Risk Management Activities

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

We are exposed to certain risks relating 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 our interest rate exposure and limit volatility in the price of natural gas.

Risk management assets and liabilities on our derivatives are presented on the Condensed Consolidated Balance Sheets (unaudited) as shown below:


	June 30, 2022				December 31, 2021
(in millions)	Assets		Liabilities		Assets		Liabilities
Current(1)
Derivatives designated as hedging instruments	$	—	$	9.5	$	—	$	136.4
Derivatives not designated as hedging instruments	33.7		0.5		10.6		0.4
Total	$	33.7	$	10.0	$	10.6	$	136.8
Noncurrent(2)
Derivatives designated as hedging instruments	$	—	$	—	$	—	$	—
Derivatives not designated as hedging instruments	71.9		1.5		13.8		7.4
Total	$	71.9	$	1.5	$	13.8	$	7.4

(1)Current assets and liabilities are presented in "Prepayments and other" and "Other accruals", respectively, on the Condensed Consolidated Balance Sheets (unaudited).

(2)Noncurrent assets and liabilities are presented in "Deferred charges and other" and "Other noncurrent liabilities", respectively, on the Condensed Consolidated Balance Sheets (unaudited).

Derivatives Not Designated as Hedging Instruments

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. At June 30, 2022 and December 31, 2021, we had 112.3 MMDth and 124.5 MMDth, respectively, of net energy derivative volumes outstanding related to our natural gas hedges.

NIPSCO has received IURC approval to lock in a fixed price for its natural gas customers using long-term forward purchase instruments and is limited to 20% of NIPSCO's average annual GCA purchase volume. As of June 30, 2022, the remaining terms of these instruments range from one to five years.

All 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.

The following table summarizes the gains and losses associated with the commodity price risk programs:


(in millions)	June 30, 2022		December 31, 2021
Regulatory Assets
Losses on commodity price risk programs	$	6.8	$	9.6
Regulatory Liabilities
Gains on commodity price risk programs	127.7		34.2

Derivatives Designated as Hedging Instruments

Interest rate risk management. As of June 30, 2022, we have one forward-starting interest rate swap with a notional value of $250.0 million to hedge the variability in cash flows attributable to changes in the benchmark interest rate associated with a forecasted debt issuance. This interest rate swap is designated as a cash flow hedge.

On June 7, 2022, we settled a $250.0 million forward-starting interest rate swap agreement contemporaneously with the issuance of $350.0 million of 5.00% senior unsecured notes maturing in 2052. The derivative contract was accounted for as a cash flow hedge. As part of the transaction, the associated net unrealized gain position of $10.2 million is being amortized from accumulated other comprehensive loss into interest expense over the life of the associated debt. Refer to Note 13, "Long Term Debt" for additional information.

Cash flow hedges included in "Accumulated other comprehensive loss" on the Condensed Consolidated Balance Sheets (unaudited) were:

(in millions)

AOCI(1)

Amounts Expected to be Reclassified to Earnings During the Next 12 Months(1)

Maximum Term

Interest Rate

(19.5)

(0.2)

365 months

(1) All amounts are net of tax.

The actual amounts reclassified from Accumulated other comprehensive loss to Net Income can differ from the estimate above due to market rate changes.

The gains and losses related to these swaps are recorded to AOCI. Upon issuance, we amortize the gains and losses over the life of the debt associated with these swaps as we recognize interest expense. These amounts are immaterial for the three and six months ended June 30, 2022 and 2021 and are recorded in "Interest expense, net" on the Condensed Statements of Consolidated Income (unaudited).

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 Condensed Statements of Consolidated Income (unaudited).

There were no amounts excluded from effectiveness testing for derivatives in cash flow hedging relationships at June 30, 2022 and December 31, 2021.

Our derivative instruments measured at fair value as of June 30, 2022 and December 31, 2021 do not contain any credit-risk-related contingent features. Cash flows for derivative financial instruments are generally classified as operating activities.