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Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2017
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities

In the normal course of business, DPL enters into various financial arrangements, including derivative financial instruments. We use derivatives principally to manage the risk of changes in market prices for commodities. The derivatives that we use to economically hedge these risks are governed by our risk management policies for forward and futures contracts. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. The objective of the hedging program is to mitigate financial risks while ensuring that we have adequate resources to meet our requirements. We monitor and value derivative positions monthly as part of our risk management processes. We use published sources for pricing, when possible, to mark positions to market. All of our derivative instruments are used for risk management purposes and are designated as normal purchase/normal sale, cash flow hedges or marked to market each reporting period.

At March 31, 2017, DPL had the following outstanding derivative instruments:
Commodity
 
Accounting Treatment (a)
 
Unit
 
Purchases
(in thousands)
 
Sales
(in thousands)
 
Net Purchases/ (Sales)
(in thousands)
FTRs
 
Not designated
 
MWh
 
0.9

 
—

 
0.9

Natural gas futures
 
Not designated
 
Dths
 
17,127.5

 
—

 
17,127.5

Forward power contracts
 
Designated
 
MWh
 
1,276.6

 
(6,250.9
)
 
(4,974.3
)
Forward power contracts
 
Not designated
 
MWh
 
1,727.3

 
(2,052.6
)
 
(325.3
)
Interest rate swaps
 
Designated
 
USD
 
$
200,000.0

 
$
—

 
$
200,000.0



(a)    Refers to whether the derivative instruments have been designated as a cash flow hedge.

At December 31, 2016, DPL had the following outstanding derivative instruments:
Commodity
 
Accounting Treatment (a)
 
Unit
 
Purchases
(in thousands)
 
Sales
(in thousands)
 
Net Purchases/ (Sales)
(in thousands)
FTRs
 
Not designated
 
MWh
 
2.3

 
—

 
2.3

Natural gas futures
 
Not designated
 
Dths
 
1,590.0

 
—

 
1,590.0

Forward power contracts
 
Designated
 
MWh
 
342.9

 
(9,974.5
)
 
(9,631.6
)
Forward power contracts
 
Not designated
 
MWh
 
2,568.3

 
(2,020.9
)
 
547.4

Interest rate swaps
 
Designated
 
USD
 
$
200,000.0

 
$
—

 
$
200,000.0



(a)    Refers to whether the derivative instruments have been designated as a cash flow hedge.

Cash Flow Hedges
As part of our risk management processes, we identify the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. The fair value of cash flow hedges is determined by observable market prices available as of the balance sheet dates and will continue to fluctuate with changes in market prices up to contract expiration. The effective portion of the hedging transaction is recognized in AOCI and transferred to earnings using specific identification of each contract when the forecasted hedged transaction takes place or when the forecasted hedged transaction is probable of not occurring. The ineffective portion of the cash flow hedge is recognized in earnings in the current period. All risk components were taken into account to determine the hedge effectiveness of the cash flow hedges.

We enter into forward power contracts to manage commodity price risk exposure related to our generation of electricity. We do not hedge all commodity price risk. We reclassify gains and losses on forward power contracts from AOCI into earnings in those periods in which the contracts settle.

In November 2016, we entered into two interest rate swaps to hedge the variable interest on our $200.0 million variable interest rate tax-exempt First Mortgage Bonds. The interest rate swaps have a combined notional amount of $200.0 million and will settle monthly based on a one month LIBOR. We use the income approach to value the swaps, which consists of forecasting future cash flows based on contractual notional amounts and applicable and available market data as of the valuation date. The most common market data inputs used in the income approach include volatilities, spot and forward benchmark interest rates (LIBOR). Forward rates with the same tenor as the derivative instrument being valued are generally obtained from published sources, with these forward rates being assessed quarterly at a portfolio-level for reasonableness versus comparable published rates. We reclassify gains and losses on the swaps out of AOCI and into earnings in those periods in which hedged interest payments occur.

We had previously entered into interest rate derivative contracts to manage interest rate exposure related to anticipated borrowings of fixed-rate debt. These interest rate derivative contracts were settled in the third quarter of 2013 and we continue to amortize amounts out of AOCI into interest expense.

The following table provides information for DPL concerning gains or losses recognized in AOCI for the cash flow hedges for the three months ended March 31, 2017 and 2016:
 
 
Three months ended
 
Three months ended
 
 
March 31, 2017
 
March 31, 2016
 
 
 
 
Interest
 
 
 
Interest
$ in millions (net of tax)
 
Power
 
Rate Hedge
 
Power
 
Rate Hedge
Beginning accumulated derivative gains / (losses) in AOCI
 
$
(4.3
)
 
$
17.4

 
$
9.2

 
$
17.5

Net gains associated with current period hedging transactions
 
4.9

 
0.3

 
21.5

 
—

Net gains / (losses) reclassified to earnings
 
 
 
 
 
 
Interest expense
 
—

 
(0.2
)
 
—

 
—

Revenues
 
(0.9
)
 
—

 
(11.0
)
 
—

Purchased power
 
2.1

 
—

 
2.8

 
—

Ending accumulated derivative gains in AOCI
 
$
1.8

 
$
17.5

 
$
22.5

 
$
17.5

 
 
 
 
 
 
 
 
 
Portion expected to be reclassified to earnings in the next twelve months (a)
 
$
2.0

 
$
(0.2
)
 
 
 
 
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)
 
17

 
41

 
 
 
 


(a)The actual amounts that we reclassify from AOCI to earnings related to power can differ from the estimate above due to market price changes.

Derivatives not designated as hedges
Certain derivative contracts are entered into on a regular basis as part of our risk management program but do not qualify for hedge accounting or the normal purchase and sales scope exceptions under FASC 815. Accordingly, such contracts are recorded at fair value with changes in the fair value charged or credited to the Condensed Consolidated Statements of Operations in the period in which the change occurred. This is commonly referred to as “MTM accounting.” Contracts we enter into as part of our risk management program may be settled financially, by physical delivery, or net settled with the counterparty. FTRs, natural gas futures, and certain forward power contracts are currently marked to market.

Certain qualifying derivative instruments have been designated as normal purchases or normal sales contracts, as provided under GAAP. Derivative contracts that have been designated as normal purchases or normal sales under GAAP are not subject to MTM accounting and are recognized in the Condensed Consolidated Statements of Operations on an accrual basis.

Financial Statement Effect
The following tables present the amount and classification within the Condensed Consolidated Statements of Operations of the gains and losses on DPL’s derivatives not designated as hedging instruments for the three months ended March 31, 2017 and 2016:
For the three months ended March 31, 2017
$ in millions
 
FTRs
 
Power
 
Natural Gas
 
Total
Change in unrealized loss
 
$
—

 
$
(0.1
)
 
$
(0.1
)
 
$
(0.2
)
Realized gain / (loss)
 
0.2

 
(2.6
)
 
(0.2
)
 
(2.6
)
Total
 
$
0.2

 
$
(2.7
)
 
$
(0.3
)
 
$
(2.8
)
Recorded in Income Statement: gain / (loss)
 
 
Revenues
 
$
—

 
$
(6.7
)
 
$
—

 
$
(6.7
)
Purchased power
 
0.2

 
4.0

 
(0.3
)
 
3.9

Total
 
$
0.2

 
$
(2.7
)
 
$
(0.3
)
 
$
(2.8
)


For the three months ended March 31, 2016
$ in millions
 
FTRs
 
Power
 
Natural Gas
 
Total
Change in unrealized gain / (loss)
 
$
0.1

 
$
(1.5
)
 
$
(0.2
)
 
$
(1.6
)
Realized gain / (loss)
 
0.2

 
(0.4
)
 
(0.2
)
 
(0.4
)
Total
 
$
0.3

 
$
(1.9
)
 
$
(0.4
)
 
$
(2.0
)
Recorded in Income Statement: gain / (loss)
Revenue
 
$
—

 
$
(1.1
)
 
$
—

 
$
(1.1
)
Purchased power
 
0.3

 
(0.8
)
 
(0.4
)
 
(0.9
)
Total
 
$
0.3

 
$
(1.9
)
 
$
(0.4
)
 
$
(2.0
)


DPL has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements.

The following tables summarize the derivative positions presented in the balance sheet where a right of offset exists under these arrangements and related cash collateral received or pledged. The following table presents the fair value and balance sheet classification of DPL’s derivative instruments at March 31, 2017:
Fair Values of Derivative Instruments
at March 31, 2017
 
 
 
 
 
 
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
 
 
$ in millions
 
Hedging Designation
 
Gross Fair Value as presented in the Condensed Consolidated Balance Sheets
 
Financial Instruments with Same Counterparty in Offsetting Position
 
Cash Collateral
 
Net Balance Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other prepayments and current assets)
 
 
Forward power contracts
 
Designated
 
$
12.7

 
$
(8.6
)
 
$
—

 
$
4.1

Forward power contracts
 
Not designated
 
6.1

 
(5.5
)
 
—

 
0.6

Natural gas futures
 
Not designated
 
0.3

 
(0.2
)
 
—

 
0.1

 
 
 
 
 
 
 
 
 
 
 
Long-term derivative positions (presented in Other deferred assets)
Interest rate swap
 
Designated
 
1.4

 
—

 
—

 
1.4

Forward power contracts
 
Not designated
 
0.1

 
(0.1
)
 
—

 
—

Total assets
 
 
 
$
20.6

 
$
(14.4
)
 
$
—

 
$
6.2

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other current liabilities)
Forward power contracts
 
Designated
 
$
9.7

 
$
(8.6
)
 
$
—

 
$
1.1

Interest rate swap
 
Designated
 
0.3

 
—

 
—

 
0.3

Forward power contracts
 
Not designated
 
8.1

 
(5.5
)
 
(0.1
)
 
2.5

Natural gas futures
 
Not designated
 
0.2

 
(0.2
)
 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
Long-term derivative positions (presented in Other deferred credits)
Forward power contracts
 
Designated
 
0.1

 
—

 
(0.1
)
 
—

Natural gas futures
 
Not designated
 
0.3

 
—

 
(0.3
)
 
—

Forward power contracts
 
Not designated
 
0.2

 
(0.1
)
 
—

 
0.1

Total liabilities
 
 
 
$
18.9

 
$
(14.4
)
 
$
(0.5
)
 
$
4.0



The following table presents the fair value and balance sheet classification of DPL’s derivative instruments at December 31, 2016:
Fair Values of Derivative Instruments
at December 31, 2016
 
 
 
 
 
 
Gross Amounts Not Offset in the Condensed Consolidated
Balance Sheets
 
 
$ in millions
 
Hedging Designation
 
Gross Fair Value as presented in the Condensed Consolidated Balance Sheets
 
Financial Instruments with Same Counterparty in Offsetting Position
 
Cash Collateral
 
Net Balance Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other prepayments and current assets)
 
 
 
 
Forward power contracts
 
Designated
 
$
11.0

 
$
(10.5
)
 
$
—

 
$
0.5

Forward power contracts
 
Not designated
 
6.0

 
(4.7
)
 
—

 
1.3

FTRs
 
Not designated
 
0.1

 
—

 
—

 
0.1

Long-term derivative positions (presented in Other deferred assets)
Interest rate swaps
 
Designated
 
1.2

 
—

 
—

 
1.2

Forward power contracts
 
Designated
 
0.6

 
(0.6
)
 
—

 
—

Forward power contracts
 
Not designated
 
1.9

 
(1.0
)
 
—

 
0.9

Total assets
 
 
 
$
20.8

 
$
(16.8
)
 
$
—

 
$
4.0

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other current liabilities)
 
 
 
 
Interest rate swaps
 
Designated
 
$
0.7

 
$
—

 
$
—

 
$
0.7

Forward power contracts
 
Designated
 
16.4

 
(10.5
)
 
(5.5
)
 
0.4

Forward power contracts
 
Not designated
 
7.7

 
(4.7
)
 
—

 
3.0

Long-term derivative positions (presented in Other deferred credits)
 
 
 
 
Forward power contracts
 
Designated
 
2.4

 
(0.6
)
 
(0.8
)
 
1.0

Forward power contracts
 
Not designated
 
2.0

 
(1.0
)
 
—

 
1.0

Total liabilities
 
 
 
$
29.2

 
$
(16.8
)
 
$
(6.3
)
 
$
6.1



Credit risk-related contingent features
Certain of our OTC commodity derivative contracts are under master netting agreements that contain provisions that require us to post collateral if our credit ratings drop below certain thresholds. We have crossed that threshold with one counterparty to the derivative instruments and they could request that we post collateral of $0.9 million at this time.

The aggregate fair value of DPL’s commodity derivative instruments that were in a MTM loss position at March 31, 2017 was $18.9 million. $0.5 million of collateral was posted directly with third parties and in a broker margin account which offsets our loss positions on the forward contracts. This liability position is further offset by the asset position of counterparties with master netting agreements of $14.4 million. Since our debt is below investment grade, we could have to post collateral for the remaining $4.0 million.
THE DAYTON POWER AND LIGHT COMPANY [Member]  
Derivative Instruments and Hedging Activities Disclosures [Line Items]  
Derivative Instruments and Hedging Activities
Derivative Instruments and Hedging Activities

In the normal course of business, DP&L enters into various financial arrangements, including derivative financial instruments. We use derivatives principally to manage the risk of changes in market prices for commodities. The derivatives that we use to economically hedge these risks are governed by our risk management policies for forward and futures contracts. Our net positions are continually assessed within our structured hedging programs to determine whether new or offsetting transactions are required. The objective of the hedging program is to mitigate financial risks while ensuring that we have adequate resources to meet our requirements. We monitor and value derivative positions monthly as part of our risk management processes. We use published sources for pricing, when possible, to mark positions to market. All of our derivative instruments are used for risk management purposes and are designated as normal purchase/normal sale, cash flow hedges or marked to market each reporting period.

At March 31, 2017, DP&L had the following outstanding derivative instruments:
Commodity
 
Accounting Treatment (a)
 
Unit
 
Purchases
(in thousands)
 
Sales
(in thousands)
 
Net Purchases/ (Sales)
(in thousands)
FTRs
 
Not designated
 
MWh
 
0.9

 
—

 
0.9

Natural gas futures
 
Not designated
 
Dths
 
17,127.5

 
—

 
17,127.5

Forward power contracts
 
Designated
 
MWh
 
1,276.6

 
(6,250.9
)
 
(4,974.3
)
Forward power contracts
 
Not designated
 
MWh
 
1,727.3

 
(2,057.9
)
 
(330.6
)
Interest rate swaps
 
Designated
 
USD
 
$
200,000.0

 
$
—

 
$
200,000.0



(a)    Refers to whether the derivative instruments have been designated as a cash flow hedge.

At December 31, 2016, DP&L had the following outstanding derivative instruments:
Commodity
 
Accounting Treatment (a)
 
Unit
 
Purchases
(in thousands)
 
Sales
(in thousands)
 
Net Purchases/ (Sales)
(in thousands)
FTRs
 
Not designated
 
MWh
 
2.3

 
—

 
2.3

Natural gas futures
 
Not designated
 
Dths
 
1,590.0

 
—

 
1,590.0

Forward power contracts
 
Designated
 
MWh
 
342.9

 
(9,974.5
)
 
(9,631.6
)
Forward power contracts
 
Not designated
 
MWh
 
2,568.3

 
(2,037.5
)
 
530.8

Interest rate swaps
 
Designated
 
USD
 
$
200,000.0

 
$
—

 
$
200,000.0



(a)    Refers to whether the derivative instruments have been designated as a cash flow hedge.

Cash Flow Hedges
As part of our risk management processes, we identify the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. The fair value of cash flow hedges is determined by observable market prices available as of the balance sheet dates and will continue to fluctuate with changes in market prices up to contract expiration. The effective portion of the hedging transaction is recognized in AOCI and transferred to earnings using specific identification of each contract when the forecasted hedged transaction takes place or when the forecasted hedged transaction is probable of not occurring. The ineffective portion of the cash flow hedge is recognized in earnings in the current period. All risk components were taken into account to determine the hedge effectiveness of the cash flow hedges.

We enter into forward power contracts to manage commodity price risk exposure related to our generation of electricity. We do not hedge all commodity price risk. We reclassify gains and losses on forward power contracts from AOCI into earnings in those periods in which the contracts settle.

In November 2016, we entered into two interest rate swaps to hedge the variable interest on our $200.0 million variable interest rate tax-exempt First Mortgage Bonds. The interest rate swaps have a combined notional amount of $200.0 million and will settle monthly based on a one month LIBOR. We use the income approach to value the swaps, which consists of forecasting future cash flows based on contractual notional amounts and applicable and available market data as of the valuation date. The most common market data inputs used in the income approach include volatilities, spot and forward benchmark interest rates (LIBOR). Forward rates with the same tenor as the derivative instrument being valued are generally obtained from published sources, with these forward rates being assessed quarterly at a portfolio-level for reasonableness versus comparable published rates. We reclassify gains and losses on the swaps out of AOCI and into earnings in those periods in which hedged interest payments occur.

The following table provides information for DP&L concerning gains or losses recognized in AOCI for the cash flow hedges for the three months ended March 31, 2017 and 2016:
 
 
Three months ended
 
Three months ended
 
 
March 31, 2017
 
March 31, 2016
 
 
 
 
Interest
 
 
 
Interest
$ in millions (net of tax)
 
Power
 
Rate Hedge
 
Power
 
Rate Hedge
Beginning accumulated derivative gains / (losses) in AOCI
 
$
(4.3
)
 
$
1.6

 
$
9.2

 
$
2.0

Net gains associated with current period hedging transactions
 
4.9

 
0.3

 
21.5

 
—

Net gains / (losses) reclassified to earnings
 
 
 
 
 
 
 
 
Interest expense
 
—

 
(0.2
)
 
—

 
(0.2
)
Revenues
 
(0.9
)
 
—

 
(11.0
)
 
—

Purchased power
 
2.1

 
—

 
2.8

 
—

Ending accumulated derivative gains in AOCI
 
$
1.8

 
$
1.7

 
$
22.5

 
$
1.8

 
 
 
 
 
 
 
 
 
Portion expected to be reclassified to earnings in the next twelve months (a)
 
$
2.0

 
$
(0.2
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)
 
17

 
41

 
 
 
 


(a)
The actual amounts that we reclassify from AOCI to earnings related to power can differ from the estimate above due to market price changes.

Derivatives not designated as hedges
Certain derivative contracts are entered into on a regular basis as part of our risk management program but do not qualify for hedge accounting or the normal purchase and sales scope exceptions under FASC 815. Accordingly, such contracts are recorded at fair value with changes in the fair value charged or credited to the Condensed Statements of Operations in the period in which the change occurred. This is commonly referred to as “MTM accounting.” Contracts we enter into as part of our risk management program may be settled financially, by physical delivery, or net settled with the counterparty. FTRs, natural gas futures, and certain forward power contracts are currently marked to market.

Certain qualifying derivative instruments have been designated as normal purchases or normal sales contracts, as provided under GAAP. Derivative contracts that have been designated as normal purchases or normal sales under GAAP are not subject to MTM accounting and are recognized in the Condensed Statements of Operations on an accrual basis.

Financial Statement Effect
The following tables present the amount and classification within the Condensed Statements of Operations of the gains and losses on DP&L's derivatives not designated as hedging instruments for the three months ended March 31, 2017 and 2016:
For the three months ended March 31, 2017
$ in millions
 
FTRs
 
Power
 
Natural Gas
 
Total
Change in unrealized loss
 
$
—

 
$
(0.1
)
 
$
(0.1
)
 
$
(0.2
)
Realized gain / (loss)
 
0.2

 
(2.6
)
 
(0.2
)
 
(2.6
)
Total
 
$
0.2

 
$
(2.7
)
 
$
(0.3
)
 
$
(2.8
)
Recorded in Income Statement: gain / (loss)
 
 
Revenues
 
$
—

 
$
(6.7
)
 
$
—

 
$
(6.7
)
Purchased power
 
0.2

 
4.0

 
(0.3
)
 
3.9

Total
 
$
0.2

 
$
(2.7
)
 
$
(0.3
)
 
$
(2.8
)


For the three months ended March 31, 2016
$ in millions
 
FTRs
 
Power
 
Natural Gas
 
Total
Change in unrealized gain / (loss)
 
$
0.1

 
$
(1.9
)
 
(0.2
)
 
$
(2.0
)
Realized gain / (loss)
 
0.2

 
(0.3
)
 
(0.2
)
 
(0.3
)
Total
 
$
0.3

 
$
(2.2
)
 
$
(0.4
)
 
$
(2.3
)
Recorded in Income Statement: gain / (loss)
 
 
Revenues
 
—

 
(1.4
)
 
—

 
(1.4
)
Purchased power
 
0.3

 
(0.8
)
 
(0.4
)
 
(0.9
)
Total
 
$
0.3

 
$
(2.2
)
 
$
(0.4
)
 
$
(2.3
)


DP&L has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements.

The following tables summarize the derivative positions presented in the balance sheet where a right of offset exists under these arrangements and related cash collateral received or pledged. The following table presents the fair value and balance sheet classification of DP&L’s derivative instruments at March 31, 2017:
Fair Values of Derivative Instruments
at March 31, 2017
 
 
 
 
 
 
Gross Amounts Not Offset in the Condensed Balance Sheets
 
 
$ in millions
 
Hedging Designation
 
Gross Fair Value as presented in the Condensed Balance Sheets
 
Financial Instruments with Same Counterparty in Offsetting Position
 
Cash Collateral
 
Net Balance Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other prepayments and current assets)
Forward power contracts
 
Designated
 
$
12.7

 
$
(8.6
)
 
$
—

 
$
4.1

Forward power contracts
 
Not designated
 
6.2

 
(5.5
)
 
—

 
0.7

Natural gas futures
 
Not designated
 
0.3

 
(0.2
)
 
—

 
0.1

 
 
 
 
 
 
 
 
 
 
 
Long-term derivative positions (presented in Other deferred assets)
Interest rate swaps
 
Designated
 
1.4

 
—

 
—

 
1.4

Forward power contracts
 
Not designated
 
0.1

 
(0.1
)
 
—

 
—

Total assets
 
 
 
$
20.7

 
$
(14.4
)
 
$
—

 
$
6.3

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other current liabilities)
Forward power contracts
 
Designated
 
$
9.7

 
$
(8.6
)
 
$
—

 
$
1.1

Interest rate swaps
 
Designated
 
0.3

 
—

 
—

 
0.3

Forward power contracts
 
Not designated
 
8.1

 
(5.5
)
 
(0.1
)
 
2.5

Natural gas futures
 
Not designated
 
0.2

 
(0.2
)
 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
Long-term derivative positions (presented in Other deferred credits)
Forward power contracts
 
Designated
 
0.1

 
—

 
(0.1
)
 
—

Natural gas futures
 
Not designated
 
0.3

 
—

 
(0.3
)
 
—

Forward power contracts
 
Not designated
 
0.2

 
(0.1
)
 
—

 
0.1

Total liabilities
 
 
 
$
18.9

 
$
(14.4
)
 
$
(0.5
)
 
$
4.0



The following table presents the fair value and balance sheet classification of DP&L’s derivative instruments at December 31, 2016:
Fair Values of Derivative Instruments
at December 31, 2016
 
 
 
 
 
 
Gross Amounts Not Offset in the Condensed Balance Sheets
 
 
$ in millions
 
Hedging Designation
 
Gross Fair Value as presented in the Condensed Balance Sheets
 
Financial Instruments with Same Counterparty in Offsetting Position
 
Cash Collateral
 
Net Balance Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other prepayments and current assets)
Forward power contracts
 
Designated
 
$
11.0

 
$
(10.5
)
 
$
—

 
$
0.5

Forward power contracts
 
Not designated
 
6.0

 
(4.7
)
 
—

 
1.3

FTRs
 
Not designated
 
0.1

 
—

 
—

 
0.1

 
 
 
 
 
 
 
 
 
 
 
Long-term derivative positions (presented in Other deferred assets)
Interest rate swaps
 
Designated
 
1.2

 
—

 
—

 
1.2

Forward power contracts
 
Designated
 
0.6

 
(0.6
)
 
—

 
—

Forward power contracts
 
Not designated
 
1.9

 
(1.0
)
 
—

 
0.9

Total assets
 
 
 
$
20.8

 
$
(16.8
)
 
$
—

 
$
4.0

 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other current liabilities)
Forward power contracts
 
Designated
 
$
16.4

 
$
(10.5
)
 
$
(5.5
)
 
$
0.4

Interest rate swaps
 
Designated
 
0.7

 
—

 
—

 
0.7

Forward power contracts
 
Not designated
 
7.7

 
(4.7
)
 
—

 
3.0

 
 
 
 
 
 
 
 
 
 
 
Long-term derivative positions (presented in Other deferred credits)
Forward power contracts
 
Designated
 
2.4

 
(0.6
)
 
(0.8
)
 
1.0

Forward power contracts
 
Not designated
 
2.0

 
(1.0
)
 
—

 
1.0

Total liabilities
 
 
 
$
29.2

 
$
(16.8
)
 
$
(6.3
)
 
$
6.1



Credit risk-related contingent features
Certain of our OTC commodity derivative contracts are under master netting agreements that contain provisions that require us to post collateral if our credit ratings drop below certain thresholds. We have crossed that threshold with one counterparty to the derivative instruments and they could request that we post collateral of $0.9 million at this time.

The aggregate fair value of DP&L’s commodity derivative instruments that were in a MTM loss position at March 31, 2017 was $18.9 million. $0.5 million of collateral was posted directly with third parties and in a broker margin account which offsets our loss positions on the forward contracts. This liability position is further offset by the asset position of counterparties with master netting agreements of $14.4 million. Since our debt is below investment grade, we could have to post collateral for the remaining $4.0 million.