XML 42 R26.htm IDEA: XBRL DOCUMENT v3.23.2
Derivative Instruments
 6 Months Ended
Jun. 30, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure [Text Block] DERIVATIVE INSTRUMENTS
The Evergy Companies engage in the wholesale and retail sale of electricity as part of their regulated electric operations, in addition to limited non-regulated energy marketing activities. These activities expose the Evergy Companies to market risks associated with the price of electricity, natural gas and other energy-related products. Management has established risk management policies and strategies to reduce the potentially adverse effects that the volatility of the markets may have on the Evergy Companies' operating results. The Evergy Companies' commodity risk management activities, which are subject to the management, direction and control of an internal risk management committee, utilize derivative instruments to reduce the effects of fluctuations in wholesale sales and fuel and purchased power expense caused by commodity price volatility.
The Evergy Companies are also exposed to market risks arising from changes in interest rates and may use derivative instruments to manage these risks. The Evergy Companies' interest rate risk management activities have included using derivative instruments to hedge against future interest rate fluctuations on anticipated debt issuances.
The Evergy Companies also engage in non-regulated energy marketing activity for trading purposes, primarily at Evergy Kansas Central, which focuses on seizing market opportunities to create value driven by expected changes in the market prices of commodities, primarily electricity and natural gas.
The Evergy Companies consider various qualitative factors, such as contract and marketplace attributes, in designating derivative instruments at inception. The Evergy Companies may elect the normal purchases and normal sales (NPNS) exception, which requires the effects of the derivative to be recorded when the underlying contract settles under accrual accounting. The Evergy Companies account for derivative instruments that are not designated as NPNS primarily as either economic hedges or trading contracts (non-hedging derivatives) which are recorded as assets or liabilities on the consolidated balance sheets at fair value. See Note 10 for additional information on the Evergy Companies' methods for assessing the fair value of derivative instruments. Changes in the fair value of non-hedging derivatives that are related to the Evergy Companies' regulated operations are deferred to a regulatory asset or regulatory liability when determined to be probable of future recovery or refund from customers. Recovery of the actual costs incurred by regulated activities will not impact earnings but will impact cash flows due to the timing of the recovery mechanism. Cash flows for all derivative instruments are classified as operating activities on the Evergy Companies' statements of cash flows, with the exception of cash flows for interest rate swap agreements accounted for as cash flows hedges of forecasted debt transactions, which are recorded as financing activities. Changes in the fair value of non-hedging derivatives that are not related to the Evergy Companies' regulated operations are recorded in operating revenues on the Evergy Companies' statements of income and comprehensive income.

The Evergy Companies offset fair value amounts recognized for derivative instruments under master netting arrangements, which include rights to reclaim cash collateral (a receivable), or the obligation to return cash collateral (a payable).
The gross notional contract amount by commodity type for derivative instruments is summarized in the following table.
June 30December 31
Non-hedging derivativesNotional volume unit of measure20232022
Evergy(millions)
Commodity contracts
PowerMWhs111.8 67.2 
Natural gasMMBtu304.3 772.7 
Evergy Kansas Central
Commodity contracts
PowerMWhs66.1 41.6 
Natural gasMMBtu298.1 769.6 
Evergy Metro
Commodity contracts
PowerMWhs33.9 18.2 
The fair values of Evergy's open derivative positions and balance sheet classifications are summarized in the following tables. The fair values below are gross values before netting agreements and netting of cash collateral.
June 30December 31
Evergy20232022
Non-hedging derivativesBalance sheet location
Commodity contracts(millions)
PowerOther assets - current$31.3 $41.6 
Other assets - long-term37.3 65.6 
Natural gasOther assets - current38.0 221.0 
Other assets - long-term2.0 1.6 
Total derivative assets$108.6 $329.8 
Commodity contracts
PowerOther liabilities - current$16.8 $41.0 
Other liabilities - long-term34.1 61.5 
Natural gasOther liabilities - current35.7 218.8 
Other liabilities - long-term2.1 1.6 
Total derivative liabilities$88.7 $322.9 
June 30December 31
Evergy Kansas Central20232022
Non-hedging derivativesBalance sheet location
Commodity contracts(millions)
PowerOther assets - current$24.1 $36.7 
Other assets - long-term37.3 65.6 
Natural gasOther assets - current38.0 221.0 
Other assets - long-term2.0 1.6 
Total derivative assets$101.4 $324.9 
Commodity contracts
PowerOther liabilities - current$14.9 $35.6 
Other liabilities - long-term34.1 61.5 
Natural gasOther liabilities - current33.9 215.1 
Other liabilities - long-term2.1 1.6 
Total derivative liabilities$85.0 $313.8 
June 30December 31
Evergy Metro20232022
Non-hedging derivativesBalance sheet location
Commodity contracts(millions)
PowerOther assets - current$2.2 $3.5 
Total derivative assets$2.2 $3.5 
Commodity contracts
PowerOther liabilities - current$1.1 $4.1 
Total derivative liabilities$1.1 $4.1 
The following tables present the line items on the Evergy Companies' consolidated balance sheets where derivative assets and liabilities are reported. The gross amounts offset in the tables below show the effect of master netting arrangements and include collateral posted to offset the net position.
June 30, 2023EvergyEvergy Kansas CentralEvergy Metro
Derivative Assets(millions)
Current
Gross amounts recognized$69.3 $62.1 $2.2 
Gross amounts offset(44.0)(42.4)(1.1)
Net amounts presented in other assets - current$25.3 $19.7 $1.1 
Long-Term
Gross amounts recognized$39.3 $39.3 $— 
Gross amounts offset(14.8)(14.8)— 
Net amounts presented in other assets - long-term$24.5 $24.5 $— 
Derivative Liabilities
Current
Gross amounts recognized$52.5 $48.8 $1.1 
Gross amounts offset(42.2)(40.5)(1.1)
Net amounts presented in other liabilities - current$10.3 $8.3 $— 
Long-Term
Gross amounts recognized$36.2 $36.2 $— 
Gross amounts offset(6.1)(6.1)— 
Net amounts presented in other liabilities - long-term$30.1 $30.1 $— 
December 31, 2022EvergyEvergy Kansas CentralEvergy Metro
Derivative Assets(millions)
Current
Gross amounts recognized$262.6 $257.7 $3.5 
Gross amounts offset(237.4)(232.9)(3.5)
Net amounts presented in other assets - current$25.2 $24.8 $— 
Long-Term
Gross amounts recognized$67.2 $67.2 $— 
Gross amounts offset(42.1)(42.1)— 
Net amounts presented in other assets - long-term$25.1 $25.1 $— 
Derivative Liabilities
Current
Gross amounts recognized$259.8 $250.7 $4.1 
Gross amounts offset(234.0)(229.4)(3.5)
Net amounts presented in other liabilities - current$25.8 $21.3 $0.6 
Long-Term
Gross amounts recognized$63.1 $63.1 $— 
Gross amounts offset(36.4)(36.4)— 
Net amounts presented in other liabilities - long-term$26.7 $26.7 $— 
The following table summarizes the amounts of gain (loss) recognized in income for the change in fair value of derivatives not designated as hedging instruments for the Evergy Companies.
Three Months Ended
June 30		Year to Date
June 30
Location of gain (loss)Contract type2023202220232022
Evergy(millions)
Operating revenuesCommodity$2.7 $19.3 $17.6 $27.2 
Total$2.7 $19.3 $17.6 $27.2 
Evergy Kansas Central
Operating revenuesCommodity$2.7 $19.3 $17.6 $27.2 
Total$2.7 $19.3 $17.6 $27.2 
Credit risk of the Evergy Companies' derivative instruments relates to the potential adverse financial impact resulting from non-performance by a counterparty of its contractual obligations. The Evergy Companies maintain credit policies and employ credit risk mitigation, such as collateral requirements or letters of credit, when necessary to minimize their overall credit risk and monitor exposure. Substantially all of the Evergy Companies' counterparty credit risk associated with derivative instruments relates to Evergy Kansas Central's non-regulated energy marketing activities. As of June 30, 2023, if counterparty groups completely failed to perform on contracts, Evergy's and Evergy Kansas Central's maximum exposure related to derivative assets was $41.6 million. As of June 30, 2023, the potential loss after the consideration of applicable master netting arrangements and collateral received for Evergy and Evergy Kansas Central was $29.4 million.
Certain of the Evergy Companies' derivative instruments contain collateral provisions that are tied to the Evergy Companies' credit ratings and may require the posting of collateral for various reasons, including if the Evergy Companies' credit ratings were to fall below investment grade. Substantially all of these derivative instruments relate to Evergy Kansas Central's non-regulated energy marketing activities. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position as of June 30, 2023, was $34.9 million for which Evergy and Evergy Kansas Central have posted collateral of $1.1 million in the normal course of business. If the credit-risk-related contingent features underlying these agreements were triggered
as of June 30, 2023, Evergy and Evergy Kansas Central could be required to post an additional $32.8 million of collateral to their counterparties.