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Financial Instruments | 3 Months Ended
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Dec. 31, 2022
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 15 to the consolidated financial statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. During the three months ended December 31, 2022, 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 2022-2023 heating season (generally October through March), in the jurisdictions where we are permitted to utilize financial instruments, we anticipate hedging approximately 32 percent, or 17.7 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 manage interest rate risk by periodically entering into financial instruments to effectively fix the Treasury yield component of the interest cost associated with anticipated financings. The following table summarizes our existing forward starting interest rate swaps as of December 31, 2022. These swaps were designated as cash flow hedges at the time the agreements were executed.
Planned Debt Issuance Date |  | Amount Hedged |  |
|  | (In thousands) |  |
Fiscal 2024 |  | $ | 450,000 |  |  |
Fiscal 2025 |  | 600,000 |  |  |
Fiscal 2026 |  | 300,000 |  |  |
|  | $ | 1,350,000 |  |  |
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 statements of comprehensive income. As of December 31, 2022, 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 December 31, 2022, we had 12,039 MMcf of net long 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 December 31, 2022 and September 30, 2022. 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. However, as of December 31, 2022 and September 30, 2022, no gross amounts and no cash collateral were netted within our consolidated balance sheet.
|  |  | December 31, 2022
| Balance Sheet Location |  | Assets |  | Liabilities
|  |  | (In thousands)
Designated As Hedges: |  |  |  |  |
Interest rate contracts | Other current assets / Other current liabilities |  | $ | 107,834 |  |  | $ | — |
Interest rate contracts | Deferred charges and other assets / Deferred credits and other liabilities |  | 276,451 |  |  | — |
Total |  |  | 384,285 |  |  | — |
Not Designated As Hedges: |  |  |  |  |
Commodity contracts | Other current assets / Other current liabilities |  | 3,255 |  |  | (10,443) |
Commodity contracts | Deferred charges and other assets / Deferred credits and other liabilities |  | 316 |  |  | (1,597) |
Total |  |  | 3,571 |  |  | (12,040) |
Gross / Net Financial Instruments |  |  | $ | 387,856 |  |  | $ | (12,040) |
|  |  | September 30, 2022
| Balance Sheet Location |  | Assets |  | Liabilities
|  |  | (In thousands)
Designated As Hedges: |  |  |  |  |
Interest rate contracts | Deferred charges and other assets / Deferred credits and other liabilities |  | $ | 355,075 |  |  | $ | — |
Total |  |  | 355,075 |  |  | — |
Not Designated As Hedges: |  |  |  |  |
Commodity contracts | Other current assets / Other current liabilities |  | 26,207 |  |  | (3,000) |
Commodity contracts | Deferred charges and other assets / Deferred credits and other liabilities |  | 709 |  |  | (1,129) |
Total |  |  | 26,916 |  |  | (4,129) |
Gross / Net Financial Instruments |  |  | $ | 381,991 |  |  | $ | (4,129) |
Impact of Financial Instruments on the Statement of Comprehensive Income Cash Flow Hedges As discussed above, our distribution segment has interest rate agreements, which we designated as cash flow hedges at the time the agreements were executed. The net (gain) loss on settled interest rate agreements reclassified from AOCI into interest charges on our condensed consolidated statements of comprehensive income for the three months ended December 31, 2022 and 2021 was $(0.7) million and $1.0 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 months ended December 31, 2022 and 2021. The amounts included in the table below exclude gains and losses arising from ineffectiveness because those amounts are immediately recognized in the statement of comprehensive income as incurred.
| Three Months Ended December 31 |  |
| 2022 |  | 2021 |  |  |  |
| (In thousands)
Increase (decrease) in fair value: |  |  |  |  |  |  |
Interest rate agreements | $ | 22,661 |  |  | $ | (46,622) |  |  |  |  |
Recognition of (gains) losses in earnings due to settlements: |  |  |  |  |  |  |
Interest rate agreements | (530) |  |  | 744 |  |  |  |  |
Total other comprehensive income (loss) from hedging, net of tax | $ | 22,131 |  |  | $ | (45,878) |  |  |  |  |
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. As of December 31, 2022, we had $93.6 million of net realized gains in AOCI associated with our interest rate agreements. The following amounts, net of deferred taxes, represent the expected recognition in earnings of the deferred net gains recorded in AOCI associated with our interest rate agreements, based upon the fair values of these agreements at the date of settlement. The remaining amortization periods for these settled amounts extend through fiscal 2053. However, the table below does not include the expected recognition in earnings of our outstanding interest rate swaps as those instruments have not yet settled.
| Interest Rate Agreements
| (In thousands)
Next twelve months | $ | 2,120 |
Thereafter | 91,497 |
Total | $ | 93,617 |
Financial Instruments Not Designated as Hedges As discussed above, commodity contracts which are 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 comprehensive 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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