Derivatives |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
| Derivatives | NOTE 6: DERIVATIVES In 2018, Fitchburg entered into a long-term power purchase agreement (PPA) with H.Q. Energy Services (U.S.) Inc. (HQUS) to procure bundled clean energy and associated environmental attributes pursuant to Section 83D of “An Act to Promote Energy Diversity” (2016). The PPA requires Fitchburg to purchase specified quantities of electric energy over the 20-year contract term and provides for the transfer of associated environmental attributes. (See Note 7 Regulatory Matters: Fitchburg - Massachusetts Request for Proposals.) During 2025, based on the status of the NECEC Transmission Line and the Company’s assessment that the contingency related to the commencement of deliveries was substantially resolved as of December 31, 2025, the Company concluded that the PPA met the definition of a derivative. The Company evaluated the PPA under ASC 815 and concluded that (i) the host contract includes environmental attributes that do not meet the definition of a derivative and (ii) the PPA contains an embedded derivative related to the energy component that requires bifurcation. The Company has not designated the derivative as a hedging instrument. Additionally, the derivative does not qualify for the normal purchase normal sale scope exception. Accordingly, the Company accounts for the embedded energy derivative at fair value, with subsequent changes in fair value recognized as a regulatory offset. Please see Note 1 (Summary of Significant Accounting Policies - Derivatives) for a discussion of the Company’s regulatory accounting treatment of derivatives. The PPA provides a bundled price for energy and environmental attributes. In connection with bifurcation and fair value measurement of the embedded energy derivative, the Company applied an allocation approach to separate the embedded energy derivative from the non-derivative environmental attribute component. The fair value of the embedded energy derivative is estimated using a discounted cash flow model that compares forward market prices to the adjusted fixed price for the energy component of the PPA, multiplied by expected delivery volumes, and discounted using a rate that reflects the relevant counterparty’s credit risk. Observable inputs include on-peak and off-peak forward electricity prices and the Company incorporates an adjustment to estimate the pricing through the term of the PPA. The Company has classified the embedded derivative within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs in estimating the value of the embedded derivative. Please also see Note 1 (Summary of Significant Accounting Policies) for a discussion of the Company’s fair value accounting policy. The fair value of the derivative was $26.1 million and $17.7 million as of June 30, 2026 and December 31, 2025, respectively, with $4.2 million and $2.8 million recorded in Prepayments and Other related to the current portion as of June 30, 2026 and December 31, 2025, respectively, and $21.9 million and $14.9 million in Other Assets related to the noncurrent portion as of June 30, 2026 and December 31, 2025, respectively. The Company has recorded corresponding Current and Noncurrent Regulatory Liabilities related to the fair value of the derivative. No derivative assets or liabilities were recognized as of June 30, 2025. The Company does not offset derivative assets and liabilities on the Company’s Consolidated Balance Sheets. The Company entered into a long-term energy procurement arrangement primarily to comply with regulatory clean energy requirements. The Company does not enter into such arrangements for trading or speculative purposes. The Company is exposed to credit risk related to possible nonperformance by its counterparty. The Company manages this risk through ongoing credit monitoring and, as applicable, the use of collateral or other credit enhancements. |