DERIVATIVE INSTRUMENTS (Tables)
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12 Months Ended |
Sep. 30, 2020 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
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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 | | | | 2020 | | 2019 | (Thousands) | Balance Sheet Location | Asset Derivatives | Liability Derivatives | Asset Derivatives | Liability Derivatives | Derivatives not designated as hedging instruments: | | | | | | | | | Natural Gas Distribution: | | | | | | | | | | Physical commodity contracts | Derivatives - current | | $ | 78 | | | $ | 76 | | | $ | 67 | | | $ | 245 | | | | | | | | | | | | Financial commodity contracts | Derivatives - current | | 71 | | | 282 | | | 382 | | | 570 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Energy Services: | | | | | | | | | | Physical commodity contracts | Derivatives - current | | 6,454 | | | 20,438 | | | 6,847 | | | 27,540 | | | Derivatives - noncurrent | | 1,264 | | | 12,003 | | | 1,710 | | | 12,641 | | Financial commodity contracts | Derivatives - current | | 16,671 | | | 12,965 | | | 17,806 | | | 29,057 | | | Derivatives - noncurrent | | 2,037 | | | 1,346 | | | 5,716 | | | 6,105 | | Foreign currency contracts | Derivatives - current | | 36 | | | 104 | | | 1 | | | 211 | | | Derivatives - noncurrent | | 48 | | | 3 | | | — | | | 75 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total fair value of derivatives | | | $ | 26,659 | | | $ | 47,217 | | | $ | 32,529 | | | $ | 76,444 | |
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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 contracts | | 18,708 | | | (14,311) | | | — | | | 4,397 | | Foreign currency contracts | | 84 | | | (84) | | | — | | | — | | Total Energy Services | | $ | 26,510 | | | $ | (17,982) | | | $ | (200) | | | $ | 8,328 | | Natural Gas Distribution | | | | | | | | | Physical commodity contracts | | $ | 78 | | | $ | (65) | | | $ | — | | | $ | 13 | | Financial commodity contracts | | 71 | | | (71) | | | — | | | — | | | | | | | | | | | Total Natural Gas Distribution | | $ | 149 | | | $ | (136) | | | $ | — | | | $ | 13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities: | | | | | | | | | Energy Services | | | | | | | | | Physical commodity contracts | | $ | 32,441 | | | $ | (3,587) | | | $ | — | | | $ | 28,854 | | Financial commodity contracts | | 14,311 | | | (14,311) | | | — | | | — | | Foreign currency contracts | | 107 | | | (84) | | | — | | | 23 | | Total Energy Services | | $ | 46,859 | | | $ | (17,982) | | | $ | — | | | $ | 28,877 | | Natural Gas Distribution | | | | | | | | | Physical commodity contracts | | $ | 76 | | | $ | (65) | | | $ | — | | | $ | 11 | | Financial commodity contracts | | 282 | | | (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 contracts | | 23,522 | | | (19,646) | | | — | | | 3,876 | | Foreign currency contracts | | 1 | | | (1) | | | — | | | — | | Total Energy Services | | $ | 32,080 | | | $ | (22,553) | | | $ | (200) | | | $ | 9,327 | | Natural Gas Distribution | | | | | | | | | Physical commodity contracts | | $ | 67 | | | $ | (9) | | | $ | — | | | $ | 58 | | Financial commodity contracts | | 382 | | | (382) | | | | | — | | | | | | | | | | | Total Natural Gas Distribution | | $ | 449 | | | $ | (391) | | | $ | — | | | $ | 58 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities: | | | | | | | | | Energy Services | | | | | | | | | Physical commodity contracts | | $ | 40,181 | | | $ | (2,906) | | | $ | — | | | $ | 37,275 | | Financial commodity contracts | | 35,162 | | | (19,646) | | | (15,516) | | | — | | Foreign currency contracts | | 286 | | | (1) | | | — | | | 285 | | Total Energy Services | | $ | 75,629 | | | $ | (22,553) | | | $ | (15,516) | | | $ | 37,560 | | Natural Gas Distribution | | | | | | | | | Physical commodity contracts | | $ | 245 | | | $ | (9) | | | $ | — | | | $ | 236 | | Financial commodity contracts | | 570 | | | (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.
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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 contracts | | 18,708 | | | (14,311) | | | — | | | 4,397 | | Foreign currency contracts | | 84 | | | (84) | | | — | | | — | | Total Energy Services | | $ | 26,510 | | | $ | (17,982) | | | $ | (200) | | | $ | 8,328 | | Natural Gas Distribution | | | | | | | | | Physical commodity contracts | | $ | 78 | | | $ | (65) | | | $ | — | | | $ | 13 | | Financial commodity contracts | | 71 | | | (71) | | | — | | | — | | | | | | | | | | | Total Natural Gas Distribution | | $ | 149 | | | $ | (136) | | | $ | — | | | $ | 13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities: | | | | | | | | | Energy Services | | | | | | | | | Physical commodity contracts | | $ | 32,441 | | | $ | (3,587) | | | $ | — | | | $ | 28,854 | | Financial commodity contracts | | 14,311 | | | (14,311) | | | — | | | — | | Foreign currency contracts | | 107 | | | (84) | | | — | | | 23 | | Total Energy Services | | $ | 46,859 | | | $ | (17,982) | | | $ | — | | | $ | 28,877 | | Natural Gas Distribution | | | | | | | | | Physical commodity contracts | | $ | 76 | | | $ | (65) | | | $ | — | | | $ | 11 | | Financial commodity contracts | | 282 | | | (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 contracts | | 23,522 | | | (19,646) | | | — | | | 3,876 | | Foreign currency contracts | | 1 | | | (1) | | | — | | | — | | Total Energy Services | | $ | 32,080 | | | $ | (22,553) | | | $ | (200) | | | $ | 9,327 | | Natural Gas Distribution | | | | | | | | | Physical commodity contracts | | $ | 67 | | | $ | (9) | | | $ | — | | | $ | 58 | | Financial commodity contracts | | 382 | | | (382) | | | | | — | | | | | | | | | | | Total Natural Gas Distribution | | $ | 449 | | | $ | (391) | | | $ | — | | | $ | 58 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative liabilities: | | | | | | | | | Energy Services | | | | | | | | | Physical commodity contracts | | $ | 40,181 | | | $ | (2,906) | | | $ | — | | | $ | 37,275 | | Financial commodity contracts | | 35,162 | | | (19,646) | | | (15,516) | | | — | | Foreign currency contracts | | 286 | | | (1) | | | — | | | 285 | | Total Energy Services | | $ | 75,629 | | | $ | (22,553) | | | $ | (15,516) | | | $ | 37,560 | | Natural Gas Distribution | | | | | | | | | Physical commodity contracts | | $ | 245 | | | $ | (9) | | | $ | — | | | $ | 236 | | Financial commodity contracts | | 570 | | | (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.
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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 Derivatives | Amount of Gain (Loss) Recognized in Income on Derivatives | Derivatives not designated as hedging instruments: | 2020 | | 2019 | | 2018 | Energy Services: | | | | | | | Physical commodity contracts | Operating revenues | $ | 1,163 | | | $ | (5,732) | | | $ | (9,311) | | Physical commodity contracts | Natural gas purchases | (3,366) | | | (521) | | | (197) | | Financial commodity contracts | Natural gas purchases | 58,949 | | | (643) | | | (24,622) | | Foreign currency contracts | Natural gas purchases | (41) | | | (283) | | | (379) | | Home Services and Other: | | | | | | | Interest rate contracts | Interest expense | — | | (233) | | | 334 | | Total unrealized and realized (losses) gains | $ | 56,705 | | | $ | (7,412) | | | $ | (34,175) | |
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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) | 2020 | | 2019 | | 2018 | 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 | |
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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 Derivatives | Location of Gain (Loss) Reclassified from OCI into Income | Amount of Pre-tax Gain (Loss) Reclassified from OCI into Income | | Derivatives in cash flow hedging relationships: | 2020 | 2019 | | 2020 | 2019 | | | Interest rate contracts | $ | (13,568) | | $ | — | | Interest expense | $ | 140 | | $ | — | | | |
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Schedule of Outstanding Long (Short) Derivatives |
NJNG and Energy Services had the following outstanding long (short) derivatives as of September 30: | | | | | | | | | | | | | | | | | | | | | | | | | Volume (Bcf) | | | Transaction Type | | | 2020 | | 2019 | Natural Gas Distribution | | Futures | | | 23.7 | | | 27.6 | | | | | | | | | | | | | | | | | | | | Physical Commodity | | | 6.0 | | | 11.6 | | | | | | | | | | Energy Services | | Futures | | | (27.5) | | | (29.6) | | | | Swaps | | | (1.8) | | | (5.0) | | | | Options | | | — | | | 1.0 | | | | Physical Commodity | | | 5.0 | | | 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.
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Schedule of Broker Margin Accounts by Company |
The balances as of September 30, by segment, are as follows: | | | | | | | | | | | | (Thousands) | Balance Sheet Location | 2020 | 2019 | Natural Gas Distribution | Restricted broker margin accounts | $ | 13,525 | | $ | 1,982 | | | | | | Energy Services | Restricted broker margin accounts | $ | 55,919 | | $ | 71,741 | | | | | |
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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 grade | | 8,527 | | | Internally-rated investment grade | | 24,647 | | | Internally-rated noninvestment grade | | 12,471 | | | Total | | $ | 177,750 | | |
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