190 
Interest rate contracts:  
Derivatives – Other - Current— 560 — 659 
Derivatives – Other - Noncurrent— 7,467 — 9,279 
Total derivatives not designated as hedging instruments under GAAP$32,216 $10,861 $4,140 $12,996 
Total Derivatives$32,216 $10,861 $4,140 $12,996 
SJI and SJG enter into derivative contracts with counterparties, some of which are subject to master netting arrangements, which allow net settlements under certain conditions. These derivatives are presented at gross fair values on the condensed consolidated balance sheets. Information related to these offsetting arrangements were as follows (in thousands):
As of September 30, 2021
DescriptionGross amounts of recognized assets/liabilitiesGross amount offset in the balance sheetNet amounts of assets/liabilities in balance sheetGross amounts not offset in the balance sheetNet amount
Financial InstrumentsCash Collateral Posted/(Received)
SJI (includes SJG and all other consolidated subsidiaries):
Derivatives - Energy Related Assets$178,997 $— $178,997 $(86,407)(A)$(45,782)$46,808 
Derivatives - Energy Related Liabilities$(131,368)$— $(131,368)$86,407 (B)$— $(44,961)
Derivatives - Other$(8,027)$— $(8,027)$— $— $(8,027)
SJG:
Derivatives - Energy Related Assets$32,216 $— $32,216 $(1,025)(A)$(13,661)$17,530 
Derivatives - Energy Related Liabilities$(2,834)$— $(2,834)$1,025 (B)$— $(1,809)
Derivatives - Other$(8,027)$— $(8,027)$— $— $(8,027)
As of December 31, 2020
DescriptionGross amounts of recognized assets/liabilitiesGross amount offset in the balance sheetNet amounts of assets/liabilities in balance sheetGross amounts not offset in the balance sheetNet amount
Financial InstrumentsCash Collateral Posted/(Received)
SJI (includes SJG and all other consolidated subsidiaries):
Derivatives - Energy Related Assets$48,374 $— $48,374 $(24,027)(A)$— $24,347 
Derivatives - Energy Related Liabilities$(31,953)$— $(31,953)$24,027 (B)$2,176 $(5,750)
Derivatives - Other$(9,938)$— $(9,938)$— $— $(9,938)
SJG:
Derivatives - Energy Related Assets$4,140 $— $4,140 $(716)(A)$— $3,424 
Derivatives - Energy Related Liabilities$(3,058)$— $(3,058)$716 (B)$2,176 $(166)
Derivatives - Other$(9,938)$— $(9,938)$— $— $(9,938)

(A) The balances at September 30, 2021 and December 31, 2020 were related to derivative liabilities which can be net settled against derivative assets.

(B) The balances at September 30, 2021 and December 31, 2020 were related to derivative assets which can be net settled against derivative liabilities.
The effect of derivative instruments on the condensed consolidated statements of (loss)/income are as follows (in thousands):
 Three Months Ended
September 30,		Nine Months Ended
September 30,
Derivatives Previously in Cash Flow Hedging Relationships under GAAP2021202020212020
SJI (includes SJG and all other consolidated subsidiaries):
Interest Rate Contracts:  
Losses reclassified from AOCL into income (a)$(12)$(12)$(35)$(35)
SJG:
Interest Rate Contracts:
Losses reclassified from AOCL into income (a)$(12)$(12)$(35)$(35)

(a) Included in Interest Charges
 Three Months Ended
September 30,		Nine Months Ended
September 30,
Derivatives Not Designated as Hedging Instruments under GAAP2021202020212020
SJI (no balances for SJG; includes all other consolidated subsidiaries):
Losses on energy-related commodity contracts (a)$(19,815)$(6,246)$(35,089)$(7,807)
Gains (Losses) on interest rate contracts (b)— 342 — (4,040)
Total$(19,815)$(5,904)$(35,089)$(11,847)

(a)  Included in Operating Revenues - Nonutility
(b)  Included in Interest Charges

Certain of SJI’s derivative instruments contain provisions that require immediate payment or demand immediate and ongoing collateralization on derivative instruments in net liability positions in the event of a material adverse change in the credit standing of SJI. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position on September 30, 2021 is not material. The amount SJI would have been required to pay to settle the instruments immediately or post collateral to its counterparties if the credit-risk-related contingent features underlying these agreements were triggered on September 30, 2021 after offsetting asset positions with the same counterparties under master netting arrangements, is also not material.