Risk Management Activities

12 Months Ended

Dec. 31, 2021

Risk Management Activities [Abstract]

Risk Management Activities

Risk Management Activities

We are exposed to certain risks related to our ongoing business operations; namely commodity price risk and interest rate risk. We recognize that the prudent and selective use of derivatives may help to lower our cost of debt capital, manage interest rate exposure and limit volatility in the price of natural gas.

Risk management assets and liabilities on our derivatives are presented on the Consolidated Balance Sheets as shown below:

	December 31, 2021				December 31, 2020
(in millions)	Assets		Liabilities		Assets		Liabilities
Current(1)
Derivatives designated as hedging instruments	$	—	$	136.4	$	—	$	70.9
Derivatives not designated as hedging instruments	10.6		0.4		10.4		7.3
Total	$	10.6	$	136.8	$	10.4	$	78.2
Noncurrent(2)
Derivatives designated as hedging instruments	$	—	$	—	$	—	$	99.5
Derivatives not designated as hedging instruments	13.8		7.4		2.8		45.1
Total	$	13.8	$	7.4	$	2.8	$	144.6

(1) Presented in "Prepayments and other" and "Other accruals", respectively, on the Consolidated Balance Sheets.

(2) Presented in "Deferred charges and other" and "Other noncurrent liabilities", respectively, on the Consolidated Balance Sheets.

Derivatives Not Designated as Hedging Instruments

Commodity price risk management. We, along with our utility customers, are exposed to variability in cash flows associated with natural gas purchases and volatility in natural gas prices. We purchase natural gas for sale and delivery to our retail, commercial and industrial customers, and for most customers the variability in the market price of gas is passed through in their rates. Some of our utility subsidiaries offer programs whereby variability in the market price of gas is assumed by the respective utility. The objective of our commodity price risk programs is to mitigate the gas cost variability, for us or on behalf of our customers, associated with natural gas purchases or sales by economically hedging the various gas cost components using a combination of futures, options, forwards or other derivative contracts. At December 31, 2021, we had 124.5 MMDth of net energy derivative volumes outstanding related to our natural gas hedges.

NIPSCO has received IURC approval to lock in a fixed price for its natural gas customers using long-term forward purchase instruments and is limited to 20% of NIPSCO’s average annual GCA purchase volume. As of December 31, 2021, the remaining terms of these instruments range from one to six years.

All gains and losses on these derivative contracts are deferred as regulatory liabilities or assets and are remitted to or collected from customers through NIPSCO’s quarterly GCA and FAC mechanisms, respectively. These instruments are not designated as accounting hedges. Refer to Note 9, "Regulatory Matters," for additional information.

Derivatives Designated as Hedging Instruments

Interest rate risk management. As of December 31, 2021, we have two forward-starting interest rate swaps with an aggregate notional value totaling $500.0 million to hedge the variability in cash flows attributable to changes in the benchmark interest rate associated with forecasted debt issuances. These interest rate swaps are designated as cash flow hedges.

Cash flow hedges included in Accumulated Other Comprehensive Income (Loss) on the Consolidated Balance Sheets were:

(in millions)	AOCI(1)		Amounts Expected to be Reclassified to Earnings During the Next 12 Months(1)	Maximum Term
Interest Rate	$	25.4	0.8	371 months

(1) All amounts are net of tax.

The actual amounts reclassified from Accumulated Other Comprehensive Income (Loss) to Net Income can differ from the estimate above due to market price changes.

The gains and losses related to these swaps are recorded to AOCI. Upon issuance, we amortize the gains and losses over the life of the debt associated with these swaps as we recognize interest expense. These amounts are immaterial in 2021, 2020 and 2019 and are recorded in "Interest expense, net" on the Statements of Consolidated Income (Loss).

If it becomes probable that a hedged forecasted transaction will no longer occur, the accumulated gains or losses on the derivative will be recognized currently in "Other, net" in the Statements of Consolidated Income (Loss).

There were no amounts excluded from effectiveness testing for derivatives in cash flow hedging relationships at December 31, 2021, 2020 and 2019.

Our derivative instruments measured at fair value as of December 31, 2021 and 2020 do not contain any credit-risk-related contingent features. Cash flows for derivative financial instruments are generally classified in cash flows from operating activities.