DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

We use derivatives as part of our risk management program to manage the risks associated with the price volatility of purchased power, generation, and natural gas costs for the benefit of our customers. Our approach is non-speculative and designed to mitigate risk. Our regulated hedging programs are approved by the PSCW.

We record derivative instruments on our balance sheets as an asset or liability measured at fair value unless they qualify for the normal purchases and sales exception, and are so designated. We continually assess our contracts designated as normal and will discontinue the treatment of these contracts as normal if the required criteria are no longer met. 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 fair value accounting to be offset to regulatory assets and liabilities.

The following table shows our derivative assets and derivative liabilities:

	June 30, 2017				December 31, 2016
(in millions)	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Other current
Natural gas contracts	$	0.5	$	0.6	$	6.3	$	0.1
Petroleum products contracts	0.2		0.1		0.2		0.1
FTRs	6.0		—		3.1		—
Coal contracts	0.7		1.5		1.5		0.5
Total other current *	$	7.4	$	2.2	$	11.1	$	0.7
Other long-term
Natural gas contracts	$	—	$	0.1	$	0.5	$	—
Coal contracts	—		0.8		0.4		—
Total other long-term *	—		0.9		0.9		—
Total	$	7.4	$	3.1	$	12.0	$	0.7

* On our balance sheets, we classify derivative assets and liabilities as other current or other long-term based on the maturities of the underlying contracts.

Realized gains (losses) on derivative instruments are primarily recorded in cost of sales on the income statements. Our estimated notional sales volumes and realized gains (losses) were as follows:

	Three Months Ended June 30, 2017				Three Months Ended June 30, 2016
(in millions)	Volumes	Gains (Losses)			Volumes	Gains (Losses)
Natural gas contracts	5.0 Dth	$	0.2		9.6 Dth	$	(4.8	)
Petroleum products contracts	4.9 gallons	(0.4		)	2.6 gallons	(0.8		)
FTRs	7.3 MWh	2.0			5.7 MWh	0.5
Total		$	1.8			$	(5.1	)

	Six Months Ended June 30, 2017				Six Months Ended June 30, 2016
(in millions)	Volumes	Gains (Losses)			Volumes	Gains (Losses)
Natural gas contracts	13.2 Dth	$	0.7		20.2 Dth	$	(12.0	)
Petroleum products contracts	9.8 gallons	(0.9		)	4.2 gallons	(1.5		)
FTRs	14.3 MWh	4.5			10.9 MWh	2.3
Total		$	4.3			$	(11.2	)

On our balance sheets, the 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. At June 30, 2017, we had posted cash collateral of $2.3 million in our margin accounts, and at December 31, 2016, we had received cash collateral of $3.4 million in our margin accounts. On our balance sheets, cash collateral provided to others is reflected in other current assets and cash collateral received is reflected in other current liabilities.

The following table shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on our balance sheets:

	June 30, 2017							December 31, 2016
(in millions)	Derivative Assets			Derivative Liabilities				Derivative Assets				Derivative Liabilities
Gross amount recognized on the balance sheet	$	7.4		$	3.1			$	12.0			$	0.7
Gross amount not offset on the balance sheet	(0.5		)	(0.7		)	(1)	(3.6		)	(2)	(0.2		)
Net amount	$	6.9		$	2.4			$	8.4			$	0.5

⁽¹⁾  Includes cash collateral posted of $0.2 million.

⁽²⁾  Includes cash collateral received of $3.4 million.