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Accounting for Derivative Instruments
 3 Months Ended
Mar. 31, 2017
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Accounting for Derivative Instruments
10. 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.
The Company holds certain derivative instruments that are not held for trading purposes and are 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 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 March 31, 2017 and December 31, 2016, the Company had paid $0.3 million and zero in collateral outstanding, respectively. 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.

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 (in thousands):
Non-trading 
Commodity
Notional

March 31, 2017

December 31, 2016
Natural Gas
MMBtu

9,136


8,016

Natural Gas Basis
MMBtu

—


—

Electricity
MWh

4,276


3,958

Trading
Commodity
Notional

March 31, 2017

December 31, 2016
Natural Gas
MMBtu

108


(953
)
Natural Gas Basis
MMBtu

—


(380
)


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 March 31,
  
2017

2016
Gain (loss) on non-trading derivatives, net
$
2,519


$
(5,876
)
Gain (loss) on trading derivatives, net
368


(242
)
Loss on derivatives, net
2,887


(6,118
)
Current period settlements on non-trading derivatives (1) (2)
3,341


12,643

Current period settlements on trading derivatives
86


244

Total current period settlements on derivatives
$
3,427


$
12,887


(1)
Excludes settlements of $0.6 million and $2.2 million, respectively, for the three months ended March 31, 2017 and 2016 related to non-trading derivative liabilities assumed in the acquisitions of CenStar and Oasis.
(2)
Excludes settlements of $14.7 million for the three months ended March 31, 2017 related to non-trading derivative liabilities assumed in the acquisitions of the Provider Companies and Major Energy Companies.
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 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):
  
March 31, 2017
Description
Gross Assets

Gross
Amounts
Offset

Net Assets

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
4,436


$
(2,056
)

$
2,380


$
—


$
2,380

Trading commodity derivatives
(23
)

31


8


—


8

Total Current Derivative Assets
4,413


(2,025
)

2,388


—


2,388

Non-trading commodity derivatives
60


(60
)

—


—


—

Total Non-current Derivative Assets
60


(60
)

—


—


—

Total Derivative Assets
$
4,473


$
(2,085
)

$
2,388


$
—


$
2,388



March 31, 2017
Description
Gross 
Liabilities

Gross
Amounts
Offset

Net
Liabilities

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
(11,015
)

$
9,012


$
(2,003
)

$
300


$
(1,703
)
Trading commodity derivatives
(20
)

—


(20
)

—


(20
)
Total Current Derivative Liabilities
(11,035
)

9,012


(2,023
)

300


(1,723
)
Non-trading commodity derivatives
(7,605
)

2,765


(4,840
)

—


(4,840
)
Total Non-current Derivative Liabilities
(7,845
)

2,881


(4,964
)

—


(4,964
)
Total Derivative Liabilities
$
(18,880
)

$
11,893


$
(6,987
)

$
300


$
(6,687
)

  
December 31, 2016
Description
Gross Assets

Gross
Amounts
Offset

Net Assets

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
19,657


$
(11,844
)

$
7,813


$
—


$
7,813

Trading commodity derivatives
614


(83
)

531


—


531

Total Current Derivative Assets
20,271


(11,927
)

8,344


—


8,344

Non-trading commodity derivatives
7,874


(4,791
)

3,083


—


3,083

Total Non-current Derivative Assets
7,874


(4,791
)

3,083


—


3,083

Total Derivative Assets
$
28,145


$
(16,718
)

$
11,427


$
—


$
11,427



December 31, 2016
Description
Gross 
Liabilities

Gross
Amounts
Offset

Net
Liabilities

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
(662
)

$
69


$
(593
)

$
—


$
(593
)
Trading commodity derivatives
(92
)

5


(87
)

—


(87
)
Total Current Derivative Liabilities
(754
)

74


(680
)

—


(680
)
Non-trading commodity derivatives
(305
)

237


(68
)

—


(68
)
Total Non-current Derivative Liabilities
(305
)

237


(68
)

—


(68
)
Total Derivative Liabilities
$
(1,059
)

$
311


$
(748
)

$
—


$
(748
)

Three Months Ended March 31,
  
2017
 
2016
Loss on non-trading derivatives, net
(21,037
)
 
$
(9,620
)
Loss on trading derivatives, net
(419
)
 
(129
)
Loss on derivatives, net
(21,456
)
 
(9,749
)
Current period settlements on non-trading derivatives (1) (2)
7,574

 
11,277

Current period settlements on trading derivatives
(160
)
 
(5
)
Total current period settlements on derivatives
$
7,414

 
$
11,272

(1)
Excludes settlements of less than $0.1 million and $(0.8) million, respectively, for the three months ended March 31, 2017 and 2016 related to non-trading derivative liabilities assumed in the acquisitions of CenStar and Oasis.
(2)
Excludes settlements of $(1.3) million for the three months ended March 31, 2017 related to non-trading derivative liabilities assumed in the acquisitions of the Provider Companies and Major Energy Companies.

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 cost of revenues on the condensed 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):
  
March 31, 2017
Description
Gross Assets

Gross
Amounts
Offset

Net Assets

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
4,436


$
(2,056
)

$
2,380


$
—


$
2,380

Trading commodity derivatives
(23
)

31


8


—


8

Total Current Derivative Assets
$
4,413


$
(2,025
)

$
2,388


$
—


$
2,388

Non-trading commodity derivatives
$
60


$
(60
)

$
—


$
—


$
—

Total Non-current Derivative Assets
$
60


$
(60
)

$
—


$
—


$
—

Total Derivative Assets
$
4,473


$
(2,085
)

$
2,388


$
—


$
2,388




March 31, 2017
Description
Gross 
Liabilities

Gross
Amounts
Offset

Net
Liabilities

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
(11,015
)

$
9,012


$
(2,003
)

$
300


$
(1,703
)
Trading commodity derivatives
(20
)

—


(20
)

—


(20
)
Total Current Derivative Liabilities
$
(11,035
)

$
9,012


$
(2,023
)

$
300


$
(1,723
)
Non-trading commodity derivatives
$
(7,605
)

$
2,765


$
(4,840
)

$
—


$
(4,840
)
Trading commodity derivatives
$
(240
)

$
116


$
(124
)

$
—


$
(124
)
Total Non-current Derivative Liabilities
$
(7,845
)

$
2,881


$
(4,964
)

$
—


$
(4,964
)
Total Derivative Liabilities
$
(18,880
)

$
11,893


$
(6,987
)

$
300


$
(6,687
)


  
December 31, 2016
Description
Gross Assets

Gross
Amounts
Offset

Net Assets

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
19,657


$
(11,844
)

$
7,813


$
—


$
7,813

Trading commodity derivatives
614


(83
)

531


—


531

Total Current Derivative Assets
20,271


(11,927
)

8,344


—


8,344

Non-trading commodity derivatives
7,874


(4,791
)

3,083


—


3,083

Total Non-current Derivative Assets
7,874


(4,791
)

3,083


—


3,083

Total Derivative Assets
$
28,145


$
(16,718
)

$
11,427


$
—


$
11,427




December 31, 2016
Description
Gross 
Liabilities

Gross
Amounts
Offset

Net
Liabilities

Cash
Collateral
Offset

Net Amount
Presented
Non-trading commodity derivatives
$
(662
)

$
69


$
(593
)

$
—


$
(593
)
Trading commodity derivatives
(92
)

5


(87
)

—


(87
)
Total Current Derivative Liabilities
(754
)

74


(680
)

—


(680
)
Non-trading commodity derivatives
(305
)

237


(68
)

—


(68
)
Total Non-current Derivative Liabilities
(305
)

237


(68
)

—


(68
)
Total Derivative Liabilities
$
(1,059
)

$
311


$
(748
)

$
—


$
(748
)