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Derivative Instruments | 9 Months Ended
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Sep. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments | Derivative Instruments We use derivative and non-derivative contracts to manage risks related to obtaining adequate supplies and the price fluctuations of natural gas, electricity and propane and to mitigate interest rate risk. Our natural gas, electric and propane distribution operations have entered into agreements with suppliers to purchase natural gas, electricity and propane for resale to our customers. Our natural gas gathering and transmission company has entered into contracts with producers to secure natural gas to meet its obligations. Purchases under these contracts typically either do not meet the definition of derivatives or are considered “normal purchases and normal sales” and are accounted for on an accrual basis. Our propane distribution operations may also enter into fair value hedges of their inventory or cash flow hedges of their future purchase commitments in order to mitigate the impact of wholesale price fluctuations. Occasionally, we may enter into interest rate swap agreements to mitigate risk associated with changes in short-term borrowing rates. As of September 30, 2025, our natural gas and electric distribution operations did not have any outstanding derivative contracts. Volume of Derivative Activity As of September 30, 2025, the volume of our commodity derivative contracts were as follows:
Business unit |  | Commodity |  | Contract Type |  | Quantity hedged (in millions) |  | Designation |  | Longest Expiration date of hedge
Sharp |  | Propane (gallons) |  | Purchases |  | 11.7 |  | Cash flow hedges |  | June 2028
Sharp entered into futures and swap agreements to mitigate the risk of fluctuations in wholesale propane index prices associated with the propane volumes that are expected to be purchased and/or sold during the heating season. Under the futures and swap agreements, Sharp will receive the difference between (i) the index prices (Mont Belvieu prices in October 2025 through June 2028) and (ii) the per gallon propane swap prices, to the extent the index prices exceed the contracted prices. If the index prices are lower than the contract prices, Sharp will pay the difference. We designated and accounted for the propane swaps as cash flow hedges. The change in the fair value of the swap agreements is recorded as unrealized gain (loss) in other comprehensive income (loss) and later recognized in the statement of income in the same period and in the same line item as the hedged transaction. The amount of unrealized loss that we expect to reclassify from accumulated other comprehensive income (loss) related to our commodity cash flow hedges to earnings during the 12-month period ended September 30, 2026 is $0.2 million. Interest Rate Swap Activities We manage interest rate risk by entering into derivative contracts to hedge the variability in cash flows attributable to changes in the short-term borrowing rates. In September 2022, we entered into a three-year interest rate swap with a notional amount of $50.0 million at pricing of 3.98 percent. As of September 30, 2025, this swap had expired. In August 2024, we entered into an additional interest rate swap through August 2029, at a notional amount of $50.0 million and pricing of 3.97 percent. Our interest rate swaps are cash settled monthly as the counter-party pays us the 30-day SOFR rate less the fixed rate. We designate and account for interest rate swaps as cash flow hedges. Accordingly, unrealized gains and losses associated with the interest rate swap are recorded as a component of accumulated other comprehensive income (loss). When the interest rate swap settles, the realized gain or loss is recorded in the income statement and is recognized as a component of interest charges. Broker Margin Futures exchanges have contract specific margin requirements that require the posting of cash or cash equivalents relating to traded contracts. Margin requirements consist of initial margin that is posted upon the initiation of a position, maintenance margin that is usually expressed as a percent of initial margin, and variation margin that fluctuates based on the daily mark-to-market relative to maintenance margin requirements. We currently maintain a broker margin account for Sharp included within other current assets on the condensed consolidated balance sheets which had a balance of $2.4 million and $1.9 million as of September 30, 2025 and December 31, 2024, respectively. Financial Statements Presentation The following tables present information about the fair value and related gains and losses of our derivative contracts. We did not have any derivative contracts with a credit-risk related contingency. Fair values of the derivative contracts recorded in the condensed consolidated balance sheets as of September 30, 2025 and December 31, 2024, are as follows:
|  | Derivative Assets
|  |  |  | Fair Value As Of
(in millions) |  | Balance Sheet Location |  | September 30, 2025 |  | December 31, 2024
Derivatives designated as cash flow hedges |  |  |  |  |  |
Propane swap agreements |  | Derivative assets, at fair value |  | $ | 0.1 |  |  | $ | 0.6 |
Interest rate swap agreements |  | Derivative assets, at fair value |  | — |  |  | 0.1 |
Total Derivative Assets (1) |  |  |  | $ | 0.1 |  |  | $ | 0.7 |
(1) Derivative assets, at fair value, include $0.1 million in current assets in the condensed consolidated balance sheet at September 30, 2025 and $0.6 million at December 31, 2024, with the remainder of the balances classified as long-term.
|  | Derivative Liabilities
|  |  |  | Fair Value As Of
(in millions) |  | Balance Sheet Location |  | September 30, 2025 |  | December 31, 2024
Derivatives designated as cash flow hedges |  |  |  |  |  |
Propane swap agreements |  | Derivative liabilities, at fair value |  | $ | 0.3 |  |  | $ | — |
Interest rate swap agreements |  | Derivative liabilities, at fair value |  | 1.5 |  |  | 0.1 |
Total Derivative Liabilities (1) |  |  |  | $ | 1.8 |  |  | $ | 0.1 |
(1) Derivative liabilities, at fair value, include $0.5 million in current liabilities in the condensed consolidated balance sheet at September 30, 2025 and no current derivative liabilities at December 31, 2024, with the remainder of the balances classified as long-term. The effects of gains and losses from derivative instruments on the condensed consolidated statements of income are as follows:
|  |  |  | Amount of Gain (Loss) on Derivatives
|  | Location of Gain |  | For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
(in millions) |  | (Loss) on Derivatives |  | 2025 |  | 2024 |  | 2025 |  | 2024
Derivatives designated as cash flow hedges |  |  |  |  |  |  |  |  |  |
Propane swap agreements |  | Revenues |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (0.3) |
Propane swap agreements |  | Unregulated propane and natural gas costs |  | (0.1) |  |  | (0.1) |  |  | 0.7 |  |  | 1.3 |
Interest rate swap agreements |  | Interest expense |  | 0.1 |  |  | 0.3 |  |  | 0.3 |  |  | 0.6 |
Total |  |  |  | $ | — |  |  | $ | 0.2 |  |  | $ | 1.0 |  |  | $ | 1.6 |

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