Segment Reporting

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Segment Reporting

14. Segment Reporting

Our determination of reportable business segments considers the strategic operating units under which we make financial decisions, allocate resources and assess performance of our business. Our reportable business segments are retail electricity and retail natural gas. The retail electricity segment consists of electricity sales and transmission to residential and commercial customers. The retail natural gas segment consists of natural gas sales to, and natural gas transportation and distribution for, residential and commercial customers. Corporate and other consists of expenses and assets of the retail electricity and natural gas segments that are managed at a consolidated level such as general and administrative expenses. Asset optimization activities are also included in Corporate and other.

For the three months ended September 30, 2020 and 2019, we recorded asset optimization revenues of $6.2 million and $14.6 million and asset optimization cost of revenues of $6.8 million and $14.9 million, respectively, and for the nine months ended September 30, 2020 and 2019, we recorded asset optimization revenues of $16.5 million and $50.7 million and asset optimization cost of revenues of $16.8 million and $48.5 million, respectively, which are presented on a net basis in asset optimization revenues.

We use retail gross margin to assess the performance of our operating segments. Retail gross margin is defined as operating (loss) income plus (i) depreciation and amortization expenses and (ii) general and administrative expenses, less (i) net asset optimization (expenses) revenues, (ii) net (losses) gains on non-trading derivative instruments, and (iii) net current period cash settlements on non-trading derivative instruments. We deduct net (losses) gains on non-trading derivative instruments, excluding current period cash settlements, from the retail gross margin calculation in order to remove the non-cash impact of net gains and losses on these derivative instruments. Retail gross margin should not be considered an alternative to, or more meaningful than, operating income, as determined in accordance with GAAP.

Below is a reconciliation of retail gross margin to income before income tax expense (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Reconciliation of Retail Gross Margin to Income before taxes
Income before income tax expense	$	27,747	$	44,243	$	72,190	$	17,959
Interest and other income	(80)		(322)		(293)		(1,005)
Interest expense	1,487		2,174		4,233		6,392
Operating income	29,154		46,095		76,130		23,346
Depreciation and amortization	7,278		9,496		24,084		31,963
General and administrative	19,080		27,629		66,087		94,352
Less:
Net asset optimization (expense) revenues	(558)		(254)		(319)		2,242
Net, gain (loss) on non-trading derivative instruments	2,550		12,528		(14,019)		(42,741)
Net, Cash settlements on non-trading derivative instruments	6,489		12,764		33,153		33,677
Retail Gross Margin	$	47,031	$	58,182	$	147,486	$	156,483

Financial data for business segments are as follows (in thousands):

Three Months Ended September 30, 2020
	Retail Electricity		Retail Natural Gas		Corporate and Other		Eliminations		Consolidated
Total Revenues	$	132,958	$	8,230	$	(558)	$	—	$	140,630
Retail cost of revenues	82,061		3,057		—		—		85,118
Less:
Net asset optimization expense	—		—		(558)		—		(558)
Net, gain on non-trading derivative instruments	1,923		627		—		—		2,550
Current period settlements on non-trading derivatives	6,212		277		—		—		6,489
Retail Gross Margin	$	42,762	$	4,269	$	—	$	—	$	47,031
Total Assets at September 30, 2020	$	2,821,953	$	910,665	$	322,542	$	(3,694,032)	$	361,128
Goodwill at September 30, 2020	$	117,813	$	2,530	$	—	$	—	$	120,343

Three Months Ended September 30, 2019
	Retail Electricity		Retail Natural Gas		Corporate and Other		Eliminations		Consolidated
Total revenues	$	197,010	$	10,331	$	(254)	$	—	$	207,087
Retail cost of revenues	119,100		4,767		—		—		123,867
Less:
Net asset optimization expense	—		—		(254)		—		(254)
Net gain (loss) on non-trading derivative instruments	12,652		(124)		—		—		12,528
Current period settlements on non-trading derivatives	12,115		649		—		—		12,764
Retail Gross Margin	$	53,143	$	5,039	$	—	$	—	$	58,182
Total Assets at December 31, 2019	$	2,524,884	$	820,601	$	341,411	$	(3,263,928)	$	422,968
Goodwill at December 31, 2019	$	117,813	$	2,530	$	—	$	—	$	120,343

Nine Months Ended September 30, 2020
	Retail Electricity		Retail Natural Gas		Corporate and Other		Eliminations		Consolidated
Total revenues	$	366,981	$	69,185	$	(319)	$	—	$	435,847
Retail cost of revenues	241,712		27,834		—		—		269,546
Less:
Net asset optimization expense	—		—		(319)		—		(319)
Net (loss) gain on non-trading derivatives	(14,416)		397		—		—		(14,019)
Current period settlements on non-trading derivatives	30,544		2,609		—		—		33,153
Retail Gross Margin	$	109,141	$	38,345	$	—	$	—	$	147,486
Total Assets at September 30, 2020	$	2,821,953	$	910,665	$	322,542	$	(3,694,032)	$	361,128
Goodwill at September 30, 2020	$	117,813	$	2,530	$	—	$	—	$	120,343

Nine Months Ended September 30, 2019
	Retail Electricity		Retail Natural Gas		Corporate and Other		Eliminations		Consolidated
Total revenues	$	539,878	$	85,422	$	2,242	$	—	$	627,542
Retail cost of revenues	433,175		44,706		—		—		477,881
Less:
Net asset optimization revenues	—		—		2,242		—		2,242
Net, (loss) gain on non-trading derivatives	(42,984)		243		—		—		(42,741)
Current period settlements on non-trading derivatives	32,957		720		—		—		33,677
Retail Gross Margin	$	116,730	$	39,753	$	—	$	—	$	156,483
Total Assets at December 31, 2019	$	2,524,884	$	820,601	$	341,411	$	(3,263,928)	$	422,968
Goodwill at December 31, 2019	$	117,813	$	2,530	$	—	$	—	$	120,343