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Accounting for Derivative Instruments | 9 Months Ended
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Sep. 30, 2015
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Accounting for Derivative Instruments | Accounting for Derivative Instruments The Company is exposed to the impact of market fluctuations in the price of electricity and natural gas and basis costs, storage and ancillary capacity charges from independent system operators. The Company uses derivative instruments to manage exposure to these risks, and historically designated certain derivative instruments as cash flow hedges for accounting purposes. For derivatives designated in a qualifying cash flow hedging relationship, the effective portion of the change in fair value is recognized in accumulated other comprehensive income (“OCI”) and reclassified to earnings in the period in which the hedged item affects earnings. Any ineffective portion of the derivative’s change in fair value is recognized currently in earnings. As of September 30, 2015 and December 31, 2014, the Company had not designated any derivative instruments as cash flow hedges. The Company also holds certain derivative instruments that are not held for trading purposes but are also not designated as hedges for accounting purposes. These derivative instruments represent economic hedges that mitigate the Company’s exposure to fluctuations in commodity prices. For these derivative instruments, changes in the fair value are recognized currently in earnings in retail revenues or retail cost of revenues. As part of the Company’s strategy to optimize its assets and manage related risks, it also manages a portfolio of commodity derivative instruments held for trading purposes. The Company’s commodity trading activities are subject to limits within the Company’s Risk Management Policy. For these derivative instruments, changes in the fair value are recognized currently in earnings in net asset optimization revenues. Derivative assets and liabilities are presented net in the Company’s condensed combined and consolidated balance sheets when the derivative instruments are executed with the same counterparty under a master netting arrangement. The Company’s derivative contracts include transactions that are executed both on an exchange and centrally cleared as well as over-the-counter, bilateral contracts that are transacted directly with a third party. To the extent the Company has paid or received collateral related to the derivative assets or liabilities, such amounts would be presented net against the related derivative asset or liability’s fair value. As of September 30, 2015 and December 31, 2014, the Company had paid zero in collateral. The specific types of derivative instruments the Company may execute to manage the commodity price risk include the following:
• | Forward contracts, which commit the Company to purchase or sell energy commodities in the future;
• | Futures contracts, which are exchange-traded standardized commitments to purchase or sell a commodity or financial instrument;
• | Swap agreements, which require payments to or from counterparties based upon the differential between two prices for a predetermined notional quantity; and
• | Option contracts, which convey to the option holder the right but not the obligation to purchase or sell a commodity.
The Company has entered into other energy-related contracts that do not meet the definition of a derivative instrument or qualify for the normal purchase or normal sale exception and are therefore not accounted for at fair value including the following: •Forward electricity and natural gas purchase contracts for retail customer load, and •Natural gas transportation contracts and storage agreements. In connection with the acquisitions of Oasis and CenStar, the Company novated their existing transactions for the purchase and sale of gas and power over to SE and SEG. Volumetric Underlying Derivative Transactions The following table summarizes the net notional volume buy/(sell) of the Company’s open derivative financial instruments accounted for at fair value, broken out by commodity, as of: Non-trading
Commodity | Notional |  | September 30, 2015 |  | December 31, 2014
Natural Gas | MMBtu |  | 10,131 |  |  | 9,690 |
Natural Gas Basis | MMBtu |  | 993 |  |  | 2,710 |
Electricity | MWh |  | 1,368 |  |  | 607 |
Trading
Commodity | Notional |  | September 30, 2015 |  | December 31, 2014
Natural Gas | MMBtu |  | (160 | ) |  | (155 | )
Natural Gas Basis | MMBtu |  | (760 | ) |  | (56 | )
Gains (Losses) on Derivative Instruments Gains (losses) on derivative instruments, net and current period settlements on derivative instruments were as follows for the periods indicated (in thousands):
| Three Months Ended September 30,
| 2015 |  | 2014
Loss on non-trading derivatives, net (including loss on non-trading derivatives—affiliates, net of $0 and $0 for the three months ended September 30, 2015 and 2014, respectively) | $ | 132 |  |  | $ | (1,163 | )
Gain (loss) on trading derivatives, net (including loss on trading derivatives—affiliates, net of $0 and $0 for the three months ended September 30, 2015 and 2014, respectively) | (71 | ) |  | (15 | )
Loss on derivatives, net | 61 |  |  | (1,178 | )
Current period settlements on non-trading derivatives (1) | 4,035 |  |  | 3,039 |
Current period settlements on trading derivatives (including current period settlements on trading derivatives—affiliates, net of $0 and $0 for the three months ended September 30, 2015 and 2014, respectively) | 128 |  |  | (35 | )
Total current period settlements on derivatives | $ | 4,163 |  |  | $ | 3,004 |
(1) Excludes settlements of $2.0 million for the three months ended September 30, 2015 related to non-trading derivative liabilities assumed in the acquisitions of CenStar and Oasis.
| Nine Months Ended September 30,
| 2015 |  | 2014
Gain (loss) on non-trading derivatives, net | $ | (5,876 | ) |  | $ | 5,847 |
Loss on trading derivatives, net (including loss on trading derivatives—affiliates, net of $0 and $1,792 for the nine months ended September 30, 2015 and 2014, respectively) | (242 | ) |  | (5,585 | )
Gain (loss) on derivatives, net | (6,118 | ) |  | 262 |
Current period settlements on non-trading derivatives (1) | 12,643 |  |  | (9,959 | )
Current period settlements on trading derivatives (including current period settlements on trading derivatives—affiliates, net of $0 and $1,693 for the nine months ended September 30, 2015 and 2014, respectively) | 244 |  |  | 2,707 |
Total current period settlements on derivatives | $ | 12,887 |  |  | $ | (7,252 | )
(1) Excludes settlements of $2.2 million for the nine months ended September 30, 2015 related to non-trading derivative liabilities assumed in the acquisitions of CenStar and Oasis. Gains (losses) on trading derivative instruments are recorded in net asset optimization revenues and gains (losses) on non-trading derivative instruments are recorded in retail revenues or retail cost of revenues on the condensed combined and consolidated statements of operations. Fair Value of Derivative Instruments The following tables summarize the fair value and offsetting amounts of the Company’s derivative instruments by counterparty and collateral received or paid as of (in thousands):
| September 30, 2015
Description | Gross Assets |  | Gross Amounts Offset |  | Net Assets |  | Cash Collateral Offset |  | Net Amount Presented
Non-trading commodity derivatives | $ | 292 |  |  | $ | (168 | ) |  | $ | 124 |  |  | $ | — |  |  | $ | 124 |
Trading commodity derivatives | 8 |  |  | (3 | ) |  | 5 |  |  | — |  |  | 5 |
Total Current Derivative Assets | 300 |  |  | (171 | ) |  | 129 |  |  | — |  |  | 129 |
Non-trading commodity derivatives | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total Non-current Derivative Assets | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total Derivative Assets | $ | 300 |  |  | $ | (171 | ) |  | $ | 129 |  |  | $ | — |  |  | $ | 129 |
| September 30, 2015
Description | Gross Liabilities |  | Gross Amounts Offset |  | Net Liabilities |  | Cash Collateral Offset |  | Net Amount Presented
Non-trading commodity derivatives | $ | (12,239 | ) |  | $ | 5,845 |  |  | $ | (6,393 | ) |  | $ | — |  |  | $ | (6,393 | )
Trading commodity derivatives | (76 | ) |  | 32 |  |  | (44 | ) |  | — |  |  | (44 | )
Total Current Derivative Liabilities | (12,315 | ) |  | 5,877 |  |  | (6,437 | ) |  | — |  |  | (6,437 | )
Non-trading commodity derivatives | (1,346 | ) |  | 474 |  |  | (873 | ) |  | — |  |  | (873 | )
Total Non-current Derivative Liabilities | (1,346 | ) | v | 474 |  |  | (873 | ) |  | — |  |  | (873 | )
Total Derivative Liabilities | $ | (13,661 | ) |  | $ | 6,351 |  |  | $ | (7,310 | ) |  | $ | — |  |  | $ | (7,310 | )
| December 31, 2014
Description | Gross Assets |  | Gross Amounts Offset |  | Net Assets |  | Cash Collateral Offset |  | Net Amount Presented
Non-trading commodity derivatives | $ | 3,642 |  |  | $ | (3,562 | ) |  | $ | 80 |  |  | $ | — |  |  | $ | 80 |
Trading commodity derivatives | 234 |  |  | (98 | ) |  | 136 |  |  | — |  |  | 136 |
Total Current Derivative Assets | 3,876 |  |  | (3,660 | ) |  | 216 |  |  | — |  |  | 216 |
Non-trading commodity derivatives | 313 |  |  | (313 | ) |  | — |  |  | — |  |  | — |
Total Non-current Derivative Assets | 313 |  |  | (313 | ) |  | — |  |  | — |  |  | — |
Total Derivative Assets | $ | 4,189 |  |  | $ | (3,973 | ) |  | $ | 216 |  |  | $ | — |  |  | $ | 216 |
| December 31, 2014
Description | Gross Liabilities |  | Gross Amounts Offset |  | Net Liabilities |  | Cash Collateral Offset |  | Net Amount Presented
Non-trading commodity derivatives | $ | (14,911 | ) |  | $ | 3,562 |  |  | $ | (11,349 | ) |  | $ | — |  |  | $ | (11,349 | )
Trading commodity derivatives | (275 | ) |  | 98 |  |  | (177 | ) |  | — |  |  | (177 | )
Total Current Derivative Liabilities | (15,186 | ) |  | 3,660 |  |  | (11,526 | ) |  | — |  |  | (11,526 | )
Non-trading commodity derivatives | (791 | ) |  | 313 |  |  | (478 | ) |  | — |  |  | (478 | )
Total Non-current Derivative Liabilities | (791 | ) |  | 313 |  |  | (478 | ) |  | — |  |  | (478 | )
Total Derivative Liabilities | $ | (15,977 | ) |  | $ | 3,973 |  |  | $ | (12,004 | ) |  | $ | — |  |  | $ | (12,004 | )

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624171-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41620-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624163-113959 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579240-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624177-113959 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80784-113994 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41641-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5579245-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624258-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35736893&loc=d3e80748-113994 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708775-113959 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5708773-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5618551-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5580258-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=56946850&loc=SL5624181-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=56946850&loc=d3e41638-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 + Details
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