Risk Management Activities

12 Months Ended

Dec. 31, 2022

Risk Management Activities [Abstract]

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, 2022				December 31, 2021
(in millions)	Assets		Liabilities		Assets		Liabilities
Current(1)
Derivatives designated as hedging instruments	$	—	$	—	$	—	$	136.4
Derivatives not designated as hedging instruments	18.8		1.1		10.6		0.4
Total	$	18.8	$	1.1	$	10.6	$	136.8
Noncurrent(2)
Derivatives designated as hedging instruments	$	—	$	—	$	—	$	—
Derivatives not designated as hedging instruments	66.0		1.9		13.8		7.4
Total	$	66.0	$	1.9	$	13.8	$	7.4

(1) Presented in "Prepayments and other" and "Other accruals", respectively, on the Consolidated Balance Sheets.

(2) Presented in "Deferred charges and other" and "Other noncurrent liabilities", respectively, on the Consolidated Balance Sheets.

Our derivative instruments are subject to enforceable master netting arrangements or similar agreements. No collateral was either received or posted related to our outstanding derivative positions at December 31, 2022. If the above gross asset and liability positions were presented net of amounts owed or receivable from counterparties, we would report a net asset position of $81.8 million and $16.6 million at December 31, 2022 and 2021, respectively.

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. As of December 31, 2022 and 2021, we had 99.0 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 December 31, 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 hedging instruments. Refer to Note 9, "Regulatory Matters," for additional information.

Derivatives Designated as Hedging Instruments

Interest rate risk management. As of December 31, 2022, we have no forward-starting interest rate swaps outstanding.

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 AOCI into interest expense over the life of the associated debt. Refer to Note 15, "Long-Term Debt," for additional information.

On December 21, 2022, we settled a $250.0 million forward-starting interest rate swap agreement that was designated as a cash flow hedge. As part of the transaction, the associated net unrealized gain position of $10.0 million was recognized immediately

in "Other, net" on the Statements of Consolidated Income (Loss) due to the probability that the forecasted borrowing transaction would no longer occur.

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

(in millions)

AOCI(1)

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

Maximum Term

Interest Rate

(12.6)

(0.3)

353 months

(1) All amounts are net of tax.

The net gain related to these swaps are recorded to AOCI. We amortize the net gain over the life of the debt associated with these swaps as we recognize interest expense. These amounts are immaterial in 2022, 2021 and 2020 and are recorded in "Interest expense, net" on the Statements of Consolidated Income (Loss).

There were no amounts excluded from effectiveness testing for derivatives in cash flow hedging relationships at December 31, 2021 and 2020.

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