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Derivative instruments | 6 Months Ended
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Jun. 30, 2011
Derivative instruments [Abstract] |
Derivative instruments |
12. | Derivative instruments
| The Company's policy allows the use of derivative instruments as part of an overall energy price, foreign currency and interest rate risk management program to efficiently manage and minimize commodity price, foreign currency and interest rate risk. As of June 30, 2011, the Company had no outstanding foreign currency or interest rate hedges. The following information should be read in conjunction with Notes 1 and 7 in the Company's Notes to Consolidated Financial Statements in the 2010 Annual Report.
| Cascade and Intermountain
| At June 30, 2011, Cascade held natural gas swap agreements, with total forward notional volumes of 676,000 MMBtu, which were not designated as hedges. Cascade utilizes, and Intermountain periodically utilizes, natural gas swap agreements to manage a portion of their regulated natural gas supply portfolios in order to manage fluctuations in the price of natural gas related to core customers in accordance with authority granted by the IPUC, WUTC and OPUC. Core customers consist of residential, commercial and smaller industrial customers. The fair value of the derivative instrument must be estimated as of the end of each reporting period and is recorded on the Consolidated Balance Sheets as an asset or a liability. Periodic changes in the fair market value of the derivative instruments are recorded on the Consolidated Balance Sheets as a regulatory asset or a regulatory liability, and settlements of these arrangements are expected to be recovered through the purchased gas cost adjustment mechanism. Gains and losses on the settlements of these derivative instruments are recorded as a component of purchased natural gas sold on the Consolidated Statements of Income as they are recovered through the purchased gas cost adjustment mechanism. Under the terms of these arrangements, Cascade and Intermountain will either pay or receive settlement payments based on the difference between the fixed strike price and the monthly index price applicable to each contract. For the three and six months ended June 30, 2011, Cascade recorded the change in the fair market value of the derivative instruments of $1.9 million and $8.5 million, respectively, as a decrease to regulatory assets. For the three and six months ended June 30, 2010, Cascade and Intermountain recorded the change in the fair market value of the derivative instruments of $3.9 million and $9.0 million, respectively, as a decrease to regulatory assets.
| Certain of Cascade's derivative instruments contain credit-risk-related contingent features that permit the counterparties to require collateralization if Cascade's derivative liability positions exceed certain dollar thresholds. The dollar thresholds in certain of Cascade's agreements are determined and may fluctuate based on Cascade's credit rating on its debt. In addition, Cascade's derivative instruments contain cross-default provisions that state if the entity fails to make payment with respect to certain of its indebtedness, in excess of specified amounts, the counterparties could require early settlement or termination of such entity's derivative instruments in liability positions. The aggregate fair value of Cascade's derivative instruments with credit-risk-related contingent features that are in a liability position at June 30, 2011, was $900,000. The aggregate fair value of assets that would have been needed to settle the instruments immediately if the credit-risk-related contingent features were triggered on June 30, 2011, was $900,000.
| Fidelity
| At June 30, 2011, Fidelity held natural gas swap agreements with total forward notional volumes of 23.3 million MMBtu, natural gas basis swap agreements with total forward notional volumes of 12.9 million MMBtu, and oil swap, collar and put option agreements with total forward notional volumes of 3.7 million Bbl, all of which were designated as cash flow hedging instruments. At June 30, 2011, Fidelity held an oil call option agreement with total forward notional volumes of 184,000 Bbl, which did not qualify for hedge accounting. Fidelity utilizes these derivative instruments to manage a portion of the market risk associated with fluctuations in the price of natural gas and oil and basis differentials on its forecasted sales of natural gas and oil production.
| The fair value of the derivative instruments must be estimated as of the end of each reporting period and is recorded on the Consolidated Balance Sheets as an asset or liability. Changes in the fair value attributable to the effective portion of hedging instruments, net of tax, are recorded in stockholders' equity as a component of accumulated other comprehensive income (loss). At the date the natural gas and oil quantities are settled, the amounts accumulated in other comprehensive income (loss) are reported in the Consolidated Statements of Income. To the extent that the hedges are not effective, the ineffective portion of the changes in fair market value is recorded directly in earnings. The proceeds received for natural gas and oil production are generally based on market prices.
| The amount of hedge ineffectiveness was immaterial for the three and six months ended June 30, 2011, and 2010, and there were no components of the derivative instruments' gain or loss excluded from the assessment of hedge effectiveness. Gains and losses must be reclassified into earnings as a result of the discontinuance of cash flow hedges if it is probable that the original forecasted transactions will not occur. There were no such reclassifications into earnings as a result of the discontinuance of hedges. The gain on the derivative instrument that did not qualify for hedge accounting was reported in operating revenues on the Consolidated Statements of Income and was $1.9 million (before tax) and $179,000 (before tax) for the three and six months ended June 30, 2011, respectively.
| Gains and losses on derivative instruments that are reclassified from accumulated other comprehensive income (loss) to current-period earnings are included in operating revenues on the Consolidated Statements of Income. For further information regarding the gains and losses on derivative instruments qualifying as cash flow hedges that were recognized in other comprehensive income (loss) and the gains and losses reclassified from accumulated other comprehensive income (loss) into earnings, see Note 8.
| As of June 30, 2011, the maximum term of the derivative instruments, in which the exposure to the variability in future cash flows for forecasted transactions is being hedged, is 30 months. Based on June 30, 2011, fair values, over the next 12 months net losses of approximately $2.3 million (after tax) are estimated to be reclassified from accumulated other comprehensive income (loss) into earnings, subject to changes in natural gas and oil market prices, as the hedged transactions affect earnings.
| Certain of Fidelity's derivative instruments contain cross-default provisions that state if Fidelity or any of its affiliates fails to make payment with respect to certain indebtedness, in excess of specified amounts, the counterparties could require early settlement or termination of derivative instruments in liability positions. The aggregate fair value of Fidelity's derivative instruments with credit-risk-related contingent features that are in a liability position at June 30, 2011, was $24.5 million. The aggregate fair value of assets that would have been needed to settle the instruments immediately if the credit-risk-related contingent features were triggered on June 30, 2011, was $24.5 million.
| The location and fair value of all of the Company's derivative instruments in the Consolidated Balance Sheets were as follows:
Asset Derivatives | Location on Consolidated Balance Sheets |  | Fair Value at June 30, 2011 |  |  | Fair Value at June 30, 2010 |  |  | Fair Value at December 31, 2010 |
|  |  | (In thousands) |
Designated as hedges | Commodity derivative instruments |  | $ | 14,040 |  |  | $ | 24,932 |  |  | $ | 15,123 |
| Other assets – noncurrent |  |  | 6,265 |  |  |  | 8,524 |  |  |  | 4,104 |
|  |  |  | 20,305 |  |  |  | 33,456 |  |  |  | 19,227 |
Not designated as hedges | Commodity derivative instruments |  |  | 194 |  |  |  | - |  |  |  | - |
| Other assets – noncurrent |  |  | - |  |  |  | - |  |  |  | - |
|  |  |  | 194 |  |  |  | - |  |  |  | - |
Total asset derivatives |  |  | $ | 20,499 |  |  | $ | 33,456 |  |  | $ | 19,227 |
Liability Derivatives | Location on Consolidated Balance Sheets |  | Fair Value at June 30, 2011 |  |  | Fair Value at June 30, 2010 |  |  | Fair Value at December 31, 2010 |
|  |  | (In thousands) |
Designated as hedges | Commodity derivative instruments |  | $ | 17,780 |  |  | $ | 1,961 |  |  | $ | 15,069 |
| Other liabilities – noncurrent |  |  | 6,735 |  |  |  | - |  |  |  | 6,483 |
|  |  |  | 24,515 |  |  |  | 1,961 |  |  |  | 21,552 |
Not designated as hedges | Commodity derivative instruments |  |  | 906 |  |  |  | 18,199 |  |  |  | 9,359 |
| Other liabilities – noncurrent |  |  | - |  |  |  | 698 |  |  |  | - |
|  |  |  | 906 |  |  |  | 18,897 |  |  |  | 9,359 |
Total liability derivatives |  |  | $ | 25,421 |  |  | $ | 20,858 |  |  | $ | 30,911 |

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- Definition This element can be used to disclose the entity's entire derivative instruments and hedging activities disclosure as a single block of text. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising there from, and the amounts of and methodologies and assumptions used in determining the amounts of such items. + Details
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