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Derivative Instruments Derivative Instruments (Tables)
 9 Months Ended
Sep. 30, 2013
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Fair Value of Derivative Instruments Table
The following tables present information about CERC’s derivative instruments and hedging activities. The first four tables provide a balance sheet overview of CERC’s Derivative Assets and Liabilities as of December 31, 2012 and September 30, 2013, while the last two tables provide a breakdown of the related income statement impacts for the three and nine months ended September 30, 2012 and 2013.
Fair Value of Derivative Instruments
 
 
 
 
December 31, 2012
Total derivatives not designated
as hedging instruments
 
Balance Sheet
Location
 
Derivative
Assets
Fair Value
 
Derivative
Liabilities
Fair Value
 
 
 
 
(in millions)
Natural gas derivatives (1) (2)
 
Current Assets: Non-trading derivative assets
 
$
37

 
$
1

Natural gas derivatives (1) (2)
 
Other Assets: Non-trading derivative assets
 
6

 
—

Natural gas derivatives (1) (2)
 
Current Liabilities: Non-trading derivative liabilities
 
5

 
27

Natural gas derivatives (1) (2)
 
Other Liabilities: Non-trading derivative liabilities
 
1

 
4

Total
 
$
49

 
$
32

________________
(1)
The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 489  billion cubic feet (Bcf) or a net 101 Bcf long position.  Of the net long position, basis swaps constitute 73 Bcf.

(2)
Natural gas contracts are presented on a net basis in the Condensed Consolidated Balance Sheets. Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due and causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within the Condensed Consolidated Balance Sheets. The net of total non-trading derivative assets and liabilities was a $26 million asset as shown on CERC’s Condensed Consolidated Balance Sheets (and as detailed in the table below), and was comprised of the natural gas contracts derivative assets and liabilities separately shown above offset by collateral netting of $9 million:

Offsetting of Natural Gas Derivative Assets and Liabilities
 
 
December 31, 2012
 
 
Gross Amounts Recognized (1)
 
Gross Amounts Offset in the Consolidated Balance Sheets
 
Net Amount Presented in the Consolidated Balance Sheets (2)
 
 
(in millions)
Current Assets: Non-trading derivative assets
 
$
42

 
$
(6
)
 
$
36

Other Assets: Non-trading derivative assets
 
7

 
(1
)
 
6

Current Liabilities: Non-trading derivative liabilities
 
(28
)
 
14

 
(14
)
Other Liabilities: Non-trading derivative liabilities
 
(4
)
 
2

 
(2
)
Total
 
$
17

 
$
9

 
$
26

________________
(1)
Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements.

(2)
The derivative assets and liabilities on the Consolidated Balance Sheets exclude accounts receivable or accounts payable that, should they exist, could be used as offsets to these balances in the event of a default.
Fair Value of Derivative Instruments
 
 
 
 
September 30, 2013
Total derivatives not designated
as hedging instruments
 
Balance Sheet
Location
 
Derivative
Assets
Fair Value
 
Derivative
Liabilities
Fair Value
 
 
 
 
(in millions)
Natural gas derivatives (1) (3)
 
Current Assets: Non-trading derivative assets
 
$
26

 
$
—

Natural gas derivatives (1) (3)
 
Other Assets: Non-trading derivative assets
 
10

 
—

Natural gas derivatives (1) (2) (3)
 
Current Liabilities: Non-trading derivative liabilities
 
8

 
17

Natural gas derivatives (1) (3)
 
Other Liabilities: Non-trading derivative liabilities
 
—

 
4

Total                                                                          
 
$
44

 
$
21

________________
(1)
The fair value shown for natural gas contracts is comprised of derivative gross volumes totaling 607 Bcf or a net 24 Bcf long position.  Of the net long position, basis swaps constitute 89 Bcf.

(2)
The $17 million Derivative Current Liability includes $2 million related to physical forwards purchased from Enable.

(3)
Natural gas contracts are presented on a net basis in the Condensed Consolidated Balance Sheets. Natural gas contracts are subject to master netting arrangements. This netting applies to all undisputed amounts due or past due and causes derivative assets (liabilities) to be ultimately presented net in a liability (asset) account within the Condensed Consolidated Balance Sheets. The net of total non-trading derivative assets and liabilities was a $29 million asset as shown on CERC’s Condensed Consolidated Balance Sheets (and as detailed in the table below), and was comprised of the natural gas contracts derivative assets and liabilities separately shown above offset by collateral netting of $6 million:
Offsetting of Natural Gas Derivative Assets and Liabilities
 
 
September 30, 2013
 
 
Gross Amounts Recognized (1)
 
Gross Amounts Offset in the Consolidated Balance Sheets
 
Net Amount Presented in the Consolidated Balance Sheets (2)
 
 
(in millions)
Current Assets: Non-trading derivative assets
 
$
34

 
$
(8
)
 
$
26

Other Assets: Non-trading derivative assets
 
10

 
—

 
10

Current Liabilities: Non-trading derivative liabilities
 
(17
)
 
11

 
(6
)
Other Liabilities: Non-trading derivative liabilities
 
(4
)
 
3

 
(1
)
Total
 
$
23

 
$
6

 
$
29

________________
(1)
Gross amounts recognized include some derivative assets and liabilities that are not subject to master netting arrangements.

(2)
The derivative assets and liabilities on the Consolidated Balance Sheets exclude accounts receivable or accounts payable that, should they exist, could be used as offsets to these balances in the event of a default.
Income Statement Impact of Derivative Activity Table

For CERC’s price stabilization activities of the Natural Gas Distribution business segment, the settled costs of derivatives are ultimately recovered through purchased gas adjustments. Accordingly, the net unrealized gains and losses associated with these contracts are recorded as net regulatory assets. Realized and unrealized gains and losses on other derivatives are recognized in the Condensed Statements of Consolidated Income as revenue for physical natural gas sales derivative contracts and as natural gas expense for financial natural gas derivatives and other physical natural gas derivatives.
Income Statement Impact of Derivative Activity
 
 
 
 
Three Months Ended September 30,
Total derivatives not designated
as hedging instruments
 
Income Statement Location
 
2012
 
2013
 
 
 
 
(in millions)
Natural gas derivatives
 
Gains (Losses) in Revenue
 
$
(21
)
 
$
11

Natural gas derivatives (1)
 
Gains (Losses) in Expense: Natural Gas
 
24

 
(2
)
Total
 
$
3

 
$
9



Income Statement Impact of Derivative Activity
 
 
 
 
Nine Months Ended September 30,
Total derivatives not designated
as hedging instruments
 
Income Statement Location
 
2012
 
2013
 
 
 
 
(in millions)
Natural gas derivatives
 
Gains (Losses) in Revenue
 
$
22

 
$
24

Natural gas derivatives (1) (2)
 
Gains (Losses) in Expense: Natural Gas
 
(44
)
 
(3
)
Total
 
$
(22
)
 
$
21

 ________________
(1)
The Gains (Losses) in Expense: Natural Gas includes $-0- during the three months September 30, 2013 and $(3) million during the nine months ended September 30, 2013 related to physical forwards purchased from Enable.

(2)
The Gains (Losses) in Expense: Natural Gas includes $(38) million and $-0- of costs during the nine months ended September 30, 2012 and 2013, respectively, associated with price stabilization activities of the Natural Gas Distribution business segment that will be ultimately recovered through purchased gas adjustments.