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Accounting for Derivative Instruments
 3 Months Ended
Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Accounting for Derivative Instruments
11. Accounting for Derivative Instruments
The Company is exposed to the impact of market fluctuations in the price of electricity and natural gas and basis costs, storage and ancillary capacity charges from independent system operators. The Company uses derivative instruments to manage exposure to these risks, and historically designated certain derivative instruments as cash flow hedges for accounting purposes.
The Company holds certain derivative instruments that are not held for trading purposes and are not designated as hedges for accounting purposes. These derivative instruments represent economic hedges that mitigate the Company’s exposure to fluctuations in commodity prices. For these derivative instruments, changes in the fair value are recognized currently in earnings in retail cost of revenues.
As part of the Company’s strategy to optimize its assets and manage related risks, it also manages a portfolio of commodity derivative instruments held for trading purposes. The Company’s commodity trading activities are subject to limits within the Company’s Risk Management Policy. For these derivative instruments, changes in the fair value are recognized currently in earnings in net asset optimization revenues.
Derivative assets and liabilities are presented net in the Company’s condensed consolidated balance sheets when the derivative instruments are executed with the same counterparty under a master netting arrangement. The Company’s derivative contracts include transactions that are executed both on an exchange and centrally cleared as well as over-the-counter, bilateral contracts that are transacted directly with a third party. To the extent the Company has paid or received collateral related to the derivative assets or liabilities, such amounts would be presented net against the related derivative asset or liability’s fair value. As of March 31, 2018 and December 31, 2017, the Company had paid $5.7 million and $0.1 million in collateral outstanding, respectively. The specific types of derivative instruments the Company may execute to manage the commodity price risk include the following:

•
Forward contracts, which commit the Company to purchase or sell energy commodities in the future;
•
Futures contracts, which are exchange-traded standardized commitments to purchase or sell a commodity or financial instrument;
•
Swap agreements, which require payments to or from counterparties based upon the differential between two prices for a predetermined notional quantity; and
•
Option contracts, which convey to the option holder the right but not the obligation to purchase or sell a commodity.
The Company has entered into other energy-related contracts that do not meet the definition of a derivative instrument or qualify for the normal purchase or normal sale exception and are therefore not accounted for at fair value, including the following:

•
Forward electricity and natural gas purchase contracts for retail customer load, and
•
Natural gas transportation contracts and storage agreements.

Volumetric Underlying Derivative Transactions
The following table summarizes the net notional volume buy/(sell) of the Company’s open derivative financial instruments accounted for at fair value, broken out by commodity, as of (in thousands):
Non-trading 
Commodity
Notional

March 31, 2018

December 31, 2017
Natural Gas
MMBtu

5,585


9,191

Electricity
MWh

7,787


8,091

Trading
Commodity
Notional

March 31, 2018

December 31, 2017
Natural Gas
MMBtu

190


26

Natural Gas Basis
MMBtu

75


(225
)


Gains (Losses) on Derivative Instruments
Gains (losses) on derivative instruments, net and current period settlements on derivative instruments were as follows for the periods indicated (in thousands):

Three Months Ended March 31,
  
2018
 
2017 (1)
Loss on non-trading derivatives, net
(36,712
)
 
$
(21,376
)
Gain (loss) on trading derivatives, net
170

 
(420
)
Loss on derivatives, net
(36,542
)
 
(21,796
)
Current period settlements on non-trading derivatives  (2) (3) (4) (5) (6)
(14,882
)
 
7,515

Current period settlements on trading derivatives
(655
)
 
(160
)
Total current period settlements on derivatives
$
(15,537
)
 
$
7,355


(1)
Financial information has been recast to include results attributable to the acquisition of Perigee Energy, LLC by an affiliate on February 3, 2017. See Notes 2 and 4, "Basis of Presentation and Summary of Significant Accounting Policies" and "Acquisitions," respectively, for further discussion.
(2)
Excludes settlements of zero and less than $0.1 million, respectively, for the three months ended March 31, 2018 and 2017 related to non-trading derivative liabilities assumed in the acquisitions of CenStar and Oasis.
(3)
Excludes settlements of $(0.8) million and $(1.3) million, respectively, for the three months ended March 31, 2018 and 2017 related to non-trading derivative liabilities assumed in the acquisitions of the Provider Companies and Major Energy Companies.
(4) Excludes settlements of $(0.1) million and zero for the three months ended March 31, 2018 and 2017 related to non-trading derivative liabilities assumed in the acquisitions of Perigee and other customers.
(5) Excludes settlements of less than $0.1 million for the three months ended March 31, 2018 related to non-trading derivative liabilities assumed in the acquisition of the Verde Companies.
(6) Excludes settlements of $0.1 million for the three months ended March 31, 2018 related to non-trading derivative liabilities assumed in the acquisition of the HIKO Companies.

Gains (losses) on trading derivative instruments are recorded in net asset optimization revenues, and gains (losses) on non-trading derivative instruments are recorded in retail cost of revenues on the condensed consolidated statements of operations.
Fair Value of Derivative Instruments
The following tables summarize the fair value and offsetting amounts of the Company’s derivative instruments by counterparty and collateral received or paid as of (in thousands):
  
March 31, 2018
Description
Gross Assets

Gross
Amounts
Offset

Net Assets

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
20,777


$
(12,941
)

$
7,836


$
—


$
7,836

Trading commodity derivatives
140


(11
)

129


—


129

Total Current Derivative Assets
$
20,917


$
(12,952
)

$
7,965


$
—


$
7,965

Non-trading commodity derivatives
$
1,546


$
(1,284
)

$
262


$
—


$
262

Trading commodity derivatives
$
—


$
—


$
—


$
—


$
—

Total Non-current Derivative Assets
$
1,546


$
(1,284
)

$
262


$
—


$
262

Total Derivative Assets
$
22,463


$
(14,236
)

$
8,227


$
—


$
8,227




March 31, 2018
Description
Gross 
Liabilities

Gross
Amounts
Offset

Net
Liabilities

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
(34,454
)

$
16,486


$
(17,968
)

$
5,660


$
(12,308
)
Trading commodity derivatives
(50
)

11


(39
)

—


(39
)
Total Current Derivative Liabilities
$
(34,504
)

$
16,497


$
(18,007
)

$
5,660


$
(12,347
)
Non-trading commodity derivatives
$
(17,051
)

$
6,925


$
(10,126
)

$
—


$
(10,126
)
Trading commodity derivatives
$
(932
)

$
20


$
(912
)

$
—


$
(912
)
Total Non-current Derivative Liabilities
$
(17,983
)

$
6,945


$
(11,038
)

$
—


$
(11,038
)
Total Derivative Liabilities
$
(52,487
)

$
23,442


$
(29,045
)

$
5,660


$
(23,385
)


  
December 31, 2017
Description
Gross Assets

Gross
Amounts
Offset

Net Assets

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
60,167


$
(29,432
)

$
30,735


$
—


$
30,735

Trading commodity derivatives
918


(462
)

456


—


456

Total Current Derivative Assets
61,085


(29,894
)

31,191


—


31,191

Non-trading commodity derivatives
16,055


(12,746
)

3,309


—


3,309

Trading commodity derivatives
—


—


—


—


—

Total Non-current Derivative Assets
16,055


(12,746
)

3,309


—


3,309

Total Derivative Assets
$
77,140


$
(42,640
)

$
34,500


$
—


$
34,500




December 31, 2017
Description
Gross 
Liabilities

Gross
Amounts
Offset

Net
Liabilities

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
(4,517
)

$
3,059


$
(1,458
)

$
65


$
(1,393
)
Trading commodity derivatives
(517
)

273


(244
)

—


(244
)
Total Current Derivative Liabilities
(5,034
)

3,332


(1,702
)

65


(1,637
)
Non-trading commodity derivatives
(676
)

732


56


—


56

Trading commodity derivatives
(566
)

18


(548
)

—


(548
)
Total Non-current Derivative Liabilities
(1,242
)

750


(492
)

—


(492
)
Total Derivative Liabilities
$
(6,276
)

$
4,082


$
(2,194
)

$
65


$
(2,129
)