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Financial Instruments | 6 Months Ended
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Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Instruments | Financial Instruments We currently use financial instruments to mitigate commodity price risk and interest rate risk. The objectives and strategies for using financial instruments and the related accounting for these financial instruments are fully described in Notes 2 and 13 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017. During the six months ended March 31, 2018, there were no material changes in our objectives, strategies and accounting for using financial instruments. Our financial instruments do not contain any credit-risk-related or other contingent features that could cause payments to be accelerated when our financial instruments are in net liability positions. The following summarizes those objectives and strategies. Commodity Risk Management Activities Our purchased gas cost adjustment mechanisms essentially insulate our distribution segment from commodity price risk; however, our customers are exposed to the effects of volatile natural gas prices. We manage this exposure through a combination of physical storage, fixed-price forward contracts and financial instruments, primarily over-the-counter swap and option contracts, in an effort to minimize the impact of natural gas price volatility on our customers during the winter heating season. We typically seek to hedge between 25 and 50 percent of anticipated heating season gas purchases using financial instruments. For the 2017-2018 heating season (generally October through March), in the jurisdictions where we are permitted to utilize financial instruments, we hedged approximately 26 percent, or 15.0 Bcf of the winter flowing gas requirements. We have not designated these financial instruments as hedges for accounting purposes. Interest Rate Risk Management Activities We periodically manage interest rate risk by entering into financial instruments to effectively fix the Treasury yield component of the interest cost associated with anticipated financings. As of March 31, 2018, we had forward starting interest rate swaps to effectively fix the Treasury yield component associated with the anticipated issuance of $450 million unsecured senior notes in fiscal 2019 at 3.78%, which we designated as a cash flow hedge at the time the swaps were executed. As of March 31, 2018, we had $49.1 million of net realized losses in accumulated other comprehensive income (AOCI) associated with the settlement of financial instruments used to fix the Treasury yield component of the interest cost of financing various issuances of long-term debt and senior notes, which will be recognized as a component of interest expense over the life of the associated notes from the date of settlement. The remaining amortization periods for these settled amounts extend through fiscal 2045. Quantitative Disclosures Related to Financial Instruments The following tables present detailed information concerning the impact of financial instruments on our condensed consolidated balance sheet and income statements. As of March 31, 2018, our financial instruments were comprised of both long and short commodity positions. A long position is a contract to purchase the commodity, while a short position is a contract to sell the commodity. As of March 31, 2018, we had 6,251 MMcf of net short commodity contracts outstanding. These contracts have not been designated as hedges. Financial Instruments on the Balance Sheet The following tables present the fair value and balance sheet classification of our financial instruments as of March 31, 2018 and September 30, 2017. The gross amounts of recognized assets and liabilities are netted within our unaudited Condensed Consolidated Balance Sheets to the extent that we have netting arrangements with our counterparties.
| Balance Sheet Location |  | Assets |  | Liabilities
|  |  | (In thousands)
March 31, 2018 |  |  |  |  |
Designated As Hedges: |  |  |  |  |
Interest rate contracts | Other current assets / Other current liabilities |  | $ | — |  |  | $ | (85,948 | )
Total |  |  | — |  |  | (85,948 | )
Not Designated As Hedges: |  |  |  |  |
Commodity contracts | Other current assets / Other current liabilities |  | 602 |  |  | (996 | )
Total |  |  | 602 |  |  | (996 | )
Gross Financial Instruments |  |  | 602 |  |  | (86,944 | )
Gross Amounts Offset on Consolidated Balance Sheet: |  |  |  |  |
Contract netting |  |  | — |  |  | — |
Net Financial Instruments |  |  | 602 |  |  | (86,944 | )
Cash collateral |  |  | — |  |  | — |
Net Assets/Liabilities from Risk Management Activities |  |  | $ | 602 |  |  | $ | (86,944 | )
| Balance Sheet Location |  | Assets |  | Liabilities
|  |  | (In thousands)
September 30, 2017 |  |  |  |  |
Designated As Hedges: |  |  |  |  |
Interest rate contracts | Deferred charges and other assets / Deferred credits and other liabilities |  | $ | — |  |  | $ | (112,076 | )
Total |  |  | — |  |  | (112,076 | )
Not Designated As Hedges: |  |  |  |  |
Commodity contracts | Other current assets / Other current liabilities |  | 2,436 |  |  | (322 | )
Commodity contracts | Deferred charges and other assets / Deferred credits and other liabilities |  | 803 |  |  | — |
Total |  |  | 3,239 |  |  | (322 | )
Gross Financial Instruments |  |  | 3,239 |  |  | (112,398 | )
Gross Amounts Offset on Consolidated Balance Sheet: |  |  |  |  |
Contract netting |  |  | — |  |  | — |
Net Financial Instruments |  |  | 3,239 |  |  | (112,398 | )
Cash collateral |  |  | — |  |  | — |
Net Assets/Liabilities from Risk Management Activities |  |  | $ | 3,239 |  |  | $ | (112,398 | )
Impact of Financial Instruments on the Income Statement Cash Flow Hedges As discussed above, our distribution segment has interest rate swap agreements, which we designated as a cash flow hedge at the time the swaps were executed. The net loss on settled interest rate agreements reclassified from AOCI into interest charges on our condensed consolidated statements of income for the three months ended March 31, 2018 and 2017 was $0.6 million and $0.1 million and for the six months ended March 31, 2018 and 2017 was $1.2 million and $0.3 million. The following table summarizes the gains and losses arising from hedging transactions that were recognized as a component of other comprehensive income (loss), net of taxes, for the three and six months ended March 31, 2018 and 2017. The amounts included in the table below exclude gains and losses arising from ineffectiveness because those amounts are immediately recognized in the income statement as incurred.
| Three Months Ended March 31 |  | Six Months Ended March 31
| 2018 |  | 2017 (1) |  | 2018 |  | 2017 (1)
| (In thousands)
Increase in fair value: |  |  |  |  |  |  |
Interest rate agreements | $ | 21,786 |  |  | $ | 4,144 |  |  | $ | 20,454 |  |  | $ | 95,271 |
Forward commodity contracts(2) | — |  |  | — |  |  | — |  |  | 9,847 |
Recognition of (gains) losses in earnings due to settlements: |  |  |  |  |  |  |
Interest rate agreements | 458 |  |  | 86 |  |  | 835 |  |  | 173 |
Forward commodity contracts(2) | — |  |  | — |  |  | — |  |  | (4,865 | )
Total other comprehensive income from hedging, net of tax | $ | 22,244 |  |  | $ | 4,230 |  |  | $ | 21,289 |  |  | $ | 100,426 |
(1) | Utilizing an income tax rate ranging from 37 percent to 39 percent based on the effective rates in each taxing jurisdiction for the three and six-month period ended March 31, 2017.
(2) | Due to the sale of AEM, these amounts are included in income from discontinued operations.
Deferred gains (losses) recorded in AOCI associated with our interest rate agreements are recognized in earnings as they are amortized over the terms of the underlying debt instruments. The following amounts, net of deferred taxes, represent the expected recognition in earnings, as of March 31, 2018, of the deferred losses recorded in AOCI associated with our financial instruments, based upon the fair values of these financial instruments at the date of settlement. However, the table below does not include the expected recognition in earnings of our outstanding interest rate agreements as those instruments have not yet settled.
| Interest Rate Agreements
| (In thousands)
Next twelve months | $ | (1,833 | )
Thereafter | (47,281 | )
Total | $ | (49,114 | )
Financial Instruments Not Designated as Hedges As discussed above, financial instruments used in our distribution segment are not designated as hedges. However, there is no earnings impact on our distribution segment as a result of the use of these financial instruments because the gains and losses arising from the use of these financial instruments are recognized in the consolidated statement of income as a component of purchased gas cost when the related costs are recovered through our rates and recognized in revenue. Accordingly, the impact of these financial instruments is excluded from this presentation.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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