National Grid 2015 Annual Report Download - page 147

30. Financial risk management continued
(d) Currency risk continued
The currency exposure on other financial instruments is as follows:
2015 2014
Sterling
£m
Euro
£m
Dollar
£m
Other
£m
Total
£m
Sterling
£m
Euro
£m
Dollar
£m
Other
£m
Total
£m
Trade and other receivables 200 –1,495 –1,695 142 –1,623 –1,765
Trade and other payables (1,403) –(1,457) –(2,860) (1,370) –(1,291) –(2,661)
Other non-current assets (19) –(252) –(271) (16) –(220) –(236)
The carrying amounts of other financial instruments are denominated in the above currencies, which in most instances are the functional
currency of the respective subsidiaries. Our exposure to dollars is due to activities in our US subsidiaries. We do not have any other
significant exposure to currency risk on these balances.
(e) Commodity risk
We purchase electricity and gas to supply our customers in the US and to meet our own energy needs. Substantially all our costs of
purchasing electricity and gas for supply to customers are recoverable at an amount equal to cost. The timing of recovery of these costs
can vary between financial periods leading to an under- or over-recovery within any particular year that can lead to large fluctuations in
theincome statement. We follow approved policies to manage price and supply risks for our commodity activities.
Our energy procurement risk management policy and delegations of authority govern our US commodity trading activities for energy
transactions. The purpose of this policy is to ensure we transact within pre-defined risk parameters and only in the physical and financial
markets where we or our customers have a physical market requirement. In addition, state regulators require National Grid to manage
commodity risk and cost volatility prudently through diversified pricing strategies. In some jurisdictions we are required to file a plan
outlining our strategy to be approved by regulators. In certain cases we might receive guidance with regard to specific hedging limits.
Energy purchase contracts for the forward purchase of electricity or gas that are used to satisfy physical delivery requirements to
customers or for energy that the Company uses itself meet the normal purchase, sale or usage exemption of IAS 39. They are, therefore,
not recognised in the financial statements. Disclosure of commitments under such contracts is made in note 27.
We enter into forward contracts for the purchase of commodities, some of which do not meet the own use exemption for accounting
purposes and hence are accounted for as derivatives. We also enter into derivative financial instruments linked to commodity prices,
including index-linked futures, swaps and options contracts. These derivative financial instruments are used to manage market price
volatility and are carried at fair value on the statement of financial position, with the mark-to-market changes reflected through earnings.
Financial Statements
NATIONAL GRID ANNUAL REPORT AND ACCOUNTS 2014/15 145