DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2023

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 are included in the other current and other long-term line items on our balance sheets. The following table shows our derivative assets and derivative liabilities. None of the derivatives shown below were designated as hedging instruments.


	September 30, 2023				December 31, 2022
(in millions)	Derivative Assets		Derivative Liabilities		Derivative Assets		Derivative Liabilities
Current
Natural gas contracts	$	12.5	$	81.1	$	32.5	$	88.2
FTRs and TCRs	11.3		—		7.8		—
Coal contracts	0.6		13.8		18.9		—
Total current	24.4		94.9		59.2		88.2

Long-term
Natural gas contracts	0.2		2.3		—		8.4
Coal contracts	0.2		11.3		15.6		—
Total long-term	0.4		13.6		15.6		8.4
Total	$	24.8	$	108.5	$	74.8	$	96.6

Realized gains and losses on derivatives used in our regulated utility operations are recorded in cost of sales upon settlement; however, they may be subsequently deferred for future rate recovery or refund as the gains and losses are included in our utilities’ fuel and natural gas cost recovery mechanisms. Realized gains and losses on FTRs and TCRs used in our non-utility operations are recorded in operating revenues on the income statements. Our estimated notional sales volumes and realized gains and losses were as follows:


	Three Months Ended September 30, 2023			Three Months Ended September 30, 2022
(in millions)	Volumes	Gains (Losses)		Volumes	Gains
Natural gas contracts	37.8 Dth	$	(56.3)	32.7 Dth	$	119.1
FTRs and TCRs	8.1 MWh	21.9		7.0 MWh	7.4
Total		$	(34.4)		$	126.5

	Nine Months Ended September 30, 2023			Nine Months Ended September 30, 2022
(in millions)	Volumes	Gains (Losses)		Volumes	Gains
Natural gas contracts	144.2 Dth	$	(200.7)	133.3 Dth	$	259.6
FTRs and TCRs	22.9 MWh	26.4		21.0 MWh	12.7
Total		$	(174.3)		$	272.3

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 September 30, 2023 and December 31, 2022, we had posted cash collateral of $118.4 million and $122.4 million, respectively. These amounts were recorded on our balance sheets as collateral on deposit.

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


	September 30, 2023					December 31, 2022
(in millions)	Derivative Assets		Derivative Liabilities			Derivative Assets		Derivative Liabilities
Gross amount recognized on the balance sheet	$	24.8	$	108.5		$	74.8	$	96.6
Gross amount not offset on the balance sheet	(3.4)		(71.7)		(1)	(17.5)		(82.5)		(2)
Net amount	$	21.4	$	36.8		$	57.3	$	14.1

(1)Includes cash collateral posted of $68.3 million.

(2)Includes cash collateral posted of $65.0 million.

Cash Flow Hedges

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 derivative gains related to these swap agreements reclassified from accumulated other comprehensive loss to interest expense during the three and nine months ended September 30, 2023 and 2022 were not significant. At September 30, 2023, the amount expected to be reclassified from accumulated other comprehensive loss to interest expense over the next twelve months was also not significant.