XML 44 R21.htm IDEA: XBRL DOCUMENT

Accounting for Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2021

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value

The following table presents the volumes, fair values and classification of the Company's derivative instruments recorded on the balance sheets:


Puget Energy and Puget Sound Energy
	June 30, 2021					December 31, 2020
(Dollars in Thousands)	Volumes (millions)	Assets1		Liabilities2		Volumes	Assets1		Liabilities2
Electric portfolio derivatives	*	$	104,938	$	45,039	*	$	22,544	$	46,922
Natural gas derivatives (MMBtus)3	308	63,281		11,018		320	19,276		14,352
Total derivative contracts		$	168,219	$	56,057		$	41,820	$	61,274
Current		$	150,371	$	37,491		$	33,015	$	31,441
Long-term		17,848		18,566			8,805		29,833
Total derivative contracts		$	168,219	$	56,057		$	41,820	$	61,274

_______________

1 Balance sheet classification: Current and Long-term Unrealized gain on derivative instruments.

2 Balance sheet classification: Current and Long-term Unrealized loss on derivative instruments.

3 All fair value adjustments on derivatives relating to the natural gas business have been deferred in accordance with ASC 980, “Regulated Operations,” due to the purchased gas adjustment (PGA) mechanism. The net derivative asset or liability and offsetting regulatory liability or asset are related to contracts used to economically hedge the cost of physical gas purchased to serve natural gas customers.

* Electric portfolio derivatives consist of electric generation fuel of 247.0 million One Million British Thermal Units (MMBtu) and purchased electricity of

7.5 million Megawatt Hours (MWhs) at June 30, 2021, and 212.2 million MMBtus and 6.6 million MWhs at December 31, 2020.

Offsetting Assets and Liabilities

The following tables present the potential effect of netting arrangements, including rights of set-off associated with the Company's derivative assets and liabilities:


Puget Energy and Puget Sound Energy
	At June 30, 2021
	Gross Amount Recognized in the Statement of Financial Position1		Gross Amounts Offset in the Statement of Financial Position		Net of Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
(Dollars in Thousands)							Commodity Contracts		Cash Collateral Received/Posted		Net Amount
Assets:
Energy derivative contracts	$	168,219	$	—	$	168,219	$	(36,898)	$	—	$	131,321
Liabilities:
Energy derivative contracts	$	56,057	$	—	$	56,057	$	(36,898)	$	(216)	$	18,943



Puget Energy and Puget Sound Energy	At December 31, 2020
	Gross Amount Recognized in the Statement of Financial Position1		Gross Amounts Offset in the Statement of Financial Position		Net of Amounts Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position
(Dollars in Thousands)							Commodity Contracts		Cash Collateral Received/Posted		Net Amount
Assets:
Energy derivative contracts	$	41,820	$	—	$	41,820	$	(21,696)	$	—	$	20,124
Liabilities:
Energy derivative contracts	$	61,274	$	—	$	61,274	$	(21,696)	$	(9,343)	$	30,235

_______________

1 All derivative contract deals are executed under ISDA, NAESB and WSPP master netting agreements with right of set-off.

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance

The following table presents the effect and classification of the realized and unrealized gains (losses) of the Company's derivatives recorded on the statements of income:


Puget Energy and Puget Sound Energy		Three Months Ended June 30,				Six Months Ended June 30,
(Dollars in Thousands)	Classification	2021		2020		2021		2020
Gas for Power Derivatives:
Unrealized	Unrealized gain (loss) on derivative instruments, net	$	51,241	$	4,764	$	52,869	$	(4,990)
Realized	Electric generation fuel	2,785		(743)		11,098		553
Power Derivatives:
Unrealized	Unrealized gain (loss) on derivative instruments, net	10,035		7,398		31,409		(31,388)
Realized	Purchased electricity	6,287		(6,228)		(7,016)		(12,163)
Total gain (loss) recognized in income on derivatives		$	70,348	$	5,191	$	88,360	$	(47,988)

Schedule of Credit Risk Related Contingent Features

The following table presents the aggregate fair value of all derivative instruments with credit-risk-related contingent features that are in a liability position and the amount of additional collateral the Company could be required to post:


Puget Energy and Puget Sound Energy
(Dollars in Thousands)	At June 30, 2021						At December 31, 2020
	Fair Value1		Posted		Contingent		Fair Value1		Posted		Contingent
Contingent Feature	Liability		Collateral		Collateral		Liability		Collateral		Collateral
Credit rating2	$	21,600	$	—	$	21,600	$	26,966	$	—	$	26,966
Requested credit for adequate assurance	6,875		—		—		6,576		—		—
Forward value of contract3	216		3,993		N/A		9,343		20,903		N/A
Total	$	28,691	$	3,993	$	21,600	$	42,885	$	20,903	$	26,966

_______________

1 Represents the derivative fair value of contracts with contingent features for counterparties in net derivative liability positions. Excludes NPNS, accounts

payable and accounts receivable.

2 Failure by PSE to maintain an investment grade credit rating from each of the major credit rating agencies provides counterparties a contractual right to

demand collateral.

3. Collateral requirements may vary, based on changes in the forward value of underlying transactions relative to contractually defined collateral thresholds.