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DERIVATIVE INSTRUMENTS (Tables)
12 Months Ended
Sep. 30, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Fair Value of Derivative Assets and Liabilities
The following table reflects the fair value of the Company’s derivative assets and liabilities recognized on the Consolidated Balance Sheets as of September 30:
Fair Value
20202019
(Thousands)Balance Sheet LocationAsset
Derivatives
Liability
Derivatives
Asset
Derivatives
Liability
Derivatives
Derivatives not designated as hedging instruments:
Natural Gas Distribution:
Physical commodity contractsDerivatives - current$78 $76 $67 $245 
Financial commodity contractsDerivatives - current71 282 382 570 
Energy Services:
Physical commodity contractsDerivatives - current6,454 20,438 6,847 27,540 
Derivatives - noncurrent1,264 12,003 1,710 12,641 
Financial commodity contractsDerivatives - current16,671 12,965 17,806 29,057 
Derivatives - noncurrent2,037 1,346 5,716 6,105 
Foreign currency contractsDerivatives - current36 104 211 
Derivatives - noncurrent48 3 — 75 
Total fair value of derivatives$26,659 $47,217 $32,529 $76,444 
Offsetting Assets
The following table summarizes the reported gross amounts, the amounts that the Company has the right to offset but elects not to, financial collateral, as well as the net amounts the Company could present on the Consolidated Balance Sheets but elects not to.
(Thousands)
Amounts Presented on Balance Sheets (1)
Offsetting Derivative Instruments (2)
Financial Collateral Received/Pledged (3)
Net Amounts (4)
As of September 2020:
Derivative assets:
Energy Services
Physical commodity contracts$7,718 $(3,587)$(200)$3,931 
Financial commodity contracts18,708 (14,311) 4,397 
Foreign currency contracts84 (84)  
Total Energy Services$26,510 $(17,982)$(200)$8,328 
Natural Gas Distribution
Physical commodity contracts$78 $(65)$ $13 
Financial commodity contracts71 (71)  
Total Natural Gas Distribution$149 $(136)$ $13 
Derivative liabilities:
Energy Services
Physical commodity contracts$32,441 $(3,587)$ $28,854 
Financial commodity contracts14,311 (14,311)  
Foreign currency contracts107 (84) 23 
Total Energy Services$46,859 $(17,982)$ $28,877 
Natural Gas Distribution
Physical commodity contracts$76 $(65)$ $11 
Financial commodity contracts282 (71) 211 
Total Natural Gas Distribution$358 $(136)$ $222 
As of September 30, 2019:
Derivative assets:
Energy Services
Physical commodity contracts$8,557 $(2,906)$(200)$5,451 
Financial commodity contracts23,522 (19,646)— 3,876 
Foreign currency contracts(1)— — 
Total Energy Services$32,080 $(22,553)$(200)$9,327 
Natural Gas Distribution
Physical commodity contracts$67 $(9)$— $58 
Financial commodity contracts382 (382)— 
Total Natural Gas Distribution$449 $(391)$— $58 
Derivative liabilities:
Energy Services
Physical commodity contracts$40,181 $(2,906)$— $37,275 
Financial commodity contracts35,162 (19,646)(15,516)— 
Foreign currency contracts286 (1)— 285 
Total Energy Services$75,629 $(22,553)$(15,516)$37,560 
Natural Gas Distribution
Physical commodity contracts$245 $(9)$— $236 
Financial commodity contracts570 (382)(188)— 
Total Natural Gas Distribution$815 $(391)$(188)$236 
(1)Derivative assets and liabilities are presented on a gross basis on the balance sheet as the Company does not elect balance sheet offsetting under ASC 210-20.
(2)Includes transactions with NAESB netting election, transactions held by FCMs with net margining and transactions with ISDA netting.
(3)Financial collateral includes cash balances at FCMs, as well as cash received from or pledged to other counterparties.
(4)Net amounts represent presentation of derivative assets and liabilities if the Company were to elect balance sheet offsetting under ASC 210-20.
Offsetting Liabilities
The following table summarizes the reported gross amounts, the amounts that the Company has the right to offset but elects not to, financial collateral, as well as the net amounts the Company could present on the Consolidated Balance Sheets but elects not to.
(Thousands)
Amounts Presented on Balance Sheets (1)
Offsetting Derivative Instruments (2)
Financial Collateral Received/Pledged (3)
Net Amounts (4)
As of September 2020:
Derivative assets:
Energy Services
Physical commodity contracts$7,718 $(3,587)$(200)$3,931 
Financial commodity contracts18,708 (14,311) 4,397 
Foreign currency contracts84 (84)  
Total Energy Services$26,510 $(17,982)$(200)$8,328 
Natural Gas Distribution
Physical commodity contracts$78 $(65)$ $13 
Financial commodity contracts71 (71)  
Total Natural Gas Distribution$149 $(136)$ $13 
Derivative liabilities:
Energy Services
Physical commodity contracts$32,441 $(3,587)$ $28,854 
Financial commodity contracts14,311 (14,311)  
Foreign currency contracts107 (84) 23 
Total Energy Services$46,859 $(17,982)$ $28,877 
Natural Gas Distribution
Physical commodity contracts$76 $(65)$ $11 
Financial commodity contracts282 (71) 211 
Total Natural Gas Distribution$358 $(136)$ $222 
As of September 30, 2019:
Derivative assets:
Energy Services
Physical commodity contracts$8,557 $(2,906)$(200)$5,451 
Financial commodity contracts23,522 (19,646)— 3,876 
Foreign currency contracts(1)— — 
Total Energy Services$32,080 $(22,553)$(200)$9,327 
Natural Gas Distribution
Physical commodity contracts$67 $(9)$— $58 
Financial commodity contracts382 (382)— 
Total Natural Gas Distribution$449 $(391)$— $58 
Derivative liabilities:
Energy Services
Physical commodity contracts$40,181 $(2,906)$— $37,275 
Financial commodity contracts35,162 (19,646)(15,516)— 
Foreign currency contracts286 (1)— 285 
Total Energy Services$75,629 $(22,553)$(15,516)$37,560 
Natural Gas Distribution
Physical commodity contracts$245 $(9)$— $236 
Financial commodity contracts570 (382)(188)— 
Total Natural Gas Distribution$815 $(391)$(188)$236 
(1)Derivative assets and liabilities are presented on a gross basis on the balance sheet as the Company does not elect balance sheet offsetting under ASC 210-20.
(2)Includes transactions with NAESB netting election, transactions held by FCMs with net margining and transactions with ISDA netting.
(3)Financial collateral includes cash balances at FCMs, as well as cash received from or pledged to other counterparties.
(4)Net amounts represent presentation of derivative assets and liabilities if the Company were to elect balance sheet offsetting under ASC 210-20.
Effect of Derivative Instruments on the Consolidated Statements of Operations
The following table reflects the effect of derivative instruments on the Consolidated Statements of Operations as of September 30:
(Thousands)Location of Gain (Loss) Recognized in Income on DerivativesAmount of Gain (Loss) Recognized in Income on Derivatives
Derivatives not designated as hedging instruments:202020192018
Energy Services:
Physical commodity contractsOperating revenues$1,163 $(5,732)$(9,311)
Physical commodity contractsNatural gas purchases(3,366)(521)(197)
Financial commodity contractsNatural gas purchases58,949 (643)(24,622)
Foreign currency contractsNatural gas purchases(41)(283)(379)
Home Services and Other:
Interest rate contractsInterest expense(233)334 
Total unrealized and realized (losses) gains$56,705 $(7,412)$(34,175)
Effect of Derivative Instruments Designated as Cash Flow Hedges on OCI
The following table reflects the gains (losses) associated with NJNG’s derivative instruments as of September 30:
(Thousands)202020192018
Natural Gas Distribution:
Physical commodity contracts$2,077 $5,926 $1,232 
Financial commodity contracts(3,903)(7,700)1,844 
Interest rate contracts — 8,467 
Total unrealized and realized (losses) gains$(1,826)$(1,774)$11,543 
Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)
The following table reflects the effect of derivative instruments designated as cash flow hedges in OCI as of September 30:
(Thousands)Amount of Pre-tax Gain (Loss) Recognized in OCI on DerivativesLocation of Gain (Loss) Reclassified from OCI into IncomeAmount of Pre-tax Gain (Loss) Reclassified from OCI into Income
Derivatives in cash flow hedging relationships:2020201920202019
Interest rate contracts$(13,568)$— Interest expense$140 $— 
Schedule of Outstanding Long (Short) Derivatives
NJNG and Energy Services had the following outstanding long (short) derivatives as of September 30:
Volume (Bcf)
Transaction Type20202019
Natural Gas DistributionFutures23.7 27.6 
Physical Commodity6.0 11.6 
Energy ServicesFutures(27.5)(29.6)
Swaps(1.8)(5.0)
Options 1.0 
Physical Commodity5.0 44.5 
Not included in the above table are Energy Services' net notional amount of foreign currency transactions of approximately $5.1 million and $6.2 million and 960,000 and 796,000 SRECs that were open, as of September 30, 2020 and 2019, respectively.
Schedule of Broker Margin Accounts by Company The balances as of September 30, by segment, are as follows:
(Thousands)Balance Sheet Location20202019
Natural Gas DistributionRestricted broker margin accounts$13,525 $1,982 
Energy ServicesRestricted broker margin accounts$55,919 $71,741 
Summary of Gross Credit Exposures
The following is a summary of gross credit exposures grouped by investment and noninvestment grade counterparties, as of September 30, 2020. The amounts presented below have not been reduced by any collateral received or netting and exclude accounts receivable for NJNG retail natural gas sales and services and Clean Energy Ventures residential solar installations.
(Thousands)Gross Credit
Exposure
Investment grade$132,105 
Noninvestment grade8,527 
Internally-rated investment grade24,647 
Internally-rated noninvestment grade12,471 
Total$177,750