Derivative Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedges, Assets [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

We utilize derivatives as part of our risk management program to manage the volatility and costs of purchased power, generation and natural gas purchases for the benefit of our customers. Our approach is non-speculative and designed to mitigate risk and protect against price volatility. Regulated hedging programs require prior approval by the PSCW.

We record derivative instruments on the balance sheet as an asset or liability measured at its fair value, and changes in the derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met or we receive regulatory treatment for the derivative. For most energy related physical and financial contracts in our regulated operations that qualify as derivatives, the PSCW allows the effects of the fair market value accounting to be offset to regulatory assets and liabilities. As of September 30, 2014, we recognized $1.3 million in regulatory assets and $18.5 million in regulatory liabilities related to derivatives in comparison to $0.3 million in regulatory assets and $8.1 million in regulatory liabilities as of December 31, 2013.

We record our current derivative assets on the balance sheet in prepayments and other current assets and the current portion of the liabilities in other current liabilities. The long-term portion of our derivative assets of $1.7 million is recorded in other deferred charges and other assets as of September 30, 2014, and the long-term portion of our derivative liabilities of $0.1 million is recorded in other deferred credit and other liabilities as of September 30, 2014. Our Consolidated Condensed Balance Sheets as of September 30, 2014 and December 31, 2013 include:

	September 30, 2014				December 31, 2013
	Derivative Asset		Derivative Liability		Derivative Asset		Derivative Liability
	(Millions of Dollars)
Natural Gas	$	4.2	$	0.9	$	2.8	$	0.1
Fuel Oil	—		—		0.6		—
FTRs	10.1		—		3.5		—
Coal	5.5		—		2.1		0.2
Total	$	19.8	$	0.9	$	9.0	$	0.3

Our Consolidated Condensed Income Statements include gains (losses) on derivative instruments used in our risk management strategies under fuel and purchased power for those commodities supporting our electric operations and under cost of gas sold for the natural gas sold to our customers. Our estimated notional volumes and gains (losses) were as follows:

	Three Months Ended September 30, 2014				Three Months Ended September 30, 2013
	Volume	Gains (Losses)			Volume	Gains (Losses)
		(Millions of Dollars)				(Millions of Dollars)
Natural Gas	4.1 million Dth	$	(0.5	)	3.6 million Dth	$	(0.5	)
Fuel Oil	2.6 million gallons	—			2.5 million gallons	(0.1		)
FTRs	6.6 million MWh	2.0			6.9 million MWh	5.4
Total		$	1.5			$	4.8

	Nine Months Ended September 30, 2014			Nine Months Ended September 30, 2013
	Volume	Gains (Losses)		Volume	Gains (Losses)
		(Millions of Dollars)			(Millions of Dollars)
Natural Gas	16.7 million Dth	$	4.9	18.2 million Dth	$	(2.6	)
Fuel Oil	7.0 million gallons	0.6		6.2 million gallons	0.1
FTRs	19.7 million MWh	11.6		19.2 million MWh	11.0
Total		$	17.1		$	8.5

As of September 30, 2014 and December 31, 2013, we posted collateral of $1.3 million and zero, respectively, in our margin accounts. These amounts are recorded on the balance sheets in other current assets.

The fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against the fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement.

The table below shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on the balance sheet as of September 30, 2014 and December 31, 2013.

	September 30, 2014						December 31, 2013
	Derivative			Derivative			Derivative		Derivative
	Asset			Liability			Asset		Liability
	(Millions of Dollars)
Gross Amount Recognized on the Balance Sheet	$	19.8		$	0.9		$	9.0	$	0.3
Gross Amount Not Offset on Balance Sheet (a)	(0.3		)	(0.9		)	—		—
Net Amount	$	19.5		$	—		$	9.0	$	0.3

(a) Gross Amount Not Offset on Balance Sheet includes cash collateral posted of $0.6 million and zero as of September 30, 2014 and December 31, 2013