XML 38 R20.htm IDEA: XBRL DOCUMENT v3.20.4
Risk Management Activities
 12 Months Ended
Dec. 31, 2020
Risk Management Activities [Abstract]  
Risk Management Activities Risk Management Activities
We are exposed to certain risks related to our ongoing business operations; namely commodity price risk and interest rate risk. We recognize that the prudent and selective use of derivatives may help to lower our cost of debt capital, manage interest rate exposure and limit volatility in the price of natural gas.
Risk management assets and liabilities on our derivatives are presented on the Consolidated Balance Sheets as shown below:
December 31, (in millions)
20202019
Risk Management Assets - Current(1)
Interest rate risk programs$— $— 
Commodity price risk programs10.4 0.6 
Total$10.4 $0.6 
Risk Management Assets - Noncurrent(2)
Interest rate risk programs$— $— 
Commodity price risk programs2.8 3.8 
Total$2.8 $3.8 
Risk Management Liabilities - Current
Interest rate risk programs$70.9 $— 
Commodity price risk programs7.3 12.6 
Total$78.2 $12.6 
Risk Management Liabilities - Noncurrent
Interest rate risk programs$99.5 $76.2 
Commodity price risk programs45.1 57.8 
Total$144.6 $134.0 
(1)Presented in "Prepayments and other" on the Consolidated Balance Sheets.
(2)Presented in "Deferred charges and other" on the Consolidated Balance Sheets.
Commodity Price Risk Management
We, along with our utility customers, are exposed to variability in cash flows associated with natural gas purchases and volatility in natural gas prices. We purchase natural gas for sale and delivery to our retail, commercial and industrial customers, and for most customers the variability in the market price of gas is passed through in their rates. Some of our utility subsidiaries offer programs whereby variability in the market price of gas is assumed by the respective utility. The objective of our commodity price risk programs is to mitigate the gas cost variability, for us or on behalf of our customers, associated with natural gas purchases or sales by economically hedging the various gas cost components using a combination of futures, options, forwards or other derivative contracts.
NIPSCO received IURC approval to lock in a fixed price for its natural gas customers using long-term forward purchase instruments. The term of these instruments range from five to 10 years and is limited to 20% of NIPSCO’s average annual GCA purchase volume. Gains and losses on these derivative contracts are deferred as regulatory liabilities or assets and are remitted to or collected from customers through NIPSCO’s quarterly GCA mechanism. These instruments are not designated as accounting hedges.
Interest Rate Risk Management
As of December 31, 2020, we have two forward-starting interest rate swaps with an aggregate notional value totaling $500.0 million to hedge the variability in cash flows attributable to changes in the benchmark interest rate during the periods from the effective dates of the swaps to the anticipated dates of forecasted debt issuances, which are expected to take place by the end of 2024. These interest rate swaps are designated as cash flow hedges. The gains and losses related to these swaps are recorded to AOCI and will be recognized in "Interest expense, net" concurrently with the recognition of interest expense on the associated debt, once issued. If it becomes probable that a hedged forecasted transaction will no longer occur, the accumulated gains or losses on the derivative will be recognized currently in "Other, net" in the Statements of Consolidated Income (Loss).
The passage of the TCJA and Greater Lawrence Incident led to significant changes to our long-term financing plan. As a result, during 2018, we settled forward-starting interest rate swaps with a notional value of $750.0 million. These derivative contracts were accounted for as cash flow hedges. As part of the transactions, the associated net unrealized gain of $46.2 million was recognized immediately in "Other, net" in the Statements of Consolidated Income (Loss) as it became probable the forecasted borrowing transactions would no longer occur.
There were no amounts excluded from effectiveness testing for derivatives in cash flow hedging relationships at December 31, 2020, 2019 and 2018.
Our derivative instruments measured at fair value as of December 31, 2020 and 2019 do not contain any credit-risk-related contingent features.