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DERIVATIVE INSTRUMENTS | 9 Months Ended
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Sep. 30, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS 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. None of our derivatives are designated as hedging instruments, with the exception of our interest rate swaps, which have been designated as cash flow hedges. The following table shows our derivative assets and derivative liabilities:
|  | September 30, 2018 |  | December 31, 2017
(in millions) |  | Derivative Assets |  | Derivative Liabilities |  | Derivative Assets |  | Derivative Liabilities
Other current |  |  |  |  |  |  |  |
Natural gas contracts |  | $ | 9.7 |  |  | $ | 4.5 |  |  | $ | 5.6 |  |  | $ | 9.4 |
Petroleum products contracts |  | — |  |  | — |  |  | 1.2 |  |  | — |
FTRs |  | 11.5 |  |  | — |  |  | 4.4 |  |  | — |
Coal contracts |  | 0.4 |  |  | — |  |  | 0.6 |  |  | 0.6 |
Total other current * |  | $ | 21.6 |  |  | $ | 4.5 |  |  | $ | 11.8 |  |  | $ | 10.0 |
Other long-term |  |  |  |  |  |  |  |
Natural gas contracts |  | $ | 0.2 |  |  | $ | 0.4 |  |  | $ | 0.1 |  |  | $ | 1.4 |
Coal contracts |  | 0.4 |  |  | — |  |  | 0.5 |  |  | 0.2 |
Interest rate swaps |  | 0.8 |  |  | — |  |  | — |  |  | — |
Total other long-term * |  | $ | 1.4 |  |  | $ | 0.4 |  |  | $ | 0.6 |  |  | $ | 1.6 |
Total |  | $ | 23.0 |  |  | $ | 4.9 |  |  | $ | 12.4 |  |  | $ | 11.6 |
* | On our balance sheets, we classify derivative assets and liabilities as other current or other long-term based on the maturities of the underlying contracts.
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 September 30, 2018 |  | Three Months Ended September 30, 2017
(in millions) |  | Volumes |  | Gains |  | Volumes |  | Gains (Losses)
Natural gas contracts |  | 36.7 Dth |  | $ | 0.4 |  |  | 24.9 Dth |  | $ | (2.1 | )
Petroleum products contracts |  | 1.3 gallons |  | 0.5 |  |  | 4.4 gallons |  | (0.5 | )
FTRs |  | 7.9 MWh |  | 7.1 |  |  | 9.4 MWh |  | 4.2 |
Total |  |  |  | $ | 8.0 |  |  |  |  | $ | 1.6 |
|  | Nine Months Ended September 30, 2018 |  | Nine Months Ended September 30, 2017
(in millions) |  | Volumes |  | Gains (Losses) |  | Volumes |  | Gains (Losses)
Natural gas contracts |  | 124.7 Dth |  | $ | (7.1 | ) |  | 84.2 Dth |  | $ | (1.1 | )
Petroleum products contracts |  | 5.1 gallons |  | 1.3 |  |  | 14.2 gallons |  | (1.4 | )
FTRs |  | 22.9 MWh |  | 14.7 |  |  | 28.0 MWh |  | 9.4 |
Total |  |  |  | $ | 8.9 |  |  |  |  | $ | 6.9 |
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, 2018 and December 31, 2017, we had posted cash collateral of $6.8 million and $16.2 million, respectively, in our margin accounts. These amounts were recorded on our balance sheets in other current assets. At September 30, 2018, we had also received cash collateral of $0.1 million in our margin accounts. This amount was recorded on our balance sheet in other current liabilities. We had not received any cash collateral at December 31, 2017. The following table shows derivative assets and derivative liabilities if derivative instruments by counterparty were presented net on our balance sheets:
|  | September 30, 2018 |  | December 31, 2017
(in millions) |  | Derivative Assets |  | Derivative Liabilities |  | Derivative Assets |  | Derivative Liabilities
Gross amount recognized on the balance sheet |  | $ | 23.0 |  |  | $ | 4.9 |  |  | $ | 12.4 |  |  | $ | 11.6 |  |
Gross amount not offset on the balance sheet |  | (3.7 | ) | (1) | (3.6 | ) |  | (4.9 | ) |  | (9.0 | ) | (2)
Net amount |  | $ | 19.3 |  |  | $ | 1.3 |  |  | $ | 7.5 |  |  | $ | 2.6 |  |
(1) | Includes cash collateral received of $0.1 million.
(2) | Includes cash collateral posted of $4.1 million.
Certain of our derivative and nonderivative commodity instruments contain provisions that could require "adequate assurance" in the event of a material change in our creditworthiness, or the posting of additional collateral for instruments in net liability positions, if triggered by a decrease in credit ratings. We did not have any derivative instruments with specific credit risk-related contingent features that were in a net liability position at September 30, 2018. The aggregate fair value of all derivative instruments with these features that were in a net liability position at December 31, 2017 was $3.7 million. At December 31, 2017, we had not posted any collateral related to the credit risk-related contingent features of these commodity instruments. If all of the credit risk-related contingent features contained in derivative instruments in a net liability position had been triggered at December 31, 2017, we would have been required to post collateral of $2.7 million. Cash Flow Hedges In July 2018, we executed two interest rate swap agreements with a combined notional value of $250.0 million to hedge the variable interest rate risk associated with our 2007 Junior Notes. The swap agreements will provide a fixed interest rate of 4.9765% on $250.0 million of the $500.0 million of outstanding 2007 Junior Notes through November 15, 2021. As these agreements qualified for cash flow hedge accounting treatment, the related gains and losses are being deferred in accumulated other comprehensive income (OCI) and are being amortized to interest expense as interest is accrued on the 2007 Junior Notes. During 2015, we settled several forward interest rate swap agreements entered into to mitigate interest rate risk associated with the issuance of $1.2 billion of long-term debt related to the acquisition of Integrys. As these agreements qualified for cash flow hedge accounting treatment, the proceeds of $19.0 million received upon settlement were deferred in accumulated OCI and are being amortized as a decrease to 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 recorded in OCI and in earnings:
|  | Three Months Ended September 30 |  | Nine Months Ended September 30
(in millions) |  | 2018 |  | 2017 |  | 2018 |  | 2017
Amount of net derivative gain recognized in OCI |  | $ | 0.4 |  |  | $ | — |  |  | $ | 0.4 |  |  | $ | — |
Amount of net derivative gain reclassified from accumulated OCI to interest expense |  | 0.2 |  |  | 0.6 |  |  | 1.3 |  |  | 1.7 |
We estimate that during the next twelve months, $1.6 million will be reclassified from accumulated OCI as a reduction to interest expense.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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