Derivative Instruments	12 Months Ended
Derivative Instruments	Dec. 31, 2022
15. Derivative Instruments
Derivative Instruments	15. DERIVATIVE INSTRUMENTS Derivative assets and liabilities relating to the foregoing categories consisted of the following: Derivative Assets Derivative Liabilities As at December 31 December 31 December 31 December 31 millions of dollars 2022 2021 2022 2021 Regulatory deferral: Commodity swaps and forwards $ 186 $ 146 $ 42 $ 16 FX forwards 18 7 1 8 Physical natural gas purchases and sales 52 88 - - 256 241 43 24 HFT derivatives: Power swaps and physical contracts 89 33 77 32 Natural gas swaps, futures, forwards, physical contracts 340 208 1,224 818 429 241 1,301 850 Other derivatives: Equity derivatives - 11 5 - FX forwards 5 - 23 - 5 11 28 - Total gross current derivatives 690 493 1,372 874 Impact of master netting agreements: Regulatory deferral (18) (4) (18) (4) HFT derivatives (276) (188) (276) (188) Total impact of master netting agreements (294) (192) (294) (192) Total derivatives $ 396 $ 301 $ 1,078 $ 682 Current (1) 296 195 888 533 Long-term (1) 100 106 190 149 Total derivatives $ 396 $ 301 $ 1,078 $ 682 (1) Derivative assets and liabilities are classified as current or long-term based upon the maturities of the underlying contracts. Cash Flow Hedges On May 26, 2021, the treasury lock was settled for a gain of $ 19 million that is being amortized through interest expense over 10 years as the underlying hedged item settles. As of December 31, 2022, the unrealized gain in AOCI was $ 16 million, net of tax (2021 – $ 18 million, net of tax). For the year ended December 31, 2022, unrealized gains of $ 2 million (2021 – $ 1 million) have been reclassified from AOCI into interest expense. The Company expects $ 2 million of unrealized gains currently in AOCI to be reclassified into net income within the next twelve months Regulatory Deferral The Company has recorded the following changes in realized and unrealized gains (losses) with respect to derivatives receiving regulatory deferral: Physical Commodity Physical Commodity natural gas swaps and FX natural gas swaps and FX millions of dollars purchases forwards forwards purchases forwards forwards For the year ended December 31 2022 2021 Unrealized gain (loss) in regulatory assets $ - $ (69) $ 1 $ - $ (7) $ 9 Unrealized gain (loss) in regulatory liabilities 28 343 16 88 218 (3) Realized loss in regulatory assets - 48 - - - - Realized gain in regulatory liabilities - (41) - - (3) - Realized (gain) loss in inventory (1) - (121) 1 - (8) 5 Realized (gain) loss in regulated fuel for generation and purchased power (2) (64) (146) - - (39) 5 Total change in derivative instruments $ (36) $ 14 $ 18 $ 88 $ 161 $ 16 (1) Realized (gains) losses will be recognized in fuel for generation and purchased power when the hedged item is consumed. (2) Realized (gains) losses on derivative instruments settled and consumed in the period and hedging relationships that have been terminated or the hedged transaction is no longer probable. As at December 31, 2022, the Company had the following notional volumes designated for regulatory deferral that are expected to settle as outlined below: millions 2023 2024-2026 Physical natural gas purchases: Natural gas (Mmbtu) 6 - Commodity swaps and forwards purchases: Natural gas (Mmbtu) 18 12 Power (MWh) 1 1 FX swaps and forwards: FX contracts (millions of USD) $ 206 $ 123 Weighted average rate 1.2832 1.3064 % of USD requirements 50% 28% HFT Derivatives The Company has recognized the following realized and unrealized gains (losses) with respect to HFT derivatives: For the Year ended December 31 millions of dollars 2022 2021 Power swaps and physical contracts in non-regulated operating revenues $ 17 $ 4 Natural gas swaps, forwards, futures and physical contracts in non-regulated operating revenues 47 (142) Total gains (losses) in net income $ 64 $ (138) As at December 31, 2022, the Company had the following notional volumes of outstanding HFT derivatives that are expected to settle as outlined below: 2027 and millions 2023 2024 2025 2026 thereafter Natural gas purchases (Mmbtu) 319 92 42 36 131 Natural gas sales (Mmbtu) 492 205 105 6 19 Power purchases (MWh) 2 - - - - Power sales (MWh) 2 - - - - Other Derivatives As at December 31, 2022, the Company had equity derivatives in place to manage the cash flow risk associated with forecasted future cash settlements of deferred compensation obligations and FX forwards in place to manage cash flow risk associated with forecasted USD cash inflows. The equity derivatives hedge the return on 2.8 million shares and extends until December 2023. The FX forwards have a combined notional amount of $ 448 million USD and expire throughout 2023, 2024, and 2025. The Company has recognized the following realized and unrealized gains (losses) with respect to other derivatives: For the Year ended December 31 millions of dollars 2022 2021 FX Equity FX Equity Forwards Derivatives Forwards Derivatives Unrealized gain (loss) in OM&G $ - $ (5) $ - $ 11 Unrealized loss in other income, net (18) - (15) - Realized gain (loss) in OM&G - (17) - 15 Realized gain (loss) in other income, net (6) - 18 - Total gains (losses) in net income $ (24) $ (22) $ 3 $ 26 Credit Risk The Company is exposed to credit risk with respect to amounts receivable from customers, energy marketing collateral deposits and derivative assets. Credit risk is the potential loss from a counterparty’s non-performance under an agreement. The Company manages credit risk with policies and procedures for counterparty analysis, exposure measurement, and exposure monitoring and mitigation. Credit assessments are conducted on all new customers and counterparties, and deposits or collateral are requested on any high-risk accounts. The Company assesses the potential for credit losses on a regular basis and, where appropriate, maintains provisions. With respect to counterparties, the Company has implemented procedures to monitor the creditworthiness and credit exposure of counterparties and to consider default probability in valuing the counterparty positions. The Company monitors counterparties’ credit standing, including those that are experiencing financial problems, have significant swings in default probability rates, have credit rating changes by external rating agencies, or have changes in ownership. Net liability positions are adjusted based on the Company’s current default probability. Net asset positions are adjusted based on the counterparty’s current default probability. The Company assesses credit risk internally for counterparties that are not rated. As at December 31, 2022, the maximum exposure the Company had to credit risk was $ 1.9 billion (2021 – $ 1.3 billion), which includes accounts receivable net of collateral/deposits and assets related to derivatives. It is possible that volatility in commodity prices could cause the Company to have material credit risk exposures with one or more counterparties. If such counterparties fail to perform their obligations under one or more agreements, the Company could suffer a material financial loss. The Company transacts with counterparties as part of its risk management strategy for managing commodity price, FX and interest rate risk. Counterparties that exceed established credit limits can provide a cash deposit or letter of credit to the Company for the value in excess of the credit limit where contractually required. The total cash deposits/collateral on hand as at December 31, 2022 was $ 386 million (2021 – $ 341 million), which mitigates the Company’s maximum credit risk exposure. The Company uses the cash as payment for the amount receivable or returns the deposit/collateral to the customer/counterparty where it is no longer required by the Company. The Company enters into commodity master arrangements with its counterparties to manage certain risks, including credit risk to these counterparties. The Company generally enters into International Swaps and Derivatives Association agreements, North American Energy Standards Board agreements and, or Edison Electric Institute agreements. The Company believes entering into such agreements offers protection by creating contractual rights relating to creditworthiness, collateral, non-performance and default. As at December 31, 2022, the Company had $ 131 million (2021 – $ 114 million) in financial assets, considered to be past due, which have been outstanding for an average 60 days. The fair value of these financial assets is $ 114 million (2021 – $ 93 million), the difference of which is included in the allowance for credit losses. These assets primarily relate to accounts receivable from electric and gas revenue. Concentration Risk The Company's concentrations of risk consisted of the following: As at December 31, 2022 December 31, 2021 millions of dollars % of total exposure millions of dollars % of total exposure Receivables, net Regulated utilities: Residential $ 455 19% $ 384 24% Commercial 192 8% 167 10% Industrial 121 5% 54 3% Other 122 5% 91 6% 890 37% 696 43% Trading group: Credit rating of A- or above 125 5% 66 4% Credit rating of BBB- to BBB+ 75 3% 107 7% Not rated 307 13% 132 8% 507 21% 305 19% Other accounts receivable 585 25% 329 20% 1,982 83% 1,330 82% Derivative Instruments (current and long-term) Credit rating of A- or above 202 9% 155 9% Credit rating of BBB- to BBB+ 8 0% 22 1% Not rated 186 8% 124 8% 396 17% 301 18% $ 2,378 100% $ 1,631 100% Cash Collateral The Company’s cash collateral positions consisted of the following: As at December 31 December 31 millions of dollars 2022 2021 Cash collateral provided to others $ 224 $ 212 Cash collateral received from others $ 112 $ 100 Collateral is posted in the normal course of business based on the Company’s creditworthiness, including its senior unsecured credit rating as determined by certain major credit rating agencies. Certain derivatives contain financial assurance provisions that require collateral to be posted if a material adverse credit-related event occurs. If a material adverse event resulted in the senior unsecured debt falling below investment grade, the counterparties to such derivatives could request ongoing full collateralization. As at December 31, 2022, the total fair value of derivatives in a liability position was $ 1,078 million (December 31, 2021 – $ 682 million). If the credit ratings of the Company were reduced below investment grade, the full value of the net liability position could be required to be posted as collateral for these derivatives.