Eversource 2015 Annual Report Download - page 81

Download and view the complete annual report

Please find page 81 of the 2015 Eversource annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 136

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136

69
The gross fair values of derivative assets and liabilities with the same counterparty are offset and reported as net Derivative Assets or Derivative
Liabilities, with current and long-term portions, on the balance sheets. The following table presents the gross fair values of contracts, categorized by
risk type, and the net amounts recorded as current or long-term derivative assets or liabilities:
As of December 31,
2015
2014
Commodity Supply
Net Amount
Commodity Supply
Net Amount
and Price Risk
Recorded as
and Price Risk
Recorded as
(Millions of Dollars)
Management
Netting
(1)
a Derivative
Management Netting
(1)
a Derivative
Current Derivative Assets:
Level 3:
Eversource $
16.7 $
(10.9) $
5.8
$
16.2 $
(6.6) $
9.6
CL&P 16.7 (10.9) 5.8
16.1 (6.6) 9.5
NSTAR Electric
- - -
0.1 - 0.1
Long-Term Derivative Assets:
Level 2:
Eversource $
0.1 $
- $
0.1
$
- $
- $
-
Level 3:
Eversource 62.0 (19.3) 42.7
93.5 (19.2) 74.3
CL&P 60.7 (19.3) 41.4
93.5 (19.2) 74.3
NSTAR Electric
1.3 - 1.3
- - -
Current Derivative Liabilities:
Level 2:
Eversource $
(5.8) $
- $
(5.8)
$
(9.8) $
- $
(9.8)
Level 3:
Eversource (92.3) - (92.3)
(90.0) - (90.0)
CL&P (91.8) - (91.8)
(88.5) - (88.5)
NSTAR Electric
(0.5) - (0.5)
(1.5) - (1.5)
Long-Term Derivative Liabilities:
Level 2:
Eversource $
- $
- $
-
$
(0.3) $
- $
(0.3)
Level 3:
Eversource (337.1) - (337.1)
(409.3) - (409.3)
CL&P (336.2) - (336.2)
(406.2) - (406.2)
NSTAR Electric
(0.9) - (0.9)
(3.1) - (3.1)
(1)
Amounts represent derivative assets and liabilities that Eversource elected to record net on the balance sheets. These amounts are subject to
master netting agreements or similar agreements for which the right of offset exists.
The business activities that result in the recognition of derivative assets also create exposure to various counterparties. As of December 31, 2015,
Eversource’s and CL&P’s derivative assets were exposed to counterparty credit risk. Of Eversource’s and CL&P’s derivative assets, approximately
$47 million was contracted with investment grade entities.
For further information on the fair value of derivative contracts, see Note 1H, “Summary of Significant Accounting Policies - Fair Value
Measurements,” and Note 1I, “Summary of Significant Accounting Policies - Derivative Accounting,” to the financial statements.
Derivative Contracts At Fair Value with Offsetting Regulatory Amounts
Commodity Supply and Price Risk Management: As required by regulation, CL&P, along with UI, has capacity-related contracts with generation
facilities. CL&P has a sharing agreement with UI, with 80 percent of the costs or benefits of each contract borne by or allocated to CL&P and 20
percent borne by or allocated to UI. The combined capacity of these contracts is 787 MW. The capacity contracts extend through 2026 and obligate
both CL&P and UI to make or receive payments on a monthly basis to or from the generation facilities based on the difference between a set capacity
price and the capacity market price received in the ISO-NE capacity markets. In addition, CL&P has a contract to purchase 0.1 million MWh of
energy per year through 2020.
NSTAR Electric has a renewable energy contract to purchase 0.1 million MWh of energy per year through 2018 and a capacity-related contract to
purchase up to 35 MW per year through 2019.
As of December 31, 2015 and 2014, Eversource had NYMEX financial contracts for natural gas futures in order to reduce variability associated with
the purchase price of approximately 9.1 million and 8.8 million MMBtu of natural gas, respectively.
For the years ended December 31, 2015, 2014 and 2013, there were losses of $60.2 million and gains of $134.4 million and $160.6 million,
respectively, deferred as regulatory costs, which reflect the change in fair value associated with Eversource’s derivative contracts.
Credit Risk
Certain of Eversource’s derivative contracts contain credit risk contingent provisions. These provisions require Eversource to maintain investment
grade credit ratings from the major rating agencies and to post collateral for contracts in a net liability position over specified credit limits. As of
December 31, 2015 and 2014, Eversource had $5.8 million and $10 million, respectively, of derivative contracts in a net liability position that were