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DERIVATIVE INSTRUMENTS | 9 Months Ended
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Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The electric and natural gas companies purchase and procure energy and energy-related products, which are subject to price volatility, for their customers. The costs associated with supplying energy to customers are recoverable from customers in future rates. These regulated companies manage the risks associated with the price volatility of energy and energy-related products through the use of derivative and non-derivative contracts. Many of the derivative contracts meet the definition of, and are designated as, normal and qualify for accrual accounting under the applicable accounting guidance. The costs and benefits of derivative contracts that meet the definition of normal are recognized in Operating Expenses on the statements of income as electricity or natural gas is delivered. Derivative contracts that are not designated as normal are recorded at fair value as derivative assets or liabilities on the balance sheets. For the electric and natural gas companies, regulatory assets or regulatory liabilities are recorded to offset the fair values of derivatives, as contract settlement amounts are recovered from, or refunded to, customers in their respective energy supply rates. The gross fair values of derivative assets and liabilities with the same counterparty are offset and reported as net Derivative Assets or Derivative Liabilities, with current and long-term portions, on the balance sheets. The following table presents the gross fair values of contracts, categorized by risk type, and the net amounts recorded as current or long-term derivative assets or liabilities:
|  |  | As of September 30, 2024 |  | As of December 31, 2023
CL&P (Millions of Dollars) | Fair Value Hierarchy |  | Commodity Supply and Price Risk Management |  | Netting (1) |  | Net Amount Recorded as a Derivative |  | Commodity Supply and Price Risk Management |  | Netting (1) |  | Net Amount Recorded as a Derivative
Current Derivative Assets | Level 2 |  | $ | 15.5 |  |  | $ | (0.4) |  |  | $ | 15.1 |  |  | $ | 16.4 |  |  | $ | (0.5) |  |  | $ | 15.9 |
Long-Term Derivative Assets | Level 2 |  | 2.5 |  |  | (0.2) |  |  | 2.3 |  |  | 13.6 |  |  | (0.5) |  |  | 13.1 |
Current Derivative Liabilities | Level 2 |  | (77.5) |  |  | — |  |  | (77.5) |  |  | (81.9) |  |  | — |  |  | (81.9) |
Long-Term Derivative Liabilities | Level 2 |  | (12.5) |  |  | — |  |  | (12.5) |  |  | (68.0) |  |  | — |  |  | (68.0) |
(1) Amounts represent derivative assets and liabilities that Eversource elected to record net on the balance sheets. These amounts are subject to master netting agreements or similar agreements for which the right of offset exists. Derivative Contracts at Fair Value with Offsetting Regulatory Amounts Commodity Supply and Price Risk Management: As required by regulation, CL&P, along with UI, has capacity-related contracts with generation facilities. CL&P has a sharing agreement with UI, with 80 percent of the costs or benefits of each contract borne by or allocated to CL&P and 20 percent borne by or allocated to UI. The combined capacities of these contracts as of September 30, 2024 and December 31, 2023 were 615 MW and 682 MW, respectively. The capacity contracts extend through 2026 and obligate both CL&P and UI to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity price and the capacity market price received in the ISO-NE capacity markets. For the three months ended September 30, 2024 and 2023, there were losses of $0.5 million and $1.5 million, respectively. For the nine months ended September 30, 2024 and 2023, there were losses of $3.4 million and $1.6 million, respectively. These changes in fair value associated with CL&P’s derivative contracts are deferred in Regulatory Assets on the balance sheet. Fair Value Measurements of Derivative Instruments The fair value of derivative contracts utilizes both observable and unobservable inputs. The fair value is modeled using income techniques, such as discounted cash flow valuations adjusted for assumptions related to exit price. Valuations of derivative contracts using a discounted cash flow methodology include assumptions regarding the timing and likelihood of scheduled capacity payments and also reflect non-performance risk, including credit, using the default probability approach based on the counterparty's credit rating for assets and the Company's credit rating for liabilities. Significant observable inputs for valuations of these contracts include energy-related product prices in future years for which quoted prices in an active market exist. Valuations incorporate estimates of premiums or discounts that would be required by a market participant to arrive at an exit price, using historical market transactions adjusted for the terms of the contract. Fair value measurements were prepared by individuals with expertise in valuation techniques, pricing of energy-related products, and accounting requirements. All derivative contracts were classified as Level 2 in the fair value hierarchy as of both September 30, 2024 and December 31, 2023. The following table presents changes in the Level 3 category of derivative assets and derivative liabilities measured at fair value on a recurring basis. The derivative assets and liabilities are presented on a net basis.
CL&P |  |  | For the Three Months Ended September 30, 2023 |  | For the Nine Months Ended September 30, 2023
(Millions of Dollars) |  |  |  |  |
Derivatives, Net: |  |  |  |  |  |  |
Fair Value as of Beginning of Period |  |  |  |  | $ | (152.1) |  |  | $ | (181.8) |
Net Realized/Unrealized Losses Included in Regulatory Assets |  |  |  |  | (1.5) |  |  | (1.6) |
Settlements |  |  |  |  | 17.0 |  |  | 46.8 |
Fair Value as of End of Period |  |  |  |  | $ | (136.6) |  |  | $ | (136.6) |

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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/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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