v3.26.1
Derivative Instruments and Hedging Activities
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Disclosure DERIVATIVE FINANCIAL INSTRUMENTS
Normal operations expose Basin Electric to risks associated with changes in the market price of certain commodities. Basin Electric entered into derivative financial instruments for the purpose of mitigating the risks associated with market price volatility of natural gas, tar oil, electricity and diesel. Any changes in cash flows from the underlying purchases and sales that are indexed to certain prices are offset by corresponding changes in the cash flows from the derivatives. As directed by a Basin Electric Board of Director’s policy (Board Policy) to monitor risk and establish an internal control framework, Basin Electric maintains a Risk Management Steering Committee (RMSC) that is governed by a Commodity Risk Management Manual (Manual). The Board Policy prohibits speculation and the Manual has been adopted by the RMSC. In offsetting market risk, Basin Electric is exposed to other forms of incremental risk such as credit or liquidity risk.
The following table presents the outstanding hedged forecasted transactions as of March 31, 2026:
Hedged TransactionTermContracted
Monthly Volumes
of Forecasted
Transactions		Price
Natural gas purchasesThrough December 2033
20% to 62%
$2.79 - $6.51 per dekatherm
Tar oil sales
Through December 2027
23% to 90%
$52.00 - $93.80 per barrel
Electricity purchasesThrough December 2027
24% to 90%
$30.50 - $58.60 per MWh
Diesel purchasesThrough January 2029
9% to 80%
$2.05 - $2.44 per gallon
Basin Electric is also exposed to interest rate risk. To mitigate this risk, Basin Electric entered into various interest rate swaps to reduce the impact of changes in interest rates on certain variable rate long-term bonds and projected future bond issuances. The total notional amount of outstanding swap agreements as of March 31, 2026, was $325.0 million with due dates ranging from 2032 through 2058 at a weighted average interest rate of 5.10 percent.
The fair value and classification of the asset and liability portion of the derivative instruments in the consolidated balance sheets is as follows:
March 31, 2026December 31, 2025
Balance Sheet LocationFair Value of Asset DerivativesFair Value of Liability DerivativesFair Value of Asset DerivativesFair Value of Liability Derivatives
(In thousands)
Derivatives designated as cash flow hedges:
Commodity derivatives:
Prepayments and other current assets$5,031 $— $5,312 $— 
Other investments1,858 — 1,684 — 
Other current liabilities— (8,104)— (1,319)
Other noncurrent liabilities— (1,693)— (671)
Total derivatives designated as cash flow hedges6,889 (9,797)6,996 (1,990)
Derivatives not designated as cash flow hedges:
Commodity derivatives:
Prepayments and other current assets12,367 — 34,673 — 
Other investments— — 1,211 — 
Other current liabilities— (10,895)— (14,763)
Other noncurrent liabilities— (13,072)— (14,687)
Interest rate derivatives:
Other noncurrent liabilities— (19,689)— (22,031)
Total derivatives not designated as cash flow hedges12,367 (43,656)35,884 (51,481)
$19,256 $(53,453)$42,880 $(53,471)
Under ASC 980, Basin Electric’s Board of Directors defers changes in the fair value of certain derivative instruments as regulatory assets or liabilities. Current settlements of derivatives, including interest rate swaps and commodity derivatives, resulted in (credits) charges to the consolidated statements of operations for the three months ended March 31, 2026 and 2025 of $(14.3) million and $8.3 million, respectively, which are reclassified from regulatory assets and liabilities.
The change in fair value of derivatives deferred as a regulatory item for the three months ended March 31, 2026 and the year ended December 31, 2025 resulted in net deferred (gains) losses of $(9.9) million and $21.7 million, respectively.
For derivative instruments that are designated and qualify as a cash flow hedge under ASC 815, the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into net earnings in the same period or periods during which the hedged transaction affects net margin and earnings and is presented in the same line item on the consolidated statements of operations as the net earnings effect of the hedged item.
The following table summarizes Dakota Gas and Dakota Coal gains and losses and financial statement classification of the derivatives designated as cash flow hedges as of March 31, 2026. This does not reflect the expected gains or losses arising from the underlying physical transactions; therefore it is not indicative of the economic gross profit or loss realized when the underlying physical and financial transactions were settled.
Location of Loss Recognized in
Net (Gain) Loss on Cash Flow Hedging
Relationships
March 31, 2026
Other Operating RevenuesCost of Products Sold
(In thousands)
Total amounts of income and expense line items presented on the consolidated statements of operations in which the effects of cash flow hedges are recorded$240,425 $131,746 
Loss on cash flow hedges:
Commodity derivatives:
Amount reclassified from accumulated other comprehensive income into net margins and earnings$(760)$(28)
The following table summarizes Dakota Gas and Dakota Coal gains and losses and financial statement classification of the derivatives designated as cash flow hedges as of March 31, 2025. This does not reflect the expected gains or losses arising from the underlying physical transactions; therefore it is not indicative of the economic gross profit or loss realized when the underlying physical and financial transactions were settled.
Location of Gain (Loss) Recognized in
Net (Gain) Loss on Cash Flow Hedging
Relationships
March 31, 2025
Other Operating RevenuesCost of Products Sold
(In thousands)
Total amounts of income and expense line items presented on the consolidated statements of operations in which the effects of cash flow hedges are recorded$222,934 $123,734 
Gain (loss) on cash flow hedges:
Commodity derivatives:
Amount reclassified from accumulated other comprehensive income into net margins and earnings$554 $(73)
The following table summarizes Dakota Gas and Dakota Coal gains and losses and financial statement classification of the derivatives designated as cash flow hedges for the three months ended March 31, 2026 and 2025.
March 31,
2026		March 31,
2025
(In thousands)
Decrease in fair value of commodity derivatives$(8,703)$(1,486)
Recognition of losses (gains) in earnings due to settlements on commodity derivatives788 (481)
Total other comprehensive loss from hedging$(7,915)$(1,967)
Based on March 31, 2026 prices, a $3.1 million loss would be realized, reported in pre-tax earnings and reclassified from accumulated other comprehensive income during the next 12 months. As market prices fluctuate, estimated and actual realized gains or losses will change during future periods.
There are certain commodity derivative financial instruments that do not meet the criteria for hedge accounting under ASC 815 when using the critical terms match effectiveness assessment. For those derivatives, gains or losses are recorded in the consolidated statements of operations. The following table summarizes the impact of commodity derivatives that do not meet the criteria. This does not reflect the expected gains or losses arising from the underlying physical transactions; therefore it is not indicative of the economic gross profit or loss realized when the underlying physical and financial transactions were settled.
March 31,
2026		March 31,
2025
Location of Gain on Derivatives
Recognized in Net Margin and Earnings
Recognized
Gain
Recognized Gain
(In thousands)
Derivatives not designated as cash flow hedges:
Commodity derivatives:
Other operating revenues$19 $86 
Total$19 86