DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We use derivatives as part of our risk management program to manage the risks associated with the price volatility of interest rates, purchased power, generation, and natural gas costs for the benefit of our customers and shareholders. Our approach is non-speculative and designed to mitigate risk. Regulated hedging programs are approved by our state regulators.

We record derivative instruments on our balance sheets as an asset or liability measured at fair value unless they qualify for the normal purchases and sales exception and are so designated. We continually assess our contracts designated as normal and will discontinue the treatment of these contracts as normal if the required criteria are no longer met. Changes in the derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met or we receive regulatory treatment for the derivative. For most energy-related physical and financial contracts in our regulated operations that qualify as derivatives, our regulators allow the effects of fair value accounting to be offset to regulatory assets and liabilities.

On our balance sheets, we classify derivative assets and liabilities as current or long-term based on the maturities of the underlying contracts. Derivative assets and liabilities not shown separately on our balance sheets are included in the other current and other long-term line items. The following table shows our derivative assets and derivative liabilities. None of the derivatives shown below were designated as hedging instruments.


	March 31, 2022				December 31, 2021
(in millions)	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Current
Natural gas contracts	$	169.6	$	1.4	$	60.6	$	14.0
FTRs	1.0		—		2.4		—
Coal contracts	33.7		—		44.0		—
Total current	204.3		1.4		107.0		14.0

Long-term
Natural gas contracts	10.3		—		4.0		1.1
Coal contracts	4.5		—		9.0		—
Total long-term	14.8		—		13.0		1.1
Total	$	219.1	$	1.4	$	120.0	$	15.1

Realized gains (losses) on derivatives not designated as hedging instruments are primarily recorded in cost of sales on the income statements. Our estimated notional sales volumes and realized gains (losses) were as follows:








	Three Months Ended March 31, 2022			Three Months Ended March 31, 2021
(in millions)	Volumes	Gains		Volumes	Gains (Losses)
Natural gas contracts	59.5 Dth	$	31.6	59.8 Dth	$	(7.5)
FTRs	7.0 MWh	1.0		8.4 MWh	2.1
Total		$	32.6		$	(5.4)

On our balance sheets, the amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are not offset against the fair value amounts recognized for derivative instruments executed with the same counterparty under the same master netting arrangement. At March 31, 2022 and December 31, 2021, we had posted cash collateral of $14.0 million and $13.9 million, respectively. These amounts were recorded on our balance sheets in other current assets. At March 31, 2022 and December 31, 2021, we had also received cash collateral of $146.1 million and $13.2 million, respectively. These amounts were recorded on our balance sheets in other current liabilities.

The following table shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on our balance sheets:


	March 31, 2022					December 31, 2021
(in millions)	Derivative Assets			Derivative Liabilities		Derivative Assets			Derivative Liabilities
Gross amount recognized on the balance sheet	$	219.1		$	1.4	$	120.0		$	15.1
Gross amount not offset on the balance sheet	(139.5)		(1)	(0.2)		(15.2)		(2)	(9.2)		(3)
Net amount	$	79.6		$	1.2	$	104.8		$	5.9

(1)Includes cash collateral received of $139.3 million.

(2)Includes cash collateral received of $6.4 million.

(3)Includes cash collateral posted of $0.4 million.

Cash Flow Hedges

Until their expiration on November 15, 2021, we had two interest rate swaps with a combined notional value of $250.0 million to hedge the variable interest rate risk associated with our 2007 Junior Notes. The swaps provided a fixed interest rate of 4.9765% on $250.0 million of the $500.0 million of outstanding 2007 Junior Notes. As these swaps qualified for cash flow hedge accounting treatment, the related gains and losses were deferred in accumulated other comprehensive loss and were amortized to interest expense as interest was accrued on the 2007 Junior Notes.

We previously entered into forward interest rate swap agreements to mitigate the interest rate exposure associated with the issuance of long-term debt related to the acquisition of Integrys. These swap agreements were settled in 2015, and we continue to amortize amounts out of accumulated other comprehensive loss into interest expense over the periods in which the interest costs are recognized in earnings.

The table below shows the amounts related to these cash flow hedges that were reclassified to interest expense, along with our total interest expense on the income statements:


	Three Months Ended March 31
(in millions)		2022		2021

Net derivative gain (loss) reclassified from accumulated other comprehensive loss to interest expense		$	0.1	$	(1.4)
Total interest expense line item on the income statements		117.6		119.5

We estimate that during the next twelve months $0.4 million will be reclassified from accumulated other comprehensive loss as a decrease to interest expense.