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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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| | | | |
ý☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20172021
OR
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¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
________________________
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| Commission file number | Registrant, State of Incorporation or Organization,
Address of Principal Executive Offices and Telephone Number
| IRS Employer Identification No.Number |
| | |
| 1-32853 | DUKE ENERGY CORPORATION (a Delaware corporation)
550 South Tryon
| 20-2777218 |
(a Delaware corporation)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
20-2777218 | |
| | | | | | | | | | |
Commission file number1-4928 | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number | | Commission file number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number |
1-4928 | DUKE ENERGY CAROLINAS, LLC | 56-0205520 |
(a North Carolina limited liability company)
526 South Church Street
Charlotte, North Carolina 28202-1803
704-382-3853
56-0205520
| | 1-3274 | DUKE ENERGY FLORIDA, LLC
(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
59-0247770
| | | | | | | | |
| 1-15929 | PROGRESS ENERGY, INC. | 56-2155481 |
(a North Carolina corporation)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-2155481
| | 1-1232 | DUKE ENERGY OHIO, INC.
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
31-0240030
| | | | | | | | |
| 1-3382 | DUKE ENERGY PROGRESS, LLC | 56-0165465 |
(a North Carolina limited liability company)
410 South Wilmington Street
Raleigh, North Carolina 27601-1748
704-382-3853
56-0165465
| | 1-3543 | | | | | | | | | |
| 1-3274 | DUKE ENERGY FLORIDA, LLC | 59-0247770 |
(a Florida limited liability company)
299 First Avenue North
St. Petersburg, Florida 33701
704-382-3853
| | | | | | | | | | | |
| 1-1232 | DUKE ENERGY OHIO, INC. | 31-0240030 |
(an Ohio corporation)
139 East Fourth Street
Cincinnati, Ohio 45202
704-382-3853
| | | | | | | | | | | |
| 1-3543 | DUKE ENERGY INDIANA, LLC | 35-0594457 |
(an Indiana limited liability company)
1000 East Main Street
Plainfield, Indiana 46168
704-382-3853
35-0594457
| | | | | | | | | | | |
| 1-6196 | PIEDMONT NATURAL GAS COMPANY, INC. | 56-0556998 |
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
56-0556998
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
RegistrantTitle of each classTrading symbolswhich registered
Duke Energy Common Stock, $0.001 par value DUK New York Stock Exchange LLC
Duke Energy 5.625% Junior Subordinated Debentures due DUKB New York Stock Exchange LLC
September 15, 2078
Duke Energy Depositary Shares, each representing a 1/1,000th DUK PR A New York Stock Exchange LLC
interest in a share of 5.75% Series A Cumulative
Redeemable Perpetual Preferred Stock, par value
$0.001 per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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| Duke Energy Corporation (Duke Energy) | Yesx | No ¨
☒ | No | ☐ | | Duke Energy Florida, LLC (Duke Energy Florida) | Yesx | ☒ | No¨ | ☐ |
| Duke Energy Carolinas, LLC (Duke Energy Carolinas) | Yesx | No ¨
☒ | No | ☐ | | Duke Energy Ohio, Inc. (Duke Energy Ohio) | Yesx | ☒ | No¨ | ☐ |
| Progress Energy, Inc. (Progress Energy) | Yesx | No ¨
☒ | No | ☐ | | Duke Energy Indiana, LLC (Duke Energy Indiana) | Yesx | ☒ | No¨ | ☐ |
| Duke Energy Progress, LLC (Duke Energy Progress) | Yesx | No ¨
☒ | No | ☐ | | Piedmont Natural Gas Company, Inc. (Piedmont) | Yesx | ☒ | No¨ | ☐ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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| Duke Energy | Yesx | No ¨
☒ | No | ☐ | | Duke Energy Florida | Yesx | ☒ | No¨ | ☐ |
| Duke Energy Carolinas | Yesx | No ¨
☒ | No | ☐ | | Duke Energy Ohio | Yesx | ☒ | No¨ | ☐ |
| Progress Energy | Yesx | No ¨
☒ | No | ☐ | | Duke Energy Indiana | Yesx | ☒ | No¨ | ☐ |
| Duke Energy Progress | Yesx | No ¨
☒ | No | Piedmont☐ | Yesx
| Piedmont | Yes | ☒ | No¨ | ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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| Duke Energy | Large accelerated filerx Accelerated Filer | ☒ | Accelerated filer¨ | ☐ | Non-accelerated filer ¨Filer | ☐ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Carolinas | Large accelerated filer ¨ Accelerated Filer | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerxFiler | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Progress Energy | Large accelerated filer ¨ Accelerated Filer | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerxFiler | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Progress | Large accelerated filer ¨ Accelerated Filer | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerxFiler | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Florida | Large accelerated filer ¨ Accelerated Filer | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerxFiler | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Ohio | Large accelerated filer ¨ Accelerated Filer | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerxFiler | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Duke Energy Indiana | Large accelerated filer ¨ Accelerated Filer | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerxFiler | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
| Piedmont | Large accelerated filer ¨ Accelerated Filer | ☐ | Accelerated filer¨ | ☐ | Non-accelerated filerxFiler | ☒ | Smaller reporting company¨ | ☐ | Emerging Growth Company ¨growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Duke Energy | Yes¨ | Nox
☐ | No | ☒ | | Duke Energy Florida | Yes¨ | ☐ | Nox | ☒ |
| Duke Energy Carolinas | Yes¨ | Nox
☐ | No | ☒ | | Duke Energy Ohio | Yes¨ | ☐ | Nox | ☒ |
| Progress Energy | Yes¨ | Nox
☐ | No | ☒ | | Duke Energy Indiana | Yes¨ | ☐ | Nox | ☒ |
| Duke Energy Progress | Yes¨ | Nox
☐ | No | Piedmont☒ | Yes ¨
| Piedmont | Yes | ☐ | Nox | ☒ |
Number of shares of Commoncommon stock outstanding at September 30, 2017:
| | | | | | | | |
| Registrant | Description | Shares |
| Duke Energy | Common stock, $0.001 par value | 769,343,372 |
| |
| |
| |
| |
| |
| |
| | |
Registrant | Description | Shares |
Duke Energy | Common stock, $0.001 par value | 699,975,614 |
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
TABLE OF CONTENTS
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| PART I. FINANCIAL INFORMATION |
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| Piedmont Natural Gas Company, Inc. Financial Statements | |
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| Note 1 – Organization and Basis of Presentation | |
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| Note 2 – Acquisitions and DispositionsBusiness Segments | |
| Note 3 – Business SegmentsRegulatory Matters | |
| Note 4 – Regulatory Matters | |
| Note 5 – Commitments and Contingencies | |
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| Note 65 – Debt and Credit Facilities | |
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| Note 76 – Asset Retirement ObligationsGoodwill | |
| Note 8 – Goodwill and Intangible Assets | |
| Note 97 – Related Party Transactions | |
| Note 108 – Derivatives and Hedging | |
| Note 119 – Investments in Debt and Equity Securities | |
| Note 1210 – Fair Value Measurements | |
| Note 1311 – Variable Interest Entities | |
| Note 1412 – Common StockRevenue | |
| Note 1513 – Stock-Based CompensationStockholders' Equity | |
| Note 1614 – Employee Benefit Plans | |
| Note 1715 – Income Taxes | |
| Note 1816 – Subsequent Events | |
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| PART II. OTHER INFORMATION |
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| FORWARD-LOOKING STATEMENTS | |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are based on management’s beliefs and assumptions and can often be identified by terms and phrases that include “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will,” “potential,” “forecast,” “target,” “guidance,” “outlook” or other similar terminology. Various factors may cause actual results to be materially different than the suggested outcomes within forward-looking statements; accordingly, there is no assurance that such results will be realized. These factors include, but are not limited to:
◦The impact of the COVID-19 pandemic;
◦State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices;
◦The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate;
◦The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process;
◦The costs of decommissioning nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process;
◦Costs and effects of legal and administrative proceedings, settlements, investigations and claims;
◦Industrial, commercial and residential growth or decline in service territories or customer bases resulting from sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies;
◦Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs;
◦Advancements in technology;
◦Additional competition in electric and natural gas markets and continued industry consolidation;
◦The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change;
◦Changing customer expectations and demands including heightened emphasis on environmental, social and governance concerns;
◦The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources;
◦Operational interruptions to our natural gas distribution and transmission activities;
◦The availability of adequate interstate pipeline transportation capacity and natural gas supply;
◦The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, operational accidents, information technology failures or other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences;
◦The inherent risks associated with the operation of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers;
◦The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets;
◦The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations, compliance with debt covenants and conditions and general market and economic conditions;
◦Credit ratings of the Duke Energy Registrants may be different from what is expected;
◦Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds;
◦Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all;
◦Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants;
◦The ability to control operation and maintenance costs;
◦The level of creditworthiness of counterparties to transactions;
◦The ability to obtain adequate insurance at acceptable costs;
◦Employee workforce factors, including the potential inability to attract and retain key personnel;
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◦ | State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices; |
| FORWARD-LOOKING STATEMENTS | |
◦ | The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate; |
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◦ | The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through rate case proceedings and the regulatory process; |
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◦ | The costs of decommissioning Crystal River Unit 3 and other nuclear facilities could prove to be more extensive than amounts estimated and all costs may not be fully recoverable through the regulatory process; |
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◦ | Costs and effects of legal and administrative proceedings, settlements, investigations and claims; |
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◦ | Industrial, commercial and residential growth or decline in service territories or customer bases resulting from sustained downturns of the economy and the economic health of our service territories or variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies; |
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◦ | Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs; |
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◦ | Advancements in technology; |
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◦ | Additional competition in electric and natural gas markets and continued industry consolidation; |
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◦ | The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change; |
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◦ | The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the company resulting from an incident that affects the U.S. electric grid or generating resources; |
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◦ | The ability to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business; |
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◦ | Operational interruptions to our natural gas distribution and transmission activities; |
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◦ | The availability of adequate interstate pipeline transportation capacity and natural gas supply; |
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◦ | The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches and other catastrophic events, such as fires, explosions, pandemic health events or other similar occurrences; |
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◦ | The inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks, including the financial stability of third-party service providers; |
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◦ | The timing and extent of changes in commodity prices and interest rates and the ability to recover such costs through the regulatory process, where appropriate, and their impact on liquidity positions and the value of underlying assets; |
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◦ | The results of financing efforts, including the ability to obtain financing on favorable terms, which can be affected by various factors, including credit ratings, interest rate fluctuations and general economic conditions; |
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◦ | Credit ratings of the Duke Energy Registrants may be different from what is expected; |
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◦ | Declines in the market prices of equity and fixed-income securities and resultant cash funding requirements for defined benefit pension plans, other post-retirement benefit plans and nuclear decommissioning trust funds; |
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◦ | Construction and development risks associated with the completion of the Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner, or at all; |
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◦ | Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants; |
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◦ | The ability to control operation and maintenance costs; |
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◦ | The level of creditworthiness of counterparties to transactions; |
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◦ | Employee workforce factors, including the potential inability to attract and retain key personnel; |
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◦ | The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent); |
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◦ | The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities; |
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◦ | The effect of accounting pronouncements issued periodically by accounting standard-setting bodies; |
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◦ | Substantial revision to the U.S. tax code, such as changes to the corporate tax rate or material change in the deductibility of interest; |
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◦ | The impact of potential goodwill impairments; |
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◦ | The ability to successfully complete future merger, acquisition or divestiture plans; |
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◦ | The ability to successfully integrate the natural gas businesses following the acquisition of Piedmont Natural Gas Company, Inc. and realize anticipated benefits; and |
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◦ | The ability to implement our business strategy. |
◦The ability of subsidiaries to pay dividends or distributions to Duke Energy Corporation holding company (the Parent);
◦The performance of projects undertaken by our nonregulated businesses and the success of efforts to invest in and develop new opportunities;
◦The effect of accounting pronouncements issued periodically by accounting standard-setting bodies;
◦The impact of U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings;
◦The impacts from potential impairments of goodwill or equity method investment carrying values;
◦Asset or business acquisitions and dispositions, including our ability to successfully consummate the second closing of the minority investment in Duke Energy Indiana, may not yield the anticipated benefits;
◦The actions of activist shareholders could disrupt our operations, impact our ability to execute on our business strategy, or cause fluctuations in the trading price of our common stock; and
◦The ability to implement our business strategy, including enhancing existing technology systems.
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at www.sec.gov.sec.gov. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than described. Forward-looking statements speak only as of the date they are made and the Duke Energy Registrants expressly disclaim an obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Glossary of Terms
The following terms or acronyms used in this Form 10-Q are defined below:
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| Term or Acronym | Definition |
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| 2013 Settlement | Revised and Restated Stipulation and Settlement Agreement approved in November 2013 among Duke Energy Florida, the Florida Office of Public Counsel and other customer representatives |
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| 2017 Settlement | Second Revised and Restated Settlement Agreement in 2017 among Duke Energy Florida, the Florida Office of Public Counsel and other customer representatives, which replaces and supplants the 2013 Settlement |
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| 2021 Settlement | Settlement Agreement in 2021 among Duke Energy Florida, the Florida Office of Public Counsel, the Florida Industrial Power Users Group, White Springs Agricultural Chemicals, Inc. d/b/a PSC Phosphate and NUCOR Steel Florida, Inc. |
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| ACP | Atlantic Coast Pipeline, LLC, a limited liability company owned by Dominion Energy, Inc. and Duke Energy |
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| ACP pipeline | The approximately 600-mile canceled interstate natural gas pipeline |
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| AFS | Available for Sale |
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| AFUDC | Allowance for funds used during construction |
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| ARO | Asset retirement obligations |
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| Bison | Bison Insurance Company Limited |
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| Board | Duke Energy Board of Directors |
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| CCR | Coal Combustion Residuals |
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| Coal Ash Act | North Carolina Coal Ash Management Act of 2014 |
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| the company | Duke Energy Corporation and its subsidiaries |
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| COVID-19 | Coronavirus Disease 2019 |
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| CRC | Cinergy Receivables Company, LLC |
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| Crystal River Unit 3 | Crystal River Unit 3 Nuclear Plant |
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| DEFPF | Duke Energy Florida Project Finance, LLC |
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| DEFR | Duke Energy Florida Receivables, LLC |
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| DEPR | Duke Energy Progress Receivables, LLC |
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| DERF | Duke Energy Receivables Finance Company, LLC |
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| Duke Energy | Duke Energy Corporation (collectively with its subsidiaries) |
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| Duke Energy Ohio | Duke Energy Ohio, Inc. |
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| Duke Energy Progress | Duke Energy Progress, LLC |
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| Duke Energy Carolinas | Duke Energy Carolinas, LLC |
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| Duke Energy Florida | Duke Energy Florida, LLC |
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| Duke Energy Indiana | Duke Energy Indiana, LLC |
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| Duke Energy Kentucky | Duke Energy Kentucky, Inc. |
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| Duke Energy Registrants | Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont |
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| EDIT | Excess deferred income tax |
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| Elliott | Elliott Investment Management, L.P. |
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| EPS | Earnings Per Share |
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| ETR | Effective tax rate |
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| Exchange Act | Securities Exchange Act of 1934 |
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| FERC | Federal Energy Regulatory Commission |
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| FPSC | Florida Public Service Commission |
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| FTR | Financial transmission rights |
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| GAAP | Generally accepted accounting principles in the U.S. |
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PART I. FINANCIAL INFORMATION
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| GAAP Reported Earnings | Net Income Available to Duke Energy Corporation Common Stockholders |
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| GAAP Reported EPS | Basic Earnings Per Share Available to Duke Energy Corporation common stockholders |
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| GIC | GIC Private Limited, Singapore's sovereign wealth fund and an experienced investor in U.S. infrastructure |
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| GWh | Gigawatt-hours |
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| IMR | Integrity Management Rider |
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| IRS | Internal Revenue Service |
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| Investment Trusts | NDTF investments and grantor trusts of Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana |
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| IURC | Indiana Utility Regulatory Commission |
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| KPSC | Kentucky Public Service Commission |
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| LLC | Limited Liability Company |
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| MGP | Manufactured gas plant |
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| MW | Megawatt |
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| MWh | Megawatt-hour |
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| NCUC | North Carolina Utilities Commission |
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| NDTF | Nuclear decommissioning trust funds |
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| NPNS | Normal purchase/normal sale |
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| OPEB | Other Post-Retirement Benefit Obligations |
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| OVEC | Ohio Valley Electric Corporation |
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| Piedmont | Piedmont Natural Gas Company, Inc. |
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| PJM | Pennsylvania-New Jersey-Maryland Interconnection |
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| PPA | Purchase Power Agreement |
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| Progress Energy | Progress Energy, Inc. |
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| PSCSC | Public Service Commission of South Carolina |
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| PUCO | Public Utilities Commission of Ohio |
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| RTO | Regional Transmission Organization |
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| Subsidiary Registrants | Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont |
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| the Tax Act | Tax Cuts and Jobs Act |
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| TPUC | Tennessee Public Utility Commission |
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| U.S. | United States |
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| VIE | Variable Interest Entity |
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| WACC | Weighted Average Cost of Capital |
ITEM 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions, except per share amounts) | 2021 | | 2020 | | 2021 | | 2020 |
| Operating Revenues | | | | | | | |
| Regulated electric | $ | 6,495 | | | $ | 6,315 | | | $ | 16,972 | | | $ | 16,402 | |
| Regulated natural gas | 263 | | | 214 | | | 1,314 | | | 1,115 | |
| Nonregulated electric and other | 193 | | | 192 | | | 573 | | | 574 | |
| Total operating revenues | 6,951 | | | 6,721 | | | 18,859 | | | 18,091 | |
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 1,844 | | | 1,849 | | | 4,702 | | | 4,645 | |
| Cost of natural gas | 75 | | | 41 | | | 430 | | | 299 | |
| Operation, maintenance and other | 1,507 | | | 1,450 | | | 4,319 | | | 4,142 | |
| Depreciation and amortization | 1,265 | | | 1,217 | | | 3,698 | | | 3,497 | |
| Property and other taxes | 371 | | | 324 | | | 1,073 | | | 1,003 | |
| Impairment of assets and other charges | 211 | | | 28 | | | 342 | | | 36 | |
| Total operating expenses | 5,273 | | | 4,909 | | | 14,564 | | | 13,622 | |
| Gains on Sales of Other Assets and Other, net | 9 | | | 2 | | | 11 | | | 10 | |
| Operating Income | 1,687 | | | 1,814 | | | 4,306 | | | 4,479 | |
| Other Income and Expenses | | | | | | | |
| Equity in earnings (losses) of unconsolidated affiliates | 22 | | | (80) | | | 14 | | | (2,004) | |
| Other income and expenses, net | 238 | | | 127 | | | 493 | | | 310 | |
| Total other income and expenses | 260 | | | 47 | | | 507 | | | (1,694) | |
| Interest Expense | 581 | | | 522 | | | 1,688 | | | 1,627 | |
| Income Before Income Taxes | 1,366 | | | 1,339 | | | 3,125 | | | 1,158 | |
| Income Tax Expense (Benefit) | 90 | | | 105 | | | 210 | | | (74) | |
| | | | | | | |
| | | | | | | |
| Net Income | 1,276 | | | 1,234 | | | 2,915 | | | 1,232 | |
| Add: Net Loss Attributable to Noncontrolling Interests | 129 | | | 70 | | | 247 | | | 208 | |
| Net Income Attributable to Duke Energy Corporation | 1,405 | | | 1,304 | | | 3,162 | | | 1,440 | |
| Less: Preferred Dividends | 39 | | | 39 | | | 92 | | | 93 | |
| Net Income Available to Duke Energy Corporation Common Stockholders | $ | 1,366 | | | $ | 1,265 | | | $ | 3,070 | | | $ | 1,347 | |
| | | | | | | |
| Earnings Per Share – Basic and Diluted | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Net income available to Duke Energy Corporation common stockholders | | | | | | | |
| Basic and Diluted | $ | 1.79 | | | $ | 1.74 | | | $ | 4.00 | | | $ | 1.85 | |
| | | | | | | |
| Weighted Average Shares Outstanding | | | | | | | |
| Basic and Diluted | 769 | | | 735 | | | 769 | | | 735 | |
| | | | | | | |
See Notes to Condensed Consolidated Financial Statements
9
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions, except per-share amounts) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Operating Revenues | | | | | | | |
| Regulated electric | $ | 6,091 |
| | $ | 6,303 |
| | $ | 16,122 |
| | $ | 16,321 |
|
| Regulated natural gas | 247 |
| | 89 |
| | 1,168 |
| | 355 |
|
| Nonregulated electric and other | 144 |
| | 184 |
| | 476 |
| | 490 |
|
| Total operating revenues | 6,482 |
| | 6,576 |
| | 17,766 |
| | 17,166 |
|
| Operating Expenses | | | | |
| |
|
| Fuel used in electric generation and purchased power | 1,863 |
| | 2,031 |
| | 4,853 |
| | 5,140 |
|
| Cost of natural gas | 68 |
| | 6 |
| | 402 |
| | 64 |
|
| Operation, maintenance and other | 1,442 |
| | 1,460 |
| | 4,282 |
| | 4,227 |
|
| Depreciation and amortization | 900 |
| | 819 |
| | 2,594 |
| | 2,402 |
|
| Property and other taxes | 313 |
| | 302 |
| | 924 |
| | 887 |
|
| Impairment charges | 207 |
| | 10 |
| | 216 |
| | 14 |
|
| Total operating expenses | 4,793 |
| | 4,628 |
| | 13,271 |
| | 12,734 |
|
| Gains on Sales of Other Assets and Other, net | 6 |
| | 6 |
| | 24 |
| | 21 |
|
| Operating Income | 1,695 |
| | 1,954 |
| | 4,519 |
| | 4,453 |
|
| Other Income and Expenses | | | | |
|
| |
|
|
| Equity in earnings (losses) of unconsolidated affiliates | 36 |
| | (60 | ) | | 101 |
| | (37 | ) |
| Other income and expenses, net | 88 |
| | 86 |
| | 255 |
| | 237 |
|
| Total other income and expenses | 124 |
| | 26 |
| | 356 |
| | 200 |
|
| Interest Expense | 498 |
| | 464 |
| | 1,475 |
| | 1,431 |
|
| Income From Continuing Operations Before Income Taxes | 1,321 |
| | 1,516 |
| | 3,400 |
| | 3,222 |
|
| Income Tax Expense from Continuing Operations | 364 |
| | 515 |
| | 1,035 |
| | 1,020 |
|
| Income From Continuing Operations | 957 |
| | 1,001 |
| | 2,365 |
| | 2,202 |
|
| (Loss) Income From Discontinued Operations, net of tax | (2 | ) | | 180 |
| | (4 | ) | | 190 |
|
| Net Income | 955 |
| | 1,181 |
| | 2,361 |
| | 2,392 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 1 |
| | 5 |
| | 5 |
| | 13 |
|
| Net Income Attributable to Duke Energy Corporation | $ | 954 |
| | $ | 1,176 |
| | $ | 2,356 |
| | $ | 2,379 |
|
| | | | | | | | |
| Earnings Per Share – Basic and Diluted | | | | | | | |
| Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 1.36 |
| | $ | 1.44 |
| | $ | 3.37 |
| | $ | 3.19 |
|
| Diluted | $ | 1.36 |
| | $ | 1.44 |
| | $ | 3.37 |
| | $ | 3.18 |
|
| Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | — |
| | $ | 0.26 |
| | $ | (0.01 | ) | | $ | 0.26 |
|
| Diluted | $ | — |
| | $ | 0.26 |
| | $ | (0.01 | ) | | $ | 0.26 |
|
| Net income attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 1.36 |
| | $ | 1.70 |
| | $ | 3.36 |
| | $ | 3.45 |
|
| Diluted | $ | 1.36 |
| | $ | 1.70 |
| | $ | 3.36 |
| | $ | 3.44 |
|
| Weighted average shares outstanding | | | | | | | |
| Basic | 700 |
| | 689 |
| | 700 |
| | 689 |
|
| Diluted | 700 |
| | 691 |
| | 700 |
| | 690 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Net Income | $ | 1,276 | | | $ | 1,234 | | | $ | 2,915 | | | $ | 1,232 | |
Other Comprehensive Income (Loss), net of tax(a) | | | | | | | |
| | | | | | | |
| Pension and OPEB adjustments | 1 | | | 1 | | | 3 | | | 1 | |
| Net unrealized gains (losses) on cash flow hedges | 9 | | | (83) | | | (59) | | | (159) | |
| Reclassification into earnings from cash flow hedges | 2 | | | 4 | | | 9 | | | 8 | |
| | | | | | | |
| Unrealized (losses) gains on available-for-sale securities | (2) | | | (2) | | | (6) | | | 5 | |
| | | | | | | |
| Other Comprehensive Income (Loss), net of tax | 10 | | | (80) | | | (53) | | | (145) | |
| Comprehensive Income | 1,286 | | | 1,154 | | | 2,862 | | | 1,087 | |
| Add: Comprehensive Loss Attributable to Noncontrolling Interests | 128 | | | 70 | | | 240 | | | 220 | |
| Comprehensive Income Attributable to Duke Energy | 1,414 | | | 1,224 | | | 3,102 | | | 1,307 | |
| Less: Preferred Dividends | 39 | | | 39 | | | 92 | | | 93 | |
| Comprehensive Income Available to Duke Energy Corporation Common Stockholders | $ | 1,375 | | | $ | 1,185 | | | $ | 3,010 | | | $ | 1,214 | |
(a)Net of income tax impacts of approximately $24 million for the three months ended September 30, 2020, and $16 million and $43 million for the nine months ended September 30, 2021, and 2020, respectively. All other periods presented include immaterial income tax impacts.
See Notes to Condensed Consolidated Financial Statements
10
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Net Income | $ | 955 |
| | $ | 1,181 |
| | $ | 2,361 |
| | $ | 2,392 |
|
| Other Comprehensive Income, net of tax | | | | | | | |
| Foreign currency translation adjustments | — |
| | (12 | ) | | — |
| | 95 |
|
| Pension and OPEB adjustments | — |
| | — |
| | 2 |
| | 2 |
|
| Net unrealized gains (losses) on cash flow hedges | 2 |
| | 6 |
| | (2 | ) | | (19 | ) |
| Reclassification into earnings from cash flow hedges | (2 | ) | | 1 |
| | 3 |
| | 3 |
|
| Unrealized gains on available-for-sale securities | 2 |
| | — |
| | 10 |
| | 7 |
|
| Other Comprehensive Income (Loss), net of tax | 2 |
| | (5 | ) | | 13 |
| | 88 |
|
| Comprehensive Income | 957 |
| | 1,176 |
| | 2,374 |
| | 2,480 |
|
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 1 |
| | 4 |
| | 5 |
| | 16 |
|
| Comprehensive Income Attributable to Duke Energy Corporation | $ | 956 |
| | $ | 1,172 |
| | $ | 2,369 |
| | $ | 2,464 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 548 | | | $ | 259 | |
| | | |
| Receivables (net of allowance for doubtful accounts of $48 at 2021 and $29 at 2020) | 998 | | | 1,009 | |
| Receivables of VIEs (net of allowance for doubtful accounts of $75 at 2021 and $117 at 2020) | 2,431 | | | 2,144 | |
| Inventory | 2,900 | | | 3,167 | |
| | | |
| Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs) | 1,791 | | | 1,641 | |
| Other (includes $347 at 2021 and $296 at 2020 related to VIEs) | 768 | | | 462 | |
| Total current assets | 9,436 | | | 8,682 | |
| Property, Plant and Equipment | | | |
| Cost | 160,652 | | | 155,580 | |
| Accumulated depreciation and amortization | (50,543) | | | (48,827) | |
| Facilities to be retired, net | 127 | | | 29 | |
| Net property, plant and equipment | 110,236 | | | 106,782 | |
| Other Noncurrent Assets | | | |
| Goodwill | 19,303 | | | 19,303 | |
| Regulatory assets (includes $896 at 2021 and $937 at 2020 related to VIEs) | 12,247 | | | 12,421 | |
| Nuclear decommissioning trust funds | 9,861 | | | 9,114 | |
| Operating lease right-of-use assets, net | 1,287 | | | 1,524 | |
| Investments in equity method unconsolidated affiliates | 951 | | | 961 | |
| | | |
| Other (includes $134 at 2021 and $81 at 2020 related to VIEs) | 3,686 | | | 3,601 | |
| Total other noncurrent assets | 47,335 | | | 46,924 | |
| Total Assets | $ | 167,007 | | | $ | 162,388 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 2,888 | | | $ | 3,144 | |
| Notes payable and commercial paper | 2,098 | | | 2,873 | |
| Taxes accrued | 908 | | | 482 | |
| Interest accrued | 558 | | | 537 | |
| Current maturities of long-term debt (includes $221 at 2021 and $472 at 2020 related to VIEs) | 4,873 | | | 4,238 | |
| | | |
| Asset retirement obligations | 673 | | | 718 | |
| Regulatory liabilities | 1,319 | | | 1,377 | |
| Other | 2,239 | | | 2,936 | |
| Total current liabilities | 15,556 | | | 16,305 | |
| Long-Term Debt (includes $3,923 at 2021 and $3,535 at 2020 related to VIEs) | 57,929 | | | 55,625 | |
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 9,875 | | | 9,244 | |
| Asset retirement obligations | 12,278 | | | 12,286 | |
| Regulatory liabilities | 15,530 | | | 15,029 | |
| Operating lease liabilities | 1,093 | | | 1,340 | |
| Accrued pension and other post-retirement benefit costs | 988 | | | 969 | |
| Investment tax credits | 804 | | | 687 | |
| | | |
| Other (includes $341 at 2021 and $316 at 2020 related to VIEs) | 1,714 | | | 1,719 | |
| Total other noncurrent liabilities | 42,282 | | | 41,274 | |
| Commitments and Contingencies | 0 | | 0 |
| Equity | | | |
| Preferred stock, Series A, $0.001 par value, 40 million depositary shares authorized and outstanding at 2021 and 2020 | 973 | | | 973 | |
| Preferred stock, Series B, $0.001 par value, 1 million shares authorized and outstanding at 2021 and 2020 | 989 | | | 989 | |
| Common stock, $0.001 par value, 2 billion shares authorized; 769 million shares outstanding at 2021 and 2020 | 1 | | | 1 | |
| Additional paid-in capital | 44,348 | | | 43,767 | |
| Retained earnings | 3,293 | | | 2,471 | |
| Accumulated other comprehensive loss | (297) | | | (237) | |
| Total Duke Energy Corporation stockholders' equity | 49,307 | | | 47,964 | |
| Noncontrolling interests | 1,933 | | | 1,220 | |
| Total equity | 51,240 | | | 49,184 | |
| Total Liabilities and Equity | $ | 167,007 | | | $ | 162,388 | |
See Notes to Condensed Consolidated Financial Statements
11
|
| | | | | | | |
| (in millions) | September 30, 2017 | | December 31, 2016 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 282 |
| | $ | 392 |
|
| Receivables (net of allowance for doubtful accounts of $13 at 2017 and $14 at 2016) | 528 |
| | 751 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $54 at 2017 and 2016) | 2,089 |
| | 1,893 |
|
| Inventory | 3,265 |
| | 3,522 |
|
| Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs) | 1,109 |
| | 1,023 |
|
| Other | 433 |
| | 458 |
|
| Total current assets | 7,706 |
| | 8,039 |
|
| Property, Plant and Equipment | | | |
| Cost | 125,582 |
| | 121,397 |
|
| Accumulated depreciation and amortization | (41,161 | ) | | (39,406 | ) |
| Generation facilities to be retired, net | 441 |
| | 529 |
|
| Net property, plant and equipment | 84,862 |
| | 82,520 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 19,418 |
| | 19,425 |
|
| Regulatory assets (includes $1,101 at 2017 and $1,142 at 2016 related to VIEs) | 13,367 |
| | 12,878 |
|
| Nuclear decommissioning trust funds | 6,814 |
| | 6,205 |
|
| Investments in equity method unconsolidated affiliates | 1,366 |
| | 925 |
|
| Other | 2,792 |
| | 2,769 |
|
| Total other noncurrent assets | 43,757 |
| | 42,202 |
|
| Total Assets | $ | 136,325 |
| | $ | 132,761 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 2,645 |
| | $ | 2,994 |
|
| Notes payable and commercial paper | 1,899 |
| | 2,487 |
|
| Taxes accrued | 627 |
| | 384 |
|
| Interest accrued | 538 |
| | 503 |
|
| Current maturities of long-term debt (includes $215 at 2017 and $260 at 2016 related to VIEs) | 2,485 |
| | 2,319 |
|
| Asset retirement obligations | 619 |
| | 411 |
|
| Regulatory liabilities | 273 |
| | 409 |
|
| Other | 1,734 |
| | 2,044 |
|
| Total current liabilities | 10,820 |
| | 11,551 |
|
| Long-Term Debt (includes $4,219 at 2017 and $3,587 at 2016 related to VIEs) | 48,929 |
| | 45,576 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 15,058 |
| | 14,155 |
|
| Asset retirement obligations | 9,586 |
| | 10,200 |
|
| Regulatory liabilities | 7,027 |
| | 6,881 |
|
| Accrued pension and other post-retirement benefit costs | 1,105 |
| | 1,111 |
|
| Investment tax credits | 534 |
| | 493 |
|
| Other | 1,624 |
| | 1,753 |
|
| Total other noncurrent liabilities | 34,934 |
| | 34,593 |
|
| Commitments and Contingencies |
|
| |
|
|
| Equity | | | |
| Common stock, $0.001 par value, 2 billion shares authorized; 700 million shares outstanding at 2017 and 2016 | 1 |
| | 1 |
|
| Additional paid-in capital | 38,774 |
| | 38,741 |
|
| Retained earnings | 2,936 |
| | 2,384 |
|
| Accumulated other comprehensive loss | (80 | ) | | (93 | ) |
| Total Duke Energy Corporation stockholders' equity | 41,631 |
| | 41,033 |
|
| Noncontrolling interests | 11 |
| | 8 |
|
| Total equity | 41,642 |
| | 41,041 |
|
| Total Liabilities and Equity | $ | 136,325 |
| | $ | 132,761 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| (in millions) | 2021 | | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 2,915 | | | $ | 1,232 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 4,189 | | | 4,081 | |
| Equity in (earnings) losses of unconsolidated affiliates | (14) | | | 2,004 | |
| Equity component of AFUDC | (126) | | | (112) | |
| | | |
| | | |
| Impairment of assets and other charges | 342 | | | 36 | |
| Deferred income taxes | 206 | | | 210 | |
| | | |
| | | |
| | | |
| Payments for asset retirement obligations | (389) | | | (463) | |
| | | |
| | | |
| Provision for rate refunds | (41) | | | (15) | |
| Refund of AMT credit carryforwards | — | | | 572 | |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 116 | | | 87 | |
| Receivables | (167) | | | 58 | |
| Inventory | 268 | | | 43 | |
| Other current assets | (643) | | | 199 | |
| Increase (decrease) in | | | |
| Accounts payable | (146) | | | (563) | |
| Taxes accrued | 431 | | | 386 | |
| Other current liabilities | 10 | | | (284) | |
| Other assets | 199 | | | (338) | |
| Other liabilities | 77 | | | (367) | |
| Net cash provided by operating activities | 7,227 | | | 6,766 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (7,089) | | | (7,408) | |
| | | |
| Contributions to equity method investments | (30) | | | (276) | |
| | | |
| | | |
| Purchases of debt and equity securities | (4,292) | | | (6,160) | |
| Proceeds from sales and maturities of debt and equity securities | 4,335 | | | 6,087 | |
| | | |
| | | |
| | | |
| Disbursements to canceled equity method investments | (855) | | | — | |
| Other | (269) | | | (207) | |
| Net cash used in investing activities | (8,200) | | | (7,964) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the: | | | |
| Issuance of long-term debt | 6,379 | | | 6,162 | |
| | | |
| Issuance of common stock | 5 | | | 75 | |
| | | |
| Payments for the redemption of long-term debt | (3,696) | | | (3,468) | |
| | | |
| Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 109 | | | 2,372 | |
| Payments for the redemption of short-term debt with original maturities greater than 90 days | (997) | | | (1,143) | |
| Notes payable and commercial paper | 165 | | | (969) | |
| | | |
| | | |
| Contributions from noncontrolling interests | 1,556 | | | 402 | |
| Dividends paid | (2,340) | | | (2,113) | |
| | | |
| Other | (21) | | | (93) | |
| Net cash provided by financing activities | 1,160 | | | 1,225 | |
| | | |
| Net increase in cash, cash equivalents and restricted cash | 187 | | | 27 | |
| Cash, cash equivalents and restricted cash at beginning of period | 556 | | | 573 | |
| Cash, cash equivalents and restricted cash at end of period | $ | 743 | | | $ | 600 | |
| Supplemental Disclosures: | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 998 | | | $ | 992 | |
| Non-cash dividends | — | | | 82 | |
| | | |
See Notes to Condensed Consolidated Financial Statements
12
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 2,361 |
| | $ | 2,392 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 2,990 |
| | 2,847 |
|
| Equity component of AFUDC | (175 | ) | | (140 | ) |
| Gains on sales of other assets | (28 | ) | | (27 | ) |
| Impairment charges | 216 |
| | 279 |
|
| Deferred income taxes | 1,016 |
| | 648 |
|
| Equity in earnings of unconsolidated affiliates | (101 | ) | | (34 | ) |
| Accrued pension and other post-retirement benefit costs | 19 |
| | 12 |
|
| Contributions to qualified pension plans | (8 | ) | | — |
|
| Payments for asset retirement obligations | (420 | ) | | (443 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 4 |
| | 36 |
|
| Receivables | 80 |
| | (276 | ) |
| Inventory | 248 |
| | 455 |
|
| Other current assets | (176 | ) | | (163 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (554 | ) | | (207 | ) |
| Taxes accrued | 233 |
| | 417 |
|
| Other current liabilities | (532 | ) | | (157 | ) |
| Other assets | (160 | ) | | (64 | ) |
| Other liabilities | (2 | ) | | 36 |
|
| Net cash provided by operating activities | 5,011 |
| | 5,611 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (5,841 | ) | | (5,252 | ) |
| Contributions to equity method investments | (370 | ) | | (198 | ) |
| Purchases of available-for-sale securities | (3,170 | ) | | (4,048 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 3,199 |
| | 4,107 |
|
| Change in restricted cash | (29 | ) | | (34 | ) |
| Other | (149 | ) | | (130 | ) |
| Net cash used in investing activities | (6,360 | ) | | (5,555 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the: | | | |
| Issuance of long-term debt | 5,710 |
| | 8,647 |
|
| Issuance of common stock related to employee benefit plans | — |
| | 7 |
|
| Payments for the redemption of long-term debt | (2,035 | ) | | (988 | ) |
| Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 265 |
| | 1,424 |
|
| Payments for the redemption of short-term debt with original maturities greater than 90 days | (237 | ) | | (492 | ) |
| Notes payable and commercial paper | (647 | ) | | (1,579 | ) |
| Dividends paid | (1,825 | ) | | (1,731 | ) |
| Other | 8 |
| | (22 | ) |
| Net cash provided by financing activities | 1,239 |
| | 5,266 |
|
| Changes in cash and cash equivalents associated with assets held for sale | — |
| | 11 |
|
| Net (decrease) increase in cash and cash equivalents | (110 | ) | | 5,333 |
|
| Cash and cash equivalents at beginning of period | 392 |
| | 383 |
|
| Cash and cash equivalents at end of period | $ | 282 |
| | $ | 5,716 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 740 |
| | $ | 631 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2020 and 2021 |
| | | | | | | | Accumulated Other Comprehensive | | | |
| | | | | | | | (Loss) Income | | | |
| | | | | | | | | Net Unrealized | | Total | | |
| | | | | | | | Net Gains | (Losses) Gains | | Duke Energy | | |
| | | Common | | Additional | | | (Losses) on | on Available- | Pension and | Corporation | | |
| | Preferred | Stock | Common | Paid-in | Retained | | Cash Flow | for-Sale- | OPEB | Stockholders' | Noncontrolling | Total |
| (in millions) | | Stock | Shares | Stock | Capital | Earnings | | Hedges | Securities | Adjustments | Equity | Interests | Equity |
| Balance at June 30, 2020 | | $ | 1,962 | | 735 | | $ | 1 | | $ | 40,997 | | $ | 2,707 | | | $ | (111) | | $ | 10 | | $ | (82) | | $ | 45,484 | | $ | 1,127 | | $ | 46,611 | |
| Net income (loss) | | — | | — | | — | | — | | 1,265 | | | — | | — | | — | | 1,265 | | (70) | | 1,195 | |
| Other comprehensive (loss) income | | — | | — | | — | | — | | — | | | (79) | | (2) | | 1 | | (80) | | — | | (80) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common stock issuances, including dividend reinvestment and employee benefits | | — | | 1 | | — | | 65 | | — | | | — | | — | | — | | 65 | | — | | 65 | |
| | | | | | | | | | | | | |
| Common stock dividends | | — | | — | | — | | — | | (712) | | | — | | — | | — | | (712) | | — | | (712) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Contribution from noncontrolling interests, net of transaction costs(a) | | — | | — | | — | | (17) | | — | | | — | | — | | — | | (17) | | 239 | | 222 | |
| Distributions to noncontrolling interest in subsidiaries | | — | | — | | — | | — | | — | | | — | | — | | — | | — | | (8) | | (8) | |
| Other | | — | | — | | — | | 1 | | — | | | — | | — | | — | | 1 | | 1 | | 2 | |
| Balance at September 30, 2020 | | $ | 1,962 | | $ | 736 | | $ | 1 | | $ | 41,046 | | $ | 3,260 | | | $ | (190) | | $ | 8 | | $ | (81) | | $ | 46,006 | | $ | 1,289 | | $ | 47,295 | |
| | | | | | | | | | | | | |
| Balance at June 30, 2021 | | $ | 1,962 | | 769 | | $ | 1 | | $ | 43,788 | | $ | 2,687 | | | $ | (234) | | $ | 2 | | $ | (74) | | $ | 48,132 | | $ | 1,413 | | $ | 49,545 | |
| Net income (loss) | | — | | — | | — | | — | | 1,366 | | | — | | — | | — | | 1,366 | | (129) | | 1,237 | |
| Other comprehensive income (loss) | | — | | — | | — | | — | | — | | | 10 | | (2) | | 1 | | 9 | | 1 | | 10 | |
| | | | | | | | | | | | | |
| Common stock issuances, including dividend reinvestment and employee benefits | | — | | — | | — | | 20 | | — | | | — | | — | | — | | 20 | | — | | 20 | |
| | | | | | | | | | | | | |
| Common stock dividends | | — | | — | | — | | — | | (760) | | | — | | — | | — | | (760) | | — | | (760) | |
Sale of noncontrolling interest(c) | | — | | — | | — | | 545 | | — | | | — | | — | | — | | 545 | | 454 | | 999 | |
Contribution from noncontrolling interests, net of transaction costs(a) | | — | | — | | — | | (3) | | — | | | — | | — | | — | | (3) | | 213 | | 210 | |
| Distributions to noncontrolling interest in subsidiaries | | — | | — | | — | | — | | — | | | — | | — | | — | | — | | (22) | | (22) | |
| Other | | — | | — | | — | | (2) | | — | | | — | | — | | — | | (2) | | 3 | | 1 | |
| Balance at September 30, 2021 | | $ | 1,962 | | $ | 769 | | $ | 1 | | $ | 44,348 | | $ | 3,293 | | | $ | (224) | | $ | — | | $ | (73) | | $ | 49,307 | | $ | 1,933 | | $ | 51,240 | |
See Notes to Condensed Consolidated Financial Statements
13
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | | | | | | | | | | | | | Net Unrealized |
| | | | Total |
| | | | |
| | | | | | | | | | Foreign |
| | Net |
| | (Losses) Gains |
| | | | Duke Energy |
| | | | |
| | Common |
| | | | Additional |
| | | | Currency |
| | Losses on |
| | on Available- |
| | Pension and |
| | Corporation |
| | | | |
| | Stock |
| | Common |
| | Paid-in |
| | Retained |
| | Translation |
| | Cash Flow |
| | for-Sale- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
| (in millions) | Shares |
| | Stock |
| | Capital |
| | Earnings |
| | Adjustments |
| | Hedges |
| | Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
| Balance at December 31, 2015 | 688 |
| | $ | 1 |
| | $ | 37,968 |
| | $ | 2,564 |
| | $ | (692 | ) | | $ | (50 | ) | | $ | (3 | ) | | $ | (61 | ) | | $ | 39,727 |
| | $ | 44 |
| | $ | 39,771 |
|
| Net income | — |
| | — |
| | — |
| | 2,379 |
| | — |
| | — |
| | — |
| | — |
| | 2,379 |
| | 13 |
| | 2,392 |
|
| Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 92 |
| | (16 | ) | | 7 |
| | 2 |
| | 85 |
| | 3 |
| | 88 |
|
| Common stock issuances, including dividend reinvestment and employee benefits | 1 |
| | — |
| | 29 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 29 |
| | — |
| | 29 |
|
| Common stock dividends | — |
| | — |
| | — |
| | (1,731 | ) | | — |
| | — |
| | — |
| | — |
| | (1,731 | ) | | — |
| | (1,731 | ) |
| Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) |
| Balance at September 30, 2016 | 689 |
| | $ | 1 |
|
| $ | 37,997 |
|
| $ | 3,212 |
|
| $ | (600 | ) |
| $ | (66 | ) |
| $ | 4 |
|
| $ | (59 | ) |
| $ | 40,489 |
|
| $ | 57 |
|
| $ | 40,546 |
|
| | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | 700 |
| | $ | 1 |
| | $ | 38,741 |
| | $ | 2,384 |
| | $ | — |
| | $ | (20 | ) | | $ | (1 | ) | | $ | (72 | ) | | $ | 41,033 |
| | $ | 8 |
| | $ | 41,041 |
|
| Net income | — |
| | — |
| | — |
| | 2,356 |
| | — |
| | — |
| | — |
| | — |
| | 2,356 |
| | 5 |
| | 2,361 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | 10 |
| | 2 |
| | 13 |
| | — |
| | 13 |
|
| Common stock issuances, including dividend reinvestment and employee benefits | — |
| | — |
| | 33 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 33 |
| | — |
| | 33 |
|
| Common stock dividends | — |
| | — |
| | — |
| | (1,825 | ) | | — |
| | — |
| | — |
| | — |
| | (1,825 | ) | | — |
| | (1,825 | ) |
| Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
Other(a) | — |
| | — |
| | — |
| | 21 |
| | — |
| | — |
| | — |
| | — |
| | 21 |
| | — |
| | 21 |
|
| Balance at September 30, 2017 | 700 |
|
| $ | 1 |
|
| $ | 38,774 |
|
| $ | 2,936 |
|
| $ | — |
|
| $ | (19 | ) |
| $ | 9 |
|
| $ | (70 | ) |
| $ | 41,631 |
|
| $ | 11 |
|
| $ | 41,642 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 for more information. |
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2020 and 2021 |
| | | | | | | | Accumulated Other Comprehensive | | | |
| | | | | | | | (Loss) Income | | | |
| | | | | | | | | Net Unrealized | | Total | | |
| | | | | | | | Net Gains | Gains (Losses) | | Duke Energy | | |
| | | Common | | Additional | | | (Losses) on | on Available- | Pension and | Corporation | | |
| | Preferred | Stock | Common | Paid-in | Retained | | Cash Flow | for-Sale- | OPEB | Stockholders' | Noncontrolling | Total |
| (in millions) | | Stock | Shares | Stock | Capital | Earnings | | Hedges | Securities | Adjustments | Equity | Interests | Equity |
| Balance at December 31, 2019 | | $ | 1,962 | | 733 | | $ | 1 | | $ | 40,881 | | $ | 4,108 | | | $ | (51) | | $ | 3 | | $ | (82) | | $ | 46,822 | | $ | 1,129 | | $ | 47,951 | |
| Net income (loss) | | — | | — | | — | | — | | 1,347 | | | — | | — | | — | | 1,347 | | (208) | | 1,139 | |
| Other comprehensive (loss) income | | — | | — | | — | | — | | — | | | (139) | | 5 | | 1 | | (133) | | (12) | | (145) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common stock issuances, including dividend reinvestment and employee benefits | | — | | 3 | | — | | 181 | | — | | | — | | — | | — | | 181 | | — | | 181 | |
| | | | | | | | | | | | | |
| Common stock dividends | | — | | — | | — | | — | | (2,103) | | | — | | — | | — | | (2,103) | | — | | (2,103) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Contributions from noncontrolling interests, net of transaction costs(a) | | — | | — | | — | | (17) | | — | | | — | | — | | — | | (17) | | 402 | | 385 | |
| Distributions to noncontrolling interest in subsidiaries | | — | | — | | — | | — | | — | | | — | | — | | — | | — | | (22) | | (22) | |
Other(b) | | — | | — | | — | | 1 | | (92) | | | — | | — | | — | | (91) | | — | | (91) | |
| Balance at September 30, 2020 | | $ | 1,962 | | 736 | | $ | 1 | | $ | 41,046 | | $ | 3,260 | | | $ | (190) | | $ | 8 | | $ | (81) | | $ | 46,006 | | $ | 1,289 | | $ | 47,295 | |
| | | | | | | | | | | | | |
| Balance at December 31, 2020 | | $ | 1,962 | | 769 | | $ | 1 | | $ | 43,767 | | $ | 2,471 | | | $ | (167) | | $ | 6 | | $ | (76) | | $ | 47,964 | | $ | 1,220 | | $ | 49,184 | |
| Net income (loss) | | — | | — | | — | | — | | 3,070 | | | — | | — | | — | | 3,070 | | (247) | | 2,823 | |
| Other comprehensive (loss) income | | — | | — | | — | | — | | — | | | (57) | | (6) | | 3 | | (60) | | 7 | | (53) | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Common stock issuances, including dividend reinvestment and employee benefits | | — | | — | | — | | 43 | | — | | | — | | — | | — | | 43 | | — | | 43 | |
| | | | | | | | | | | | | |
| Common stock dividends | | — | | — | | — | | — | | (2,248) | | | — | | — | | — | | (2,248) | | — | | (2,248) | |
Sale of noncontrolling interest(c) | | — | | — | | — | | 545 | | — | | | — | | — | | — | | 545 | | 454 | | 999 | |
Contributions from noncontrolling interests, net of transaction costs(a) | | — | | — | | — | | (6) | | — | | | — | | — | | — | | (6) | | 531 | | 525 | |
| Distributions to noncontrolling interest in subsidiaries | | — | | — | | — | | — | | — | | | — | | — | | — | | — | | (34) | | (34) | |
| Other | | — | | — | | — | | (1) | | — | | | — | | — | | — | | (1) | | 2 | | 1 | |
| Balance at September 30, 2021 | | $ | 1,962 | | 769 | | $ | 1 | | $ | 44,348 | | $ | 3,293 | | | $ | (224) | | $ | — | | $ | (73) | | $ | 49,307 | | $ | 1,933 | | $ | 51,240 | |
(a)Relates to tax equity financing activity in the Commercial Renewables segment.
(b)Amounts in Retained earnings primarily represent impacts due to implementation of a new accounting standard related to Current Estimated Credit Losses. See Note 1 for additional discussion.
(c)Relates to the sale of a noncontrolling interest in Duke Energy Indiana. See Note 2 for additional discussion.
See Notes to Condensed Consolidated Financial Statements
14
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Operating Revenues | $ | 2,104 | | | $ | 2,058 | | | $ | 5,430 | | | $ | 5,416 | |
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 452 | | | 497 | | | 1,218 | | | 1,326 | |
| Operation, maintenance and other | 471 | | | 402 | | | 1,347 | | | 1,218 | |
| Depreciation and amortization | 366 | | | 372 | | | 1,088 | | | 1,090 | |
| Property and other taxes | 91 | | | 57 | | | 248 | | | 213 | |
| Impairment of assets and other charges | 163 | | | 20 | | | 238 | | | 22 | |
| Total operating expenses | 1,543 | | | 1,348 | | | 4,139 | | | 3,869 | |
| (Losses) Gains on Sales of Other Assets and Other, net | (1) | | | 1 | | | 1 | | | 1 | |
| Operating Income | 560 | | | 711 | | | 1,292 | | | 1,548 | |
| Other Income and Expenses, net | 126 | | | 42 | | | 218 | | | 128 | |
| Interest Expense | 137 | | | 122 | | | 400 | | | 370 | |
| Income Before Income Taxes | 549 | | | 631 | | | 1,110 | | | 1,306 | |
| Income Tax Expense | 16 | | | 76 | | | 40 | | | 178 | |
| Net Income and Comprehensive Income | $ | 533 | | | $ | 555 | | | $ | 1,070 | | | $ | 1,128 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See Notes to Condensed Consolidated Financial Statements
15
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 2,136 |
| | $ | 2,226 |
| | $ | 5,581 |
| | $ | 5,641 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 531 |
| | 581 |
| | 1,394 |
| | 1,391 |
|
| Operation, maintenance and other | 480 |
| | 493 |
| | 1,431 |
| | 1,481 |
|
| Depreciation and amortization | 281 |
| | 268 |
| | 804 |
| | 802 |
|
| Property and other taxes | 67 |
| | 68 |
| | 206 |
| | 206 |
|
| Total operating expenses | 1,359 |
| | 1,410 |
| | 3,835 |
| | 3,880 |
|
| Loss on Sales of Other Assets and Other, net | — |
| | (1 | ) | | — |
| | (1 | ) |
| Operating Income | 777 |
| | 815 |
| | 1,746 |
| | 1,760 |
|
| Other Income and Expenses, net | 26 |
| | 39 |
| | 99 |
| | 121 |
|
| Interest Expense | 108 |
| | 102 |
| | 314 |
| | 316 |
|
| Income Before Income Taxes | 695 |
| | 752 |
| | 1,531 |
| | 1,565 |
|
| Income Tax Expense | 229 |
| | 258 |
| | 522 |
| | 539 |
|
| Net Income | $ | 466 |
| | $ | 494 |
| | $ | 1,009 |
| | $ | 1,026 |
|
| Other Comprehensive Income, net of tax | | | | | | | |
| Reclassification into earnings from cash flow hedges | — |
| | — |
| | 1 |
| | 1 |
|
| Comprehensive Income | $ | 466 |
| | $ | 494 |
| | $ | 1,010 |
| | $ | 1,027 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 21 | | | $ | 21 | |
| Receivables (net of allowance for doubtful accounts of $2 at 2021 and $1 at 2020) | 278 | | | 247 | |
| Receivables of VIEs (net of allowance for doubtful accounts of $40 at 2021 and $22 at 2020) | 915 | | | 696 | |
| Receivables from affiliated companies | 85 | | | 124 | |
| | | |
| Inventory | 969 | | | 1,010 | |
| Regulatory assets | 460 | | | 473 | |
| Other | 104 | | | 20 | |
| Total current assets | 2,832 | | | 2,591 | |
| Property, Plant and Equipment | | | |
| Cost | 51,790 | | | 50,640 | |
| Accumulated depreciation and amortization | (17,959) | | | (17,453) | |
| Facilities to be retired, net | 89 | | | — | |
| Net property, plant and equipment | 33,920 | | | 33,187 | |
| Other Noncurrent Assets | | | |
| Regulatory assets | 2,743 | | | 2,996 | |
| Nuclear decommissioning trust funds | 5,434 | | | 4,977 | |
| Operating lease right-of-use assets, net | 95 | | | 110 | |
| Other | 1,197 | | | 1,187 | |
| Total other noncurrent assets | 9,469 | | | 9,270 | |
| Total Assets | $ | 46,221 | | | $ | 45,048 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 673 | | | $ | 1,000 | |
| Accounts payable to affiliated companies | 184 | | | 199 | |
| Notes payable to affiliated companies | 86 | | | 506 | |
| Taxes accrued | 391 | | | 76 | |
| Interest accrued | 137 | | | 117 | |
| Current maturities of long-term debt | 357 | | | 506 | |
| Asset retirement obligations | 245 | | | 264 | |
| Regulatory liabilities | 503 | | | 473 | |
| Other | 516 | | | 546 | |
| Total current liabilities | 3,092 | | | 3,687 | |
| Long-Term Debt | 12,318 | | | 11,412 | |
| Long-Term Debt Payable to Affiliated Companies | 300 | | | 300 | |
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 3,893 | | | 3,842 | |
| Asset retirement obligations | 5,134 | | | 5,086 | |
| Regulatory liabilities | 6,867 | | | 6,535 | |
| Operating lease liabilities | 83 | | | 97 | |
| Accrued pension and other post-retirement benefit costs | 64 | | | 73 | |
| Investment tax credits | 288 | | | 236 | |
| Other | 558 | | | 626 | |
| Total other noncurrent liabilities | 16,887 | | | 16,495 | |
| Commitments and Contingencies | 0 | | 0 |
| Equity | | | |
| Member's equity | 13,631 | | | 13,161 | |
| Accumulated other comprehensive loss | (7) | | | (7) | |
| Total equity | 13,624 | | | 13,154 | |
| Total Liabilities and Equity | $ | 46,221 | | | $ | 45,048 | |
See Notes to Condensed Consolidated Financial Statements
16
|
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 18 |
| | $ | 14 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 180 |
| | 160 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016) | 691 |
| | 645 |
|
| Receivables from affiliated companies | 146 |
| | 163 |
|
| Notes receivable from affiliated companies | — |
| | 66 |
|
| Inventory | 1,000 |
| | 1,055 |
|
| Regulatory assets | 237 |
| | 238 |
|
| Other | 27 |
| | 37 |
|
| Total current assets | 2,299 |
| | 2,378 |
|
| Property, Plant and Equipment | | | |
| Cost | 42,321 |
| | 41,127 |
|
| Accumulated depreciation and amortization | (14,969 | ) | | (14,365 | ) |
| Net property, plant and equipment | 27,352 |
| | 26,762 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 3,077 |
| | 3,159 |
|
| Nuclear decommissioning trust funds | 3,621 |
| | 3,273 |
|
| Other | 910 |
| | 943 |
|
| Total other noncurrent assets | 7,608 |
| | 7,375 |
|
| Total Assets | $ | 37,259 |
| | $ | 36,515 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 726 |
| | $ | 833 |
|
| Accounts payable to affiliated companies | 159 |
| | 247 |
|
| Notes payable to affiliated companies | 468 |
| | — |
|
| Taxes accrued | 368 |
| | 143 |
|
| Interest accrued | 135 |
| | 102 |
|
| Current maturities of long-term debt | 705 |
| | 116 |
|
| Asset retirement obligations | 304 |
| | 222 |
|
| Regulatory liabilities | 105 |
| | 161 |
|
| Other | 435 |
| | 468 |
|
| Total current liabilities | 3,405 |
|
| 2,292 |
|
| Long-Term Debt | 8,520 |
| | 9,187 |
|
| Long-Term Debt Payable to Affiliated Companies | 300 |
| | 300 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 6,796 |
| | 6,544 |
|
| Asset retirement obligations | 3,297 |
| | 3,673 |
|
| Regulatory liabilities | 2,884 |
| | 2,840 |
|
| Accrued pension and other post-retirement benefit costs | 108 |
| | 97 |
|
| Investment tax credits | 234 |
| | 203 |
|
| Other | 559 |
| | 607 |
|
| Total other noncurrent liabilities | 13,878 |
| | 13,964 |
|
| Commitments and Contingencies |
|
| |
|
|
| Equity | | | |
| Member's equity | 11,164 |
| | 10,781 |
|
| Accumulated other comprehensive loss | (8 | ) | | (9 | ) |
| Total equity | 11,156 |
| | 10,772 |
|
| Total Liabilities and Equity | $ | 37,259 |
| | $ | 36,515 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| (in millions) | 2021 | | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 1,070 | | | $ | 1,128 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 1,295 | | | 1,295 | |
| Equity component of AFUDC | (46) | | | (46) | |
| | | |
| Loss on sales of other assets | (1) | | | — | |
| Impairment of assets and other charges | 238 | | | 22 | |
| Deferred income taxes | (146) | | | (103) | |
| | | |
| | | |
| | | |
| Payments for asset retirement obligations | (132) | | | (127) | |
| Provision for rate refunds | (29) | | | (1) | |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | (1) | | | — | |
| Receivables | (172) | | | 41 | |
| Receivables from affiliated companies | 39 | | | 50 | |
| Inventory | 41 | | | 4 | |
| Other current assets | (153) | | | 197 | |
| Increase (decrease) in | | | |
| Accounts payable | (254) | | | (313) | |
| Accounts payable to affiliated companies | (15) | | | (55) | |
| Taxes accrued | 315 | | | 352 | |
| Other current liabilities | 72 | | | (121) | |
| Other assets | 52 | | | (72) | |
| Other liabilities | 167 | | | (23) | |
| Net cash provided by operating activities | 2,340 | | | 2,228 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,947) | | | (1,931) | |
| | | |
| Purchases of debt and equity securities | (2,465) | | | (1,313) | |
| Proceeds from sales and maturities of debt and equity securities | 2,465 | | | 1,313 | |
| Notes receivable from affiliated companies | — | | | (65) | |
| Other | (122) | | | (105) | |
| Net cash used in investing activities | (2,069) | | | (2,101) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 1,367 | | | 965 | |
| Payments for the redemption of long-term debt | (616) | | | (457) | |
| Notes payable to affiliated companies | (421) | | | (29) | |
| Distributions to parent | (600) | | | (600) | |
| Other | (1) | | | (1) | |
| Net cash used in financing activities | (271) | | | (122) | |
| Net increase in cash and cash equivalents | — | | | 5 | |
| Cash and cash equivalents at beginning of period | 21 | | | 18 | |
| Cash and cash equivalents at end of period | $ | 21 | | | $ | 23 | |
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 308 | | | $ | 295 | |
See Notes to Condensed Consolidated Financial Statements
17
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 1,009 |
| | $ | 1,026 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 1,051 |
| | 1,020 |
|
| Equity component of AFUDC | (79 | ) | | (75 | ) |
| Losses on sales of other assets and other, net | — |
| | 1 |
|
| Deferred income taxes | 330 |
| | 382 |
|
| Accrued pension and other post-retirement benefit costs | — |
| | 3 |
|
| Payments for asset retirement obligations | (201 | ) | | (204 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 1 |
| | 4 |
|
| Receivables | (40 | ) | | (191 | ) |
| Receivables from affiliated companies | 17 |
| | 19 |
|
| Inventory | 50 |
| | 217 |
|
| Other current assets | 8 |
| | 81 |
|
| Increase (decrease) in | | | |
| Accounts payable | (78 | ) | | (179 | ) |
| Accounts payable to affiliated companies | (88 | ) | | (100 | ) |
| Taxes accrued | 225 |
| | 248 |
|
| Other current liabilities | (149 | ) | | 51 |
|
| Other assets | (18 | ) | | 57 |
|
| Other liabilities | (26 | ) | | (15 | ) |
| Net cash provided by operating activities | 2,012 |
| | 2,345 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,747 | ) | | (1,531 | ) |
| Purchases of available-for-sale securities | (1,660 | ) | | (2,070 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 1,664 |
| | 2,070 |
|
| Notes receivable from affiliated companies | 66 |
| | 131 |
|
| Other | (58 | ) | | (65 | ) |
| Net cash used in investing activities | (1,735 | ) | | (1,465 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — |
| | 992 |
|
| Payments for the redemption of long-term debt | (115 | ) | | (3 | ) |
| Notes payable to affiliated companies | 468 |
| | — |
|
| Distributions to parent | (625 | ) | | (1,800 | ) |
| Other | (1 | ) | | — |
|
| Net cash used in financing activities | (273 | ) | | (811 | ) |
| Net increase in cash and cash equivalents | 4 |
| | 69 |
|
| Cash and cash equivalents at beginning of period | 14 |
| | 13 |
|
| Cash and cash equivalents at end of period | $ | 18 |
| | $ | 82 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 292 |
| | $ | 228 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 and 2021 |
| | | Accumulated Other | | |
| | | Comprehensive | | |
| | | Loss | | |
| Member's | | Net Losses on | | Total |
| (in millions) | Equity | | Cash Flow Hedges | | Equity |
| Balance at June 30, 2020 | $ | 13,079 | | | $ | (7) | | | $ | 13,072 | |
| Net income | 555 | | | — | | | 555 | |
| | | | | |
| Distributions to parent | (300) | | | — | | | (300) | |
| Other | (1) | | | — | | | (1) | |
| Balance at September 30, 2020 | $ | 13,333 | | | $ | (7) | | | $ | 13,326 | |
| | | | | |
| Balance at June 30, 2021 | $ | 13,399 | | | $ | (7) | | | $ | 13,392 | |
| Net income | 533 | | | — | | | 533 | |
| | | | | |
| Distributions to parent | (300) | | | — | | | (300) | |
| Other | (1) | | | — | | | (1) | |
| Balance at September 30, 2021 | $ | 13,631 | | | $ | (7) | | | $ | 13,624 | |
| | | | | |
| Nine Months Ended September 30, 2020 and 2021 |
| | | Accumulated Other | | |
| | | Comprehensive | | |
| | | Loss | | |
| Member's | | Net Losses on | | Total |
| (in millions) | Equity | | Cash Flow Hedges | | Equity |
| Balance at December 31, 2019 | $ | 12,818 | | | $ | (7) | | | $ | 12,811 | |
| Net income | 1,128 | | | — | | | 1,128 | |
| | | | | |
| Distributions to parent | (600) | | | — | | | (600) | |
Other(a) | (13) | | | — | | | (13) | |
| Balance at September 30, 2020 | $ | 13,333 | | | $ | (7) | | | $ | 13,326 | |
| | | | | |
| Balance at December 31, 2020 | $ | 13,161 | | | $ | (7) | | | $ | 13,154 | |
| Net income | 1,070 | | | — | | | 1,070 | |
| | | | | |
| Distributions to parent | (600) | | | — | | | (600) | |
| | | | | |
| Balance at September 30, 2021 | $ | 13,631 | | | $ | (7) | | | $ | 13,624 | |
(a)Amounts primarily represent impacts due to implementation of a new accounting standard related to Current Estimated Credit Losses. See Note 1 for additional discussion.
See Notes to Condensed Consolidated Financial Statements
18
|
| | | | | | | | | | | |
| | | | Accumulated Other | | |
| | | | Comprehensive | | |
| | | | Loss | | |
| | | | Net Losses on |
| | |
| | Member's |
| | Cash Flow |
| | Total |
|
| (in millions) | Equity |
| | Hedges |
| | Equity |
|
| Balance at December 31, 2015 | $ | 11,617 |
| | $ | (11 | ) | | $ | 11,606 |
|
| Net income | 1,026 |
| | — |
| | 1,026 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
|
| Distributions to parent | (1,800 | ) | | — |
| | (1,800 | ) |
| Other | (3 | ) | | — |
| | (3 | ) |
| Balance at September 30, 2016 | $ | 10,840 |
| | $ | (10 | ) | | $ | 10,830 |
|
| | | | | | |
| Balance at December 31, 2016 | $ | 10,781 |
| | $ | (9 | ) | | $ | 10,772 |
|
| Net income | 1,009 |
| | — |
| | 1,009 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
|
| Distributions to parent | (625 | ) | | — |
| | (625 | ) |
| Other | (1 | ) | | — |
| | (1 | ) |
| Balance at September 30, 2017 | $ | 11,164 |
| | $ | (8 | ) | | $ | 11,156 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Operating Revenues | $ | 3,233 | | | $ | 3,197 | | | $ | 8,417 | | | $ | 8,117 | |
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 1,074 | | | 1,088 | | | 2,702 | | | 2,628 | |
| Operation, maintenance and other | 636 | | | 646 | | | 1,863 | | | 1,789 | |
| Depreciation and amortization | 504 | | | 472 | | | 1,430 | | | 1,356 | |
| Property and other taxes | 144 | | | 147 | | | 419 | | | 419 | |
| Impairment of assets and other charges | 42 | | | 1 | | | 79 | | | 1 | |
| Total operating expenses | 2,400 | | | 2,354 | | | 6,493 | | | 6,193 | |
| Gains on Sales of Other Assets and Other, net | 8 | | | 3 | | | 9 | | | 9 | |
| Operating Income | 841 | | | 846 | | | 1,933 | | | 1,933 | |
| Other Income and Expenses, net | 86 | | | 24 | | | 167 | | | 89 | |
| Interest Expense | 200 | | | 194 | | | 592 | | | 599 | |
| Income Before Income Taxes | 727 | | | 676 | | | 1,508 | | | 1,423 | |
| Income Tax Expense | 94 | | | 70 | | | 174 | | | 190 | |
| | | | | | | |
| | | | | | | |
| Net Income | 633 | | | 606 | | | $ | 1,334 | | | $ | 1,233 | |
| Less: Net Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | 1 | | | 1 | |
| Net Income Attributable to Parent | $ | 632 | | | $ | 605 | | | $ | 1,333 | | | $ | 1,232 | |
| | | | | | | |
| Net Income | $ | 633 | | | $ | 606 | | | $ | 1,334 | | | $ | 1,233 | |
| Other Comprehensive Income, net of tax | | | | | | | |
| Pension and OPEB adjustments | (1) | | | — | | | — | | | 1 | |
| Net unrealized gains on cash flow hedges | 1 | | | 1 | | | 2 | | | 3 | |
| | | | | | | |
| | | | | | | |
| Unrealized gains on available-for-sale securities | — | | | 1 | | | — | | | 1 | |
| | | | | | | |
| Other Comprehensive Income, net of tax | — | | | 2 | | | 2 | | | 5 | |
| Comprehensive Income | 633 | | | 608 | | | $ | 1,336 | | | $ | 1,238 | |
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | 1 | | | 1 | |
| Comprehensive Income Attributable to Parent | $ | 632 | | | $ | 607 | | | $ | 1,335 | | | $ | 1,237 | |
See Notes to Condensed Consolidated Financial Statements
19
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 2,864 |
| | $ | 2,965 |
| | $ | 7,435 |
| | $ | 7,645 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 1,031 |
| | 1,120 |
| | 2,588 |
| | 2,832 |
|
| Operation, maintenance and other | 572 |
| | 582 |
| | 1,650 |
| | 1,699 |
|
| Depreciation and amortization | 334 |
| | 318 |
| | 958 |
| | 904 |
|
| Property and other taxes | 140 |
| | 136 |
| | 386 |
| | 375 |
|
| Impairment charges | 135 |
| | 1 |
| | 137 |
| | 4 |
|
| Total operating expenses | 2,212 |
| | 2,157 |
| | 5,719 |
| | 5,814 |
|
| Gains on Sales of Other Assets and Other, net | 5 |
| | 6 |
| | 19 |
| | 18 |
|
| Operating Income | 657 |
| | 814 |
| | 1,735 |
| | 1,849 |
|
| Other Income and Expenses, net | 20 |
| | 31 |
| | 65 |
| | 79 |
|
| Interest Expense | 193 |
| | 177 |
| | 595 |
| | 497 |
|
| Income Before Income Taxes | 484 |
| | 668 |
| | 1,205 |
| | 1,431 |
|
| Income Tax Expense | 141 |
| | 219 |
| | 384 |
| | 496 |
|
| Net Income | 343 |
| | 449 |
| | 821 |
| | 935 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 7 |
| | 8 |
|
| Net Income Attributable to Parent | $ | 341 |
| | $ | 446 |
| | $ | 814 |
| | $ | 927 |
|
| | | | | | | | |
| Net Income | $ | 343 |
| | $ | 449 |
| | $ | 821 |
| | $ | 935 |
|
| Other Comprehensive Income, net of tax | | | | | | | |
| Pension and OPEB adjustments | 3 |
| | — |
| | 5 |
| | 2 |
|
| Net unrealized (loss) gain on cash flow hedges | (2 | ) | | — |
| | 4 |
| | — |
|
| Reclassification into earnings from cash flow hedges | — |
| | 1 |
| | — |
| | 4 |
|
| Unrealized gains on available-for-sale securities | 1 |
| | 1 |
| | 3 |
| | 2 |
|
| Other Comprehensive Income, net of tax | 2 |
|
| 2 |
|
| 12 |
|
| 8 |
|
| Comprehensive Income | 345 |
| | 451 |
| | 833 |
| | 943 |
|
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
| | 7 |
| | 8 |
|
| Comprehensive Income Attributable to Parent | $ | 343 |
|
| $ | 448 |
|
| $ | 826 |
|
| $ | 935 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 102 | | | $ | 59 | |
| Receivables (net of allowance for doubtful accounts of $11 at 2021 and $8 at 2020) | 268 | | | 228 | |
| Receivables of VIEs (net of allowance for doubtful accounts of $25 at 2021 and $29 at 2020) | 981 | | | 901 | |
| Receivables from affiliated companies | 61 | | | 157 | |
| | | |
| Inventory | 1,255 | | | 1,375 | |
| Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs) | 864 | | | 758 | |
| Other (includes $17 at 2021 and $39 at 2020 related to VIEs) | 178 | | | 109 | |
| Total current assets | 3,709 | | | 3,587 | |
| Property, Plant and Equipment | | | |
| Cost | 59,976 | | | 57,892 | |
| Accumulated depreciation and amortization | (19,211) | | | (18,368) | |
| Facilities to be retired, net | 27 | | | 29 | |
| Net property, plant and equipment | 40,792 | | | 39,553 | |
| Other Noncurrent Assets | | | |
| Goodwill | 3,655 | | | 3,655 | |
| Regulatory assets (includes $896 at 2021 and $937 at 2020 related to VIEs) | 5,785 | | | 5,775 | |
| Nuclear decommissioning trust funds | 4,427 | | | 4,137 | |
| Operating lease right-of-use assets, net | 714 | | | 690 | |
| Other | 1,175 | | | 1,227 | |
| Total other noncurrent assets | 15,756 | | | 15,484 | |
| Total Assets | $ | 60,257 | | | $ | 58,624 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 898 | | | $ | 919 | |
| Accounts payable to affiliated companies | 221 | | | 289 | |
| Notes payable to affiliated companies | 3,123 | | | 2,969 | |
| Taxes accrued | 284 | | | 121 | |
| Interest accrued | 175 | | | 202 | |
| Current maturities of long-term debt (includes $56 at 2021 and $305 at 2020 related to VIEs) | 1,932 | | | 1,426 | |
| Asset retirement obligations | 234 | | | 283 | |
| Regulatory liabilities | 541 | | | 640 | |
| Other | 856 | | | 793 | |
| Total current liabilities | 8,264 | | | 7,642 | |
| Long-Term Debt (includes $1,546 at 2021 and $1,252 at 2020 related to VIEs) | 17,406 | | | 17,688 | |
| Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 4,784 | | | 4,396 | |
| Asset retirement obligations | 5,850 | | | 5,866 | |
| Regulatory liabilities | 5,335 | | | 5,051 | |
| Operating lease liabilities | 623 | | | 623 | |
| Accrued pension and other post-retirement benefit costs | 490 | | | 505 | |
| Other | 473 | | | 462 | |
| Total other noncurrent liabilities | 17,555 | | | 16,903 | |
| Commitments and Contingencies | 0 | | 0 |
| Equity | | | |
| Common Stock, $0.01 par value, 100 shares authorized and outstanding at 2021 and 2020 | — | | | — | |
| Additional paid-in capital | 9,149 | | | 9,143 | |
| Retained earnings | 7,743 | | | 7,109 | |
| Accumulated other comprehensive loss | (13) | | | (15) | |
| Total Progress Energy, Inc. stockholders' equity | 16,879 | | | 16,237 | |
| Noncontrolling interests | 3 | | | 4 | |
| Total equity | 16,882 | | | 16,241 | |
| Total Liabilities and Equity | $ | 60,257 | | | $ | 58,624 | |
See Notes to Condensed Consolidated Financial Statements
20
|
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 30 |
| | $ | 46 |
|
| Receivables (net of allowance for doubtful accounts of $4 at 2017 and $6 at 2016) | 93 |
| | 114 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016) | 900 |
| | 692 |
|
| Receivables from affiliated companies | — |
| | 106 |
|
| Notes receivable from affiliated companies | 170 |
| | 80 |
|
| Inventory | 1,584 |
| | 1,717 |
|
| Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs) | 440 |
| | 401 |
|
| Other | 243 |
| | 148 |
|
| Total current assets | 3,460 |
| | 3,304 |
|
| Property, Plant and Equipment | | | |
| Cost | 46,659 |
| | 44,864 |
|
| Accumulated depreciation and amortization | (15,760 | ) | | (15,212 | ) |
| Generation facilities to be retired, net | 441 |
| | 529 |
|
| Net property, plant and equipment | 31,340 |
| | 30,181 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 3,655 |
| | 3,655 |
|
| Regulatory assets (includes $1,101 at 2017 and $1,142 at 2016 related to VIEs) | 6,438 |
| | 5,722 |
|
| Nuclear decommissioning trust funds | 3,194 |
| | 2,932 |
|
| Other | 909 |
| | 856 |
|
| Total other noncurrent assets | 14,196 |
| | 13,165 |
|
| Total Assets | $ | 48,996 |
| | $ | 46,650 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 1,015 |
| | $ | 1,003 |
|
| Accounts payable to affiliated companies | 289 |
| | 348 |
|
| Notes payable to affiliated companies | 576 |
| | 729 |
|
| Taxes accrued | 227 |
| | 83 |
|
| Interest accrued | 216 |
| | 201 |
|
| Current maturities of long-term debt (includes $53 at 2017 and $62 at 2016 related to VIEs) | 770 |
| | 778 |
|
| Asset retirement obligations | 250 |
| | 189 |
|
| Regulatory liabilities | 121 |
| | 189 |
|
| Other | 652 |
| | 745 |
|
| Total current liabilities | 4,116 |
| | 4,265 |
|
| Long-Term Debt (includes $1,689 at 2017 and $1,741 at 2016 related to VIEs) | 16,717 |
| | 15,590 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 1,173 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 6,463 |
| | 5,246 |
|
| Asset retirement obligations | 5,189 |
| | 5,286 |
|
| Regulatory liabilities | 2,511 |
| | 2,395 |
|
| Accrued pension and other post-retirement benefit costs | 535 |
| | 547 |
|
| Other | 298 |
| | 341 |
|
| Total other noncurrent liabilities | 14,996 |
| | 13,815 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, $0.01 par value, 100 shares authorized and outstanding at 2017 and 2016 | — |
| | — |
|
| Additional paid-in capital | 9,143 |
| | 8,094 |
|
| Retained earnings | 3,906 |
| | 3,764 |
|
| Accumulated other comprehensive loss | (26 | ) | | (38 | ) |
| Total Progress Energy, Inc. stockholders' equity | 13,023 |
| | 11,820 |
|
| Noncontrolling interests | (6 | ) | | (13 | ) |
| Total equity | 13,017 |
| | 11,807 |
|
| Total Liabilities and Equity | $ | 48,996 |
| | $ | 46,650 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| (in millions) | 2021 | | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 1,334 | | | $ | 1,233 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 1,707 | | | 1,734 | |
| Equity component of AFUDC | (37) | | | (30) | |
| | | |
| | | |
| | | |
| | | |
| Impairment of assets and other charges | 79 | | | 1 | |
| Deferred income taxes | 235 | | | (3) | |
| | | |
| | | |
| Payments for asset retirement obligations | (206) | | | (287) | |
| | | |
| Provision for rate refunds | (22) | | | 4 | |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 117 | | | (13) | |
| Receivables | (123) | | | (207) | |
| Receivables from affiliated companies | 96 | | | 32 | |
| Inventory | 120 | | | 46 | |
| Other current assets | (347) | | | 214 | |
| Increase (decrease) in | | | |
| Accounts payable | 79 | | | (124) | |
| Accounts payable to affiliated companies | (68) | | | (102) | |
| Taxes accrued | 161 | | | 263 | |
| Other current liabilities | (36) | | | (41) | |
| Other assets | (3) | | | (154) | |
| Other liabilities | (139) | | | (102) | |
| Net cash provided by operating activities | 2,947 | | | 2,464 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (2,628) | | | (2,602) | |
| | | |
| | | |
| Purchases of debt and equity securities | (1,583) | | | (4,554) | |
| Proceeds from sales and maturities of debt and equity securities | 1,649 | | | 4,543 | |
| | | |
| | | |
| | | |
| Notes receivable from affiliated companies | — | | | 164 | |
| | | |
| Other | (131) | | | (114) | |
| Net cash used in investing activities | (2,693) | | | (2,563) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 1,190 | | | 1,791 | |
| | | |
| Payments for the redemption of long-term debt | (977) | | | (1,555) | |
| | | |
| | | |
| | | |
| | | |
| Notes payable to affiliated companies | 154 | | | 338 | |
| | | |
| | | |
| | | |
| Dividends to parent | (700) | | | (400) | |
| Other | (2) | | | (13) | |
| Net cash (used in) provided by financing activities | (335) | | | 161 | |
| Net (decrease) increase in cash, cash equivalents and restricted cash | (81) | | | 62 | |
| Cash, cash equivalents and restricted cash at beginning of period | 200 | | | 126 | |
| Cash, cash equivalents and restricted cash at end of period | $ | 119 | | | $ | 188 | |
| Supplemental Disclosures: | | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 290 | | | $ | 311 | |
| | | |
| | | |
See Notes to Condensed Consolidated Financial Statements
21
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 821 |
| | $ | 935 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 1,130 |
| | 1,071 |
|
| Equity component of AFUDC | (68 | ) | | (51 | ) |
| Gains on sales of other assets | (20 | ) | | (23 | ) |
| Impairment charges | 137 |
| | 4 |
|
| Deferred income taxes | 651 |
| | 425 |
|
| Accrued pension and other post-retirement benefit costs | (9 | ) | | (19 | ) |
| Payments for asset retirement obligations | (190 | ) | | (203 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 1 |
| | 33 |
|
| Receivables | (182 | ) | | (155 | ) |
| Receivables from affiliated companies | 102 |
| | 329 |
|
| Inventory | 126 |
| | 99 |
|
| Other current assets | (279 | ) | | (30 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (281 | ) | | (24 | ) |
| Accounts payable to affiliated companies | (59 | ) | | (109 | ) |
| Taxes accrued | 143 |
| | 159 |
|
| Other current liabilities | (184 | ) | | (156 | ) |
| Other assets | (100 | ) | | (90 | ) |
| Other liabilities | (85 | ) | | (4 | ) |
| Net cash provided by operating activities | 1,654 |
| | 2,191 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (2,419 | ) | | (2,286 | ) |
| Purchases of available-for-sale securities | (1,393 | ) | | (1,849 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 1,411 |
| | 1,899 |
|
| Proceeds from insurance | 4 |
| | 58 |
|
| Notes receivable from affiliated companies | (90 | ) | | (43 | ) |
| Change in restricted cash | 5 |
| | (6 | ) |
| Other | (40 | ) | | (17 | ) |
| Net cash used in investing activities | (2,522 | ) | | (2,244 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 1,720 |
| | 2,375 |
|
| Payments for the redemption of long-term debt | (611 | ) | | (327 | ) |
| Notes payable to affiliated companies | (129 | ) | | (798 | ) |
| Dividends to parent | (125 | ) | | (1,075 | ) |
| Other | (3 | ) | | (1 | ) |
| Net cash provided by financing activities | 852 |
| | 174 |
|
| Net (decrease) increase in cash and cash equivalents | (16 | ) | | 121 |
|
| Cash and cash equivalents at beginning of period | 46 |
| | 44 |
|
| Cash and cash equivalents at end of period | $ | 30 |
| | $ | 165 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 174 |
| | $ | 228 |
|
| Equitization of certain notes payable to affiliates | 1,047 |
| | — |
|
| Dividend to parent related to a legal entity restructuring | 547 |
| | — |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 and 2021 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | | | | Net Gains | | Net Unrealized | | | | Total Progress | | | | |
| Additional | | | | (Losses) on | | Gains (Losses) on | | Pension and | | Energy, Inc. | | | | |
| Paid-in | | Retained | | Cash Flow | | Available-for- | | OPEB | | Stockholders' | | Noncontrolling | | Total |
| (in millions) | Capital | | Earnings | | Hedges | | Sale Securities | | Adjustments | | Equity | | Interests | | Equity |
| Balance at June 30, 2020 | $ | 9,143 | | | $ | 7,090 | | | $ | (8) | | | $ | (1) | | | $ | (6) | | | $ | 16,218 | | | $ | 3 | | | $ | 16,221 | |
| Net income | — | | | 605 | | | — | | | — | | | — | | | 605 | | | 1 | | | 606 | |
| Other comprehensive income | — | | | — | | | 1 | | | 1 | | | — | | | 2 | | | — | | | 2 | |
| | | | | | | | | | | | | | | |
| Dividends to parent | — | | | (400) | | | — | | | — | | | — | | | (400) | | | — | | | (400) | |
| Other | — | | | 1 | | | — | | | — | | | — | | | 1 | | | (1) | | | — | |
| Balance at September 30, 2020 | $ | 9,143 | | | $ | 7,296 | | | $ | (7) | | | $ | — | | | $ | (6) | | | $ | 16,426 | | | $ | 3 | | | $ | 16,429 | |
| | | | | | | | | | | | | | | |
| Balance at June 30, 2021 | $ | 9,143 | | | $ | 7,809 | | | $ | (4) | | | $ | (2) | | | $ | (7) | | | $ | 16,939 | | | $ | 3 | | | $ | 16,942 | |
| Net income | — | | | 632 | | | — | | | — | | | — | | | 632 | | | 1 | | | 633 | |
| Other comprehensive income (loss) | — | | | — | | | 1 | | | — | | | (1) | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
| Dividends to parent | — | | | (700) | | | — | | | — | | | — | | | (700) | | | — | | | (700) | |
| | | | | | | | | | | | | | | |
| Other | 6 | | | 2 | | | — | | | — | | | — | | | 8 | | | (1) | | | 7 | |
| Balance at September 30, 2021 | $ | 9,149 | | | $ | 7,743 | | | $ | (3) | | | $ | (2) | | | $ | (8) | | | $ | 16,879 | | | $ | 3 | | | $ | 16,882 | |
| | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 and 2021 |
| | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | | | | Net Gains | | Net Unrealized | | | | Total Progress | | | | |
| Additional | | | | (Losses) on | | Gains (Losses) on | | Pension and | | Energy, Inc. | | | | |
| Paid-in | | Retained | | Cash Flow | | Available-for- | | OPEB | | Stockholders' | | Noncontrolling | | Total |
| Capital | | Earnings | | Hedges | | Sale Securities | | Adjustments | | Equity | | Interests | | Equity |
| Balance at December 31, 2019 | $ | 9,143 | | | $ | 6,465 | | | $ | (10) | | | $ | (1) | | | $ | (7) | | | $ | 15,590 | | | $ | 3 | | | $ | 15,593 | |
| Net income | — | | | 1,232 | | | — | | | — | | | — | | | 1,232 | | | 1 | | | 1,233 | |
| Other comprehensive income | — | | | — | | | 3 | | | 1 | | | 1 | | | 5 | | | — | | | 5 | |
| | | | | | | | | | | | | | | |
| Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
| Dividends to parent | — | | | (400) | | | — | | | — | | | — | | | (400) | | | — | | | (400) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Other | — | | | (1) | | | — | | | — | | | — | | | (1) | | | — | | | (1) | |
| Balance at September 30, 2020 | $ | 9,143 | | | $ | 7,296 | | | $ | (7) | | | $ | — | | | $ | (6) | | | $ | 16,426 | | | $ | 3 | | | $ | 16,429 | |
| | | | | | | | | | | | | | | |
| Balance at December 31, 2020 | $ | 9,143 | | | $ | 7,109 | | | $ | (5) | | | $ | (2) | | | $ | (8) | | | $ | 16,237 | | | $ | 4 | | | $ | 16,241 | |
| Net income | — | | | 1,333 | | | — | | | — | | | — | | | 1,333 | | | 1 | | | 1,334 | |
| Other comprehensive income | — | | | — | | | 2 | | | — | | | — | | | 2 | | | — | | | 2 | |
| Distributions to noncontrolling interests | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
| Dividends to parent | — | | | (700) | | | — | | | — | | | — | | | (700) | | | — | | | (700) | |
| | | | | | | | | | | | | | | |
| Other | 6 | | | 1 | | | — | | | — | | | — | | | 7 | | | (1) | | | 6 | |
| Balance at September 30, 2021 | $ | 9,149 | | | $ | 7,743 | | | $ | (3) | | | $ | (2) | | | $ | (8) | | | $ | 16,879 | | | $ | 3 | | | $ | 16,882 | |
See Notes to Condensed Consolidated Financial Statements
22
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | | | | | | | Net Unrealized |
| | | | Total Progress |
| | | | |
| | Additional |
| | | | Net Losses on |
| | Gains on |
| | Pension and |
| | Energy, Inc. |
| | | | |
| | Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
| (in millions) | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
| Balance at December 31, 2015 | $ | 8,092 |
| | $ | 4,831 |
| | $ | (31 | ) | | $ | — |
| | $ | (17 | ) | | $ | 12,875 |
| | $ | (22 | ) | | $ | 12,853 |
|
| Net income | — |
| | 927 |
| | — |
| | — |
| | — |
| | 927 |
| | 8 |
| | 935 |
|
| Other comprehensive income | — |
| | — |
| | 4 |
| | 2 |
| | 2 |
| | 8 |
| | — |
| | 8 |
|
| Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
| Dividends to parent | — |
| | (1,075 | ) | | — |
| | — |
| | — |
| | (1,075 | ) | | — |
| | (1,075 | ) |
| Other | 4 |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | (1 | ) | | 3 |
|
| Balance at September 30, 2016 | $ | 8,096 |
|
| $ | 4,683 |
|
| $ | (27 | ) |
| $ | 2 |
|
| $ | (15 | ) |
| $ | 12,739 |
|
| $ | (16 | ) |
| $ | 12,723 |
|
| | | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | $ | 8,094 |
| | $ | 3,764 |
| | $ | (23 | ) | | $ | 1 |
| | $ | (16 | ) | | $ | 11,820 |
| | $ | (13 | ) | | $ | 11,807 |
|
| Net income | — |
| | 814 |
| | — |
| | — |
| | — |
| | 814 |
| | 7 |
| | 821 |
|
| Other comprehensive income | — |
| | — |
| | 4 |
| | 3 |
| | 5 |
| | 12 |
| | — |
| | 12 |
|
Dividends to parent(a) | — |
| | (672 | ) | | — |
| | — |
| | — |
| | (672 | ) | | — |
| | (672 | ) |
| Equitization of certain notes payable to affiliates | 1,047 |
| | — |
| | — |
| | — |
| | — |
| | 1,047 |
| | — |
| | 1,047 |
|
| Other | 2 |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
|
| Balance at September 30, 2017 | $ | 9,143 |
|
| $ | 3,906 |
|
| $ | (19 | ) |
| $ | 4 |
|
| $ | (11 | ) |
| $ | 13,023 |
|
| $ | (6 | ) |
| $ | 13,017 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Includes a $547 million non-cash dividend related to a legal entity restructuring. |
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Operating Revenues | $ | 1,667 | | | $ | 1,626 | | | $ | 4,417 | | | $ | 4,207 | |
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 523 | | | 537 | | | 1,368 | | | 1,337 | |
| Operation, maintenance and other | 368 | | | 348 | | | 1,092 | | | 970 | |
| Depreciation and amortization | 290 | | | 289 | | | 811 | | | 833 | |
| Property and other taxes | 39 | | | 38 | | | 129 | | | 129 | |
| Impairment of assets and other charges | 42 | | | 5 | | | 60 | | | 5 | |
| Total operating expenses | 1,262 | | | 1,217 | | | 3,460 | | | 3,274 | |
| Gains on Sales of Other Assets and Other, net | 7 | | | 3 | | | 8 | | | 8 | |
| Operating Income | 412 | | | 412 | | | 965 | | | 941 | |
| Other Income and Expenses, net | 67 | | | 11 | | | 111 | | | 52 | |
| Interest Expense | 79 | | | 66 | | | 226 | | | 203 | |
| Income Before Income Taxes | 400 | | | 357 | | | 850 | | | 790 | |
| Income Tax Expense | 25 | | | 11 | | | 50 | | | 79 | |
| Net Income and Comprehensive Income | $ | 375 | | | $ | 346 | | | $ | 800 | | | $ | 711 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See Notes to Condensed Consolidated Financial Statements
23
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 1,460 |
| | $ | 1,583 |
| | $ | 3,878 |
| | $ | 4,103 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 475 |
| | 569 |
| | 1,214 |
| | 1,441 |
|
| Operation, maintenance and other | 352 |
| | 360 |
| | 1,032 |
| | 1,067 |
|
| Depreciation and amortization | 182 |
| | 176 |
| | 536 |
| | 526 |
|
| Property and other taxes | 40 |
| | 40 |
| | 120 |
| | 119 |
|
| Impairment charges | — |
| | 1 |
| | — |
| | 1 |
|
| Total operating expenses | 1,049 |
| | 1,146 |
| | 2,902 |
| | 3,154 |
|
| Gains on Sales of Other Assets and Other, net | — |
| | 1 |
| | 3 |
| | 2 |
|
| Operating Income | 411 |
| | 438 |
| | 979 |
| | 951 |
|
| Other Income and Expenses, net | 14 |
| | 18 |
| | 47 |
| | 47 |
|
| Interest Expense | 65 |
| | 61 |
| | 217 |
| | 188 |
|
| Income Before Income Taxes | 360 |
| | 395 |
| | 809 |
| | 810 |
|
| Income Tax Expense | 114 |
| | 124 |
| | 262 |
| | 271 |
|
| Net Income and Comprehensive Income | $ | 246 |
| | $ | 271 |
| | $ | 547 |
| | $ | 539 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 51 | | | $ | 39 | |
| Receivables (net of allowance for doubtful accounts of $4 at 2021 and 2020) | 162 | | | 132 | |
| Receivables of VIEs (net of allowance for doubtful accounts of $17 at 2021 and $19 at 2020) | 532 | | | 500 | |
| Receivables from affiliated companies | 68 | | | 50 | |
| | | |
| Inventory | 815 | | | 911 | |
| Regulatory assets | 499 | | | 492 | |
| Other | 116 | | | 60 | |
| Total current assets | 2,243 | | | 2,184 | |
| Property, Plant and Equipment | | | |
| Cost | 36,666 | | | 35,759 | |
| Accumulated depreciation and amortization | (13,365) | | | (12,801) | |
| Facilities to be retired, net | 27 | | | 29 | |
| Net property, plant and equipment | 23,328 | | | 22,987 | |
| Other Noncurrent Assets | | | |
| Regulatory assets | 3,955 | | | 3,976 | |
| Nuclear decommissioning trust funds | 3,857 | | | 3,500 | |
| Operating lease right-of-use assets, net | 402 | | | 346 | |
| Other | 772 | | | 740 | |
| Total other noncurrent assets | 8,986 | | | 8,562 | |
| Total Assets | $ | 34,557 | | | $ | 33,733 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 392 | | | $ | 454 | |
| Accounts payable to affiliated companies | 113 | | | 215 | |
| Notes payable to affiliated companies | 117 | | | 295 | |
| Taxes accrued | 163 | | | 85 | |
| Interest accrued | 68 | | | 99 | |
| Current maturities of long-term debt | 1,207 | | | 603 | |
| Asset retirement obligations | 234 | | | 283 | |
| Regulatory liabilities | 439 | | | 530 | |
| Other | 442 | | | 411 | |
| Total current liabilities | 3,175 | | | 2,975 | |
| Long-Term Debt | 8,491 | | | 8,505 | |
| Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 2,488 | | | 2,298 | |
| Asset retirement obligations | 5,407 | | | 5,352 | |
| Regulatory liabilities | 4,685 | | | 4,394 | |
| Operating lease liabilities | 359 | | | 323 | |
| Accrued pension and other post-retirement benefit costs | 234 | | | 242 | |
| Investment tax credits | 129 | | | 132 | |
| Other | 79 | | | 102 | |
| Total other noncurrent liabilities | 13,381 | | | 12,843 | |
| Commitments and Contingencies | 0 | | 0 |
| Equity | | | |
| Member's Equity | 9,360 | | | 9,260 | |
| | | |
| | | |
| Total Liabilities and Equity | $ | 34,557 | | | $ | 33,733 | |
See Notes to Condensed Consolidated Financial Statements
24
|
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 15 |
| | $ | 11 |
|
| Receivables (net of allowance for doubtful accounts of $1 at 2017 and $4 at 2016) | 29 |
| | 51 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2017 and 2016) | 472 |
| | 404 |
|
| Receivables from affiliated companies | 8 |
| | 5 |
|
| Notes receivable from affiliated companies | 101 |
| | 165 |
|
| Inventory | 1,018 |
| | 1,076 |
|
| Regulatory assets | 230 |
| | 188 |
|
| Other | 40 |
| | 57 |
|
| Total current assets | 1,913 |
| | 1,957 |
|
| Property, Plant and Equipment | | | |
| Cost | 29,104 |
| | 28,419 |
|
| Accumulated depreciation and amortization | (10,793 | ) | | (10,561 | ) |
| Generation facilities to be retired, net | 441 |
| | 529 |
|
| Net property, plant and equipment | 18,752 |
| | 18,387 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 3,588 |
| | 3,243 |
|
| Nuclear decommissioning trust funds | 2,463 |
| | 2,217 |
|
| Other | 565 |
| | 525 |
|
| Total other noncurrent assets | 6,616 |
| | 5,985 |
|
| Total Assets | $ | 27,281 |
| | $ | 26,329 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 271 |
| | $ | 589 |
|
| Accounts payable to affiliated companies | 207 |
| | 227 |
|
| Taxes accrued | 137 |
| | 104 |
|
| Interest accrued | 91 |
| | 102 |
|
| Current maturities of long-term debt | 203 |
| | 452 |
|
| Asset retirement obligations | 250 |
| | 189 |
|
| Regulatory liabilities | 107 |
| | 158 |
|
| Other | 318 |
| | 365 |
|
| Total current liabilities | 1,584 |
| | 2,186 |
|
| Long-Term Debt | 7,204 |
| | 6,409 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 3,606 |
| | 3,323 |
|
| Asset retirement obligations | 4,426 |
| | 4,508 |
|
| Regulatory liabilities | 2,097 |
| | 1,946 |
|
| Accrued pension and other post-retirement benefit costs | 246 |
| | 252 |
|
| Investment tax credits | 144 |
| | 146 |
|
| Other | 44 |
| | 51 |
|
| Total other noncurrent liabilities | 10,563 |
| | 10,226 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's Equity | 7,780 |
| | 7,358 |
|
| Total Liabilities and Equity | $ | 27,281 |
| | $ | 26,329 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| (in millions) | 2021 | | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 800 | | | $ | 711 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 951 | | | 972 | |
| Equity component of AFUDC | (25) | | | (22) | |
| | | |
| | | |
| Impairment of assets and other charges | 60 | | | 5 | |
| Deferred income taxes | 22 | | | (33) | |
| | | |
| | | |
| Payments for asset retirement obligations | (129) | | | (249) | |
| | | |
| Provision for rate refunds | (22) | | | 4 | |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 108 | | | — | |
| Receivables | (66) | | | (34) | |
| Receivables from affiliated companies | (18) | | | 7 | |
| Inventory | 95 | | | 24 | |
| Other current assets | (79) | | | 82 | |
| Increase (decrease) in | | | |
| Accounts payable | 20 | | | (185) | |
| Accounts payable to affiliated companies | (102) | | | (59) | |
| Taxes accrued | 75 | | | 190 | |
| Other current liabilities | (36) | | | (24) | |
| Other assets | 48 | | | (185) | |
| Other liabilities | (32) | | | 21 | |
| Net cash provided by operating activities | 1,670 | | | 1,225 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,313) | | | (1,142) | |
| | | |
| | | |
| Purchases of debt and equity securities | (1,306) | | | (1,269) | |
| Proceeds from sales and maturities of debt and equity securities | 1,291 | | | 1,238 | |
| | | |
| | | |
| | | |
| Other | (36) | | | (31) | |
| Net cash used in investing activities | (1,364) | | | (1,204) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 1,190 | | | 1,296 | |
| | | |
| Payments for the redemption of long-term debt | (605) | | | (985) | |
| | | |
| | | |
| Notes payable to affiliated companies | (178) | | | 101 | |
| | | |
| Distributions to parent | (700) | | | (400) | |
| | | |
| Other | (1) | | | (12) | |
| Net cash used in financing activities | (294) | | | — | |
| Net increase in cash and cash equivalents | 12 | | | 21 | |
| Cash and cash equivalents at beginning of period | 39 | | | 22 | |
| Cash and cash equivalents at end of period | $ | 51 | | | $ | 43 | |
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 82 | | | $ | 124 | |
| | | |
See Notes to Condensed Consolidated Financial Statements
25
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 547 |
| | $ | 539 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 691 |
| | 679 |
|
| Equity component of AFUDC | (35 | ) | | (34 | ) |
| Gains on sales of other assets | (4 | ) | | (4 | ) |
| Impairment charges | — |
| | 1 |
|
| Deferred income taxes | 287 |
| | 325 |
|
| Accrued pension and other post-retirement benefit costs | (15 | ) | | (24 | ) |
| Payments for asset retirement obligations | (149 | ) | | (163 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | (2 | ) | | — |
|
| Receivables | (47 | ) | | (78 | ) |
| Receivables from affiliated companies | (3 | ) | | 11 |
|
| Inventory | 52 |
| | 91 |
|
| Other current assets | (34 | ) | | 37 |
|
| Increase (decrease) in | | | |
| Accounts payable | (286 | ) | | (44 | ) |
| Accounts payable to affiliated companies | (20 | ) | | (47 | ) |
| Taxes accrued | 33 |
| | 76 |
|
| Other current liabilities | (139 | ) | | 37 |
|
| Other assets | (49 | ) | | (32 | ) |
| Other liabilities | (9 | ) | | (10 | ) |
| Net cash provided by operating activities | 818 |
| | 1,360 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,247 | ) | | (1,106 | ) |
| Purchases of available-for-sale securities | (995 | ) | | (1,470 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 974 |
| | 1,448 |
|
| Notes receivable from affiliated companies | 64 |
| | (65 | ) |
| Other | (26 | ) | | (27 | ) |
| Net cash used in investing activities | (1,230 | ) | | (1,220 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 812 |
| | 505 |
|
| Payments for the redemption of long-term debt | (270 | ) | | (15 | ) |
| Notes payable to affiliated companies | — |
| | (209 | ) |
| Distributions to parent | (125 | ) | | (301 | ) |
| Other | (1 | ) | | 1 |
|
| Net cash provided by (used in) financing activities | 416 |
| | (19 | ) |
| Net increase in cash and cash equivalents | 4 |
| | 121 |
|
| Cash and cash equivalents at beginning of period | 11 |
| | 15 |
|
| Cash and cash equivalents at end of period | $ | 15 |
| | $ | 136 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 116 |
| | $ | 66 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | |
| | | | | Three Months Ended | | |
| | | | | September 30, 2020 and 2021 | | |
| | | | | | | |
| (in millions) | | | | | Member's Equity | | |
| Balance at June 30, 2020 | | | | | $ | 9,610 | | | |
| Net income | | | | | 346 | | | |
| Distributions to parent | | | | | (400) | | | |
| | | | | | | |
| | | | | | | |
| Balance at September 30, 2020 | | | | | $ | 9,556 | | | |
| | | | | | | |
| Balance at June 30, 2021 | | | | | $ | 9,685 | | | |
| Net income | | | | | 375 | | | |
| | | | | | | |
| Distributions to parent | | | | | (700) | | | |
| | | | | | | |
| Balance at September 30, 2021 | | | | | $ | 9,360 | | | |
| | | | | | | |
| | | | | Nine Months Ended | | |
| | | | | September 30, 2020 and 2021 | | |
| | | | | | | |
| (in millions) | | | | | Member's Equity | | |
| Balance at December 31, 2019 | | | | | $ | 9,246 | | | |
| Net income | | | | | 711 | | | |
| Distributions to parent | | | | | (400) | | | |
| Other | | | | | (1) | | | |
| | | | | | | |
| Balance at September 30, 2020 | | | | | $ | 9,556 | | | |
| | | | | | | |
| Balance at December 31, 2020 | | | | | $ | 9,260 | | | |
| Net income | | | | | 800 | | | |
| | | | | | | |
| | | | | | | |
| Distributions to parent | | | | | (700) | | | |
| | | | | | | |
| Balance at September 30, 2021 | | | | | $ | 9,360 | | | |
See Notes to Condensed Consolidated Financial Statements
26
|
| | | |
| | Member's |
| (in millions) | Equity |
| Balance at December 31, 2015 | $ | 7,059 |
|
| Net income | 539 |
|
| Distributions to parent | (301 | ) |
| Balance at September 30, 2016 | $ | 7,297 |
|
| | |
| Balance at December 31, 2016 | $ | 7,358 |
|
| Net income | 547 |
|
| Distributions to parent | (125 | ) |
| Balance at September 30, 2017 | $ | 7,780 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Operating Revenues | $ | 1,561 | | | $ | 1,567 | | | $ | 3,987 | | | $ | 3,897 | |
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 552 | | | 551 | | | 1,335 | | | 1,291 | |
| Operation, maintenance and other | 263 | | | 292 | | | 760 | | | 806 | |
| Depreciation and amortization | 214 | | | 183 | | | 619 | | | 523 | |
| Property and other taxes | 105 | | | 110 | | | 290 | | | 290 | |
| Impairment of assets and other charges | — | | | (4) | | | 19 | | | (4) | |
| Total operating expenses | 1,134 | | | 1,132 | | | 3,023 | | | 2,906 | |
| Gains on Sales of Other Assets and Other, net | 1 | | | — | | | 1 | | | — | |
| Operating Income | 428 | | | 435 | | | 965 | | | 991 | |
| Other Income and Expenses, net | 18 | | | 11 | | | 54 | | | 36 | |
| Interest Expense | 79 | | | 81 | | | 239 | | | 245 | |
| Income Before Income Taxes | 367 | | | 365 | | | 780 | | | 782 | |
| Income Tax Expense | 70 | | | 78 | | | 149 | | | 159 | |
| Net Income | $ | 297 | | | $ | 287 | | | $ | 631 | | | $ | 623 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Other Comprehensive Income, net of tax | | | | | | | |
| | | | | | | |
| Unrealized gains on available-for-sale securities | — | | | 1 | | | — | | | 1 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Comprehensive Income | $ | 297 | | | $ | 288 | | | $ | 631 | | | $ | 624 | |
See Notes to Condensed Consolidated Financial Statements
27
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 1,401 |
| | $ | 1,381 |
| | $ | 3,551 |
| | $ | 3,538 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 557 |
| | 550 |
| | 1,374 |
| | 1,391 |
|
| Operation, maintenance and other | 216 |
| | 219 |
| | 610 |
| | 623 |
|
| Depreciation and amortization | 154 |
| | 142 |
| | 423 |
| | 378 |
|
| Property and other taxes | 99 |
| | 96 |
| | 265 |
| | 256 |
|
| Impairment charges | 135 |
| | 1 |
| | 137 |
| | 4 |
|
| Total operating expenses | 1,161 |
| | 1,008 |
| | 2,809 |
| | 2,652 |
|
| Operating Income | 240 |
| | 373 |
| | 742 |
| | 886 |
|
| Other Income and Expenses, net | 15 |
| | 11 |
| | 45 |
| | 30 |
|
| Interest Expense | 71 |
| | 62 |
| | 211 |
| | 143 |
|
| Income Before Income Taxes | 184 |
| | 322 |
| | 576 |
| | 773 |
|
| Income Tax Expense | 64 |
| | 116 |
| | 208 |
| | 286 |
|
| Net Income | $ | 120 |
| | $ | 206 |
| | $ | 368 |
| | $ | 487 |
|
| Other Comprehensive Income, net of tax |
| |
| |
|
| |
|
|
| Unrealized gains on available-for-sale securities | 1 |
| | 1 |
| | 3 |
| | 2 |
|
| Comprehensive Income | $ | 121 |
| | $ | 207 |
| | $ | 371 |
|
| $ | 489 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 40 | | | $ | 11 | |
| Receivables (net of allowance for doubtful accounts of $8 at 2021 and $4 at 2020) | 104 | | | 94 | |
| Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2021 and $10 at 2020) | 449 | | | 401 | |
| Receivables from affiliated companies | 3 | | | 3 | |
| | | |
| Inventory | 439 | | | 464 | |
| Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs) | 365 | | | 265 | |
| Other (includes $17 at 2021 and $39 at 2020 related to VIEs) | 35 | | | 41 | |
| Total current assets | 1,435 | | | 1,279 | |
| Property, Plant and Equipment | | | |
| Cost | 23,300 | | | 22,123 | |
| Accumulated depreciation and amortization | (5,839) | | | (5,560) | |
| Net property, plant and equipment | 17,461 | | | 16,563 | |
| Other Noncurrent Assets | | | |
| Regulatory assets (includes $896 at 2021 and $937 at 2020 related to VIEs) | 1,829 | | | 1,799 | |
| Nuclear decommissioning trust funds | 570 | | | 637 | |
| Operating lease right-of-use assets, net | 312 | | | 344 | |
| Other | 351 | | | 335 | |
| Total other noncurrent assets | 3,062 | | | 3,115 | |
| Total Assets | $ | 21,958 | | | $ | 20,957 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 506 | | | $ | 465 | |
| Accounts payable to affiliated companies | 129 | | | 85 | |
| Notes payable to affiliated companies | 603 | | | 196 | |
| Taxes accrued | 177 | | | 82 | |
| Interest accrued | 72 | | | 69 | |
| Current maturities of long-term debt (includes $56 at 2021 and $305 at 2020 related to VIEs) | 276 | | | 823 | |
| | | |
| Regulatory liabilities | 102 | | | 110 | |
| Other | 403 | | | 374 | |
| Total current liabilities | 2,268 | | | 2,204 | |
| Long-Term Debt (includes $1,196 at 2021 and $1,002 at 2020 related to VIEs) | 7,273 | | | 7,092 | |
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 2,382 | | | 2,191 | |
| Asset retirement obligations | 443 | | | 514 | |
| Regulatory liabilities | 649 | | | 658 | |
| Operating lease liabilities | 265 | | | 300 | |
| Accrued pension and other post-retirement benefit costs | 225 | | | 231 | |
| Other | 265 | | | 209 | |
| Total other noncurrent liabilities | 4,229 | | | 4,103 | |
| Commitments and Contingencies | 0 | | 0 |
| Equity | | | |
| Member's equity | 8,190 | | | 7,560 | |
| Accumulated other comprehensive loss | (2) | | | (2) | |
| Total equity | 8,188 | | | 7,558 | |
| Total Liabilities and Equity | $ | 21,958 | | | $ | 20,957 | |
See Notes to Condensed Consolidated Financial Statements
28
|
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 8 |
| | $ | 16 |
|
| Receivables (net of allowance for doubtful accounts of $3 at 2017 and $2 at 2016) | 61 |
| | 61 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 428 |
| | 288 |
|
| Receivables from affiliated companies | — |
| | 5 |
|
| Notes receivable from affiliated companies | 70 |
| | — |
|
| Inventory | 566 |
| | 641 |
|
| Regulatory assets (includes $51 at 2017 and $50 at 2016 related to VIEs) | 211 |
| | 213 |
|
| Other (includes $20 at 2017 and $53 at 2016 related to VIEs) | 154 |
| | 125 |
|
| Total current assets | 1,498 |
| | 1,349 |
|
| Property, Plant and Equipment | | | |
| Cost | 17,546 |
| | 16,434 |
|
| Accumulated depreciation and amortization | (4,960 | ) | | (4,644 | ) |
| Net property, plant and equipment | 12,586 |
| | 11,790 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets (includes $1,101 at 2017 and $1,142 at 2016 related to VIEs) | 2,850 |
| | 2,480 |
|
| Nuclear decommissioning trust funds | 731 |
| | 715 |
|
| Other | 293 |
| | 278 |
|
| Total other noncurrent assets | 3,874 |
| | 3,473 |
|
| Total Assets | $ | 17,958 |
| | $ | 16,612 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 744 |
| | $ | 413 |
|
| Accounts payable to affiliated companies | 90 |
| | 125 |
|
| Notes payable to affiliated companies | — |
| | 297 |
|
| Taxes accrued | 143 |
| | 33 |
|
| Interest accrued | 71 |
| | 49 |
|
| Current maturities of long-term debt (includes $53 at 2017 and $62 at 2016 related to VIEs) | 567 |
| | 326 |
|
| Regulatory liabilities | 14 |
| | 31 |
|
| Other | 310 |
| | 352 |
|
| Total current liabilities | 1,939 |
| | 1,626 |
|
| Long-Term Debt (includes $1,389 at 2017 and $1,442 at 2016 related to VIEs) | 6,129 |
| | 5,799 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 3,076 |
| | 2,694 |
|
| Asset retirement obligations | 763 |
| | 778 |
|
| Regulatory liabilities | 414 |
| | 448 |
|
| Accrued pension and other post-retirement benefit costs | 257 |
| | 262 |
|
| Other | 106 |
| | 105 |
|
| Total other noncurrent liabilities | 4,616 |
| | 4,287 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's equity | 5,270 |
| | 4,899 |
|
| Accumulated other comprehensive income | 4 |
| | 1 |
|
| Total equity | 5,274 |
| | 4,900 |
|
| Total Liabilities and Equity | $ | 17,958 |
| | $ | 16,612 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| (in millions) | 2021 | | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 631 | | | $ | 623 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 752 | | | 755 | |
| Equity component of AFUDC | (12) | | | (8) | |
| | | |
| Impairment of assets and other charges | 19 | | | (4) | |
| Deferred income taxes | 207 | | | 19 | |
| | | |
| | | |
| | | |
| Payments for asset retirement obligations | (77) | | | (38) | |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 7 | | | (17) | |
| Receivables | (57) | | | (172) | |
| Receivables from affiliated companies | — | | | (3) | |
| Inventory | 25 | | | 22 | |
| Other current assets | (247) | | | 41 | |
| Increase (decrease) in | | | |
| Accounts payable | 59 | | | 63 | |
| Accounts payable to affiliated companies | 44 | | | (54) | |
| Taxes accrued | 95 | | | 217 | |
| Other current liabilities | (5) | | | (20) | |
| Other assets | (46) | | | 48 | |
| Other liabilities | (94) | | | (136) | |
| Net cash provided by operating activities | 1,301 | | | 1,336 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,316) | | | (1,460) | |
| | | |
| | | |
| Purchases of debt and equity securities | (277) | | | (3,284) | |
| Proceeds from sales and maturities of debt and equity securities | 358 | | | 3,305 | |
| | | |
| | | |
| Notes receivable from affiliated companies | — | | | 173 | |
| | | |
| Other | (95) | | | (82) | |
| Net cash used in investing activities | (1,330) | | | (1,348) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — | | | 495 | |
| | | |
| Payments for the redemption of long-term debt | (372) | | | (570) | |
| | | |
| | | |
| Notes payable to affiliated companies | 408 | | | 66 | |
| | | |
| | | |
| | | |
| Net cash provided by (used in) financing activities | 36 | | | (9) | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | 7 | | | (21) | |
| Cash, cash equivalents and restricted cash at beginning of period | 50 | | | 56 | |
| Cash, cash equivalents and restricted cash at end of period | $ | 57 | | | $ | 35 | |
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 208 | | | $ | 187 | |
See Notes to Condensed Consolidated Financial Statements
29
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 368 |
| | $ | 487 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 431 |
| | 383 |
|
| Equity component of AFUDC | (33 | ) | | (16 | ) |
| Impairment charges | 137 |
| | 4 |
|
| Deferred income taxes | 366 |
| | 136 |
|
| Accrued pension and other post-retirement benefit costs | 3 |
| | 2 |
|
| Payments for asset retirement obligations | (41 | ) | | (41 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 3 |
| | 34 |
|
| Receivables | (140 | ) | | (78 | ) |
| Receivables from affiliated companies | 1 |
| | 41 |
|
| Inventory | 74 |
| | 8 |
|
| Other current assets | (162 | ) | | (32 | ) |
| Increase (decrease) in | | | |
| Accounts payable | 6 |
| | 20 |
|
| Accounts payable to affiliated companies | (35 | ) | | (55 | ) |
| Taxes accrued | 109 |
| | 61 |
|
| Other current liabilities | (45 | ) | | (183 | ) |
| Other assets | (35 | ) | | (56 | ) |
| Other liabilities | (71 | ) | | 1 |
|
| Net cash provided by operating activities | 936 |
| | 716 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,172 | ) | | (1,179 | ) |
| Purchases of available-for-sale securities | (398 | ) | | (379 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 437 |
| | 450 |
|
| Proceeds from insurance | 4 |
| | 58 |
|
| Notes receivable from affiliated companies | (70 | ) | | — |
|
| Change in restricted cash | — |
| | (6 | ) |
| Other | (14 | ) | | 10 |
|
| Net cash used in investing activities | (1,213 | ) | | (1,046 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 908 |
| | 1,870 |
|
| Payments for the redemption of long-term debt | (341 | ) | | (12 | ) |
| Notes payable to affiliated companies | (297 | ) | | (750 | ) |
| Distributions to parent | — |
| | (774 | ) |
| Other | (1 | ) | | (2 | ) |
| Net cash provided by financing activities | 269 |
| | 332 |
|
| Net (decrease) increase in cash and cash equivalents | (8 | ) | | 2 |
|
| Cash and cash equivalents at beginning of period | 16 |
| | 8 |
|
| Cash and cash equivalents at end of period | $ | 8 |
| | $ | 10 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 102 |
| | $ | 162 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 and 2021 |
| | | Accumulated | | |
| | | Other | | |
| | | Comprehensive | | |
| | | Income (Loss) | | |
| | | Net Unrealized | | |
| | | Losses on | | |
| Member's | | Available-for-Sale | | Total |
| (in millions) | Equity | | Securities | | Equity |
| Balance at June 30, 2020 | $ | 7,125 | | | $ | (1) | | | $ | 7,124 | |
| Net income | 287 | | | — | | | 287 | |
| Other comprehensive income | — | | | 1 | | | 1 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Other | (1) | | | — | | | (1) | |
| Balance at September 30, 2020 | $ | 7,411 | | | $ | — | | | $ | 7,411 | |
| | | | | |
| Balance at June 30, 2021 | $ | 7,893 | | | $ | (2) | | | $ | 7,891 | |
| Net income | 297 | | | — | | | 297 | |
| | | | | |
| | | | | |
| Balance at September 30, 2021 | $ | 8,190 | | | $ | (2) | | | $ | 8,188 | |
| | | | | |
| Nine Months Ended September 30, 2020 and 2021 |
| | | Accumulated | | |
| | | Other | | |
| | | Comprehensive | | |
| | | Income (Loss) | | |
| | | Net Unrealized | | |
| | | Losses on | | |
| Member's | | Available-for-Sale | | Total |
| (in millions) | Equity | | Securities | | Equity |
| Balance at December 31, 2019 | $ | 6,789 | | | $ | (1) | | | $ | 6,788 | |
| Net income | 623 | | | — | | | 623 | |
| Other comprehensive income | — | | | 1 | | | 1 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Other | (1) | | | — | | | (1) | |
| Balance at September 30, 2020 | $ | 7,411 | | | $ | — | | | $ | 7,411 | |
| | | | | |
| Balance at December 31, 2020 | $ | 7,560 | | | $ | (2) | | | $ | 7,558 | |
| Net income | 631 | | | — | | | 631 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| Other | (1) | | | — | | | (1) | |
| Balance at September 30, 2021 | $ | 8,190 | | | $ | (2) | | | $ | 8,188 | |
See Notes to Condensed Consolidated Financial Statements
30
|
| | | | | | | | | | | |
| | | | Accumulated | | |
| | | | Other | | |
| | | | Comprehensive | | |
| | | | Income | | |
| | | | Net Unrealized |
| | |
| | | | Gains on |
| | |
| | Member's |
| | Available-for-Sale |
| | Total |
|
| (in millions) | Equity |
| | Securities |
| | Equity |
|
| Balance at December 31, 2015 | $ | 5,121 |
| | $ | — |
| | $ | 5,121 |
|
| Net income | 487 |
| | — |
| | 487 |
|
| Other comprehensive income | — |
| | 2 |
| | 2 |
|
| Distributions to parent | (774 | ) | | — |
| | (774 | ) |
| Other | 3 |
| | — |
| | 3 |
|
| Balance at September 30, 2016 | $ | 4,837 |
| | $ | 2 |
| | $ | 4,839 |
|
| | | | | | |
| Balance at December 31, 2016 | $ | 4,899 |
| | $ | 1 |
| | $ | 4,900 |
|
| Net income | 368 |
| | — |
| | 368 |
|
| Other comprehensive income | — |
| | 3 |
| | 3 |
|
| Other | 3 |
| | — |
| | 3 |
|
| Balance at September 30, 2017 | $ | 5,270 |
| | $ | 4 |
| | $ | 5,274 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Operating Revenues | | | | | | | |
| Regulated electric | $ | 413 | | | $ | 394 | | | $ | 1,119 | | | $ | 1,070 | |
| Regulated natural gas | 93 | | | 79 | | | 375 | | | 324 | |
| | | | | | | |
| Total operating revenues | 506 | | | 473 | | | 1,494 | | | 1,394 | |
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 119 | | | 94 | | | 294 | | | 258 | |
| | | | | | | |
| Cost of natural gas | 9 | | | 3 | | | 76 | | | 46 | |
| Operation, maintenance and other | 116 | | | 115 | | | 335 | | | 333 | |
| Depreciation and amortization | 79 | | | 72 | | | 228 | | | 208 | |
| Property and other taxes | 91 | | | 83 | | | 266 | | | 244 | |
| Impairment of assets and other charges | — | | | — | | | 5 | | | — | |
| Total operating expenses | 414 | | | 367 | | | 1,204 | | | 1,089 | |
| | | | | | | |
| Operating Income | 92 | | | 106 | | | 290 | | | 305 | |
| Other Income and Expenses, net | 4 | | | 4 | | | 14 | | | 11 | |
| Interest Expense | 29 | | | 26 | | | 82 | | | 75 | |
| Income Before Income Taxes | 67 | | | 84 | | | 222 | | | 241 | |
| Income Tax Expense | 9 | | | 14 | | | 34 | | | 40 | |
| | | | | | | |
| | | | | | | |
| Net Income and Comprehensive Income | $ | 58 | | | $ | 70 | | | $ | 188 | | | $ | 201 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See Notes to Condensed Consolidated Financial Statements
31
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
|
| 2016 |
|
| Operating Revenues | | | | | | | |
| Regulated electric | $ | 371 |
| | $ | 390 |
| | $ | 1,036 |
| | $ | 1,053 |
|
| Regulated natural gas | 90 |
| | 89 |
| | 360 |
| | 358 |
|
| Nonregulated electric and other | 10 |
| | 10 |
| | 30 |
| | 22 |
|
| Total operating revenues | 471 |
| | 489 |
| | 1,426 |
| | 1,433 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power – regulated | 100 |
| | 129 |
| | 283 |
| | 340 |
|
| Fuel used in electric generation and purchased power – nonregulated | 13 |
| | 14 |
| | 42 |
| | 37 |
|
| Cost of natural gas | 5 |
| | 6 |
| | 69 |
| | 64 |
|
| Operation, maintenance and other | 124 |
| | 126 |
| | 385 |
| | 367 |
|
| Depreciation and amortization | 63 |
| | 50 |
| | 193 |
| | 175 |
|
| Property and other taxes | 65 |
| | 59 |
| | 204 |
| | 195 |
|
| Impairment charges | — |
| | — |
| | 1 |
| | — |
|
| Total operating expenses | 370 |
| | 384 |
| | 1,177 |
| | 1,178 |
|
| Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
| | 1 |
| | 2 |
|
| Operating Income | 102 |
| | 106 |
| | 250 |
| | 257 |
|
| Other Income and Expenses, net | 4 |
| | 3 |
| | 12 |
| | 6 |
|
| Interest Expense | 22 |
| | 22 |
| | 67 |
| | 63 |
|
| Income From Continuing Operations Before Income Taxes | 84 |
| | 87 |
| | 195 |
| | 200 |
|
| Income Tax Expense From Continuing Operations | 28 |
| | 32 |
| | 67 |
| | 65 |
|
| Income From Continuing Operations | 56 |
| | 55 |
| | 128 |
| | 135 |
|
| (Loss) Income From Discontinued Operations, net of tax | (1 | ) | | 34 |
| | (1 | ) | | 36 |
|
| Net Income and Comprehensive Income | $ | 55 |
| | $ | 89 |
| | $ | 127 |
| | $ | 171 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 16 | | | $ | 14 | |
| Receivables (net of allowance for doubtful accounts of $4 at 2021 and 2020) | 107 | | | 98 | |
| Receivables from affiliated companies | 77 | | | 102 | |
| | | |
| Inventory | 114 | | | 110 | |
| | | |
| Regulatory assets | 61 | | | 39 | |
| Other | 45 | | | 31 | |
| Total current assets | 420 | | | 394 | |
| Property, Plant and Equipment | | | |
| Cost | 11,531 | | | 11,022 | |
| Accumulated depreciation and amortization | (3,102) | | | (3,013) | |
| | | |
| Net property, plant and equipment | 8,429 | | | 8,009 | |
| Other Noncurrent Assets | | | |
| Goodwill | 920 | | | 920 | |
| Regulatory assets | 634 | | | 610 | |
| | | |
| Operating lease right-of-use assets, net | 19 | | | 20 | |
| | | |
| Other | 83 | | | 72 | |
| Total other noncurrent assets | 1,656 | | | 1,622 | |
| Total Assets | $ | 10,505 | | | $ | 10,025 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 304 | | | $ | 279 | |
| Accounts payable to affiliated companies | 59 | | | 68 | |
| Notes payable to affiliated companies | 451 | | | 169 | |
| Taxes accrued | 210 | | | 247 | |
| Interest accrued | 32 | | | 31 | |
| Current maturities of long-term debt | 50 | | | 50 | |
| | | |
| Asset retirement obligations | 17 | | | 3 | |
| Regulatory liabilities | 63 | | | 65 | |
| Other | 68 | | | 70 | |
| Total current liabilities | 1,254 | | | 982 | |
| Long-Term Debt | 3,017 | | | 3,014 | |
| Long-Term Debt Payable to Affiliated Companies | 25 | | | 25 | |
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,032 | | | 981 | |
| Asset retirement obligations | 95 | | | 108 | |
| Regulatory liabilities | 734 | | | 748 | |
| Operating lease liabilities | 19 | | | 20 | |
| Accrued pension and other post-retirement benefit costs | 114 | | | 113 | |
| | | |
| Other | 92 | | | 99 | |
| Total other noncurrent liabilities | 2,086 | | | 2,069 | |
| Commitments and Contingencies | 0 | | 0 |
| Equity | | | |
| Common Stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2021 and 2020 | 762 | | | 762 | |
| Additional paid-in capital | 2,776 | | | 2,776 | |
| Retained earnings | 585 | | | 397 | |
| | | |
| Total equity | 4,123 | | | 3,935 | |
| Total Liabilities and Equity | $ | 10,505 | | | $ | 10,025 | |
See Notes to Condensed Consolidated Financial Statements
32
|
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 7 |
| | $ | 13 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 68 |
| | 71 |
|
| Receivables from affiliated companies | 81 |
| | 129 |
|
| Notes receivable from affiliated companies | 87 |
| | 94 |
|
| Inventory | 139 |
| | 137 |
|
| Regulatory assets | 57 |
| | 37 |
|
| Other | 18 |
| | 37 |
|
| Total current assets | 457 |
| | 518 |
|
| Property, Plant and Equipment | | | |
| Cost | 8,509 |
| | 8,126 |
|
| Accumulated depreciation and amortization | (2,658 | ) | | (2,579 | ) |
| Net property, plant and equipment | 5,851 |
| | 5,547 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 920 |
| | 920 |
|
| Regulatory assets | 510 |
| | 520 |
|
| Other | 27 |
| | 23 |
|
| Total other noncurrent assets | 1,457 |
| | 1,463 |
|
| Total Assets | $ | 7,765 |
| | $ | 7,528 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 251 |
| | $ | 282 |
|
| Accounts payable to affiliated companies | 59 |
| | 63 |
|
| Notes payable to affiliated companies | — |
| | 16 |
|
| Taxes accrued | 157 |
| | 178 |
|
| Interest accrued | 33 |
| | 19 |
|
| Current maturities of long-term debt | — |
| | 1 |
|
| Asset retirement obligations | 6 |
| | — |
|
| Regulatory liabilities | 15 |
| | 21 |
|
| Other | 74 |
| | 91 |
|
| Total current liabilities | 595 |
| | 671 |
|
| Long-Term Debt | 2,042 |
| | 1,858 |
|
| Long-Term Debt Payable to Affiliated Companies | 25 |
| | 25 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,512 |
| | 1,443 |
|
| Asset retirement obligations | 75 |
| | 77 |
|
| Regulatory liabilities | 232 |
| | 236 |
|
| Accrued pension and other post-retirement benefit costs | 52 |
| | 56 |
|
| Other | 134 |
| | 166 |
|
| Total other noncurrent liabilities | 2,005 |
| | 1,978 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2017 and 2016 | 762 |
| | 762 |
|
| Additional paid-in capital | 2,670 |
| | 2,695 |
|
| Accumulated deficit | (334 | ) | | (461 | ) |
| Total equity | 3,098 |
| | 2,996 |
|
| Total Liabilities and Equity | $ | 7,765 |
| | $ | 7,528 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| (in millions) | 2021 | | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 188 | | | $ | 201 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 231 | | | 211 | |
| Equity component of AFUDC | (5) | | | (4) | |
| | | |
| Impairment of assets and other charges | 5 | | | — | |
| Deferred income taxes | 27 | | | 31 | |
| | | |
| | | |
| Payments for asset retirement obligations | (1) | | | (1) | |
| Provision for rate refunds | 12 | | | 10 | |
| (Increase) decrease in | | | |
| | | |
| Receivables | (9) | | | (5) | |
| Receivables from affiliated companies | (11) | | | 35 | |
| Inventory | (4) | | | 5 | |
| Other current assets | (34) | | | 5 | |
| Increase (decrease) in | | | |
| Accounts payable | 27 | | | (28) | |
| Accounts payable to affiliated companies | (9) | | | (14) | |
| Taxes accrued | (37) | | | (23) | |
| Other current liabilities | (12) | | | 6 | |
| Other assets | (35) | | | (24) | |
| Other liabilities | 8 | | | (7) | |
| Net cash provided by operating activities | 341 | | | 398 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (615) | | | (611) | |
| | | |
| | | |
| Notes receivable from affiliated companies | 36 | | | — | |
| | | |
| Other | (42) | | | (34) | |
| Net cash used in investing activities | (621) | | | (645) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — | | | 467 | |
| | | |
| Notes payable to affiliated companies | 282 | | | (227) | |
| | | |
| | | |
| Net cash provided by financing activities | 282 | | | 240 | |
| Net increase (decrease) in cash and cash equivalents | 2 | | | (7) | |
| Cash and cash equivalents at beginning of period | 14 | | | 17 | |
| Cash and cash equivalents at end of period | $ | 16 | | | $ | 10 | |
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 103 | | | $ | 92 | |
| | | |
See Notes to Condensed Consolidated Financial Statements
33
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 127 |
| | $ | 171 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 196 |
| | 178 |
|
| Equity component of AFUDC | (8 | ) | | (4 | ) |
| Gains on sales of other assets | (1 | ) | | (2 | ) |
| Impairment charges | 1 |
| | — |
|
| Deferred income taxes | 70 |
| | 36 |
|
| Accrued pension and other post-retirement benefit costs | 3 |
| | 4 |
|
| Contributions to qualified pension plans | (4 | ) | | — |
|
| Payments for asset retirement obligations | (4 | ) | | (4 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 1 |
| | — |
|
| Receivables | 3 |
| | (1 | ) |
| Receivables from affiliated companies | 48 |
| | (3 | ) |
| Inventory | 1 |
| | (5 | ) |
| Other current assets | (8 | ) | | 50 |
|
| Increase (decrease) in | | | |
| Accounts payable | (48 | ) | | 13 |
|
| Accounts payable to affiliated companies | (4 | ) | | (4 | ) |
| Taxes accrued | (21 | ) | | (13 | ) |
| Other current liabilities | (6 | ) | | (53 | ) |
| Other assets | (13 | ) | | (8 | ) |
| Other liabilities | (2 | ) | | (28 | ) |
| Net cash provided by operating activities | 331 |
| | 327 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (457 | ) | | (334 | ) |
| Notes receivable from affiliated companies | 7 |
| | (47 | ) |
| Other | (25 | ) | | (21 | ) |
| Net cash used in investing activities | (475 | ) | | (402 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 182 |
| | 341 |
|
| Payments for the redemption of long-term debt | (2 | ) | | (53 | ) |
| Notes payable to affiliated companies | (16 | ) | | (103 | ) |
| Dividends to parent | (25 | ) | | (25 | ) |
| Other | (1 | ) | | — |
|
| Net cash provided by financing activities | 138 |
| | 160 |
|
| Net (decrease) increase in cash and cash equivalents | (6 | ) | | 85 |
|
| Cash and cash equivalents at beginning of period | 13 |
| | 14 |
|
| Cash and cash equivalents at end of period | $ | 7 |
| | $ | 99 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 65 |
| | $ | 56 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 and 2021 |
| | | Additional | | | | | | |
| Common | | Paid-in | | Retained | | | | Total |
| (in millions) | Stock | | Capital | | Earnings | | | | Equity |
| Balance at June 30, 2020 | $ | 762 | | | $ | 2,776 | | | $ | 276 | | | | | $ | 3,814 | |
| Net income | — | | | — | | | 70 | | | | | 70 | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at September 30, 2020 | $ | 762 | | | $ | 2,776 | | | $ | 346 | | | | | $ | 3,884 | |
| | | | | | | | | |
| Balance at June 30, 2021 | $ | 762 | | | $ | 2,776 | | | $ | 527 | | | | | $ | 4,065 | |
| Net income | — | | | — | | | 58 | | | | | 58 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at September 30, 2021 | $ | 762 | | | $ | 2,776 | | | $ | 585 | | | | | $ | 4,123 | |
| | | | | | | | | |
| Nine Months Ended September 30, 2020 and 2021 |
| | | Additional | | | | | | |
| Common | | Paid-in | | Retained | | | | Total |
| (in millions) | Stock | | Capital | | Earnings | | | | Equity |
| Balance at December 31, 2019 | $ | 762 | | | $ | 2,776 | | | $ | 145 | | | | | $ | 3,683 | |
| Net income | — | | | — | | | 201 | | | | | 201 | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at September 30, 2020 | $ | 762 | | | $ | 2,776 | | | $ | 346 | | | | | $ | 3,884 | |
| | | | | | | | | |
| Balance at December 31, 2020 | $ | 762 | | | $ | 2,776 | | | $ | 397 | | | | | $ | 3,935 | |
| Net income | — | | | — | | | 188 | | | | | 188 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| Balance at September 30, 2021 | $ | 762 | | | $ | 2,776 | | | $ | 585 | | | | | $ | 4,123 | |
See Notes to Condensed Consolidated Financial Statements
34
|
| | | | | | | | | | | | | | | |
| | | | Additional |
| | | | |
| | Common |
| | Paid-in |
| | Accumulated |
| | Total |
|
| (in millions) | Stock |
| | Capital |
| | Deficit |
| | Equity |
|
| Balance at December 31, 2015 | $ | 762 |
| | $ | 2,720 |
| | $ | (698 | ) | | $ | 2,784 |
|
| Net income | — |
| | — |
| | 171 |
| | 171 |
|
| Dividends to parent | — |
| | (25 | ) | | — |
| | (25 | ) |
| Contribution from parent | — |
| | — |
| | 9 |
| | 9 |
|
| Balance at September 30, 2016 | $ | 762 |
| | $ | 2,695 |
| | $ | (518 | ) | | $ | 2,939 |
|
| | | | | | | | |
| Balance at December 31, 2016 | $ | 762 |
| | $ | 2,695 |
| | $ | (461 | ) | | $ | 2,996 |
|
| Net income | — |
| | — |
| | 127 |
| | 127 |
|
| Dividends to parent | — |
| | (25 | ) | | — |
| | (25 | ) |
| Balance at September 30, 2017 | $ | 762 |
|
| $ | 2,670 |
|
| $ | (334 | ) |
| $ | 3,098 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Operating Revenues | $ | 886 | | | $ | 761 | | | $ | 2,366 | | | $ | 2,070 | |
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 292 | | | 222 | | | 710 | | | 577 | |
| Operation, maintenance and other | 173 | | | 207 | | | 543 | | | 564 | |
| Depreciation and amortization | 154 | | | 149 | | | 458 | | | 415 | |
| Property and other taxes | 16 | | | 15 | | | 57 | | | 57 | |
| Impairment of assets and other charges | — | | | — | | | 8 | | | — | |
| Total operating expenses | 635 | | | 593 | | | 1,776 | | | 1,613 | |
| Gains on Sales of Other Assets and Other, net | 1 | | | — | | | — | | | — | |
| Operating Income | 252 | | | 168 | | | 590 | | | 457 | |
| Other Income and Expenses, net | 12 | | | 9 | | | 31 | | | 28 | |
| Interest Expense | 49 | | | 29 | | | 148 | | | 114 | |
| Income Before Income Taxes | 215 | | | 148 | | | 473 | | | 371 | |
| Income Tax Expense | 34 | | | 29 | | | 77 | | | 72 | |
| Net Income and Comprehensive Income | $ | 181 | | | $ | 119 | | | $ | 396 | | | $ | 299 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See Notes to Condensed Consolidated Financial Statements
35
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 802 |
| | $ | 809 |
| | $ | 2,302 |
| | $ | 2,225 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 259 |
| | 242 |
| | 744 |
| | 690 |
|
| Operation, maintenance and other | 175 |
| | 175 |
| | 541 |
| | 526 |
|
| Depreciation and amortization | 120 |
| | 123 |
| | 336 |
| | 345 |
|
| Property and other taxes | 19 |
| | 22 |
| | 56 |
| | 67 |
|
| Impairment charges | — |
| | 8 |
| | — |
| | 8 |
|
| Total operating expenses | 573 |
| | 570 |
| | 1,677 |
| | 1,636 |
|
| Gain on Sale of Other Assets and Other, net | 1 |
|
| — |
| | 1 |
| | — |
|
| Operating Income | 230 |
| | 239 |
|
| 626 |
|
| 589 |
|
| Other Income and Expenses, net | 10 |
| | 5 |
| | 27 |
| | 15 |
|
| Interest Expense | 44 |
| | 45 |
| | 132 |
| | 136 |
|
| Income Before Income Taxes | 196 |
| | 199 |
|
| 521 |
|
| 468 |
|
| Income Tax Expense | 75 |
| | 70 |
| | 203 |
| | 159 |
|
| Net Income | $ | 121 |
| | $ | 129 |
|
| $ | 318 |
|
| $ | 309 |
|
| Other Comprehensive Loss, net of tax | | | | | | | |
| Reclassification into earnings from cash flow hedges | — |
| | — |
| | — |
| | (1 | ) |
| Comprehensive Income | $ | 121 |
| | $ | 129 |
|
| $ | 318 |
|
| $ | 308 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 14 | | | $ | 7 | |
| Receivables (net of allowance for doubtful accounts of $3 at 2021 and 2020) | 81 | | | 55 | |
| Receivables from affiliated companies | 62 | | | 112 | |
| Notes receivable from affiliated companies | 252 | | | — | |
| Inventory | 367 | | | 473 | |
| Regulatory assets | 196 | | | 125 | |
| Other | 59 | | | 37 | |
| Total current assets | 1,031 | | | 809 | |
| Property, Plant and Equipment | | | |
| Cost | 17,320 | | | 17,382 | |
| Accumulated depreciation and amortization | (5,550) | | | (5,661) | |
| | | |
| Net property, plant and equipment | 11,770 | | | 11,721 | |
| Other Noncurrent Assets | | | |
| Regulatory assets | 1,300 | | | 1,203 | |
| | | |
| Operating lease right-of-use assets, net | 51 | | | 55 | |
| Other | 276 | | | 253 | |
| Total other noncurrent assets | 1,627 | | | 1,511 | |
| Total Assets | $ | 14,428 | | | $ | 14,041 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 239 | | | $ | 188 | |
| Accounts payable to affiliated companies | 198 | | | 88 | |
| Notes payable to affiliated companies | — | | | 131 | |
| Taxes accrued | 83 | | | 62 | |
| Interest accrued | 59 | | | 51 | |
| Current maturities of long-term debt | 151 | | | 70 | |
| Asset retirement obligations | 177 | | | 168 | |
| Regulatory liabilities | 147 | | | 111 | |
| Other | 104 | | | 83 | |
| Total current liabilities | 1,158 | | | 952 | |
| Long-Term Debt | 3,791 | | | 3,871 | |
| Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,289 | | | 1,228 | |
| Asset retirement obligations | 966 | | | 1,008 | |
| Regulatory liabilities | 1,573 | | | 1,627 | |
| Operating lease liabilities | 49 | | | 53 | |
| Accrued pension and other post-retirement benefit costs | 172 | | | 171 | |
| Investment tax credits | 172 | | | 168 | |
| Other | 53 | | | 30 | |
| Total other noncurrent liabilities | 4,274 | | | 4,285 | |
| Commitments and Contingencies | 0 | | 0 |
| Equity | | | |
| Member's Equity | 5,055 | | | 4,783 | |
| Total Liabilities and Equity | $ | 14,428 | | | $ | 14,041 | |
See Notes to Condensed Consolidated Financial Statements
36
|
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 22 |
| | $ | 17 |
|
| Receivables (net of allowance for doubtful accounts of $1 at 2017 and 2016) | 74 |
| | 105 |
|
| Receivables from affiliated companies | 83 |
| | 114 |
|
| Notes receivable from affiliated companies | 29 |
| | 86 |
|
| Inventory | 450 |
| | 504 |
|
| Regulatory assets | 158 |
| | 149 |
|
| Other | 34 |
| | 45 |
|
| Total current assets | 850 |
| | 1,020 |
|
| Property, Plant and Equipment | | | |
| Cost | 14,716 |
| | 14,241 |
|
| Accumulated depreciation and amortization | (4,592 | ) | | (4,317 | ) |
| Net property, plant and equipment | 10,124 |
| | 9,924 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 1,123 |
| | 1,073 |
|
| Other | 170 |
| | 147 |
|
| Total other noncurrent assets | 1,293 |
| | 1,220 |
|
| Total Assets | $ | 12,267 |
| | $ | 12,164 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 188 |
| | $ | 263 |
|
| Accounts payable to affiliated companies | 73 |
| | 74 |
|
| Taxes accrued | 146 |
| | 31 |
|
| Interest accrued | 54 |
| | 61 |
|
| Current maturities of long-term debt | 3 |
| | 3 |
|
| Asset retirement obligations | 58 |
| | — |
|
| Regulatory liabilities | 28 |
| | 40 |
|
| Other | 111 |
| | 93 |
|
| Total current liabilities | 661 |
| | 565 |
|
| Long-Term Debt | 3,632 |
| | 3,633 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,979 |
| | 1,900 |
|
| Asset retirement obligations | 735 |
| | 866 |
|
| Regulatory liabilities | 735 |
| | 748 |
|
| Accrued pension and other post-retirement benefit costs | 78 |
| | 71 |
|
| Investment tax credits | 147 |
| | 137 |
|
| Other | 65 |
| | 27 |
|
| Total other noncurrent liabilities | 3,739 |
| | 3,749 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's Equity | 4,085 |
| | 4,067 |
|
| Total Liabilities and Equity | $ | 12,267 |
| | $ | 12,164 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| (in millions) | 2021 | | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 396 | | | $ | 299 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 460 | | | 416 | |
| Equity component of AFUDC | (19) | | | (18) | |
| | | |
| Impairment of assets and other charges | 8 | | | — | |
| Deferred income taxes | 19 | | | 11 | |
| | | |
| | | |
| Payments for asset retirement obligations | (49) | | | (48) | |
| | | |
| (Increase) decrease in | | | |
| | | |
| Receivables | (7) | | | 15 | |
| Receivables from affiliated companies | 17 | | | (5) | |
| Inventory | 106 | | | 10 | |
| Other current assets | (58) | | | 12 | |
| Increase (decrease) in | | | |
| Accounts payable | 46 | | | (1) | |
| Accounts payable to affiliated companies | (15) | | | (22) | |
| Taxes accrued | 25 | | | 65 | |
| Other current liabilities | 23 | | | (2) | |
| Other assets | 11 | | | (41) | |
| Other liabilities | 3 | | | 104 | |
| Net cash provided by operating activities | 966 | | | 795 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (584) | | | (669) | |
| | | |
| Purchases of debt and equity securities | (34) | | | (24) | |
| Proceeds from sales and maturities of debt and equity securities | 16 | | | 15 | |
| | | |
| Notes receivable from affiliated companies | (218) | | | — | |
| Other | (8) | | | (24) | |
| Net cash used in investing activities | (828) | | | (702) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — | | | 544 | |
| Payments for the redemption of long-term debt | — | | | (500) | |
| Notes payable to affiliated companies | (131) | | | 53 | |
| | | |
| Distributions to parent | — | | | (200) | |
| | | |
| Net cash used in financing activities | (131) | | | (103) | |
| Net increase (decrease) in cash and cash equivalents | 7 | | | (10) | |
| Cash and cash equivalents at beginning of period | 7 | | | 25 | |
| Cash and cash equivalents at end of period | $ | 14 | | | $ | 15 | |
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 105 | | | $ | 73 | |
See Notes to Condensed Consolidated Financial Statements
37
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 318 |
| | $ | 309 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 339 |
| | 347 |
|
| Equity component of AFUDC | (20 | ) | | (11 | ) |
| Gain on sale of other assets and other, net | (1 | ) | | — |
|
| Impairment charges | — |
| | 8 |
|
| Deferred income taxes | 101 |
| | 122 |
|
| Accrued pension and other post-retirement benefit costs | 4 |
| | 6 |
|
| Payments for asset retirement obligations | (26 | ) | | (31 | ) |
| (Increase) decrease in | | | |
| Receivables | 53 |
| | 16 |
|
| Receivables from affiliated companies | 31 |
| | (3 | ) |
| Inventory | 54 |
| | 146 |
|
| Other current assets | 18 |
| | (105 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (71 | ) | | (14 | ) |
| Accounts payable to affiliated companies | (1 | ) | | (1 | ) |
| Taxes accrued | 115 |
| | 12 |
|
| Other current liabilities | (18 | ) | | (85 | ) |
| Other assets | (24 | ) | | (38 | ) |
| Other liabilities | 32 |
| | 64 |
|
| Net cash provided by operating activities | 904 |
| | 742 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (603 | ) | | (540 | ) |
| Purchases of available-for-sale securities | (15 | ) | | (12 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 6 |
| | 9 |
|
| Notes receivable from affiliated companies | 57 |
| | 45 |
|
| Other | (40 | ) | | (28 | ) |
| Net cash used in investing activities | (595 | ) | | (526 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — |
| | 495 |
|
| Payments for the redemption of long-term debt | (3 | ) | | (476 | ) |
| Distributions to parent | (300 | ) | | (149 | ) |
| Other | (1 | ) | | (1 | ) |
| Net cash used in financing activities | (304 | ) | | (131 | ) |
| Net increase in cash and cash equivalents | 5 |
|
| 85 |
|
| Cash and cash equivalents at beginning of period | 17 |
| | 9 |
|
| Cash and cash equivalents at end of period | $ | 22 |
| | $ | 94 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 101 |
| | $ | 56 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Three Months Ended |
| | | | | | | | | | | September 30, 2020 and 2021 |
| | | | | | | | | | | |
| (in millions) | | | | | | | | | | | Member's Equity |
| Balance at June 30, 2020 | | | | | | | | | | | $ | 4,655 | |
| Net income | | | | | | | | | | | 119 | |
| | | | | | | | | | | |
| Distributions to parent | | | | | | | | | | | (100) | |
| Balance at September 30, 2020 | | | | | | | | | | | $ | 4,674 | |
| | | | | | | | | | | |
| Balance at June 30, 2021 | | | | | | | | | | | $ | 4,999 | |
| Net income | | | | | | | | | | | 181 | |
| Distributions to parent | | | | | | | | | | | (125) | |
| Balance at September 30, 2021 | | | | | | | | | | | $ | 5,055 | |
| | | | | | | | | | | |
| | | | | | | | | | | Nine Months Ended |
| | | | | | | | | | | September 30, 2020 and 2021 |
| | | | | | | | | | | |
| (in millions) | | | | | | | | | | | Member's Equity |
| Balance at December 31, 2019 | | | | | | | | | | | $ | 4,575 | |
| Net income | | | | | | | | | | | 299 | |
| | | | | | | | | | | |
| Distributions to parent | | | | | | | | | | | (200) | |
| | | | | | | | | | | |
| Balance at September 30, 2020 | | | | | | | | | | | $ | 4,674 | |
| | | | | | | | | | | |
| Balance at December 31, 2020 | | | | | | | | | | | $ | 4,783 | |
| Net income | | | | | | | | | | | 396 | |
| | | | | | | | | | | |
| Distributions to parent | | | | | | | | | | | (125) | |
| Other | | | | | | | | | | | 1 | |
| | | | | | | | | | | |
| Balance at September 30, 2021 | | | | | | | | | | | $ | 5,055 | |
See Notes to Condensed Consolidated Financial Statements
38
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated | | |
| | | | | | | | | | Other | | |
| | | | | | | | | | Comprehensive | | |
| | | | | | | | | | Income | | |
| | | | Additional |
| | | | | | Net Gains on |
| | |
| | Common |
| | Paid-in |
| | Retained |
| | Member's |
| | Cash Flow |
| | Total |
|
| (in millions) | Stock |
| | Capital |
| | Earnings |
| | Equity |
| | Hedges |
| | Equity |
|
| Balance at December 31, 2015 | $ | 1 |
| | $ | 1,384 |
| | $ | 2,450 |
| | $ | — |
| | $ | 1 |
| | $ | 3,836 |
|
| Net income | — |
| | — |
| | — |
| | 309 |
| | — |
| | 309 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
| Distributions to parent | — |
| | — |
| | — |
| | (149 | ) | | — |
| | (149 | ) |
| Transfer to Member's Equity | (1 | ) | | (1,384 | ) | | (2,450 | ) | | 3,835 |
| | — |
| | — |
|
| Balance at September 30, 2016 | $ | — |
| | $ | — |
| | $ | — |
|
| $ | 3,995 |
| | $ | — |
| | $ | 3,995 |
|
| | | | | | | | | | | | |
| Balance at December 31, 2016 | $ | — |
| | $ | — |
| | $ | — |
| | $ | 4,067 |
| | $ | — |
| | $ | 4,067 |
|
| Net income | — |
| | — |
| | — |
| | 318 |
| | — |
| | 318 |
|
| Distributions to parent | — |
| | — |
| | — |
| | (300 | ) | | — |
| | (300 | ) |
| Balance at September 30, 2017 | $ | — |
| | $ | — |
| | $ | — |
|
| $ | 4,085 |
| | $ | — |
| | $ | 4,085 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Operating Revenues | $ | 195 | | | $ | 162 | | | $ | 1,016 | | | $ | 871 | |
| Operating Expenses | | | | | | | |
| Cost of natural gas | 66 | | | 39 | | | 354 | | | 254 | |
| Operation, maintenance and other | 77 | | | 75 | | | 231 | | | 234 | |
| Depreciation and amortization | 51 | | | 45 | | | 150 | | | 133 | |
| Property and other taxes | 16 | | | 13 | | | 44 | | | 37 | |
| Impairment of assets and other charges | 4 | | | 7 | | | 9 | | | 7 | |
| Total operating expenses | 214 | | | 179 | | | 788 | | | 665 | |
| | | | | | | |
| Operating (Loss) Income | (19) | | | (17) | | | 228 | | | 206 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Other Income and Expenses, net | 16 | | | 16 | | | 51 | | | 44 | |
| | | | | | | |
| Interest Expense | 29 | | | 29 | | | 88 | | | 89 | |
| (Loss) Income Before Income Taxes | (32) | | | (30) | | | 191 | | | 161 | |
| Income Tax (Benefit) Expense | (8) | | | (5) | | | 16 | | | 6 | |
| Net (Loss) Income and Comprehensive (Loss) Income | $ | (24) | | | $ | (25) | | | $ | 175 | | | $ | 155 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
See Notes to Condensed Consolidated Financial Statements
39
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Operating Revenues | | | | | | | |
| Regulated natural gas | $ | 181 |
| | $ | 155 |
| | $ | 877 |
| | $ | 815 |
|
| Nonregulated natural gas and other | 2 |
| | 3 |
| | 7 |
| | 8 |
|
| Total operating revenues | 183 |
| | 158 |
| | 884 |
| | 823 |
|
| Operating Expenses | | | | | | | |
| Cost of natural gas | 63 |
| | 42 |
| | 333 |
| | 289 |
|
| Operation, maintenance and other | 73 |
| | 74 |
| | 226 |
| | 221 |
|
| Depreciation and amortization | 38 |
| | 35 |
| | 109 |
| | 103 |
|
| Property and other taxes | 13 |
| | 11 |
| | 38 |
| | 33 |
|
| Impairment charges | — |
| | — |
| | 7 |
| | — |
|
| Total operating expenses | 187 |
| | 162 |
| | 713 |
| | 646 |
|
| Operating (Loss) Income | (4 | ) | | (4 | ) | | 171 |
| | 177 |
|
| Equity in earnings of unconsolidated affiliates | 3 |
| | 2 |
| | 8 |
| | 25 |
|
| Other income and expenses, net | — |
| | (1 | ) | | (1 | ) | | (1 | ) |
| Total other income and expenses | 3 |
| | 1 |
| | 7 |
| | 24 |
|
| Interest Expense | 20 |
| | 17 |
| | 59 |
| | 50 |
|
| (Loss) Income Before Income Taxes | (21 | ) | | (20 | ) | | 119 |
| | 151 |
|
| Income Tax (Benefit) Expense | (10 | ) | | (8 | ) | | 43 |
| | 57 |
|
| Net (Loss) Income | $ | (11 | ) | | $ | (12 | ) | | $ | 76 |
| | $ | 94 |
|
| Other Comprehensive Income, net of tax | | | | | | | |
| Reclassification into earnings from hedging activities of equity method investments | — |
| | 1 |
| | — |
| | 1 |
|
| Comprehensive (Loss) Income | $ | (11 | ) | | $ | (11 | ) | | $ | 76 |
| | $ | 95 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 |
| ASSETS | | | |
| Current Assets | | | |
| | | |
| Receivables (net of allowance for doubtful accounts of $15 at 2021 and $12 at 2020) | $ | 96 | | | $ | 250 | |
| Receivables from affiliated companies | 11 | | | 10 | |
| | | |
| Inventory | 68 | | | 68 | |
| Regulatory assets | 125 | | | 153 | |
| | | |
| Other | 59 | | | 20 | |
| Total current assets | 359 | | | 501 | |
| Property, Plant and Equipment | | | |
| Cost | 9,733 | | | 9,134 | |
| Accumulated depreciation and amortization | (1,862) | | | (1,749) | |
| Facilities to be retired, net | 11 | | | — | |
| Net property, plant and equipment | 7,882 | | | 7,385 | |
| Other Noncurrent Assets | | | |
| Goodwill | 49 | | | 49 | |
| Regulatory assets | 335 | | | 302 | |
| Operating lease right-of-use assets, net | 17 | | | 20 | |
| Investments in equity method unconsolidated affiliates | 100 | | | 88 | |
| Other | 282 | | | 270 | |
| Total other noncurrent assets | 783 | | | 729 | |
| Total Assets | $ | 9,024 | | | $ | 8,615 | |
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 184 | | | $ | 230 | |
| Accounts payable to affiliated companies | 31 | | | 79 | |
| | | |
| Notes payable to affiliated companies | 315 | | | 530 | |
| Taxes accrued | 41 | | | 23 | |
| Interest accrued | 35 | | | 34 | |
| Current maturities of long-term debt | — | | | 160 | |
| Regulatory liabilities | 64 | | | 88 | |
| Other | 76 | | | 69 | |
| Total current liabilities | 746 | | | 1,213 | |
| Long-Term Debt | 2,968 | | | 2,620 | |
| | | |
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 875 | | | 821 | |
| Asset retirement obligations | 21 | | | 20 | |
| Regulatory liabilities | 1,004 | | | 1,044 | |
| Operating lease liabilities | 15 | | | 19 | |
| Accrued pension and other post-retirement benefit costs | 6 | | | 8 | |
| | | |
| Other | 175 | | | 155 | |
| Total other noncurrent liabilities | 2,096 | | | 2,067 | |
| Commitments and Contingencies | 0 | | 0 |
| Equity | | | |
| Common stock, no par value: 100 shares authorized and outstanding at 2021 and 2020 | 1,635 | | | 1,310 | |
| | | |
| Retained earnings | 1,579 | | | 1,405 | |
| | | |
| Total equity | 3,214 | | | 2,715 | |
| Total Liabilities and Equity | $ | 9,024 | | | $ | 8,615 | |
See Notes to Condensed Consolidated Financial Statements
40
|
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 12 |
| | $ | 25 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2017 and $3 at 2016) | 77 |
| | 232 |
|
| Receivables from affiliated companies | 8 |
| | 7 |
|
| Inventory | 53 |
| | 66 |
|
| Regulatory assets | 133 |
| | 124 |
|
| Income taxes receivable | 99 |
| | 9 |
|
| Other | 31 |
| | 12 |
|
| Total current assets | 413 |
| | 475 |
|
| Property, Plant and Equipment | | | |
| Cost | 6,579 |
| | 6,174 |
|
| Accumulated depreciation and amortization | (1,454 | ) | | (1,360 | ) |
| Net property, plant and equipment | 5,125 |
| | 4,814 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 49 |
| | 49 |
|
| Regulatory assets | 322 |
| | 373 |
|
| Investments in equity method unconsolidated affiliates | 76 |
| | 212 |
|
| Other | 11 |
| | 21 |
|
| Total other noncurrent assets | 458 |
| | 655 |
|
| Total Assets | $ | 5,996 |
| | $ | 5,944 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 98 |
| | $ | 155 |
|
| Accounts payable to affiliated companies | 7 |
| | 8 |
|
| Notes payable and commercial paper | — |
| | 330 |
|
| Notes payable to affiliated companies | 284 |
| | — |
|
| Taxes accrued | 30 |
| | 67 |
|
| Interest accrued | 24 |
| | 33 |
|
| Current maturities of long-term debt | — |
| | 35 |
|
| Regulatory liabilities | 3 |
| | — |
|
| Other | 72 |
| | 102 |
|
| Total current liabilities | 518 |
| | 730 |
|
| Long-Term Debt | 2,036 |
| | 1,786 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,046 |
| | 931 |
|
| Asset retirement obligations | 15 |
| | 14 |
|
| Regulatory liabilities | 627 |
| | 608 |
|
| Accrued pension and other post-retirement benefit costs | 14 |
| | 14 |
|
| Other | 141 |
| | 189 |
|
| Total other noncurrent liabilities | 1,843 |
| | 1,756 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, no par value: 100 shares authorized and outstanding at 2017 and 2016 | 860 |
| | 860 |
|
| Retained earnings | 739 |
| | 812 |
|
| Total equity | 1,599 |
| | 1,672 |
|
| Total Liabilities and Equity | $ | 5,996 |
| | $ | 5,944 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, |
| (in millions) | 2021 | | 2020 |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 175 | | | $ | 155 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 152 | | | 135 | |
| Equity component of AFUDC | (19) | | | (14) | |
| | | |
| | | |
| | | |
| Impairment of assets and other charges | 10 | | | 7 | |
| Deferred income taxes | 10 | | | 24 | |
| Equity in earnings from unconsolidated affiliates | (7) | | | (7) | |
| | | |
| | | |
| | | |
| Provision for rate refunds | (3) | | | (27) | |
| (Increase) decrease in | | | |
| | | |
| Receivables | 151 | | | 164 | |
| Receivables from affiliated companies | (1) | | | (1) | |
| Inventory | — | | | 25 | |
| Other current assets | 7 | | | (59) | |
| Increase (decrease) in | | | |
| Accounts payable | (55) | | | (53) | |
| Accounts payable to affiliated companies | (48) | | | 60 | |
| Taxes accrued | 17 | | | 16 | |
| Other current liabilities | (32) | | | (4) | |
| Other assets | 3 | | | (14) | |
| Other liabilities | 2 | | | 7 | |
| Net cash provided by operating activities | 362 | | | 414 | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (628) | | | (641) | |
| | | |
| Contributions to equity method investments | (9) | | | — | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| Return of investment capital | 1 | | | — | |
| | | |
| Other | (23) | | | (18) | |
| Net cash used in investing activities | (659) | | | (659) | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 347 | | | 394 | |
| | | |
| Payments for the redemption of long-term debt | (160) | | | — | |
| | | |
| | | |
| Notes payable to affiliated companies | (215) | | | (149) | |
| | | |
| | | |
| Capital contributions from parent | 325 | | | — | |
| | | |
| | | |
| | | |
| Net cash provided by financing activities | 297 | | | 245 | |
| Net increase in cash and cash equivalents | — | | | — | |
| Cash and cash equivalents at beginning of period | — | | | — | |
| Cash and cash equivalents at end of period | $ | — | | | $ | — | |
| Supplemental Disclosures: | | | |
| | | |
| | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 115 | | | $ | 123 | |
| | | |
See Notes to Condensed Consolidated Financial Statements
41
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 76 |
| | $ | 94 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 112 |
| | 111 |
|
| Impairment charges | 7 |
| | — |
|
| Deferred income taxes | 127 |
| | 50 |
|
| Equity in earnings from unconsolidated affiliates | (8 | ) | | (25 | ) |
| Accrued pension and other post-retirement benefit costs | 9 |
| | 2 |
|
| Contributions to qualified pension plans | — |
| | (1 | ) |
| Payments for asset retirement obligations | — |
| | (5 | ) |
| (Increase) decrease in | | | |
| Receivables | 157 |
| | 88 |
|
| Receivables from affiliated companies | (1 | ) | | — |
|
| Inventory | 13 |
| | 33 |
|
| Other current assets | (129 | ) | | (50 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (52 | ) | | 11 |
|
| Accounts payable to affiliated companies | (1 | ) | | — |
|
| Taxes accrued | (37 | ) | | 12 |
|
| Other current liabilities | (21 | ) | | (11 | ) |
| Other assets | (9 | ) | | 55 |
|
| Other liabilities | (7 | ) | | 17 |
|
| Net cash provided by operating activities | 236 |
| | 381 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (407 | ) | | (416 | ) |
| Contributions to equity method investments | (12 | ) | | (40 | ) |
| Other | 2 |
| | (2 | ) |
| Net cash used in investing activities | (417 | ) | | (458 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the: | | | |
| Issuance of long-term debt | 250 |
| | 296 |
|
| Issuance of common stock | — |
| | 121 |
|
| Payments for the redemption of long-term debt | (35 | ) | | (40 | ) |
| Notes payable and commercial paper | (330 | ) | | (210 | ) |
| Notes payable to affiliated companies | 284 |
| | — |
|
| Dividends paid | — |
| | (82 | ) |
| Other | (1 | ) | | — |
|
| Net cash provided by financing activities | 168 |
| | 85 |
|
| Net (decrease) increase in cash and cash equivalents | (13 | ) | | 8 |
|
| Cash and cash equivalents at beginning of period | 25 |
| | 33 |
|
| Cash and cash equivalents at end of period | $ | 12 |
| | $ | 41 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 47 |
| | $ | 30 |
|
| Transfer of ownership interest of certain equity method investees to parent | 149 |
| | — |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 and 2021 |
| Common | | | | Retained | | | | | | Total |
| (in millions) | Stock | | | | Earnings | | | | | | Equity |
| Balance at June 30, 2020 | $ | 1,310 | | | | | $ | 1,312 | | | | | | | $ | 2,622 | |
| Net loss | — | | | | | (25) | | | | | | | (25) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Balance at September 30, 2020 | $ | 1,310 | | | | | $ | 1,287 | | | | | | | $ | 2,597 | |
| | | | | | | | | | | |
| Balance at June 30, 2021 | $ | 1,635 | | | | | $ | 1,604 | | | | | | | $ | 3,239 | |
| Net loss | — | | | | | (24) | | | | | | | (24) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other | — | | | | | (1) | | | | | | | (1) | |
| | | | | | | | | | | |
| Balance at September 30, 2021 | $ | 1,635 | | | | | $ | 1,579 | | | | | | | $ | 3,214 | |
| | | | | | | | | | | |
| Nine Months Ended September 30, 2020 and 2021 |
| Common | | | | Retained | | | | | | Total |
| (in millions) | Stock | | | | Earnings | | | | | | Equity |
| Balance at December 31, 2019 | $ | 1,310 | | | | | $ | 1,133 | | | | | | | $ | 2,443 | |
| Net income | — | | | | | 155 | | | | | | | 155 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Other | — | | | | | (1) | | | | | | | (1) | |
| Balance at September 30, 2020 | $ | 1,310 | | | | | $ | 1,287 | | | | | | | $ | 2,597 | |
| | | | | | | | | | | |
| Balance at December 31, 2020 | $ | 1,310 | | | | | $ | 1,405 | | | | | | | $ | 2,715 | |
| Net income | — | | | | | 175 | | | | | | | 175 | |
| | | | | | | | | | | |
| Contribution from parent | 325 | | | | | — | | | | | | | 325 | |
| | | | | | | | | | | |
| Other | — | | | | | (1) | | | | | | | (1) | |
| Balance at September 30, 2021 | $ | 1,635 | | | | | $ | 1,579 | | | | | | | $ | 3,214 | |
|
| | | | | | | | | | | | | | | |
| | | | | | Accumulated | | |
| | | | | | Other | | |
| | | | | | Comprehensive | | |
| | | | | | Income | | |
| | | | | | Net Loss on |
| | |
| | | | | | Hedging Activities |
| | |
| | Common |
| | Retained |
| | of Unconsolidated |
| | Total |
|
| (in millions) | Stock |
| | Earnings |
| | Affiliates |
| | Equity |
|
| Balance at December 31, 2015 | $ | 728 |
| | $ | 731 |
| | $ | (1 | ) | | $ | 1,458 |
|
| Net income | — |
| | 94 |
| | — |
| | 94 |
|
| Other comprehensive income | — |
| | — |
| | 1 |
| | 1 |
|
| Common stock issuances, including dividend reinvestments and employee benefits | 121 |
| | — |
| | — |
| | 121 |
|
| Common stock dividends | — |
| | (87 | ) | | — |
| | (87 | ) |
| Balance at September 30, 2016 | $ | 849 |
| | $ | 738 |
| | $ | — |
| | $ | 1,587 |
|
| | | | | | | | |
| Balance at December 31, 2016 | $ | 860 |
| | $ | 812 |
| | $ | — |
| | $ | 1,672 |
|
| Net income | — |
| | 76 |
| | — |
| | 76 |
|
| Transfer of ownership interest of certain equity method investees to parent | — |
| | (149 | ) | | — |
| | (149 | ) |
| Balance at September 30, 2017 | $ | 860 |
| | $ | 739 |
| | $ | — |
| | $ | 1,599 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
CombinedSee Notes to Condensed Consolidated Financial Statements– (Unaudited)
42
| | | | | |
| FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
Index to Combined Notes to Condensed Consolidated Financial Statements
The unaudited notes to the condensed consolidated financial statementsCondensed Consolidated Financial Statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Applicable Notes |
| Registrant | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 13 | | 14 | | 15 | | 16 | | 17 | | 18 |
| Duke Energy Corporation | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • |
| Duke Energy Carolinas, LLC | • | | | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Progress Energy, Inc. | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Progress, LLC | • | | | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Florida, LLC | • | | | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Ohio, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | | | | | • | | • | | • |
| Duke Energy Indiana, LLC | • | | | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Piedmont Natural Gas Company, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Applicable Notes |
| Registrant | 1 | | 2 | | 3 | | 4 | | | | 5 | | | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 13 | | 14 | | 15 | | 16 |
| Duke Energy | • | | • | | • | | • | | | | • | | | | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • |
| Duke Energy Carolinas | • | | • | | • | | • | | | | • | | | | | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Progress Energy | • | | • | | • | | • | | | | • | | | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Duke Energy Progress | • | | • | | • | | • | | | | • | | | | | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Duke Energy Florida | • | | • | | • | | • | | | | • | | | | | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Duke Energy Ohio | • | | • | | • | | • | | | | • | | | | • | | • | | • | | | | • | | • | | • | | | | • | | • | | • |
| Duke Energy Indiana | • | | • | | • | | • | | | | • | | | | | | • | | • | | • | | • | | • | | • | | | | • | | • | | • |
| Piedmont | • | | • | | • | | • | | | | • | | | | • | | • | | • | | | | • | | | | • | | | | • | | • | | • |
Tables within the notes may not sum across due to (i) Progress Energy's consolidation of Duke Energy Progress, Duke Energy Florida and other subsidiaries that are not registrants and (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances and (iii) the Piedmont registrant not included in the consolidated Duke Energy results for the three and nine months ended September 30, 2016, as Piedmont results were not consolidated by Duke Energy until after the acquisition date of October 3, 2016.balances.
1. ORGANIZATION AND BASIS OF PRESENTATION
NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION
Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the Federal Energy Regulatory Commission (FERC). Duke Energy operates in the United States (U.S.) primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas, LLC (Duke Energy Carolinas); Progress Energy, Inc. (Progress Energy); Duke Energy Progress, LLC (Duke Energy Progress); Duke Energy Florida, LLC (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont). When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its separate subsidiary registrants (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
On October 3, 2016, Duke Energy completed the acquisition of Piedmont. Piedmont's results of operations and cash flows are included in the accompanying condensed consolidated financial statements of Duke Energy for the three and nine months ended September 30, 2017, but not for the three and nine months ended September 30, 2016, as Piedmont's earnings and cash flows are only included in Duke Energy's consolidated results subsequent to the acquisition date. See Note 2 for additional information regarding the acquisition.
In December 2016, Duke Energy completed an exit of the Latin American market to focus on its domestic regulated business, which was further bolstered by the acquisition of Piedmont. The sale of the International Energy business segment, excluding an equity method investment in National Methanol Company (NMC), was completed through two transactions including a sale of assets in Brazil to China Three Gorges (Luxembourg) Energy S.à.r.l. (China Three Gorges) and a sale of Duke Energy's remaining Latin American assets in Peru, Chile, Ecuador, Guatemala, El Salvador and Argentina to ISQ Enerlam Aggregator, L.P. and Enerlam (UK) Holding Ltd. (I Squared Capital) (collectively, the International Disposal Group). See Note 2 for additional information on the sale of International Energy.
The results of operations of the International Disposal Group have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these Condensed Consolidated Financial Statements exclude amounts related to discontinued operations. See Note 2 for additional information.
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries where the respective Duke Energy Registrants have control. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities. Substantially all of the Subsidiary Registrants' operations qualify for regulatory accounting.
Duke Energy Carolinas is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Carolinas is subject to the regulatory provisions of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (PSCSC), U.S. Nuclear Regulatory Commission (NRC) and FERC.
Progress Energy is a public utility holding company headquartered in Raleigh, North Carolina, subject to regulation by FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida.
Duke Energy Progress is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Progress is subject to the regulatory provisions of the NCUC, PSCSC, NRC and FERC.
Duke Energy Florida is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Duke Energy Florida is subject to the regulatory provisions of the Florida Public Service Commission (FPSC), NRC and FERC.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, the generation and sale of electricity in portions of Kentucky and the transportation and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers and recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky). References herein to Duke Energy Ohio collectively include Duke Energy Ohio and its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject to the regulatory provisions of the Public Utilities Commission of Ohio (PUCO), Kentucky Public Service Commission (KPSC) and FERC.
Duke Energy Indiana is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the Indiana Utility Regulatory Commission (IURC) and FERC.
Piedmont is a regulated public utility primarily engaged in the distribution of natural gas in portions of North Carolina, South Carolina and Tennessee. Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, Tennessee Public Utility Commission (formerly the Tennessee Regulatory Authority) (TPUC) and FERC.
BASIS OF PRESENTATION
These Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S.GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these Condensed Consolidated Financial Statements do not include all information and notes required by GAAP in the U.S. for annual financial statements. Since the interim Condensed Consolidated Financial Statements and Notes do not include all information and notes required by GAAP in the U.S. for annual financial statements the Condensed Consolidated Financial Statements and other information included in this quarterly report should be read in conjunction with the Consolidated Financial Statements and Notes in the Duke Energy Registrants’ combined Annual Report on Form 10-K for the year ended December 31, 2016, and the Consolidated Financial Statements and Notes in the Piedmont Annual Report on Form 10‑K for the year ended October 31, 2016.
Effective November 1, 2016, Piedmont's fiscal year-end was changed from October 31 to December 31, the year-end of Duke Energy. A transition report was filed on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016, to December 31, 2016.2020.
The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Condensed Consolidated Financial Statements. However, none of the registrants make any representations as to information related solely to Duke Energy or the subsidiaries of Duke Energy other than itself.
These Condensed Consolidated Financial Statements, in the opinion of the respective companies’ management, reflect all normal recurring adjustments necessary to fairly present the financial position and results of operations of each of the Duke Energy Registrants. Amounts reported in Duke Energy’s interim Condensed Consolidated Statements of Operations and each of the Subsidiary Registrants’ interim Condensed Consolidated Statements of Operations and Comprehensive Income are not necessarily indicative of amounts expected for the respective annual periods due to effects of seasonal temperature variations on energy consumption, regulatory rulings, timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices and other factors.
In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Certain prior year amountsBASIS OF CONSOLIDATION
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries or VIEs where the respective Duke Energy Registrants have been reclassifiedcontrol. See Note 11 for additional information on VIEs. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities.
OTHER CURRENT LIABILITIES
Included in Other within Current Liabilities on the Duke Energy Condensed Consolidated Balance Sheet is a current liability of $36 million and $936 million as of September 30, 2021, and December 31, 2020, respectively. The current liability, initially recorded in 2020, primarily represented Duke Energy's share of ACP's obligations of outstanding debt and to conformsatisfy ARO requirements to restore construction sites. See Notes 3 and 11 for further information.
NONCONTROLLING INTEREST
Duke Energy maintains a controlling financial interest in certain less than wholly owned nonregulated subsidiaries. As a result, Duke Energy consolidates these subsidiaries and presents the current year presentation.
UNBILLED REVENUE
Revenues on salesthird-party investors' portion of electricityDuke Energy's net income (loss), net assets and natural gas are recognized when servicecomprehensive income (loss) as noncontrolling interest. Noncontrolling interest is provided or the product is delivered. Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy and natural gas delivered but not yet billed. Unbilled revenues can vary significantly from period to periodincluded as a resultcomponent of seasonality, weather, customer usage patterns, customer mix, average price in effect for customer classes, timing of rendering customer bills, meter reading schedules, and the impact of weather normalization or margin decoupling mechanisms.
Unbilled revenues are included within Receivables and Receivables of variable interest entities (VIEs)equity on the Condensed Consolidated Balance Sheets as shownSheet.
Several operating agreements of Duke Energy's subsidiaries with noncontrolling interest are subject to allocations of earnings, tax attributes and cash flows in accordance with contractual agreements that vary throughout the lives of the subsidiaries. Therefore, Duke Energy and the other investors' (the owners) interests in the following table.subsidiaries are not fixed, and the subsidiaries apply the Hypothetical Liquidation at Book Value (HLBV) method in allocating income or loss and other comprehensive income or loss (all measured on a pretax basis) to the owners. The HLBV method measures the amounts that each owner would hypothetically claim at each balance sheet reporting date, including tax benefits realized by the owners over the IRS recapture period, upon a hypothetical liquidation of the subsidiary at the net book value of its underlying assets. The change in the amount that each owner would hypothetically receive at the reporting date compared to the amount it would have received on the previous reporting date represents the amount of income or loss allocated to each owner for the reporting period.
| | | | | |
| FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
|
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| Duke Energy | $ | 771 |
| | $ | 831 |
|
| Duke Energy Carolinas | 307 |
| | 313 |
|
| Progress Energy | 216 |
| | 161 |
|
| Duke Energy Progress | 113 |
| | 102 |
|
| Duke Energy Florida | 103 |
| | 59 |
|
| Duke Energy Ohio | 2 |
| | 2 |
|
| Duke Energy Indiana | 29 |
| | 32 |
|
| Piedmont | 4 |
| | 77 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Additionally,During September 2021, Duke Energy Ohio andcompleted the initial minority interest investment in a portion of Duke Energy Indiana sell nearly all of their retail accounts receivable to an affiliate Cinergy Receivables Company, LLC (CRC), onof GIC. GIC's ownership interest in Duke Energy Indiana represents a revolving basis. These transfers of receivables are accountednoncontrolling interest. See Note 2 for as sales and include receivables for unbilled revenues. Accordingly, the receivables sold are not reflectedadditional information on the Condensed Consolidated Balance Sheetssale.
Other operating agreements of Duke Energy OhioEnergy's subsidiaries with noncontrolling interest allocate profit and loss based on their pro rata shares of the ownership interest in the respective subsidiary. Therefore, Duke Energy Indiana. See Note 13 for further information. These receivables for unbilled revenues are shown inallocates net income or loss and other comprehensive income or loss of these subsidiaries to the table below.owners based on their pro rata shares. |
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| Duke Energy Ohio | $ | 70 |
| | $ | 97 |
|
| Duke Energy Indiana | 119 |
| | 123 |
|
AMOUNTS ATTRIBUTABLE TO CONTROLLING INTERESTS
For the three and nine months ended September 30, 2017, the Loss from Discontinued Operations, net of tax on Duke Energy's Condensed Consolidated Statements of Operations is entirely attributable to controlling interests. The following table presents Net Income Attributableallocated losses to Duke Energy Corporation for continuing operations and discontinued operationsnoncontrolling interest for the three and nine months ended September 30, 2016.2021, and 2020. |
| | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| (in millions) | September 30, 2016 | | September 30, 2016 |
| Income from Continuing Operations | $ | 1,001 |
| | $ | 2,202 |
|
| Income from Continuing Operations Attributable to Noncontrolling Interests | 2 |
| | 5 |
|
| Income from Continuing Operations Attributable to Duke Energy Corporation | $ | 999 |
| | $ | 2,197 |
|
| Income from Discontinued Operations, net of tax | $ | 180 |
| | $ | 190 |
|
| Income from Discontinued Operations Attributable to Noncontrolling Interests, net of tax | 3 |
| | 8 |
|
| Income from Discontinued Operations Attributable to Duke Energy Corporation, net of tax | $ | 177 |
| | $ | 182 |
|
| Net Income | $ | 1,181 |
| | $ | 2,392 |
|
| Net Income Attributable to Noncontrolling Interests | 5 |
| | 13 |
|
| Net Income Attributable to Duke Energy Corporation | $ | 1,176 |
| | $ | 2,379 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Noncontrolling Interest Allocation of Income | | | | | | | |
| Allocated losses to noncontrolling tax equity members utilizing the HLBV method | $ | 119 | | | $ | 59 | | | $ | 217 | | | $ | 187 | |
| Allocated losses to noncontrolling members based on pro rata shares of ownership | 10 | | | 11 | | | 30 | | | 21 | |
| Total Noncontrolling Interest Allocated Losses | $ | 129 | | | $ | 70 | | | $ | 247 | | | $ | 208 | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Duke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. See Notes 9 and 11 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. The following table presents the components of cash, cash equivalents and restricted cash included in the Condensed Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| | | Duke | | | | Duke |
| Duke | Progress | Energy | | Duke | Progress | Energy |
| Energy | Energy | Florida | | Energy | Energy | Florida |
| Current Assets | | | | | | | |
| Cash and cash equivalents | $ | 548 | | $ | 102 | | $ | 40 | | | $ | 259 | | $ | 59 | | $ | 11 | |
| Other | 194 | | 17 | | 17 | | | 194 | | 39 | | 39 | |
| Other Noncurrent Assets | | | | | | | |
| Other | 1 | | — | | — | | | 103 | | 102 | | — | |
| Total cash, cash equivalents and restricted cash | $ | 743 | | $ | 119 | | $ | 57 | | | $ | 556 | | $ | 200 | | $ | 50 | |
| | | | | | | |
INVENTORY
Inventory is used for operations and is recorded primarily using the average cost method. Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Materials and supplies are recorded as inventory when purchased and subsequently charged to expense or capitalized to property, plant and equipment when installed. Inventory, including excess or obsolete inventory, is written-down to the lower of cost or market value. Once inventory has been written-down, it creates a new cost basis for the inventory that is not subsequently written-up. Provisions for inventory write-offs were not material at September 30, 2017,2021, and December 31, 2016.2020. The components of inventory are presented in the tables below. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Materials and supplies | $ | 2,335 |
| | $ | 767 |
| | $ | 1,132 |
| | $ | 780 |
| | $ | 351 |
| | $ | 83 |
| | $ | 312 |
| | $ | 2 |
|
| Coal | 581 |
| | 197 |
| | 231 |
| | 130 |
| | 101 |
| | 17 |
| | 136 |
| | — |
|
| Natural gas, oil and other fuel | 349 |
| | 36 |
| | 221 |
| | 108 |
| | 114 |
| | 39 |
| | 2 |
| | 51 |
|
| Total inventory | $ | 3,265 |
| | $ | 1,000 |
| | $ | 1,584 |
| | $ | 1,018 |
| | $ | 566 |
| | $ | 139 |
| | $ | 450 |
| | $ | 53 |
|
| | | | December 31, 2016 | | September 30, 2021 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke | | Duke | | Duke | | Duke | | Duke | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Materials and supplies | $ | 2,374 |
| | $ | 767 |
| | $ | 1,167 |
| | $ | 813 |
| | $ | 354 |
| | $ | 84 |
| | $ | 312 |
| | $ | 1 |
| Materials and supplies | $ | 2,317 | | | $ | 779 | | | $ | 1,009 | | | $ | 674 | | | $ | 336 | | | $ | 85 | | | $ | 305 | | | $ | 11 | |
| Coal | 774 |
| | 251 |
| | 314 |
| | 148 |
| | 166 |
| | 19 |
| | 190 |
| | — |
| Coal | 312 | | | 152 | | | 89 | | | 45 | | | 43 | | | 10 | | | 61 | | | — | |
| Natural gas, oil and other fuel | 374 |
| | 37 |
| | 236 |
| | 115 |
| | 121 |
| | 34 |
| | 2 |
| | 65 |
| Natural gas, oil and other fuel | 271 | | | 38 | | | 157 | | | 96 | | | 60 | | | 19 | | | 1 | | | 57 | |
| Total inventory | $ | 3,522 |
| | $ | 1,055 |
| | $ | 1,717 |
| | $ | 1,076 |
| | $ | 641 |
| | $ | 137 |
| | $ | 504 |
| | $ | 66 |
| Total inventory | $ | 2,900 | | | $ | 969 | | | $ | 1,255 | | | $ | 815 | | | $ | 439 | | | $ | 114 | | | $ | 367 | | | $ | 68 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Materials and supplies | $ | 2,312 | | | $ | 785 | | | $ | 999 | | | $ | 673 | | | $ | 325 | | | $ | 78 | | | $ | 307 | | | $ | 12 | |
| Coal | 561 | | | 186 | | | 193 | | | 131 | | | 63 | | | 16 | | | 165 | | | — | |
| Natural gas, oil and other fuel | 294 | | | 39 | | | 183 | | | 107 | | | 76 | | | 16 | | | 1 | | | 56 | |
| Total inventory | $ | 3,167 | | | $ | 1,010 | | | $ | 1,375 | | | $ | 911 | | | $ | 464 | | | $ | 110 | | | $ | 473 | | | $ | 68 | |
| | | | | |
| FINANCIAL STATEMENTS | ORGANIZATION AND BASIS OF PRESENTATION |
EXCISE TAXESPROPERTY, PLANT & EQUIPMENT AND LEASES
Certain excise taxes levied by state or local governmentsDuke Energy continues to execute on its business transformation strategy, including the evaluation of in-office work policies considering the experience with the COVID-19 pandemic and also workforce realignment of roles and responsibilities. In May 2021, Duke Energy management approved the sale of certain properties and entered into an agreement to exit certain leased space on December 31, 2021. The sale of the properties is subject to abandonment accounting and resulted in an impairment charge. Additionally, the exit of the leased space resulted in the impairment of related furniture, fixtures and equipment. The total 2021 charges related to the reduction in physical workspace, including these impairments, are requiredexpected to be paid even if not collected fromapproximately $200 million. During the customer. These taxes are recognized onthree months ended September 30, 2021, Duke Energy recorded a gross basis. Otherwise, excise taxes are accounted for on a net basis.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notespretax charge to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Excise taxes accounted for on a gross basis as both operating revenues and property and other taxesearnings of $9 million on the Condensed Consolidated Statements of Operations, were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Duke Energy | $ | 107 |
|
| $ | 107 |
|
| $ | 289 |
|
| $ | 285 |
|
| Duke Energy Carolinas | 9 |
| | 6 |
| | 27 |
| | 21 |
|
| Progress Energy | 67 |
| | 65 |
| | 168 |
| | 161 |
|
| Duke Energy Progress | 5 |
| | 4 |
| | 14 |
| | 13 |
|
| Duke Energy Florida | 62 |
| | 61 |
| | 154 |
| | 148 |
|
| Duke Energy Ohio | 24 |
| | 26 |
| | 75 |
| | 77 |
|
| Duke Energy Indiana | 6 |
| | 10 |
| | 16 |
| | 26 |
|
| Piedmont | 1 |
| | 1 |
| | 3 |
| | 2 |
|
NEW ACCOUNTING STANDARDS
The new accounting standards adopted for 2017which includes $8 million within Impairment of assets and 2016 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. While immaterial, adoption of the following accounting standards had the most significant impact on the Duke Energy results of operations, cash flowsother charges and financial position for$1 million within Operations, maintenance and other. During the nine months ended September 30, 2017.
Stock-Based Compensation and Income Taxes. In first quarter 2017,2021, Duke Energy adopted Financial Accounting Standards Board (FASB) guidance, which revised the accounting for stock-based compensation and the associated income taxes. The adopted guidance changes certain aspectsrecorded a pretax charge to earnings of accounting for stock-based payment awards to employees including the accounting for income taxes and classification$184 million on the Condensed Consolidated Statements of Cash Flows. The primary impact to Duke Energy as a resultOperations, which includes $139 million within Impairment of implementing this guidance was a cumulative-effect adjustment to retained earnings for tax benefits not previously recognizedassets and additional income tax expense for the nine months ended September 30, 2017. See the Duke Energy Condensed Consolidated Statements of Changes in Equity for further information.other charges, $28 million within Operations, maintenance and other and $17 million within Depreciation and amortization.
Goodwill Impairment. In January 2017, the FASB issued revised guidance for the subsequent measurement of goodwill. Under the guidance, a company will recognize an impairment to goodwill for the amount by which a reporting unit's carrying value exceeds the reporting unit's fair value, not to exceed the amount of goodwill allocated to that reporting unit. Duke Energy early adopted this guidance for the 2017 annual goodwill impairment test.NEW ACCOUNTING STANDARDS
The following new accounting standard was adopted by the Duke Energy Registrants in 2021.
Leases with Variable Lease Payments. In July 2021, the Financial Accounting Standards Updates (ASUs)Board (FASB) issued new accounting guidance requiring lessors to classify a lease with variable lease payments that do not depend on a reference index or rate as an operating lease if both of the following are met: (1) the lease would have been issued, butto be classified as a sales-type or direct financing lease under prior guidance, and (2) the lessor would have not yet been adopted byrecognized a day-one loss. Duke Energy as of September 30, 2017.
Retirement Benefits. In March 2017,elected to adopt the FASB issued revised accounting guidance for the presentation of net periodic costs related to benefit plans. Current GAAP permits the aggregation of all the components of net periodic costs on the income statement and does not require the disclosure of the location of net periodic costs on the Condensed Consolidated Statement of Operations. Under the amended guidance, the service cost component of net periodic costs must be included within Operating income within the same line as other compensation expenses. All other components of net periodic costs must be outside of Operating income. In addition, the updated guidance permits only the service cost component of net periodic costs to be capitalized to Inventory or Property, Plant and Equipment. This represents a change from current GAAP, which permits all components of net periodic costs to be capitalized. These amendments should be applied retrospectively for the presentation of the various components of net periodic costs and prospectively for the change in eligible costs to be capitalized. The guidance allows for a practical expedient that permits a company to use amounts disclosed in prior-period financial statements as the estimation basis for applying the retrospective presentation requirements.
For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2018. Duke Energy currently presents the total non-capitalized net periodic costs within Operation, maintenance and other on the Condensed Consolidated Statement of Operations. The adoption of this guidance will result in a retrospective change to reclassify the presentation of the non-service cost (benefit) components of net periodic costs to Other income and expenses. Duke Energy intends to utilize the practical expedient for retrospective presentation. The change in net periodic costs eligible for capitalization is applicable prospectively. Since Duke Energy’s service cost component is expected to be greater than the total net periodic costs, the change will result in increased capitalization of net periodic costs, higher Operation, maintenance and other and higher Other income and expenses. The resulting impact to Duke Energy is expected to be an immaterial increase in net income resulting from the limitation of eligible capitalization of net periodic costs to the service cost component, which is larger than the total net periodic costs.
Revenue from Contracts with Customers. In May 2014, the FASB issued revised accounting guidance for revenue recognition from contracts with customers. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy has identified material revenue streams, which served as the basis for accounting analysis and documentation of the impact of this guidance on revenue recognition. The accounting analysis included reviewing representative contracts and tariffs for each material revenue stream. Most of Duke Energy’s revenue is expected to be in scopeimmediately upon issuance of the new guidance. The majority of our sales, including energy provided to residential customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term ("at-will"). For such arrangements, Duke Energy expects that the revenue from contracts with customersstandard and will be equivalentapplying the new standard prospectively to new lease arrangements meeting the electricity or natural gas supplied and billed in that period (including estimated billings). As such,criteria. Duke Energy does not expectcurrently have any lease arrangements that therethis new accounting guidance will be a significant shift inmaterially impact.
The following accounting standard was adopted by the timing or pattern of revenue recognition for such sales.
Also included in the accounting analysis was the evaluation of certain long-term revenue streams including electric wholesale contracts and renewables power purchase agreements (PPAs) under this guidance. For such arrangements, Duke Energy does not expect material changes toRegistrants in 2020.
Current Expected Credit Losses. In June 2016, the pattern of revenue recognition on the registrants. In addition, the power and utilities industry revenue recognition task force released several draft positions on specific industry issues in October 2017FASB issued new accounting guidance for public comment.credit losses. Duke Energy has been working closely withadopted the industry task force and will be reviewing these updated positions to evaluate the impact, if any, on Duke Energy’s specific contracts and preliminary conclusions to date. The evaluation of other revenue streams is ongoing along with consideration of potential revisions to processes, policies and controls, primarily related to evaluating supplemental disclosures required as a result of adopting this guidance. Some revenue arrangements, such as alternative revenue programs and certain PPAs accountednew accounting guidance for as leases, are excluded from the scope of this guidance and, therefore, will be accounted for and evaluated for separate presentation and disclosure under other relevant accounting guidance.
Duke Energy continues to evaluate what information would be most useful for users of the financial statements, including information already provided in disclosures outside of the financial statement footnotes. These additional disclosures could include the disaggregation of revenues by geographic location, type of service, customer class or by duration of contract ("at-will" versus contracted revenue).
Duke Energy intends to usecredit losses effective January 1, 2020, using the modified retrospective method of adoption, effective January 1, 2018. Under the modified retrospective methodwhich does not require restatement of adoption, prior year reported results are not restated and a cumulative-effect adjustment, if applicable, is recorded to retained earnings at January 1, 2018, as if the standard had always been in effect. In addition, disclosures, if applicable, include a comparison to what would have been reported for 2018 under the previous revenue recognition rules to assist financial statement users in understanding how revenue recognition has changed as a result of this standard and to facilitate comparability with prior year reported results, which are not restated under the modified retrospective approach as described above.results. Duke Energy also plans to utilize certaindid not adopt any practical expedients including applying this guidance to open contracts at the dateexpedients.
Duke Energy recognizes allowances for credit losses based on management's estimate of adoption and recognizing revenues for certain contracts under the invoice practical expedient, which allows revenue recognitionlosses expected to be consistent with invoicedincurred over the lives of certain assets or guarantees. Management monitors credit quality, changes in expected credit losses and the appropriateness of the allowance for credit losses on a forward-looking basis. Management reviews the risk of loss periodically as part of the existing assessment of collectability of receivables.
Duke Energy reviews the credit quality of its counterparties as part of its regular risk management process and requires credit enhancements, such as deposits or letters of credit, as appropriate and as allowed by regulators.
Duke Energy recorded cumulative effects of changes in accounting principles related to the adoption of the new credit loss standard for allowances for credit losses of trade and other receivables, insurance receivables and financial guarantees. These amounts (including estimated billings) provided certain criteria are met, including considerationincluded in the Condensed Consolidated Balance Sheets in Receivables, Receivables of whetherVIEs, Other Noncurrent Assets and Other Noncurrent Liabilities. See Notes 4 and 12 for more information.
Duke Energy recorded an adjustment for the invoiced amounts reasonably represent the value providedcumulative effect of a change in accounting principle due to customers. While the adoption of this standard on January 1, 2020, as shown in the table below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | January 1, 2020 |
| | | Duke | | | | Duke | | Duke | | | | | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | | | | | |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | | | | | Piedmont |
| Total pretax impact to Retained Earnings | $ | 120 | | | $ | 16 | | | $ | 2 | | | $ | 1 | | | $ | 1 | | | | | | | $ | 1 | |
The following new accounting standard has been issued but not yet adopted by the Duke Energy Registrants as of September 30, 2021.
Reference Rate Reform. In March 2020, the FASB issued new accounting guidance for reference rate reform. This guidance is elective and provides expedients to facilitate financial reporting for the anticipated transition away from the London Inter-bank Offered Rate (LIBOR) and other interbank reference rates by the end of 2022. The optional expedients are effective for modification of existing contracts or new arrangements executed between March 12, 2020, through December 31, 2022.
Duke Energy has variable-rate debt and manages interest rate risk by entering into financial contracts including interest rate swaps that are generally indexed to LIBOR. Impacted financial arrangements extending beyond 2022 may require contractual amendment or termination to fully adapt to a post-LIBOR environment. Duke Energy is assessing these financial arrangements and is evaluating the cumulative-effect adjustment,use of optional expedients outlined in the new accounting guidance. Alternative index provisions are also being assessed and incorporated into new financial arrangements that extend beyond 2022. The full outcome of the transition away from LIBOR cannot be determined at this time, but is not expected to have a material impact on either the timing or amount of revenues recognized in Duke Energy's financial statements, Duke Energy anticipates additional disclosures around the nature, amount, timing and uncertainty of our revenues and cash flows arising from contracts with customers and will continue to evaluate the requirements, as well as any additional clarifying guidance that may be issued.
Leases. In February 2016, the FASB issued revised accounting guidance for leases. The core principle of this guidance is that a lessee should recognize the assets and liabilities that arise from leases on the balance sheet.
For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2019, although it can be early adopted. The guidance is applied using a modified retrospective approach. Duke Energy is currently evaluating the financial statement impact of adopting this standard and is continuing to monitor industry implementation issues, including easements, pole attachments and renewable PPAs. Other than an expected increase in assets and liabilities, the ultimate impact of the new standard has not yet been determined. Significant system enhancements, including additional processes and controls, may be required to facilitate the identification, tracking and reporting of potential leases based upon requirements of the new lease standard.
Statement of Cash Flows. In November 2016, the FASB issued revised accounting guidance to reduce diversity in practice for the presentation and classification of restricted cash on the statement of cash flows. Under the updated guidance, restricted cash and restricted cash equivalents will be included within beginning-of-period and end-of-period cash and cash equivalents on the statement of cash flows.
For Duke Energy, this guidance is effective for the interim and annual periods beginning January 1, 2018. The guidance will be applied using a retrospective transition method to each period presented. Upon adoption by Duke Energy, the revised guidance will result in a change to the amount of cash and cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Prior to adoption, the Duke Energy Registrants reflect changes in non-current restricted cash within Cash Flows from Investing Activities and changes in current restricted cash within Cash Flows from Operating Activities on the Condensed Consolidated Statement of Cash Flows.
Financial Instruments Classification and Measurement. In January 2016, the FASB issued revised accounting guidance for the classification and measurement of financial instruments. Changes in the fair value of all equity securities will be required to be recorded in net income. Current GAAP allows some changes in fair value for available-for-sale equity securities to be recorded in Accumulated other comprehensive income (AOCI). Additional disclosures will be required to present separately the financial assets and financial liabilities by measurement category and form of financial asset. An entity's equity investments that are accounted for under the equity method of accounting are not included within the scope of the new guidance.
For Duke Energy, the revised accounting guidance is effective for interim and annual periods beginning January 1, 2018, by recording a cumulative-effect adjustment to retained earnings as of January 1, 2018. This guidance is expected to have minimal impact on the Duke Energy Registrant's Condensed Consolidated Statements of Operations and Comprehensive Income as changes in the fair value of most of the Duke Energy Registrants' available-for-sale equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidance for regulated operations.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
The Duke Energy Registrants consolidate assets and liabilities from acquisitions as of the purchase date and include earnings from acquisitions in consolidated earnings after the purchase date.
2016 Acquisition of Piedmont Natural Gas
On October 3, 2016, Duke Energy acquired all outstanding common stock of Piedmont for a total cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $2.0 billion at the time of the acquisition. The acquisition provides a foundation for Duke Energy to establish a broader, long-term strategic natural gas infrastructure platform to complement its existing natural gas pipeline investments and regulated natural gas business in the Midwest. In connection with the closing of the acquisition, Piedmont became a wholly owned subsidiary of Duke Energy.
Purchase Price Allocation
The purchase price allocation of the Piedmont acquisition is as follows: |
| | | |
| (in millions) | |
| Current assets | $ | 497 |
|
| Property, plant and equipment, net | 4,714 |
|
| Goodwill | 3,353 |
|
| Other long-term assets | 804 |
|
| Total assets | 9,368 |
|
| Current liabilities, including current maturities of long-term debt | 576 |
|
| Long-term liabilities | 1,790 |
|
| Long-term debt | 2,002 |
|
| Total liabilities | 4,368 |
|
| Total purchase price | $ | 5,000 |
|
The fair value of Piedmont's assets and liabilities was determined based on significant estimates and assumptions that are judgmental in nature, including the amount and timing of projected future cash flows, discount rates reflecting risk inherent in the future cash flows and market prices of long-term debt.
The majority of Piedmont’s operations are subject to the rate-setting authority of the NCUC, the PSCSC and the TPUC and are accounted for pursuant to accounting guidance for regulated operations. The rate-setting and cost recovery provisions currently in place for Piedmont’s regulated operations provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. Thus, the fair value of Piedmont's assets and liabilities subject to these rate-setting provisions approximates the pre-acquisition carrying value and does not reflect any net valuation adjustments.
The significant assets and liabilities for which valuation adjustments were reflected within the purchase price allocation include the acquired equity method investments and long-term debt. The difference between the fair value and the pre-acquisition carrying value of long-term debt for regulated operations was recorded as a regulatory asset.
The excess of the purchase price over the fair value of Piedmont's assets and liabilities on the acquisition date was recorded as goodwill. The goodwill reflects the value paid by Duke Energy primarily for establishing a broader, long-term strategic natural gas infrastructure growth platform, an improved risk profile and expected synergies resulting from the combined entities.
Under Securities and Exchange Commission (SEC) regulations, Duke Energy elected not to apply push down accounting to the stand-alone Piedmont financial statements.
Other Acquisition-Related Matters
Duke Energy recorded realized losses on forward-starting interest rate swaps related to the acquisition financing of $22 million and $190 million for the three and nine months ended September 30, 2016, respectively. See Note 10 for additional information.
During the nine months ended September 30, 2017, Piedmont recorded a $7 million software impairment resulting from planned accounting system and process integration.
Pro Forma Financial Information
The following unaudited pro forma financial information reflects the combined results of operations of Duke Energy and Piedmont as if the merger had occurred as of January 1, 2016. The pro forma financial information excludes potential cost savings, intercompany revenues, Piedmont’s earnings from the equity method investment in SouthStar Energy Services, LLC (SouthStar) sold immediately prior to the merger, and after-tax nonrecurring transaction and integration costs incurred by Duke Energy and Piedmont of $41 million and $161 million for the three and nine months ended September 30, 2016, respectively. See Note 3 for additional information on Piedmont's sale of SouthStar.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
This information has been presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations that would have been achieved or the future consolidated results of operations of Duke Energy. |
| | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| (in millions) | September 30, 2016 | | September 30, 2016 |
| Operating Revenues | $ | 6,713 |
| | $ | 17,927 |
|
| Net Income Attributable to Duke Energy Corporation | 1,180 |
| | 2,552 |
|
DISPOSITIONS
2016 Sale of International Energy
In December 2016, Duke Energy sold its International Energy businesses, excluding the equity method investment in NMC (the International Disposal Group), in two separate transactions. Duke Energy sold its Brazilian business to China Three Gorges for approximately $1.2 billion, including the assumption of debt, and its remaining Central and South American businesses to I Squared Capital in a deal also valued at approximately $1.2 billion, including the assumption of debt. The transactions generated cash proceeds of $1.9 billion, excluding transaction costs, which were primarily used to reduce Duke Energy holding company debt.
The following table presents the results of the International Disposal Group, which are included in (Loss) Income from Discontinued Operations, net of tax in Duke Energy's Condensed Consolidated Statements of Operations. Interest expense directly associated with the International Disposal Group was allocated to discontinued operations. No interest from corporate level debt was allocated to discontinued operations. |
| | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| (in millions) | September 30, 2016 | | September 30, 2016 |
| Operating Revenues | $ | 245 |
| | $ | 761 |
|
| Fuel used in electric generation and purchased power | 60 |
| | 177 |
|
| Cost of natural gas | 11 |
| | 34 |
|
| Operation, maintenance and other | 85 |
| | 240 |
|
| Depreciation and amortization | 18 |
| | 62 |
|
| Property and other taxes | 1 |
| | 6 |
|
Impairment charges (a) | — |
| | 194 |
|
| Loss on Sales of Other Assets and Other, net | (3 | ) | | (2 | ) |
| Other Income and Expenses, net | 14 |
| | 35 |
|
| Interest Expense | 19 |
| | 63 |
|
| Income before income taxes | 62 |
| | 18 |
|
Income tax expense (benefit) (b) | 4 |
| | (48 | ) |
| Income from discontinued operations of the International Disposal Group | 58 |
| | 66 |
|
Income from discontinued operations of other businesses(c) | 122 |
| | 124 |
|
| Income from Discontinued Operations, net of tax | $ | 180 |
| | $ | 190 |
|
| |
(a) | In conjunction with the advancements of marketing efforts during 2016, Duke Energy performed recoverability tests of the long-lived asset groups of International Energy. As a result, Duke Energy determined the carrying value of certain assets in Central America was not fully recoverable and recorded a pretax impairment charge of $194 million. The charge represents the excess carrying value over the estimated fair value of the assets, which was based on a Level 3 Fair Value measurement that was primarily determined from the income approach using discounted cash flows but also considered market information obtained in 2016. |
| |
(b) | Includes an income tax benefit of $95 million for the nine months ended September 30, 2016, related to historical undistributed foreign earnings. See Note 17 for additional information. |
| |
(c) | Duke Energy recognized an income tax benefit of $122 million resulting from immaterial out of period deferred tax liability adjustments for the three and nine months ended September 30, 2016. The amount includes $34 million recorded at Duke Energy Ohio. |
Duke Energy has elected not to separately disclose discontinued operations on the Condensed Consolidated Statements of Cash Flows. The following table summarizes Duke Energy's cash flows from discontinued operations related to the International Disposal Group. |
| | | |
| | Nine Months Ended |
| (in millions) | September 30, 2016 |
| Cash flows provided by (used in): | |
| Operating activities | $ | 201 |
|
| Investing activities | (35 | ) |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Other Sale-Related Matters
During 2017, Duke Energy provided certain transition services to China Three Gorges and I Squared Capital. Cash flows related to providing the transition services were not material and as of September 30, 2017, all transition services related to the International Disposal Group ended. Additionally, Duke Energy will reimburse China Three Gorges and I Squared Capital for all tax obligations arising from the period preceding consummation on the transactions, totaling approximately $78 million. Duke Energy has not recorded any other liabilities, contingent liabilities or indemnifications related to the International Disposal Group.
3.2. BUSINESS SEGMENTS
Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business. Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated on the Condensed Consolidated Financial Statements.
Duke Energy
Due to the Piedmont acquisition and the sale of International Energy in the fourth quarter of 2016, Duke Energy's segment structure was realigned to includeincludes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. Prior period information has been recast to conform to the current segment structure. See Note 2 for further information on the Piedmont and International Energy transactions.
| | | | | |
| FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
The Electric Utilities and Infrastructure segment primarily includes Duke Energy's regulated electric utilities in the Carolinas, Florida and the Midwest. On January 28, 2021, Duke Energy executed an agreement providing for an investment by an affiliate of GIC in Duke Energy Indiana in exchange for a 19.9% minority interest issued by Duke Energy Indiana Holdco, LLC, the holding company for Duke Energy Indiana. The regulated electric utilities conduct operations throughtransaction will be completed following 2 closings for an aggregate purchase price of approximately $2 billion. The first closing, which occurred on September 8, 2021, resulted in Duke Energy Indiana Holdco, LLC issuing 11.05% of its membership interests in exchange for approximately $1,025 million or 50% of the Subsidiary Registrants that are substantially all regulatedpurchase price. Duke Energy retained indirect control of these assets, and, accordingly, qualify for regulatory accounting treatment. Electric Utilitiestherefore, no gain or loss was recognized on the Condensed Consolidated Statements of Operations. The difference between the cash consideration received, net of transaction costs of approximately $27 million, and Infrastructure also includes Duke Energy's electric transmission infrastructure investments.the carrying value of the noncontrolling interest is $545 million and was recorded as an increase to equity.
The Gas Utilities and Infrastructure segment includes Piedmont, Duke Energy's natural gas local distribution companies in Ohio and Kentucky and Duke Energy's natural gas storage, and midstream pipeline investments. Gas Utilities and Infrastructure's operations are substantially all regulated and, accordingly, qualify for regulatory accounting treatment.renewable natural gas investments.
The Commercial Renewables segment is primarily comprised of nonregulated utility scaleutility-scale wind and solar generation assets located throughout the U.S. In 2021, Duke Energy continues to monitor recoverability of its renewable merchant plants located in the Electric Reliability Council of Texas West market and in the PJM West market due to fluctuating market pricing and long-term forecasted energy prices. The assets were not impaired as of September 30, 2021, because the carrying value of approximately $206 million continues to approximate the aggregate estimated future undiscounted cash flows. Duke Energy has a 50% ownership interest in these assets. A continued decline in energy market pricing or other factors unfavorably impacting the economics would likely result in a future impairment.
The remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of corporate interest expense on holding company debt, unallocated corporate costs, contributions to the Duke Energy Foundation and the operations of Duke Energy’s wholly owned captive insurance subsidiary,company, Bison, Insurance Company Limited (Bison). Other also includesand Duke Energy's 25 percent interest in NMC, a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. In October 2017, Duke Energy's economic ownership interest in NMC decreased from 25 percent to 17.5 percent. The investment in NMC is accounted for under the equity method of accounting.National Methanol Company.
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets. | | | | Three Months Ended September 30, 2017 | | Three Months Ended September 30, 2021 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | | | Electric | | Gas | | Total | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | | | Utilities and | | Utilities and | | Commercial | | Reportable | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
| (in millions) | Infrastructure | | Infrastructure | | Renewables | | Segments | | Other | | Eliminations | | Total |
| Unaffiliated revenues | $ | 6,122 |
| | $ | 249 |
| | $ | 95 |
| | $ | 6,466 |
| | $ | 16 |
| | $ | — |
| | $ | 6,482 |
| Unaffiliated revenues | $ | 6,560 | | | $ | 266 | | | $ | 117 | | | $ | 6,943 | | | $ | 8 | | | $ | — | | | $ | 6,951 | |
| Intersegment revenues | 7 |
| | 23 |
| | — |
| | 30 |
| | 19 |
| | (49 | ) | | — |
| Intersegment revenues | 9 | | | 23 | | | — | | | 32 | | | 20 | | | (52) | | | — | |
| Total revenues | $ | 6,129 |
| | $ | 272 |
| | $ | 95 |
| | $ | 6,496 |
| | $ | 35 |
| | $ | (49 | ) | | $ | 6,482 |
| Total revenues | $ | 6,569 | | | $ | 289 | | | $ | 117 | | | $ | 6,975 | | | $ | 28 | | | $ | (52) | | | $ | 6,951 | |
Segment income (loss)(a)(b)(c) | $ | 1,020 |
| | $ | 19 |
| | $ | (49 | ) | | $ | 990 |
| | $ | (34 | ) | | $ | — |
| | $ | 956 |
| |
| Add back noncontrolling interests | | | | | | | | | | | | | 1 |
| |
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (2 | ) | |
| Net income | | | | | | | | | | | | | $ | 955 |
| |
Segment income (loss)(a) | | Segment income (loss)(a) | $ | 1,425 | | | $ | (3) | | | $ | 78 | | | $ | 1,500 | | | $ | (134) | | | $ | — | | | $ | 1,366 | |
| Less: Noncontrolling interests | | Less: Noncontrolling interests | | 129 | |
| Add: Preferred stock dividend | | Add: Preferred stock dividend | | 39 | |
| | Net Income | | Net Income | | $ | 1,276 | |
| Segment assets | $ | 118,323 |
| | $ | 11,361 |
| | $ | 4,216 |
| | $ | 133,900 |
| | $ | 2,240 |
| | $ | 185 |
| | $ | 136,325 |
| Segment assets | $ | 141,565 | | | $ | 14,692 | | | $ | 7,037 | | | $ | 163,294 | | | $ | 3,717 | | | $ | (4) | | | $ | 167,007 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 |
| Electric | | Gas | | | | Total | | | | | | |
| Utilities and | | Utilities and | | Commercial | | Reportable | | | | | | |
| (in millions) | Infrastructure | | Infrastructure | | Renewables | | Segments | | Other | | Eliminations | | Total |
| Unaffiliated revenues | $ | 6,371 | | | $ | 217 | | | $ | 126 | | | $ | 6,714 | | | $ | 7 | | | $ | — | | | $ | 6,721 | |
| Intersegment revenues | 8 | | | 24 | | | — | | | 32 | | | 17 | | | (49) | | | — | |
| Total revenues | $ | 6,379 | | | $ | 241 | | | $ | 126 | | | $ | 6,746 | | | $ | 24 | | | $ | (49) | | | $ | 6,721 | |
Segment income (loss)(b) | $ | 1,381 | | | $ | (73) | | | $ | 60 | | | $ | 1,368 | | | $ | (103) | | | $ | — | | | $ | 1,265 | |
| Less: Noncontrolling interests | | | | | | | | | | | | | 70 | |
| Add: Preferred stock dividend | | | | | | | | | | | | | 39 | |
| | | | | | | | | | | | | |
| Net Income | | | | | | | | | | | | | $ | 1,234 | |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
46
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 6,332 |
| | $ | 89 |
| | $ | 139 |
| | $ | 6,560 |
| | $ | 16 |
| | $ | — |
| | $ | 6,576 |
|
| Intersegment revenues | 8 |
| | — |
| | — |
| | 8 |
| | 16 |
| | (24 | ) | | — |
|
| Total revenues | $ | 6,340 |
| | $ | 89 |
| | $ | 139 |
| | $ | 6,568 |
| | $ | 32 |
| | $ | (24 | ) | | $ | 6,576 |
|
Segment income (loss)(a)(c) | $ | 1,189 |
| | $ | 15 |
| | $ | (24 | ) | | $ | 1,180 |
| | $ | (181 | ) | | $ | — |
| | $ | 999 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 2 |
|
Income from discontinued operations, net of tax(d) | | | | | | | | | | | | | 180 |
|
| Net income | | | | | | | | | | | | | $ | 1,181 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 16,211 |
| | $ | 1,175 |
| | $ | 333 |
| | $ | 17,719 |
| | $ | 47 |
| | $ | — |
| | $ | 17,766 |
|
| Intersegment revenues | 23 |
| | 68 |
| | — |
| | 91 |
| | 56 |
| | (147 | ) | | — |
|
| Total revenues | $ | 16,234 |
| | $ | 1,243 |
| | $ | 333 |
| | $ | 17,810 |
| | $ | 103 |
| | $ | (147 | ) | | $ | 17,766 |
|
Segment income (loss)(a)(b)(c) | $ | 2,384 |
| | $ | 179 |
| | $ | 2 |
| | $ | 2,565 |
| | $ | (205 | ) | | $ | — |
| | $ | 2,360 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 5 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (4 | ) |
| Net income | | | | | | | | | | | | | $ | 2,361 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 16,406 |
| | $ | 355 |
| | $ | 365 |
| | $ | 17,126 |
| | $ | 40 |
| | $ | — |
| | $ | 17,166 |
|
| Intersegment revenues | 24 |
| | 3 |
| | — |
| | 27 |
| | 51 |
| | (78 | ) | | — |
|
| Total revenues | $ | 16,430 |
| | $ | 358 |
| | $ | 365 |
| | $ | 17,153 |
| | $ | 91 |
| | $ | (78 | ) | | $ | 17,166 |
|
Segment income (loss)(a)(c) | $ | 2,557 |
| | $ | 63 |
| | $ | 13 |
| | $ | 2,633 |
| | $ | (436 | ) | | $ | — |
| | $ | 2,197 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 5 |
|
Income from discontinued operations, net of tax(d) | | | | | | | | | | | | | 190 |
|
| Net income | | | | | | | | | | | | | $ | 2,392 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Other includes costs to achieve the Piedmont acquisition. See Notes 2 and 10 for additional information.BUSINESS SEGMENTS |
| |
(b) | For the three and nine months ended September 30, 2017, Electric
(a)Gas Utilities and Infrastructure includes an impairment charge related to the Florida settlement agreement. See Note 4 for additional information. |
| |
(c) | Commercial Renewables includes impairment charges related to certain wind projects. See discussion below. |
| |
(d) | For the three and nine months ended September 30, 2016, Income from Discontinued Operations includes an income tax benefit resulting from immaterial out of period deferred tax liability adjustments. See Note 2 for additional information. |
During the three and nine months ended September 30, 2017, Duke Energy recorded a pretax impairment charge of $69Infrastructure includes $3 million, on a wholly owned non-contracted wind project. The impairment was recorded within Impairment charges on Duke Energy’s Condensed Consolidated Statements of Operations. The charge represents the excess carrying value over the estimated fair value of the project, which was based on a Level 3 Fair Value measurement that was determined from the income approach using discounted cash flows. The impairment was primarily due to the non-contracted wind project being located in a market that has experienced declining market pricing during 2017 and declining long-term forecasted energy and capacity prices, driven by low natural gas prices, additional renewable generation placed in service and lack of significant load growth.
During the three and nine months ended September 30, 2016, Duke Energy recorded an other than temporary impairment (OTTI) of certain Commercial Renewables wind project investments accounted for under the equity method. The $71 million pretax impairment was recorded within Equity in earnings (losses) of unconsolidated affiliates on the Condensed Consolidated Statements of Operations, related to gas pipeline investments. See Note 3 for additional information. Other includes $8 million recorded within Impairment of assets and other charges, $1 million within Operations, maintenance and other on the Condensed Consolidated Statements of Operations, related to the workplace and workforce realignment. See Note 1 for additional information. Electric Utilities and Infrastructure includes $160 million recorded within Impairment of assets and other charges, $77 million within Other Income and expenses, $5 million within Operations, maintenance and other, $13 million within Regulated electric operating revenues and $3 million within Interest expense on the Duke Energy'sEnergy Carolinas' Condensed Consolidated Statement of Operations related to the 2018 South Carolina rate cases and the CCR settlement and insurance proceeds distributed in accordance with that agreement; it also includes $42 million recorded within Impairment of assets and other charges, $34 million within Other Income and expenses, $7 million within Operations, maintenance, and other, $15 million within Regulated electric operating revenues and $5 million within Interest expense on the Duke Energy Progress' Condensed Consolidated Statement of Operations. See Notes 3 and 4 for more information.
(b)Electric Utilities and Infrastructure includes $19 million recorded within Impairment charges and $8 million recorded within Operations, maintenance and other on the Duke Energy Carolinas' Condensed Consolidated Statements of Operations related to a partial settlement in the Duke Energy Carolinas' 2019 North Carolina rate case and $8 million recorded within Operations, maintenance and other on Duke Energy Progress' Condensed Consolidated Statements of Operation related to a partial settlement in the Duke Energy Progress' 2019 North Carolina rate case. See Note 3 for more information. Additionally, Electric Utilities and Infrastructure includes $5 million of Impairment charges related to gas pipeline assets recorded on Duke Energy Progress' Condensed Consolidated Statement of Operations. Gas Utilities and Infrastructure includes $78 million recorded within Equity in earnings (losses) of unconsolidated affiliates on the Condensed Consolidated Statements of Operations and $7 million in Impairment charges recorded on the Piedmont Condensed Consolidated Statements of Operations related to gas pipeline investments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Electric | | Gas | | | | Total | | | | | | |
| Utilities and | | Utilities and | | Commercial | | Reportable | | | | | | |
| (in millions) | Infrastructure | | Infrastructure | | Renewables | | Segments | | Other | | Eliminations | | Total |
| Unaffiliated revenues | $ | 17,161 | | | $ | 1,323 | | | $ | 355 | | | $ | 18,839 | | | $ | 20 | | | $ | — | | | $ | 18,859 | |
| Intersegment revenues | 24 | | | 68 | | | — | | | 92 | | | 61 | | | (153) | | | — | |
| Total revenues | $ | 17,185 | | | $ | 1,391 | | | $ | 355 | | | $ | 18,931 | | | $ | 81 | | | $ | (153) | | | $ | 18,859 | |
Segment income (loss)(a) | $ | 3,180 | | | $ | 259 | | | $ | 152 | | | $ | 3,591 | | | $ | (521) | | | $ | — | | | $ | 3,070 | |
| Less: Noncontrolling interests | | | | | | | | | | | | | 247 | |
| Add: Preferred stock dividend | | | | | | | | | | | | | 92 | |
| | | | | | | | | | | | | |
| Net Income | | | | | | | | | | | | | $ | 2,915 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 |
| Electric | | Gas | | | | Total | | | | | | |
| Utilities and | | Utilities and | | Commercial | | Reportable | | | | | | |
| (in millions) | Infrastructure | | Infrastructure | | Renewables | | Segments | | Other | | Eliminations | | Total |
| Unaffiliated revenues | $ | 16,571 | | | $ | 1,122 | | | $ | 378 | | | $ | 18,071 | | | $ | 20 | | | $ | — | | | $ | 18,091 | |
| Intersegment revenues | 25 | | | 72 | | | — | | | 97 | | | 53 | | | (150) | | | — | |
| Total revenues | $ | 16,596 | | | $ | 1,194 | | | $ | 378 | | | $ | 18,168 | | | $ | 73 | | | $ | (150) | | | $ | 18,091 | |
Segment income (loss)(b) | $ | 2,839 | | | $ | (1,400) | | | $ | 207 | | | $ | 1,646 | | | $ | (299) | | | $ | — | | | $ | 1,347 | |
| Less: Noncontrolling interests | | | | | | | | | | | | | 208 | |
| Add: Preferred stock dividend | | | | | | | | | | | | | 93 | |
| | | | | | | | | | | | | |
| Net Income | | | | | | | | | | | | | $ | 1,232 | |
| | | | | | | | | | | | | |
| | | | | |
| FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
(a)Gas Utilities and Infrastructure includes $19 million, recorded within Equity in earnings (losses) of unconsolidated affiliates on the Condensed Consolidated Statements of Operations, related to gas pipeline investments. See Note 3 for additional information. Commercial Renewables includes a $35 million loss related to Texas Storm Uri, of which ($8 million) is recorded within Nonregulated electric and other revenues, $2 million within Operations, maintenance and other, $29 million within Equity in earnings (losses) of unconsolidated affiliates and $12 million within Loss Attributable to Noncontrolling Interests on the Condensed Consolidated Statements of Operations. TheSee Note 4 for additional information. Other includes $139 million recorded within Impairment of assets and other than temporary declinecharges, $28 million within Operations, maintenance and other, and $17 million within Depreciation and amortization on the Condensed Consolidated Statements of Operations, related to the workplace and workplace realignment. See Note 1 for additional information. Electric Utilities and Infrastructure includes $160 million recorded within Impairment of assets and other charges, $77 million within Other Income and expenses, $5 million within Operations, maintenance and other, $13 million within regulated operating revenues and $3 million within interest expense on the Duke Energy Carolinas' Condensed Consolidated Statement of Operations related to the 2018 South Carolina rate cases and the CCR settlement and insurance proceeds distributed in valueaccordance with that agreement; it also includes $42 million recorded within Impairment of these investments was primarily attributableassets and other charges, $34 million within Other Income and expenses, $7 million within Operations, maintenance, and other, $15 million within Regulated electric operating revenues and $5 million within interest expense on the Duke Energy Progress' Condensed Consolidated Statement of Operations. See Notes 3 and 4 for more information.
(b)Gas Utilities and Infrastructure includes $2 billion recorded within Equity in earnings (losses) of unconsolidated affiliates on the Condensed Consolidated Statements of Operations, related to gas pipeline investments. See Note 3 for additional information. Other includes a $98 million reversal, included in Operations, maintenance and other on the Condensed Consolidated Statements of Operations, of 2018 severance costs due to a sustained decline in market pricing where the wind investments are located, the continued projected net losses for the projects and a reductionpartial settlement in the projected cash distributions toDuke Energy Carolinas' 2019 North Carolina rate case. See Note 3 for additional information. Electric Utilities and Infrastructure includes $19 million recorded within Impairment charges and $8 million recorded within Operations, maintenance and other on the class of investment owned by Duke Energy.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes toEnergy Carolinas' Condensed Consolidated Financial Statements – (Unaudited) – (Continued)of Operations related to a partial settlement in the Duke Energy Carolinas' 2019 North Carolina rate case and $8 million recorded within Operations, maintenance and other on Duke Energy Progress' Condensed Consolidated Statements of Operation related to a partial settlement in the Duke Energy Progress' 2019 North Carolina rate case. See Note 3 for more information. Additionally, Electric Utilities and Infrastructure includes $5 million of Impairment charges related to gas pipeline assets recorded on Duke Energy Progress' Condensed Consolidated Statement of Operations in the prior year.
Duke Energy Ohio
Duke Energy Ohio has two2 reportable operating segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure.
Electric Utilities and Infrastructure transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Northern Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and Northern Kentucky. It conducts operations primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.
The remainder of Duke Energy Ohio's operations is presented as Other, which is primarily comprised of governance costs allocated by its parent, Duke Energy, and revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from the Ohio Valley Electric Corporation's (OVEC) power plants. See Note 9 for additional information on related party transactions. |
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 371 |
| | $ | 90 |
| | $ | 461 |
| | $ | 10 |
| | $ | 471 |
|
| Segment income (loss) | 50 |
| | 14 |
| | 64 |
| | (8 | ) | | 56 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | (1 | ) |
| Net income | | | | | | | | | 55 |
|
| Segment assets | $ | 5,006 |
| | $ | 2,708 |
| | $ | 7,714 |
| | $ | 51 |
| | $ | 7,765 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 390 |
| | $ | 89 |
| | $ | 479 |
| | $ | 10 |
| | $ | 489 |
|
| Segment income (loss) | 52 |
| | 12 |
| | 64 |
| | (9 | ) | | 55 |
|
Income from discontinued operations, net of tax(a) | | | | | | | | | 34 |
|
| Net income | | | | | | | | | $ | 89 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| Electric | | Gas | | Total | | | | | | |
| Utilities and | | Utilities and | | Reportable | | | | | | |
| (in millions) | Infrastructure | | Infrastructure | | Segments | | Other | | Eliminations | | Total |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total revenues | $ | 413 | | | $ | 93 | | | $ | 506 | | | $ | — | | | $ | — | | | $ | 506 | |
| Segment income/Net (loss) income | $ | 48 | | | $ | 11 | | | $ | 59 | | | $ | (1) | | | $ | — | | | $ | 58 | |
| | | | | | | | | | | |
| Segment assets | $ | 6,716 | | | $ | 3,783 | | | $ | 10,499 | | | $ | 27 | | | $ | (21) | | | $ | 10,505 | |
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 1,036 |
| | $ | 360 |
| | $ | 1,396 |
| | $ | 30 |
| | $ | 1,426 |
|
| Segment income (loss) | 96 |
| | 56 |
| | 152 |
| | (24 | ) | | 128 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | (1 | ) |
| Net income | | | | | | | | | $ | 127 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 |
| Electric | | Gas | | Total | | | | | | |
| Utilities and | | Utilities and | | Reportable | | | | | | |
| (in millions) | Infrastructure | | Infrastructure | | Segments | | Other | | | | Total |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total revenues | $ | 394 | | | $ | 79 | | | $ | 473 | | | $ | — | | | | | $ | 473 | |
| Segment income/Net (loss) income | $ | 63 | | | $ | 9 | | | $ | 72 | | | $ | (2) | | | | | $ | 70 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | Electric |
| | Gas |
| | Total |
| | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Consolidated |
|
| Total revenues | $ | 1,053 |
| | $ | 358 |
| | $ | 1,411 |
| | $ | 22 |
| | $ | 1,433 |
|
| Segment income (loss) | 107 |
| | 57 |
| | 164 |
| | (29 | ) | | 135 |
|
Income from discontinued operations, net of tax(a) | | | | | | | | | 36 |
|
| Net income | | | | | | | | | $ | 171 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| Electric | | Gas | | Total | | | | | | |
| Utilities and | | Utilities and | | Reportable | | | | | | |
| (in millions) | Infrastructure | | Infrastructure | | Segments | | Other | | | | Total |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total revenues | $ | 1,119 | | | $ | 375 | | | $ | 1,494 | | | $ | — | | | | | $ | 1,494 | |
| Segment income/Net (loss) income | $ | 122 | | | $ | 77 | | | $ | 199 | | | $ | (11) | | | | | $ | 188 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 |
| Electric | | Gas | | Total | | | | | | |
| Utilities and | | Utilities and | | Reportable | | | | | | |
| (in millions) | Infrastructure | | Infrastructure | | Segments | | Other | | | | Total |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Total revenues | $ | 1,070 | | | $ | 324 | | | $ | 1,394 | | | $ | — | | | | | $ | 1,394 | |
| Segment income/Net (loss) income | $ | 137 | | | $ | 68 | | | $ | 205 | | | $ | (4) | | | | | $ | 201 | |
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(a)FINANCIAL STATEMENTS | For the three and nine months ended September 30, 2016, Income from Discontinued Operations includes an income tax benefit resulting from immaterial out of period deferred tax liability adjustments. See Note 2 for additional information.REGULATORY MATTERS |
DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA, DUKE ENERGY INDIANA AND PIEDMONT
Piedmont has one reportable segment, Gas Utilities and Infrastructure, which transports and sells natural gas. The remainder of Piedmont's operations is presented as Other, which is comprised of certain unallocated corporate costs, including acquisition-related expenses, and earnings from Piedmont's equity method investment in SouthStar prior to its sale. Piedmont sold its 15 percent membership interest in SouthStar on October 3, 2016. Piedmont's income, net of tax, from SouthStar for the three and nine months ended September 30, 2016, was $2 million and $12 million, respectively.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The remaining Subsidiary Registrants each have one reportable operating segment, Electric Utilities and Infrastructure, which generates, transmits, distributes and sells electricity. The remainder of each company's operations is presented as Other, which is comprised of certain unallocated corporate costs. Other for Progress Energy also includes interest expense on corporate debt instruments of $56 million and $167 million for the three and nine months ended September 30, 2017, respectively, and $55 million and $166 million for the three and nine months ended September 30, 2016, respectively. The following table summarizes the net (loss) income of Other for each of these entities. |
| | | | | | | | | | | | | | |
| | Three Months Ended | Nine Months Ended |
| | September 30, | September 30, |
| (in millions) | 2017 |
| | 2016 |
| 2017 |
| | 2016 |
|
| Duke Energy Carolinas | $ | (6 | ) | | $ | (16 | ) | $ | (18 | ) | | $ | (50 | ) |
| Progress Energy | (32 | ) | | (45 | ) | (120 | ) | | (139 | ) |
| Duke Energy Progress | (4 | ) | | (10 | ) | (11 | ) | | (26 | ) |
| Duke Energy Florida | (2 | ) | | (5 | ) | (7 | ) | | (14 | ) |
| Duke Energy Indiana | (2 | ) | | (3 | ) | (5 | ) | | (10 | ) |
| Piedmont | (5 | ) | | — |
| (18 | ) | | 7 |
|
The assets at Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana are substantially all included within the Electric Utilities and Infrastructure segment at September 30, 2017. The assets at Piedmont are substantially all included within the Gas Utilities and Infrastructure segment at September 30, 2017.
4.3. REGULATORY MATTERS
RATE-RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.
Duke Energy Carolinas and Duke Energy Progress
2021 Coal Ash Basin Closure Costs DeferralSettlement
On January 22, 2021, Duke Energy Carolinas and Duke Energy Progress entered into the Coal Combustion Residuals Settlement Agreement (the “CCR Settlement Agreement”) with the North Carolina Public Staff (Public Staff), the North Carolina Attorney General’s Office and the Sierra Club (collectively, the "Settling Parties"), which was filed with the NCUC on January 25, 2021. The CCR Settlement Agreement resolves all coal ash prudence and cost recovery issues in connection with 2019 rate cases filed by Duke Energy Carolinas and Duke Energy Progress with the NCUC, as well as the equitable sharing issue on remand from the 2017 Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases as a result of the December 11, 2020 North Carolina Supreme Court opinion. The settlement also provides clarity on coal ash cost recovery in North Carolina for Duke Energy Carolinas and Duke Energy Progress through January 2030 and February 2030 (the "Term"), respectively.
Duke Energy Carolinas and Duke Energy Progress agreed not to seek recovery of approximately $1 billion of systemwide deferred coal ash expenditures, but will retain the ability to earn a debt and equity return during the amortization period, which shall be five years under the 2019 North Carolina rate cases and will be set by the NCUC in future rate case proceedings. The equity return and the amortization period on deferred coal ash costs under the 2017 Duke Energy Carolinas and Duke Energy Progress North Carolina rate cases will remain unaffected. The equity return on deferred coal ash costs under the 2019 North Carolina rate cases and future rate cases in North Carolina will be set at 150 basis points lower than the authorized return on equity (ROE) then in effect, with a capital structure composed of 48% debt and 52% equity. Duke Energy Carolinas and Duke Energy Progress retain the ability to earn a full WACC return during the deferral period, which is the period from when costs are incurred until they are recovered in rates.
The Settling Parties agreed that execution by Duke Energy Carolinas and Duke Energy Progress of a settlement agreement between themselves and the NCDEQ dated December 31, 2019, (the “DEQ Settlement”) and the coal ash management plans included therein or subsequently approved by DEQ are reasonable and prudent. The Settling Parties retain the right to challenge the reasonableness and prudence of actions taken by Duke Energy Carolinas and Duke Energy Progress and costs incurred to implement the scope of work agreed upon in the DEQ Settlement, after February 1, 2020, and March 1, 2020, for Duke Energy Carolinas and Duke Energy Progress, respectively. The Settling Parties further agreed to waive rights through the Term to challenge the reasonableness or prudence of Duke Energy Carolinas’ and Duke Energy Progress’ historical coal ash management practices, and to waive the right to assert any arguments that future coal ash costs, including financing costs, shall be shared between either company and customers through equitable sharing or any other rate base or return adjustment that shares the revenue requirement burden of coal ash costs not otherwise disallowed due to imprudence.
The Settling Parties agreed to a sharing arrangement for future coal ash insurance litigation proceeds between Duke Energy Carolinas and Duke Energy Progress and North Carolina customers. For more information, see Note 4 "Commitments and Contingencies."
As a result of the CCR Settlement Agreement, Duke Energy Carolinas and Duke Energy Progress recorded a pretax charge of approximately $454 million and $494 million, respectively, in the fourth quarter of 2020 to Impairment charges and a reversal of approximately $50 million and $102 million, respectively, to Regulated electric operating revenues on the respective Consolidated Statements of Operations.
The Coal Ash Settlement was approved without modification in the NCUC Orders in the 2019 rate cases on March 31, 2021, and April 16, 2021, for Duke Energy Carolinas and Duke Energy Progress, respectively. The NCUC issued an Order on Remand Accepting CCR Settlement and Affirming Previous Orders Setting Rates and Imposing Penalties in the 2017 rate cases on June 25, 2021.
2020 North Carolina Storm Securitization Filings
On December 30, 2016,October 26, 2020, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the NCUC, seeking an accounting order authorizing deferral of certain costs incurredas agreed to in connection with federal and state environmental remediation requirements related topartial settlements reached in the permanent closure of ash basins and other ash storage units at coal-fired generating facilities that have provided or are providing generation to customers located in2019 North Carolina. Initial comments were received in March 2017, and reply comments were filed on April 19, 2017. The NCUC has consolidatedCarolina Rate Cases for Duke Energy Carolinas'Carolinas and Duke Energy Progress’ coal ash deferral requests intoProgress, seeking authorization for the financing of the costs of each utility's storm recovery activities required as a result of Hurricane Florence, Hurricane Michael, Hurricane Dorian and Winter Storm Diego. Specifically, Duke Energy Carolinas and Duke Energy Progress requested that the NCUC find that their respective generalstorm recovery costs and related financing costs are appropriately financed by debt secured by storm recovery property, and that the commission issue financing orders by which each utility may accomplish such financing using a securitization structure. On January 27, 2021, Duke Energy Carolinas, Duke Energy Progress and the Public Staff filed an Agreement and Stipulation of Partial Settlement, subject to review and approval of the NCUC, resolving certain accounting issues, including agreement to support an 18- to 20-year bond period. The total revenue requirement over a proposed 20-year bond period for the storm recovery charges is approximately $287 million for Duke Energy Carolinas and $920 million for Duke Energy Progress and will be finalized upon issuance of the bonds. A remote evidentiary hearing ended on January 29, 2021. In the NCUC Orders in the 2019 rate case docketscases issued on March 31, 2021, and April 16, 2021, for decision. See "2017 North Carolina Rate Case" sections below for additional discussion.Duke Energy Carolinas and Duke Energy Progress, respectively, the reasonableness and prudence of the deferred storm costs was approved. On May 10, 2021, the NCUC issued financing orders authorizing the companies to issue storm recovery bonds, subject to the terms of the financing orders, and approving the Agreement and Stipulation of Partial Settlement in its entirety. Duke Energy Carolinas and Duke Energy Progress are currently in the process of structuring and marketing the bonds that will be presented to the market. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
| | | | | |
| FINANCIAL STATEMENTS | REGULATORY MATTERS |
COVID-19 Filings
North Carolina
Duke Energy Carolinas and Duke Energy Progress filed a joint petition on August 7, 2020, with the NCUC for deferral treatment of incremental costs and the cost of waived customer fees due to the COVID-19 pandemic. Comments on the joint petition were filed on November 5, 2020, and reply comments were filed on November 30, 2020. A summary of incremental COVID-19 costs incurred as of June 30, 2021, was filed with the NCUC by Duke Energy Carolinas and Duke Energy Progress on August 6, 2021. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
South Carolina
Duke Energy Carolinas and Duke Energy Progress filed a report on June 30, 2020, as required by PSCSC order, reporting revenue impact, costs and savings related to COVID-19 to date. On August 14, 2020, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the PSCSC for approval of an accounting order to defer incremental COVID-19 related costs incurred through June 30, 2020, and for the ongoing months during the duration of the COVID-19 pandemic. Duke Energy Carolinas and Duke Energy Progress withdrew their joint petition on May 17, 2021.
Duke Energy Carolinas
2017 North Carolina Rate Case
On August 25, 2017, Duke Energy Carolinas filed an application with the NCUC for a rate increase for retail customers of approximately $647 million, which representsmillion. On February 28, 2018, Duke Energy Carolinas and the Public Staff filed an approximate 13.6 percent increase in annual base revenues. Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included an ROE of 9.9% and a capital structure of 52% equity and 48% debt. On June 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction.
The rate increase is driven by capital investments subsequentNorth Carolina Attorney General and other parties separately filed Notices of Appeal to the previous base rate case, including grid improvement projects, investments in customer service technologies, costs of complying with coal combustion residuals (CCR) regulations and the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) and recovery of costs related to licensing and development ofSupreme Court. The North Carolina Supreme Court consolidated the William States Lee III Nuclear Station (Lee Nuclear Station) discussed below. An evidentiary hearing is scheduled to begin on February 19, 2018. Duke Energy Carolinas cannot predictand Duke Energy Progress appeals. On December 11, 2020, the outcomeNorth Carolina Supreme Court issued an opinion, which affirmed, in part, and reversed and remanded, in part, the NCUC’s decisions. In the Opinion, the court upheld the NCUC's decision to include coal ash costs in the cost of this matter.service, as well as the NCUC’s discretion to allow a return on the unamortized balance of coal ash costs. The court also remanded to the NCUC a single issue to consider the assessment of support for the Public Staff’s equitable sharing argument. On January 22, 2021, Duke Energy Carolinas and Duke Energy Progress entered into the CCR Settlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021, and approved by the NCUC on March 31, 2021. The NCUC issued an Order on Remand Accepting CCR Settlement and Affirming Previous Orders Setting Rates and Imposing Penalties on June 25, 2021.
Lincoln County Combustion Turbine Addition2019 North Carolina Rate Case
On June 12, 2017,September 30, 2019, Duke Energy Carolinas filed an application with the NCUC for a Certificatenet rate increase for retail customers of Public Convenienceapproximately $291 million, which represented an approximate 6% increase in annual base revenues. The gross rate case revenue increase request was $445 million, which was offset by an EDIT rider of $154 million to return to customers North Carolina and Necessity (CPCN) to construct and operate a new 402-megawatt (MW) simple cycle advanced combustion turbine natural gas-fueled electric generating unit at its existing Lincoln County site.federal EDIT resulting from recent reductions in corporate tax rates. The request for a rate increase was driven by major capital investments subsequent to the previous base rate case, coal ash pond closure costs, accelerated coal plant depreciation and deferred 2018 storm costs. Duke Energy Carolinas requested rates be effective no later than August 1, 2020.
On March 25, 2020, Duke Energy Carolinas and the Public Staff filed an Agreement and Stipulation of Partial Settlement, subject to review and approval of the NCUC, resolving certain issues in the base rate proceeding. On July 24, 2020, Duke Energy Carolinas filed its request for approval of its notice to customers required to implement temporary rates. On July 27, 2020, Duke Energy Carolinas filed a joint motion with Duke Energy Progress and the Public Staff notifying the commission that the parties reached a joint partial settlement with the Public Staff. Also on July 27, 2020, Duke Energy Carolinas filed a letter stating that it intended to update its temporary rates calculation to reflect the terms of the partial settlement. On July 31, 2020, Duke Energy Carolinas and the Public Staff filed a Second Agreement and Stipulation of Partial Settlement (Second Partial Settlement), subject to review and approval of the NCUC, resolving certain remaining issues in the base rate proceeding. The remaining items litigated at hearing included recovery of deferred coal ash compliance costs that are subject to asset retirement obligation accounting, implementation of new depreciation rates and the amortization period of the loss on the hydro station sale.
On August 4, 2020, Duke Energy Carolinas filed an amended motion for approval of its amended notice to customers, seeking to exercise its statutory right to implement temporary rates subject to refund on or after August 24, 2020. The revenue requirement to be recovered, subject to refund, through the temporary rates was based on and consistent with the base rate component of the Second Partial Settlement and excluded the items to be litigated noted above. The NCUC approved the August 4, 2020 amended temporary rates motion on August 6, 2020, and temporary rates went into effect on August 24, 2020.
The Duke Energy Carolinas evidentiary hearing concluded on September 18, 2020, and post-hearing filings were made with the NCUC from all parties by November 4, 2020. On January 22, 2021, Duke Energy Carolinas and Duke Energy Progress entered into the CCR Settlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021.
On March 31, 2021, the NCUC issued an order approving the March 25, 2020, and July 31, 2020, partial settlements. The order includes approval of 1) an ROE of 9.6% based upon a capital structure of 52% equity and 48% debt; 2) deferral treatment of approximately $800 million of grid improvement projects with a return; 3) a flow back period of five years for unprotected federal EDIT; and 4) the reasonableness and prudence of $213 million of deferred storm costs, which were removed from the rate case and for which Duke Energy Carolinas filed a petition seeking securitization in October 2020. Additionally, the order approved without modification the CCR Settlement Agreement.
| | | | | |
| FINANCIAL STATEMENTS | REGULATORY MATTERS |
The order denied Duke Energy Carolinas' proposal to shorten the remaining depreciable lives of certain Duke Energy Carolinas coal-fired generating units, indicating the NCUC has not had the chance to fully examine the issue within the context of an integrated resource planning (IRP) proceeding, and upon retirement the remaining net book value of these units should be placed in a regulatory asset account to be amortized over an appropriate period to be determined in a future rate case.
On May 21, 2021, the NCUC issued an Order Approving Rate Schedules, which resulted in a net increase of approximately $33 million. Revised customer rates became effective on June 1, 2021. The deadline to appeal has passed and no parties appealed the NCUC's order.
2018 South Carolina Rate Case
On November 8, 2018, Duke Energy Carolinas filed an application with the PSCSC for a rate increase for retail customers of approximately $168 million.
After hearings in March 2019, the PSCSC issued an order on May 21, 2019, which included an ROE of 9.5% and a capital structure of 53% equity and 47% debt. The order also included constructionthe following material components:
•Approval of cancellation of the Lee Nuclear Project, with Duke Energy Carolinas maintaining the Combined Operating License;
•Approval of recovery of $125 million (South Carolina retail portion) of Lee Nuclear Project development costs (including AFUDC through December 2017) over a 12-year period, but denial of a return on the deferred balance of costs;
•Approval of recovery of $96 million of coal ash costs over a five-year period with a return at Duke Energy Carolinas' WACC;
•Denial of recovery of $115 million of certain coal ash costs deemed to be related transmissionto the Coal Ash Act and natural gas pipeline interconnection facilities. If approved, construction would beginincremental to the federal CCR rule;
•Approval of a $66 million decrease to base rates to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35% to 21%;
•Approval of a $45 million decrease through the EDIT Rider to return EDIT resulting from the federal tax rate change and deferred revenues since January 2018 related to the change, to be returned in accordance with an extended commissioningthe Average Rate Assumption Method (ARAM) for protected EDIT, over a 20-year period for unprotected EDIT associated with Property, Plant and validationEquipment, over a five-year period for unprotected EDIT not associated with Property, Plant and Equipment and over a five-year period for the deferred revenues; and
•Approval of a $17 million decrease through the EDIT Rider related to reductions in the North Carolina state income tax rate from 2020-20246.9% to 2.5% to be returned over a five-year period.
As a result of the order, revised customer rates were effective June 1, 2019. On May 31, 2019, Duke Energy Carolinas filed a Petition for Rehearing or Reconsideration of that order contending substantial rights of Duke Energy Carolinas were prejudiced by unlawful, arbitrary and an estimated commercialcapricious rulings by the PSCSC on certain issues presented in the proceeding. On June 19, 2019, the PSCSC issued a Directive denying Duke Energy Carolinas' request to rehear or reconsider the commission's rulings on certain issues presented in the proceeding including coal ash remediation and disposal costs, ROE and the recovery of a return on deferred operation dateand maintenance expenses. An order detailing the commission's decision in 2024. An evidentiary hearingthe Directive was held in August 2017. Briefs and proposed ordersissued on October 18, 2019. Duke Energy Carolinas filed a notice of appeal on November 15, 2019, with the Supreme Court of South Carolina. On November 20, 2019, the South Carolina Energy Users Committee filed a Notice of Appeal with the Supreme Court of South Carolina. Initial briefs were filed on April 21, 2020, which included the South Carolina Energy User's Committee brief arguing that the PSCSC erred in allowing Duke Energy Carolinas' recovery of costs related to the Lee Nuclear Station. Response briefs were filed on July 6, 2020, and reply briefs were filed on August 11, 2020. Oral arguments were heard before the Supreme Court of South Carolina on May 26, 2021.
On October 9, 2017. A27, 2021, the Supreme Court of South Carolina affirmed the PSCSC's May 2019 order to:
•Disallow cost recovery on certain CCR compliance costs the PSCSC deemed to be incremental to the federal CCR rules;
•Disallow recovery of certain coal ash litigation expenses;
•Disallow a return on certain deferred expenses; and
•Allow recovery of Lee Nuclear Project preconstruction costs.
The Supreme Court's decision is expectednotes the prior determination made by the end of 2017.PSCSC that Duke Energy could submit coal ash costs for recovery that were not initially approved in the rate case order if such costs can be attributed to the CCR rules. As a result of the Court's opinion, Duke Energy Carolinas recognized a pretax charge of approximately $160 million to Impairment of assets and other charges, and a $31 million increase in Other income and expenses, net, in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2021, principally related to coal ash remediation at retired coal ash basin sites. Duke Energy Carolinas is evaluating whether to file a Petition for rehearing on the Supreme Court's decision. Petitions are due November 11, 2021, unless an extension is sought and granted.
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Oconee Nuclear Station Subsequent License Renewal
On June 7, 2021, Duke Energy Carolinas filed a subsequent license renewal application for the Oconee Nuclear Station (ONS) with the U.S. Nuclear Regulatory Commission (NRC) to renew ONS’s operating license for an additional 20 years. The subsequent license renewal would extend operations of the facility from 60 to 80 years. The current license for units 1 and 2 expire in 2033 and the license for unit 3 expires in 2034. By a Federal Register Notice dated July 28, 2021, the NRC provided a 60-day comment period for persons whose interest may be affected by the issuance of a subsequent renewed license for ONS to file a request for a hearing and a petition for leave to intervene. On September 27, 2021, Beyond Nuclear and Sierra Club (Petitioners) filed a Hearing Request and Petition to Intervene (Hearing Request) and a Petition for Waiver. The Hearing Request proposes 3 contentions purporting to challenge Duke Energy Carolinas’ environmental report (ER). In general, the proposed contentions claim that the ER does not consider certain information regarding the environmental aspects of Severe Accidents caused by a hypothetical failure of the Jocassee Dam, and therefore does not satisfy the National Environmental Policy Act of 1969, as amended (NEPA), or the NRC’s NEPA-implementing regulations. Duke Energy Carolinas filed its answer to the proposed contentions on October 22, 2021, and the Petitioners have until November 5, 2021, to respond to Duke Energy Carolina’s answer.
Duke Energy Carolinas and Duke Energy Progress intend to seek renewal of operating licenses and 20-year license extensions for all of their nuclear stations. New depreciation rates were implemented for all of the nuclear facilities during the second quarter of 2021. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
William States Lee Combined Cycle Facility
On April 9, 2014, the PSCSC granted Duke Energy Carolinas and North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN) for the construction and operation of a 750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and estimates a cost to build of $600 million for its share of the facility, including allowance for funds used during construction (AFUDC). The project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Appeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. On March 24, 2017, the South Carolina Supreme Court denied the request for review, thus concluding the matter.
Lee Nuclear Station
In December 2007, Duke Energy Carolinas applied to the NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed Lee Nuclear Station to be located at a site in Cherokee County, South Carolina. The NCUC and PSCSC concurred with the prudency of Duke Energy Carolinas decisions to incur certain project development and preconstruction costs through several separately issued orders through 2011, although full cost recovery is not guaranteed. In December 2016, the NRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of the COLs being issued.
On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. On May 15, 2017, the NCUC issued an order requiring Duke Energy Carolinas to provide information regarding potential impacts of the Westinghouse bankruptcy on the Lee Nuclear Station, as well as Duke Energy Carolinas' plans for cost recovery and additional financial information regarding the project. As part of its 2017 North Carolina Rate Case discussed above, Duke Energy Carolinas is seeking NCUC approval to cancel the development of the Lee Nuclear Station project due to the Westinghouse bankruptcy filing and other market activity and is requesting recovery of incurred licensing and development costs. Duke Energy Carolinas will maintain the license issued by the NRC in December 2016. Duke Energy Carolinas cannot predict the outcome of this matter.
Duke Energy Progress
2017 North Carolina Rate Case
On June 1, 2017, Duke Energy Progress filed an application with the NCUC for a rate increase for retail customers of approximately $477 million, which representswas subsequently adjusted to $420 million. On November 22, 2017, Duke Energy Progress and the Public Staff filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included an ROE of 9.9% and a capital structure of 52% equity and 48% debt. On February 23, 2018, the NCUC issued an order approving the stipulation. The Public Staff, the North Carolina Attorney General and the Sierra Club filed notices of appeal to the North Carolina Supreme Court.
The North Carolina Supreme Court consolidated the Duke Energy Carolinas and Duke Energy Progress appeals. On December 11, 2020, the North Carolina Supreme Court issued an opinion, which affirmed, in part, and reversed and remanded, in part, the NCUC’s decisions. In the Opinion, the court upheld the NCUC's decision to include coal ash costs in the cost of service, as well as the NCUC’s discretion to allow a return on the unamortized balance of coal ash costs. The court also remanded to the NCUC a single issue to consider the assessment of support for the Public Staff’s equitable sharing argument. On January 22, 2021, Duke Energy Progress and Duke Energy Carolinas entered into the CCR Settlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021, and approved by the NCUC on April 16, 2021. The NCUC issued an Order on Remand Accepting CCR Settlement and Affirming Previous Orders Setting Rates and Imposing Penalties on June 25, 2021.
2019 North Carolina Rate Case
On October 30, 2019, Duke Energy Progress filed an application with the NCUC for a net rate increase for retail customers of approximately $464 million, which represented an approximate 14.9 percent12.3% increase in annual base revenues. The gross rate case revenue increase request was $586 million, which was offset by riders of $122 million, primarily an EDIT rider of $120 million to return to customers North Carolina and federal EDIT resulting from recent reductions in corporate tax rates. The request for a rate increase iswas driven by major capital investments subsequent to the previous base rate case, coal ash pond closure costs, accelerated coal plant depreciation and deferred 2018 storm costs. Duke Energy Progress sought to defer and recover incremental Hurricane Dorian storm costs in this proceeding and requested rates be effective no later than September 1, 2020. As a result of complyingthe COVID-19 pandemic, on March 24, 2020, the NCUC suspended the procedural schedule and postponed the previously scheduled evidentiary hearing on this matter indefinitely.
On June 2, 2020, Duke Energy Progress and the Public Staff filed an Agreement and Stipulation of Partial Settlement, subject to review and approval of the NCUC, resolving certain issues in the base rate proceeding. On July 27, 2020, Duke Energy Progress filed a joint motion with Duke Energy Carolinas and the Public Staff notifying the commission that the parties reached a joint partial settlement with the Public Staff. On July 31, 2020, Duke Energy Progress and the Public Staff filed a Second Agreement and Stipulation of Partial Settlement, subject to review and approval of the NCUC, resolving certain remaining issues in the base rate proceeding. The remaining items litigated at hearing included recovery of deferred coal ash compliance costs that are subject to asset retirement obligation accounting and implementation of new depreciation rates.
On August 7, 2020, Duke Energy Progress filed a motion for approval of notice required to implement temporary rates, seeking to exercise its statutory right to implement temporary rates subject to refund on or after September 1, 2020. The revenue requirement to be recovered subject to refund through the temporary rates was based on and consistent with the terms of the base rate component of the settlement agreements with the Public Staff and excluded items to be litigated noted above. In addition, Duke Energy Progress also sought authorization to place a temporary decrement EDIT Rider into effect, concurrent with the temporary base rate change. The NCUC approved the August 7, 2020 temporary rates motion on August 11, 2020, and temporary rates went into effect on September 1, 2020.
The Duke Energy Progress evidentiary hearing concluded on October 6, 2020, and post-hearing filings were filed with the NCUC from all parties by December 4, 2020. On January 22, 2021, Duke Energy Progress and Duke Energy Carolinas entered into the CCR regulationsSettlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021.
On April 16, 2021, the NCUC issued an order approving the June 2, 2020, and July 31, 2020, partial settlements. The order includes approval of 1) an ROE of 9.6% based upon a capital structure of 52% equity and 48% debt; 2) deferral treatment of approximately $400 million of grid improvement projects with a return; 3) a flow back period of five years for unprotected federal EDIT; and 4) the reasonableness and prudence of approximately $714 million of deferred storm costs, which were removed from the rate case and for which Duke Energy Progress filed a petition seeking securitization in October 2020. Additionally, the order approved without modification the CCR Settlement Agreement.
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The order denied Duke Energy Progress' proposal to shorten the remaining depreciable lives of certain Duke Energy Progress coal-fired generating units, indicating the NCUC has not had the chance to fully examine the issue within the context of an IRP proceeding, and upon retirement the remaining net book value of these units should be placed in a regulatory asset account to be amortized over an appropriate period to be determined in a future rate case.
On May 21, 2021, the NCUC issued an Order Approving Rate Schedules, which resulted in a net increase of approximately $178 million. Revised customer rates became effective on June 1, 2021. The deadline to appeal has passed and no parties appealed the NCUC's order.
2018 South Carolina Rate Case
On November 8, 2018, Duke Energy Progress filed an application with the PSCSC for a rate increase for retail customers of approximately $59 million.
After hearings in April 2019, the PSCSC issued an order on May 21, 2019, which included an ROE of 9.5% and a capital structure of 53% equity and 47% debt. The order also included the following material components:
•Approval of recovery of $4 million of coal ash costs over a five-year period with a return at Duke Energy Progress' WACC;
•Denial of recovery of $65 million of certain coal ash costs deemed to be related to the Coal Ash Act and incremental to the federal CCR rule;
•Approval of a $17 million decrease to base rates to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 35% to 21%;
•Approval of a $12 million decrease through the EDIT Tax Savings Rider resulting from the federal tax rate change and deferred revenues since January 2018 related to the change, to be returned in accordance with ARAM for protected EDIT, over a 20-year period for unprotected EDIT associated with Property, Plant and Equipment, over a five-year period for unprotected EDIT not associated with Property, Plant and Equipment and over a three-year period for the deferred revenues; and
•Approval of a $12 million increase due to the expiration of EDIT related to reductions in the North Carolina state income tax rate from 6.9% to 2.5%.
As a result of the order, revised customer rates were effective June 1, 2019. On May 31, 2019, Duke Energy Progress filed a Petition for Rehearing or Reconsideration of that order contending substantial rights of Duke Energy Progress were prejudiced by unlawful, arbitrary and capricious rulings by the PSCSC on certain issues presented in the proceeding. On June 19, 2019, the PSCSC issued a Directive denying Duke Energy Progress' request to rehear or reconsider the commission's rulings on certain issues presented in the proceeding including coal ash remediation and disposal costs, relating to storm recovery, investments in customer service technologiesROE and the recovery of a return on deferred operation and maintenance expenses, but allowing additional litigation-related costs. As a result of the Directive allowing litigation-related costs, associated with renewable purchased power. Intervenorscustomer rates were revised effective July 1, 2019. An order detailing the commission's decision in the Directive was issued on October 18, 2019. Duke Energy Progress filed a notice of appeal on November 15, 2019, with the Supreme Court of South Carolina. Initial briefs were filed on April 21, 2020. Response briefs were filed on July 6, 2020, and reply briefs were filed on August 11, 2020. Oral arguments were heard before the Supreme Court of South Carolina on May 26, 2021.
On October 27, 2021, the Supreme Court of South Carolina affirmed the PSCSC's May 2019 order to:
•Disallow cost recovery on certain CCR compliance costs the PSCSC deemed to be incremental to the federal CCR rules;
•Disallow recovery of certain coal ash litigation expenses; and
•Disallow a return on certain deferred expenses.
The Supreme Court's decision notes the prior determination made by the PSCSC that Duke Energy could submit coal ash costs for recovery that were not initially approved in the rate case order if such costs can be attributed to the CCR rules. As a result of the Court's opinion, Duke Energy Progress recognized a pretax charge of approximately $42 million to Impairment of assets and other charges, and a $6 million increase in Other income and expenses, net, in the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2021, principally related to coal ash remediation at retired coal ash basin sites. Duke Energy Progress is evaluating whether to file a Petition for rehearing on the Supreme Court's decision. Petitions are due November 11, 2021, unless an extension is sought and granted.
Western Carolinas Modernization Plan
On October 8, 2018, Duke Energy Progress filed testimonyan application with the NCUC for a CPCN to construct the Hot Springs Microgrid Solar and Battery Storage Facility, which was approved with certain conditions on May 10, 2019. A hearing to update the NCUC on the status of the project was held on March 5, 2020. Construction began in May 2020 with commercial operation expected to begin in December 2021.
On July 27, 2020, Duke Energy Progress filed an application with the NCUC for a CPCN to construct the Woodfin Solar Facility, a 5-MW solar generating facility to be constructed on a closed landfill in Buncombe County. The expert hearing was held on November 18, 2020. The application was approved and a CPCN was granted by order of the NCUC on April 20, 2021. Construction began in April 2021 with an expected in-service date in March 2022.
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FERC Return on Equity Complaints
On October 201711, 2019, North Carolina Eastern Municipal Power Agency (NCEMPA) filed a complaint at the FERC against Duke Energy Progress pursuant to Section 206 of the Federal Power Act (FPA), alleging that the 11% stated ROE component contained in the demand formula rate in the Full Requirements Power Purchase Agreement (FRPPA) between NCEMPA and Duke Energy Progress' responses are due November 6, 2017. An evidentiaryProgress is unjust and unreasonable. On July 16, 2020, the FERC set this matter for hearing and settlement judge procedures and established a refund effective date of October 11, 2019. In its order setting the matter for settlement, the FERC allowed for the consideration of variations to the base transmission-related ROE methodology developed in its Order No. 569-A, through the introduction of “specific facts and circumstances” involving issues specific to the case. The parties reached a settlement in principle at a settlement conference on January 7, 2021, and filed a settlement package on March 10, 2021. The FERC Trial Staff filed comments in support of the settlement. On April 19, 2021, the Settlement Judge certified the settlement to the FERC as an uncontested settlement. The FERC approved the settlement on May 25, 2021, and Duke Energy Progress filed compliance documents on June 10, 2021. The FERC accepted the compliance filing on October 8, 2021.
On October 16, 2020, North Carolina Electric Membership Corporation (NCEMC) filed a complaint at the FERC against Duke Energy Progress pursuant to Section 206 of the FPA, alleging that the 11% stated ROE component in the demand formula rate in the Power Supply and Coordination Agreement between NCEMC and Duke Energy Progress is scheduledunjust and unreasonable. Under FPA Section 206, the earliest refund effective date that the FERC can establish is the date of the filing of the complaint. Duke Energy Progress responded to beginthe complaint on November 20, 2017.2020, seeking dismissal, demonstrating that the 11% ROE is just and reasonable for the service provided. The parties filed responsive pleadings and are awaiting an order from the FERC. Duke Energy Progress cannot predict the outcome of this matter.
Storm Cost Deferral Filing
Duke Energy Florida
2021 Settlement Agreement
On December 16, 2016,January 14, 2021, Duke Energy ProgressFlorida filed a Settlement Agreement (the “2021 Settlement”) with the FPSC. The parties to the 2021 Settlement include Duke Energy Florida, the Office of Public Counsel (OPC), the Florida Industrial Power Users Group, White Springs Agricultural Chemicals, Inc. d/b/a PCS Phosphate and NUCOR Steel Florida, Inc. (collectively, the “Parties”).
Pursuant to the 2021 Settlement, the Parties agreed to a base rate stay-out provision that expires year-end 2024; however, Duke Energy Florida is allowed an increase to its base rates of an incremental $67 million in 2022, $49 million in 2023 and $79 million in 2024, subject to adjustment in the event of tax reform during the years 2021, 2022 and 2023. The Parties also agreed to an ROE band of 8.85% to 10.85% with a midpoint of 9.85% based on a capital structure of 53% equity and 47% debt. The ROE band can be increased by 25 basis points if the average 30-year U.S. Treasury rate increases 50 basis points or more over a six-month period in which case the midpoint ROE would rise from 9.85% to 10.10%. Duke Energy Florida will also be able to retain the DOE award of approximately $173 million for spent nuclear fuel, which is expected to be received in 2022, in order to mitigate customer rates over the term of the 2021 Settlement. In return, Duke Energy Florida will be able to recognize the $173 million into earnings from 2022 through 2024.
In addition to these terms, the 2021 Settlement contains provisions related to the accelerated depreciation of Crystal River Units 4-5, the approval of approximately $1 billion in future investments in new cost-effective solar power, the implementation of a new Electric Vehicle Charging Station Program and the deferral and recovery of costs in connection with the implementation of Duke Energy Florida’s Vision Florida program, which explores various emerging non-carbon emitting generation technology, distributed technologies and resiliency projects, among other things. The 2021 Settlement also resolves remaining unrecovered storm costs for Hurricane Dorian and Hurricane Michael.
The FPSC approved the 2021 Settlement on May 4, 2021, issuing an order on June 4, 2021. Revised customer rates will be effective January 1, 2022, with subsequent base rate increases effective January 1, 2023, and January 1, 2024.
Storm Restoration Cost Recovery
Duke Energy Florida filed a petition with the NCUC requesting an accounting orderFPSC on April 30, 2019, to defer certainrecover $223 million of estimated retail incremental storm restoration costs incurredfor Hurricane Michael, consistent with the provisions in connection with responsethe 2017 Settlement, and the FPSC approved the petition on June 11, 2019. The FPSC also approved allowing Duke Energy Florida to use the tax savings resulting from the Tax Act to recover these storm costs in lieu of implementing a storm surcharge. Approved storm costs are currently expected to be fully recovered by year-end 2021. On November 22, 2019, Duke Energy Florida filed a petition for approval of actual retail recoverable storm restoration costs related to Hurricane MatthewMichael in the amount of $191 million plus interest. On May 19, 2020, Duke Energy Florida filed a supplemental true up reducing the actual retail recoverable storm restoration costs related to Hurricane Michael by approximately $3 million, resulting in a total request to recover $188 million actual retail recoverable storm restoration costs, plus interest. Approximately $80 million of these costs are included in Regulatory assets within Current Assets and other significant stormsOther Noncurrent Assets on the Condensed Consolidated Balance Sheets as of December 31, 2020.
Duke Energy Florida filed a petition with the FPSC on December 19, 2019, to recover $169 million of estimated retail incremental storm restoration costs for Hurricane Dorian, consistent with the provisions in 2016.the 2017 Settlement and the FPSC approved the petition on February 24, 2020. The final estimateactual amount of incremental operation and maintenance and capital costs of $116$145 million was filed on September 30, 2020. The 2021 Settlement resolved all matters regarding storm cost recovery relating to Hurricane Michael and Hurricane Dorian.
Clean Energy Connection
On July 1, 2020, Duke Energy Florida petitioned the FPSC for approval of a voluntary solar program. The program consists of 10 new solar generating facilities with combined capacity of approximately 750 MW. The program allows participants to support cost-effective solar development in Florida by paying a subscription fee based on per kilowatt-subscriptions and receiving a credit on their bill based on the actual generation associated with their portion of the solar portfolio. The estimated cost of the 10 new solar generation facilities is approximately $1 billion over the next four years, and this investment will be included in base rates offset by the revenue from the subscription fees. The credits will be included for recovery in the fuel cost recovery clause. A remote hearing was held on November 17, 2020, and post-hearing briefs were filed with the NCUCFPSC from all parties by December 9, 2020. The FPSC voted to approve the program on January 5, 2021, and issued its written order on January 26, 2021.
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On February 24, 2021, the League of United Latin American Citizens (LULAC) filed a notice of appeal of the FPSC’s order approving the Clean Energy Connection to the Supreme Court of Florida. LULAC's initial brief was filed on May 26, 2021, and Appellees' response briefs were filed on July 26, 2021. LULAC's reply brief was filed on September 24, 2021, and its request for oral argument was filed on September 28, 2021. The FPSC approval order remains in September 2017. On March 15, 2017,effect pending the NCUC Public Staff filed comments supporting deferraloutcome of a portion ofthe appeal. Duke Energy Progress’ requested amount. Duke Energy Progress filed reply comments on April 12, 2017. On July 10, 2017, the NCUC consolidated Duke Energy Progress' storm deferral request into the Duke Energy Progress rate case docket for decision. See "2017 North Carolina Rate Case" for additional discussion. Duke Energy ProgressFlorida cannot predict the outcome of this matter.
Western Carolinas Modernization Plan
On November 4, 2015, Duke Energy Progress announced a Western Carolinas Modernization Plan, which included retirement of the existing Asheville coal-fired plant, the construction of two 280‑MW combined-cycle natural gas plants having dual fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The plan also included upgrades to existing transmission lines and substations, installation of solar generation and a pilot battery storage project. These investments will be made within the next seven years. Duke Energy Progress is also working with the local natural gas distribution company to upgrade an existing natural gas pipeline to serve the natural gas plant.
On March 28, 2016, the NCUC issued an order approving a CPCN for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, 2017, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are underway and construction of these plants is scheduled to begin in 2017, with an expected in-service date in late 2019. Duke Energy Progress plans to file for future approvals related to the proposed solar generation and pilot battery storage project.
The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $405 million and $492 million is included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016, respectively.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Florida
Hurricane Irma Storm Damage
In September 2017, all of Duke Energy Florida’s service territory was impacted by Hurricane Irma, which caused significant damage, resulting in approximately 1.3 million customers experiencing outages. Total storm restoration costs, including capital, are currently estimated at approximately $500 million. These estimates could change as Duke Energy Florida receives additional information on actual costs. After depleting any existing storm reserves, which were approximately $60 million before Hurricane Irma, Duke Energy Florida is permitted to petition the FPSC for recovery of additional incremental operation and maintenance costs resulting from the storm and to replenish the storm reserve to approximately $132 million for retail customers. Duke Energy Florida plans to make this petition by the end of 2017. At September 30, 2017, Duke Energy Florida's Condensed Consolidated Balance Sheets included approximately $400 million of recoverable costs under the FPSC's storm rule in Regulatory assets within Other Noncurrent Assets related to deferred Hurricane Irma storm costs. This amount is in addition to the storm reserve replenishment discussed above as part of Duke Energy Florida's petition to the FPSC.
2017 Second Revised and Restated Settlement Agreement
On October 25, 2017, the FPSC approved a 2017 Second Revised and Restated Settlement Agreement (2017 Settlement) filed by Duke Energy Florida. The 2017 Settlement replaces and supplants the Revised and Restated Stipulation and Settlement Agreement approved in November 2013 (2013 Settlement). The 2017 Settlement extends the base rate case stay-out provision from the 2013 Settlement through the end of 2021 unless actual or projected return on equity falls below 9.5 percent; however, Duke Energy Florida is allowed a multiyear increase to its base rates of $67 million per year in 2019, 2020 and 2021, as well as base rate increases for solar generation. In addition to carrying forward the provisions contained in the 2013 Settlement related to the Crystal River 1 and 2 coal units and future generation needs in Florida, the 2017 Settlement contains provisions related to future investments in solar and renewable energy technology, future investments in AMI technology as well as recovery of existing meters, impacts of potential tax reform, an electric vehicle charging station pilot program, as well as the termination of the proposed Levy Nuclear Project discussed below. As part of the 2017 Settlement, Duke Energy Florida will not move forward with building the Levy nuclear plant and recorded an pretax impairment charge of approximately $135 million in third quarter 2017 to write off all unrecovered Levy Nuclear Project costs, including the COL.
The 2017 Settlement includes provisions to recover 2017 under-recovered fuel costs of approximately $196 million over a 24-month period beginning in January 2018. On September 1, 2017, Duke Energy Florida submitted Alternate 2018 Fuel and Capacity clause projection filings consistent with the terms of the 2017 Settlement. The updated capacity filing reflects the removal of all Levy costs. The FPSC approved Duke Energy Florida's 2018 Alternate projection filings on October 25, 2017. A final order is expected by the end of 2017.
Levy Nuclear Project
On July 28, 2008, Duke Energy Florida applied to the NRC for COLs for two Westinghouse AP1000 reactors at Levy (Levy Nuclear Project). In 2008, the FPSC granted Duke Energy Florida’s petition for an affirmative Determination of Need and related orders requesting cost recovery under Florida’s nuclear cost-recovery rule, together with the associated facilities, including transmission lines and substation facilities. In October 2016, the NRC issued COLs for the proposed Levy Nuclear Plant Units 1 and 2. Duke Energy Florida is not required to build the nuclear reactors as a result of the COLs being issued.
On January 28, 2014, Duke Energy Florida terminated the Levy engineering, procurement and construction agreement (EPC). Duke Energy Florida may be required to pay for work performed under the EPC. Duke Energy Florida recorded an exit obligation in 2014 for the termination of the EPC. This liability was recorded within Other in Other Noncurrent Liabilities with an offset primarily to Regulatory assets on the Condensed Consolidated Balance Sheets. Duke Energy Florida is allowed to recover reasonable and prudent EPC cancellation costs from its retail customers. On May 1, 2017, Duke Energy Florida filed a request with the FPSC to recover approximately $82 million of Levy Nuclear Project costs from retail customers in 2018. As part of the 2017 Settlement discussed above, Duke Energy Florida is no longer seeking recovery of costs related to the Levy Nuclear Project and the ongoing Westinghouse litigation discussed in Note 5. All remaining Levy Nuclear Project issues have been resolved.
Hines Chiller Uprate Project
On February 2, 2017, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirement for a Chiller Uprate Project (Uprate Project) at the Hines Energy Complex. The Uprate Project was placed into service in March 2017 at a cost of approximately $150 million. The annual retail revenue requirement is approximately $19 million. On March 28, 2017, the FPSC issued an order approving the revenue requirement, which was included in base rates for the first billing cycle of April 2017.
Duke Energy Ohio
Duke Energy Kentucky Rate Case
On September 1, 2017, Duke Energy Kentucky filed a rate case with the KPSC requesting an increase in electric base rates of approximately $49 million, which represents an approximate 15 percent increase on the average customer bill. The rate increase is driven by increased investment in utility plant, increased operations and maintenance expenses, and recovery of regulatory assets. The application also includes implementation of the Environmental Surcharge Mechanism to recover environmental costs not recovered in base rates, requests to establish a Distribution Capital Investment Rider to recover incremental costs of specific programs, requests to establish a FERC Transmission Cost Reconciliation Rider to recover escalating transmission costs and modification to the Profit Sharing Mechanism to increase customers' share of proceeds from the benefits of owning generation and to mitigate shareholder risks associated with that generation. The KPSC set filing deadlines of December 29, 2017, and February 14, 2018, for intervenor testimony and rebuttal testimony, respectively. An evidentiary hearing has not been scheduled.Duke Energy Kentucky anticipates that rates will go into effect in mid-April 2018. Duke Energy Kentucky cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Ohio Electric Security Plan Filing
On June 1, 2017, Duke Energy Ohio filed with the PUCO a request for a standard service offer in the form of an electric security plan (ESP). If approved by the PUCO, the term of the ESP would be from June 1, 2018, to May 31, 2024. Terms of the ESP include continuation of market-based customer rates through competitive procurement processes for generation, continuation and expansion of existing rider mechanisms and proposed new rider mechanisms relating to regulatory mandates, costs incurred to enhance the customer experience and transform the grid and a service reliability rider for vegetation management. Public hearings were held in October 2017 and an evidentiary hearing scheduled to begin on November 13, 2017, has been continued to November 28, 2017. Duke Energy Ohio cannot predict the outcome of this matter.
Woodsdale Station Fuel System Filing
On June 9, 2015, the FERC ruled in favor of PJM Interconnection, LLC (PJM) on a revised Tariff and Reliability Assurance Agreement including implementation of a Capacity Performance (CP) proposal and to amend sections of the Operating Agreement related to generation non-performance. The CP proposal includes performance-based penalties for non-compliance. Duke Energy Kentucky is a Fixed Resource Requirement (FRR) entity, and therefore is subject to the compliance standards through its FRR plans. A partial CP obligation will apply to Duke Energy Kentucky in the delivery year beginning June 1, 2019, with full compliance beginning June 1, 2020. Duke Energy Kentucky has developed strategies for CP compliance investments. On May 31, 2017, Duke Energy Kentucky filed an application with the KPSC requesting authority to construct an ultra-low sulfur diesel backup fuel system for the Woodsdale Station. The back-up fuel system is projected to cost approximately $55 million and, if approved, is anticipated to be in service prior to the CP compliance deadline of April 2019. Duke Energy Kentucky cannot predict the outcome of this matter.
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR), which is currently set at zero dollars, to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. The filing seeks to adjust Rider PSR for OVEC costs subsequent to April 1, 2017. Duke Energy Ohio is seeking deferral authority for net costs incurred from April 1, 2017, until the new rates under Rider PSR are put into effect. Various intervenors have filed motions to dismiss or stay the proceeding and Duke Energy Ohio has opposed these filings. See Note 13 for additional discussion of Duke Energy Ohio's ownership interest in OVEC. Duke Energy Ohio cannot predict the outcome of this matter.
East Bend Coal Ash Basin Filing
On December 2, 2016, Duke Energy Kentucky filed with the KPSC a request for a CPCN for construction projects necessary to close and repurpose an ash basin at the East Bend facility as a result of current and proposed U.S. Environmental Protection Agency (EPA) regulations. Duke Energy Kentucky estimated a total cost of approximately $93 million in the filing and expects in-service date in the fourth quarter of 2018. On June 6, 2017, the KPSC approved the CPCN request.
Base Rate Case
Duke Energy Ohio filed with the PUCO an electric distribution base rate case application andon October 1, 2021, with supporting testimony filed on October 15, 2021, requesting an increase in Marchelectric distribution base rates of approximately $55 million and an ROE of 10.3%. This is an approximate 3.3% average increase across all customer classes. The drivers for this case are capital invested since Duke Energy Ohio's last electric distribution base rate case in 2017. Duke Energy Ohio has requested an estimated annual increase of approximately $15 million and a returnis also seeking to adjust the caps on equity of 10.4 percent. The application also includes requests to continue certain current riders and establish new riders related to LED Outdoor Lighting Service and regulatory mandates. On September 26, 2017,its Distribution Capital Investment Rider (DCI Rider). Duke Energy Ohio anticipates the PUCO staff filed a report recommending a revenue decrease between approximately $18 million and $29 million and a returnwill rule on equity between 9.22 percent and 10.24 percent. Objections to the staff report are duerequest by November 9, 2017. Public hearings were held in late October and early November. An evidentiary hearing is scheduled to begin on December 11, 2017.the summer of 2022. Duke Energy Ohio cannot predict the outcome of this matter.
Ohio House Bill 6
On July 23, 2019, House Bill 6 was signed into law and became effective January 1, 2020. Among other things, the bill allows for funding, through a rider mechanism referred to as the Clean Air Fund (Rider CAF), of 2 nuclear generating facilities located in Northern Ohio owned by Energy Harbor (f/k/a FirstEnergy Solutions) and certain renewable resources, repeal of energy efficiency mandates and recovery of prudently incurred costs, net of any revenues, for Ohio investor-owned utilities that are participants under the OVEC power agreement. The OVEC recovery is through a non-bypassable rider that replaced any existing recovery mechanism approved by the PUCO and will remain in place through 2030. As such, Duke Energy Ohio created the Legacy Generation Rider (Rider LGR) that replaced Rider PSR effective January 1, 2020. The amounts recoverable from customers are subject to an annual cap, with incremental costs that exceed such cap eligible for deferral and recovery subject to review. See Note 11 for additional discussion of Duke Energy Ohio's ownership interest in OVEC. House Bill 128 was signed into law on March 31, 2021, and became effective June 30, 2021. The bill removes nuclear plant funding included in HB 6, eliminates Rider CAF and establishes the Solar Generation Fund Rider (Rider SGF) to recover the renewable investments originally included in HB 6. HB 128 does not impact OVEC cost recovery or any transmission or distribution rider.
Energy Efficiency Cost Recovery
On February 26, 2020, the PUCO issued an order directing utilities to wind down their demand-side management programs by September 30, 2020, and to terminate the programs by December 31, 2020, in response to changes in Ohio law that eliminated Ohio's energy efficiency mandates. On March 27, 2020, Duke Energy Ohio filed an Application for Rehearing seeking clarification on the final true up and reconciliation process after 2020. On November 18, 2020, the PUCO issued 2 orders on the application for rehearing. The first order was a Third Entry on Rehearing on the Duke Energy Ohio portfolio holding the cost cap previously imposed was unlawful, a shared savings cap of $8 million pretax should be imposed and lost distribution revenues could not be recovered after December 31, 2020. The second order directs all utilities set the rider to zero effective January 1, 2021, and to file a separate application for final reconciliation of all energy efficiency costs prior to December 31, 2020. On December 18, 2020, Duke Energy Ohio filed an application for rehearing. On January 13, 2021, the application for rehearing was granted for further consideration. Duke Energy Ohio cannot predict the outcome of this matter.
On October 9, 2020, Duke Energy Ohio filed an application to implement a voluntary energy efficiency program portfolio to commence on January 1, 2021. The application proposes a mechanism for recovery of program costs and a benefit associated with avoided transmission and distribution costs. The application remains under review. Effective January 1, 2021, Duke Energy Ohio suspended its energy efficiency programs due to changes in Ohio law. On June 14, 2021, the PUCO issued an entry for each utility to file by July 15, 2021, a proposal to reestablish low-income programs through December 31, 2021. Duke Energy Ohio filed its application on July 14, 2021. Duke Energy Ohio cannot predict the outcome of this matter.
Natural Gas Pipeline Extension
Duke Energy Ohio is proposing to installinstalling a new natural gas pipeline (the Central Corridor Project) in its Ohio service territory to increase system reliability and enable the retirement of older infrastructure. On January 20, 2017, Duke Energy Ohio filed an amendedcurrently estimates the pipeline development costs and construction activities will range from $185 million to $205 million in direct costs (excluding overheads and AFUDC) and that construction of the pipeline extension will be completed in time for use during the 2021/2022 winter season. An evidentiary hearing on Duke Energy Ohio's application withfor a Certificate of Environmental Compatibility and Public Need concluded on April 11, 2019. On November 21, 2019, the Ohio Power Siting Board for approval of one of two proposed routes. A public hearing was held on June 15, 2017, and an adjudicatory hearing was scheduled to begin September 11, 2017. On August 24, 2017, an administrative law judge (ALJ) granted a request made by(OPSB) approved Duke Energy OhioOhio's application subject to delay41 conditions on construction. Applications for rehearing were filed by several stakeholders on December 23, 2019, arguing that the procedural schedule while it works through various issues related toOPSB approval was incorrect. On February 20, 2020, the pipeline route. If approved, constructionOPSB denied the rehearing requests. On April 15, 2020, those stakeholders filed a notice of appeal at the Supreme Court of Ohio of the pipeline extension is expected to be completed beforeOPSB’s decision approving Duke Energy Ohio’s Central Corridor project application. The Ohio Supreme Court affirmed the 2020/2021 winter season. The proposed project involves the installation of a natural gas line and is estimated to cost approximately $110 million, excluding AFUDC.
Advanced Metering InfrastructureOPSB order on September 22, 2021.
On April 25, 2016, Duke Energy Kentucky filed with the KPSC an application for approval of a CPCN for the construction of advanced metering infrastructure. Duke Energy Kentucky estimates the $49 million project will take two years to complete. Duke Energy Kentucky also requested approval to establish a regulatory asset for the remaining book value of existing meter equipment and inventory to be replaced. Duke Energy Kentucky and the Kentucky attorney general entered into a stipulation to settle matters related to the application. On May 25, 2017, the KPSC issued an order to approve the stipulation with certain modifications. On June 1, 2017, Duke Energy Kentucky filed its acceptance of the modifications. Duke Energy Ohio has approximately $7 million included in Regulatory assets on its Condensed Consolidated Balance Sheets at September 30, 2017, for the book value of existing meter equipment.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Accelerated Natural Gas Service Line Replacement Rider
On January 20, 2015,22, 2020, Duke Energy Ohio filed an application with the OPSB for approval to amend the certificated pipeline route due to changes in the route negotiated with property owners and municipalities. On January 21, 2021, the OPSB approved the amended filing with recommended conditions that reaffirm previous conditions and provide guidance regarding local permitting and construction supervision.
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| FINANCIAL STATEMENTS | REGULATORY MATTERS |
MGP Cost Recovery
In an order issued in 2013, the PUCO approved Duke Energy Ohio's deferral and recovery of an accelerated natural gas service line replacement program (ASRP). Under the ASRP,costs related to environmental remediation at 2 sites (East End and West End) that housed former MGP operations. Duke Energy Ohio proposed to replace certain natural gas service lines on an accelerated basis over a 10-year period.has collected approximately $55 million in environmental remediation costs incurred between 2008 through 2012 through Rider MGP, which is currently suspended. Duke Energy Ohio also proposedhas made annual applications with the PUCO to complete preliminary survey and investigation work related torecover its incremental remediation costs consistent with the PUCO’s directive in Duke Energy Ohio’s 2012 natural gas service linesbase rate case. To date, the PUCO has not ruled on Duke Energy Ohio’s annual applications for the calendar years 2013 through 2019. On September 28, 2018, the Staff of the PUCO (Staff) issued a report recommending a disallowance of approximately $12 million of the $26 million in MGP remediation costs incurred between 2013 through 2017 that Staff believes are customer ownednot eligible for recovery. Staff interprets the PUCO’s 2013 order granting Duke Energy Ohio recovery of MGP remediation as limiting the recovery to work directly on the East End and West End sites. On October 30, 2018, Duke Energy Ohio filed reply comments objecting to the Staff’s recommendations and explaining, among other things, the obligation Duke Energy Ohio has under Ohio law to remediate all areas impacted by the former MGPs and not just physical property that housed the former plants and equipment. On March 29, 2019, Duke Energy Ohio filed its annual application to recover incremental remediation expense for which it doesthe calendar year 2018 seeking recovery of approximately $20 million in remediation costs. On July 12, 2019, the Staff recommended a disallowance of approximately $11 million for work that the Staff believes occurred in areas not have valid records and, further,authorized for recovery. Additionally, the Staff recommended that any discussion pertaining to relocate interior natural gas meters to suitable exterior locations where such relocation can be accomplished. Duke Energy Ohio's projected total capitalrecovery of ongoing MGP costs should be directly tied to or netted against insurance proceeds collected by Duke Energy Ohio. An evidentiary hearing concluded on November 21, 2019. Initial briefs were filed on January 17, 2020, and operations and maintenance expenditures under the ASRPreply briefs were approximately $240 million. The filing also sought approval of a rider mechanism (Rider ASRP) to recover related expenditures.filed on February 14, 2020.
On March 31, 2020, Duke Energy Ohio proposedfiled its annual application to update Rider ASRP on an annual basis. Intervenors opposedrecover incremental MGP remediation expense, seeking recovery of approximately $39 million in remediation costs incurred during 2019. On July 23, 2020, the ASRP, primarily because they believeStaff recommended a disallowance of approximately $4 million for work the program is neither required nor necessary under federal pipeline regulation. On October 26, 2016,Staff believes occurred in areas not authorized for recovery. Additionally, the PUCO issued an order denying the proposed ASRP.Staff recommended insurance proceeds, net of litigation costs and attorney fees, should be paid to customers and not be held by Duke Energy Ohio's applicationOhio until all investigation and remediation is complete. Duke Energy Ohio filed comments in response to the Staff report on August 21, 2020, and intervenor comments were filed on November 9, 2020.
The 2013 PUCO order also contained conditional deadlines for rehearingcompleting the MGP environmental remediation and the deferral of related remediation costs. Subsequent to the PUCO decisionorder, the deadline was denied onextended to December 31, 2019. On May 17, 2017.
Energy Efficiency Cost Recovery
On March 28, 2014,10, 2019, Duke Energy Ohio filed an application requesting a continuation of its existing deferral authority for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. The PUCO approvedMGP remediation that must occur after December 31, 2019. On July 12, 2019, the Staff recommended the commission deny the deferral authority request. On September 13, 2019, intervenor comments were filed opposing Duke Energy Ohio’s application but found thatOhio's request for continuation of existing deferral authority and on October 2, 2019, Duke Energy Ohio filed reply comments.
A Stipulation and Recommendation was not permitted to use banked energy savings from previous years in order to calculate the amount of allowed incentive. This conclusion represented a change to the cost recovery mechanism that had been agreed upon by intervenors and approved by the PUCO in previous cases. The PUCO granted the applications for rehearing filed jointly by Duke Energy Ohio, the Staff, the Office of the Ohio Consumers' Counsel and an intervenor. On January 6, 2016,the Ohio Energy Group on August 31, 2021, which is subject to review and approval by the PUCO. If approved, the Stipulation and Recommendation would, among other things, resolve all open issues regarding MGP remediation costs incurred between 2013 and 2019, including Duke Energy Ohio’s request for additional deferral authority beyond 2019, and the pending issues related to the Tax Act as it relates to Duke Energy Ohio’s natural gas operations. These impacts are not expected to have a material impact on the Duke Energy Ohio financial statements. The Stipulation and Recommendation further acknowledges Duke Energy Ohio’s ability to file a request for additional deferral authority in the future related to environmental remediation of any MGP impacts in the Ohio River if necessary, subject to specific conditions. On October 15, 2021, the PUCO Staff entered intogranted motions to intervene filed in September 2021 by Interstate Gas Supply, Inc. and Retail Energy Supply Association on a stipulation, pending the PUCO's approval, to resolve issues related to performance incentives and the PUCO Staff audit of 2013 costs, among other issues. In December 2015, based upon the stipulation, limited basis. An evidentiary hearing is scheduled for November 22, 2021. Duke Energy Ohio re-established approximately $20 millioncannot predict the outcome of this matter.
Tax Act – Ohio
On December 21, 2018, Duke Energy Ohio filed an application to change its base rate tariffs and establish a new rider to implement the benefits of the revenues that had been previously reversed.Tax Act for natural gas customers. Duke Energy Ohio requested commission approval to implement the tariff changes and rider effective April 1, 2019. The new rider will flow through to customers the benefit of the reduction in the statutory federal tax rate from 35% to 21% since January 1, 2018, all future benefits of the lower tax rates and a full refund of deferred income taxes collected at the higher tax rates in prior years. Deferred income taxes subject to normalization rules will be refunded consistent with federal law and deferred income taxes not subject to normalization rules will be refunded over a 10-year period. The PUCO established a procedural schedule and testimony was filed on July 31, 2019. An evidentiary hearing occurred on August 7, 2019. Initial briefs were filed on September 11, 2019. Reply briefs were filed on September 25, 2019. The Stipulation and Recommendation filed on August 31, 2021, disclosed in the MGP Cost Recovery matter above, also resolves the outstanding issues in this proceeding. On October 26, 2016, the PUCO issued an order approving the stipulation without modification. Intervenors requested a rehearing of the PUCO decision. In December 2016, 15, 2021, the PUCO granted motions to intervene filed in September 2021 by Interstate Gas Supply, Inc. and Retail Energy Supply Association on a rehearinglimited basis. An evidentiary hearing is scheduled for November 22, 2021. Duke Energy Ohio cannot predict the purposeoutcome of further review.this matter.
Duke Energy Kentucky Natural Gas Base Rate Case
On June 1, 2021, Duke Energy Kentucky filed an application with the KPSC requesting an increase in natural gas base rates of approximately $15 million, an approximate 13% average increase across all customer classes. The drivers for this case are capital invested since Duke Energy Kentucky's last natural gas base rate case in 2018. Duke Energy Kentucky is also seeking implementation of a Governmental Mandate Adjustment mechanism (Rider GMA) in order to recover from or pay to customers the financial impact of governmental directives and mandates, including changes in federal or state tax rates and regulations issued by the Pipeline and Hazardous Materials Safety Administration (PHMSA). On October 8, 2021, Duke Energy Kentucky filed a Stipulation and Recommendation jointly with the Kentucky Attorney General, subject to review and approval by the KPSC, which if approved, would resolve the case. The Stipulation and Recommendation includes a $9 million increase in base revenues, an ROE of 9.375% for natural gas base rates and 9.3% for natural gas riders, a rider for PHMSA-required capital investments with an annual 5% rate increase cap and a four-year natural gas base rate case stay-out. The hearing was held on October 18, 2021. Duke Energy Kentucky anticipates the KPSC will rule on the request by the end of 2021. Duke Energy Kentucky cannot predict the outcome of this matter.
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| FINANCIAL STATEMENTS | REGULATORY MATTERS |
Midwest Propane Caverns
Duke Energy Ohio uses propane stored in caverns to meet peak demand during winter. Once the Central Corridor Project is complete, the propane peaking facilities will no longer be necessary and will be retired. On October 7, 2021, Duke Energy Ohio requested deferral treatment of the property, plant and equipment as well as costs related to propane inventory and decommissioning costs. There is approximately $27 million in Property, Plant and Equipment on the Condensed Consolidated Balance Sheets as of September 30, 2021, and December 31, 2020, related to the propane caverns. Duke Energy Ohio cannot predict the outcome of this matter.
Duke Energy Indiana
2019 Indiana Rate Case
On July 2, 2019, Duke Energy Indiana filed a general rate case with the IURC for a rate increase for retail customers of approximately $395 million. The rebuttal case, filed on December 4, 2019, updated the requested revenue requirement to result in a 15.6% or $396 million average retail rate increase, including the impacts of the Utility Receipts Tax. Hearings concluded on February 7, 2020. On June 15, 2016,29, 2020, the IURC issued an order in the rate case approving a revenue increase of $146 million before certain adjustments and ratemaking refinements. The order approved Duke Energy Ohio filed an applicationIndiana’s requested forecasted rate base of $10.2 billion as of December 31, 2020, including the Edwardsport Integrated Gasification Combined Cycle (IGCC) Plant. The IURC reduced Duke Energy Indiana’s request by slightly more than $200 million, when accounting for approvalthe utility receipts tax and other adjustments. Approximately 50% of the reduction was due to a three-year energy efficiencyprospective change in depreciation and peak demand reduction portfoliouse of programs. A stipulationregulatory asset for the end-of-life inventory at retired generating plants, approximately 20% was due to the approved ROE of 9.7% versus the requested ROE of 10.4% and modified stipulationapproximately 20% was related to miscellaneous earnings neutral adjustments. Step one rates were estimated to be approximately 75% of the total and became effective on July 30, 2020. Step two rates are estimated to be the remaining 25% of the total rate increase. Step two rates were approved July 28, 2021, and implemented in August 2021. Step two rates are based on a return on equity of 9.7% and actual December 31, 2020 capital structure with a 54% equity component. Step two rates will be reconciled to January 1, 2021. Several groups appealed the IURC order to the Indiana Court of Appeals. Appellate briefs were filed on December 22, 2016,October 14, 2020, focusing on three issues: wholesale sales allocations, coal ash basin cost recovery and the Edwardsport IGCC operating and maintenance expense level approved. The appeal was fully briefed in January 27, 2017, respectively. Under2021 and an oral argument was held on April 8, 2021. The Indiana Court of Appeals affirmed the termsIURC decision on May 13, 2021. The Indiana Office of Utility Consumer Counselor (OUCC) and the stipulations, which included supportDuke Industrial Group filed a joint petition to transfer the rate case appeal to the Indiana Supreme Court on June 28, 2021. Response briefs were filed July 19, 2021. The Indiana Supreme Court granted the petition to transfer on September 16, 2021, and scheduled oral argument for deferral authority of all costs and a cap on shared savings incentives,November 16, 2021. Duke Energy Ohio has offered its energy efficiency and peak demand reduction programs throughout 2017. On February 3, 2017, Duke Energy Ohio filed for deferral authority of its costs incurred in 2017 in respect of its proposed energy efficiency and peak demand reduction portfolio. The PUCO staff and one intervenor have proposed a cap on both program costs and shared savings. On September 27, 2017, the PUCO issued an order approving a modified stipulation. The modifications impose an annual cap of approximately $38 million on program costs and shared savings incentives combined, but allowed for Duke Energy Ohio to file for a waiver of costs in excess of the cap in 2017. On October 12, 2017, Duke Energy Ohio filed a motion for a waiver for recovery of costs incurred in 2017 above the annual cap. Duke Energy OhioIndiana cannot predict the outcome of this matter.
2012 Natural Gas Rate Case/Manufactured Gas Plant Cost2020 Indiana Coal Ash Recovery Case
On November 13, 2013, the PUCO issued an order approving a settlement ofIn Duke Energy Ohio’s natural gas baseIndiana’s 2019 rate case, and authorizing the recovery ofIURC approved coal ash basin closure costs incurred between 2008expended through 2018 including financing costs as a regulatory asset and 2012 for environmental investigation and remediation of two former manufactured gas plant (MGP) sites. The PUCO order also authorized Duke Energy Ohio to continue deferring MGP environmental investigation and remediation costs incurred subsequent to 2012 and to submit annual filings to adjust the MGP rider for future costs. Intervening parties appealed this decision to the Ohio Supreme Court and on June 29, 2017, the Ohio Supreme Court issued its decision affirming the PUCO order. Appellants filed a request for reconsideration, which was denied on September 27, 2017. This matter is now final.
The PUCO order also contained deadlines for completing the MGP environmental investigation and remediation costs at the MGP sites. For the property known as the East End site, the PUCO order established a deadline of December 31, 2016, which was subsequently extended to December 31, 2019. In January 2017, intervening parties filed for rehearing of the PUCO's decision. On February 8, 2017, the PUCO denied the rehearing request. As of September 30, 2017, Duke Energy Ohio had approximately $36 million included in Regulatory assets on the Condensed Consolidated Balance Sheetsrate base. The IURC also opened a subdocket for future remediation costs expected to be incurred at the East End site.
Regional Transmission Organization Realignment
Duke Energy Ohio, including Duke Energy Kentucky, transferred control of its transmission assets from Midcontinent Independent System Operator, Inc. (MISO) to PJM, effective December 31, 2011. The PUCO approved a settlementpost-2018 coal ash related to Duke Energy Ohio’s recovery of certain costs of the Regional Transmission Organization (RTO) realignment via a non-bypassable rider. Duke Energy Ohio is allowed to recover all MISO Transmission Expansion Planning (MTEP) costs, including but not limited to Multi Value Project (MVP) costs, directly or indirectly charged to Ohio customers. Duke Energy Ohio also agreed to vigorously defend against any charges for MVP projects from MISO. The KPSC also approved a request to effect the RTO realignment, subject to a commitment not to seek double recovery in a future rate case of the transmission expansion fees that may be charged by MISO and PJM in the same period or overlapping periods.
Duke Energy Ohio had a recorded liability for its exit obligation and share of MTEP costs, excluding MVP, of $90 million at September 30, 2017, and December 31, 2016, recorded within Other in Current liabilities and Other in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The retail portions of MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider. As of September 30, 2017, and December 31, 2016, Duke Energy Ohio had $71 million recorded in Regulatory assets on the Condensed Consolidated Balance Sheets.
MVP. MISO approved 17 MVP proposals prior to Duke Energy Ohio’s exit from MISO on December 31, 2011. Construction of these projects is expected to continue through 2020. Costs of these projects, including operating and maintenance costs, property and income taxes, depreciation and an allowed return, are allocated and billed to MISO transmission owners.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
On December 29, 2011, MISO filed a tariff with the FERC providing for the allocation of MVP costs to a withdrawing owner based on monthly energy usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation methodology to transmission owners who withdrew from MISO prior to January 1, 2012, is consistent with the tariff at the time of their withdrawal from MISO and, (ii) if not, what the amount of and methodology for calculating any MVP cost responsibility should be. In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. On July 16, 2013, a FERC ALJ issued an initial decision. Under this Initial Decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio filed exceptions to the initial decision, requesting FERC to overturn the ALJ’s decision.
On October 29, 2015, the FERC issued an order reversing the ALJ's decision. The FERC ruled the cost allocation methodology is not consistent with the MISO tariff and that Duke Energy Ohio has no liability for MVP costs after its withdrawal from MISO. On May 19, 2016, the FERC denied the request for rehearing filed by MISO and the MISO Transmission Owners. On July 15, 2016, the MISO Transmission Owners filed a petition for review with the U.S. Court of Appeals for the Sixth Circuit. On June 21, 2017, a three-judge panel affirmed FERC's 2015 decision holding that Duke Energy Ohio has no liability for the cost of the MVP projects constructed after Duke Energy Ohio's withdrawal from MISO. MISO did not file further petitions for review and this matter is now final.
Duke Energy Indiana
Coal Combustion Residual Plan
On March 17, 2016,expenditures. Duke Energy Indiana filed withtestimony on April 15, 2020, in the IURC a requestcoal ash subdocket requesting recovery for approvalthe post-2018 coal ash basin closure costs for plans that have been approved by the Indiana Department of its first group of federally mandated CCR rule compliance projects (Phase I CCR Compliance Projects) to comply with the EPA's CCR rule. The projects in this Phase I filing are CCR compliance projects, including the conversion of Cayuga and Gibson stations to dry bottom ash handling and related water treatment. Duke Energy Indiana has requested timely recovery of approximately $380 million in retail capital costs, including AFUDC, and recovery of incremental operating and maintenance costs under a federal mandate tracker that provides for timely recovery of 80 percent of such costs andEnvironmental Management (IDEM) as well as continuing deferral, with carrying costs, of 20 percent of such costs for recovery in a subsequent retail base rate case. On January 24, 2017, Duke Energy Indiana and various intervenors filed a settlement agreement withon the IURC. Terms of the settlement include recovery of 60 percent of the estimated CCR compliance construction project capital costs through existing rider mechanisms and deferral of 40 percent of these costs until Duke Energy Indiana's next general retail rate case. The deferred costs will earn a return based on Duke Energy Indiana's long-term debt rate of 4.73 percent until costs are included in retail rates, at which time the deferred costs will earn a full return. Costs are to be capped at $365 million, plus actual AFUDC. Costs above the cap would be considered for recovery in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring.balance. An evidentiary hearing was held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017.September 14, 2020. Briefing was completed by mid-September 2021. On May 24, 2017, the IURC approved the settlement agreement.
FERC Transmission Return on Equity Complaints
Customer groups have filed with the FERC complaints against MISO and its transmission-owning members, including Duke Energy Indiana, alleging, among other things, that the current base rate of return on equity earned by MISO transmission owners of 12.38 percent is unjust and unreasonable. The complaints, among other things, claim that the current base rate of return on equity earned by MISO transmission owners should be reduced to 8.67 percent. On January 5, 2015, the FERC issued an order accepting the MISO transmission owners' adder of 0.50 percent to the base rate of return on equity based on participation in an RTO subject to it being applied to a return on equity that is shown to be just and reasonable in the pending return on equity complaints. On December 22, 2015, the presiding FERC ALJ in the first complaint issued an Initial Decision in which the base rate of return on equity was set at 10.32 percent. On September 28, 2016, the Initial Decision in the first complaint was affirmed by FERC, but is subject to rehearing requests. On June 30, 2016, the presiding FERC ALJ in the second complaint issued an Initial Decision setting the base rate of return on equity at 9.70 percent. The Initial Decision in the second complaint is pending FERC review. On April 14, 2017, the U.S. Court of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. This decision may affect the outcome of the complaints against Duke Energy Indiana. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.
Grid Infrastructure Improvement Plan
In June 2016,November 3, 2021, the IURC issued an order approving a settlement agreement among Duke Energy Indiana and certain parties related to a proposed grid infrastructure improvement plan. The settlement agreement includedallowing recovery for post-2018 coal ash basin closure costs for the removal of an AMI project and also provided forplans that have been approved by IDEM, as well as continuing deferral, accounting for depreciation and post-in-servicewith carrying costs, for AMI projects outside the plan. Duke Energy Indiana withdrew its request for a regulatory asset for current meters and will retain any savings associated with future AMI installation until the next retail base rate case, which is required to be filed prior to the end of the plan. During the third quarter of 2016, Duke Energy Indiana decided to implement the AMI project. This decision resulted in a pretax impairment charge related to existing or non-AMI meters of approximately $8 million for the three and nine months ended September 30, 2016, based in part on the requirement to file a base rate case in 2022 under the approved plan. As of September 30, 2017, Duke Energy Indiana's remaining net book value of non-AMI meters is approximately $43 million and will be depreciated through 2022. In the event that Duke Energy Indiana were to file a base rate case earlier than 2022, it would result in additional impairment charges.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Benton County Wind Farm Dispute
On December 16, 2013, Benton County Wind Farm LLC (BCWF) filed a lawsuit against Duke Energy Indiana seeking damages for past generation losses totaling approximately $16 million alleging Duke Energy Indiana violated its obligations under a 2006 PPA by refusing to offer electricity to the market at negative prices. Damage claims continue to increase during times that BCWF is not dispatched. Under 2013 revised MISO market rules, Duke Energy Indiana is required to make a price offer to MISO for the power it proposes to sell into MISO markets and MISO determines whether BCWF is dispatched. Because market prices would have been negative due to increased market participation, Duke Energy Indiana determined it would not bid at negative prices in order to balance customer needs against BCWF's need to run. BCWF contends Duke Energy Indiana must bid at the lowest negative price to ensure dispatch, while Duke Energy Indiana contends it is not obligated to bid at any particular price, that it cannot ensure dispatch with any bid and that it has reasonably balanced the parties' interests. On July 6, 2015, the U.S. District Court for the Southern District of Indiana entered judgment against BCWF on all claims. BCWF appealed the decision and on December 9, 2016, the appeals court ruled in favor of BCWF. On June 30, 2017, the parties finalized a settlement agreement. Terms of the settlement included Duke Energy Indiana paying $29 million for back damages. Additionally, the parties agreed on the method by which the contract will be bid into the market in the future. Duke Energy Indiana recorded an obligation and a regulatory asset related to the settlement amount in fourth quarter 2016. The settlement amount was paid in June 2017. The IURC issued an order on September 27, 2017, approving recovery of the settlement amount through Duke Energy Indiana's fuel clause.balance. The IURC order has been appealedis subject to appeal within 30 days to the IURC or the Indiana Court of Appeals. Duke Energy Indiana cannot predict the outcome of this matter.
Piedmont
South Carolina2020 Tennessee Rate Stabilization Adjustment FilingCase
In June 2017,On July 2, 2020, Piedmont filed an application with the TPUC, its first general rate case in Tennessee in nine years, for a rate increase for retail customers of approximately $30 million, which represents an approximate 15% increase in annual revenues. The rate increase is driven by significant infrastructure upgrade investments since Piedmont's previous rate case. Approximately half of the plant additions being added to rate base are categories of capital investment not covered under the IMR mechanism, which was approved in 2013. Piedmont amended its requested increase to approximately $26 million in December 2020. As authorized under Tennessee law, Piedmont implemented interim rates on January 2, 2021, at the level requested in its adjusted request. A settlement reached with the Tennessee Consumer Advocate in mid-January was filed with the PSCSCTPUC on February 2, 2021. The settlement results in an increase of revenues of approximately $16 million and an ROE of 9.8%. On May 6, 2021, the TPUC issued an order approving the settlement. Revised customer rates became effective January 2, 2021. Piedmont refunded customers the difference between bills previously rendered under interim rates and such bills if rendered under approved rates, plus interest, in April 2021.
2021 North Carolina Rate Case
On March 22, 2021, Piedmont filed an application with the NCUC for a rate increase for retail customers of approximately $109 million, which represents an approximate 10% increase in retail revenues. The rate increase is driven by customer growth and significant infrastructure upgrade investments (plant additions) since the last general rate case. Approximately 70% of the plant additions being rolled into rate base are categories of plant investment not covered under the SouthIMR mechanism, which was originally approved as part of the 2013 North Carolina Rate Stabilization ActCase. On July 28, 2021, Piedmont amended its quarterly monitoring reportrequested increase to approximately $97 million.
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| FINANCIAL STATEMENTS | REGULATORY MATTERS |
On September 7, 2021, Piedmont and the Public Staff, the Carolina Utility Customers Association, Inc. and the Carolina Industrial Group for Fair Utility Rates IV filed a Stipulation of Partial Settlement (Stipulation), which is subject to review and approval by the 12-month period ending March 31, 2017. The filing included a revenue deficiency calculation and tariff rates in order to permit PiedmontNCUC, resolving most issues between these parties. Major components of the opportunity to earn the rate ofStipulation include:
•A return on equity of 12.6 percent established in its last general rate case.9.6% and a capital structure of 51.6% equity and 48.4% debt;
•Continuation of the IMR mechanism and margin decoupling; and
•A revenue increase of $67 million, subject to completion of the Robeson County LNG facility and the Pender Onslow County expansion project.
An evidentiary hearing to review the Stipulation and other issues concluded on September 9, 2021. On October 4, 2017,12, 2021, Piedmont notified the PSCSC approvedNCUC of its intent to implement the stipulated rates effective November 1, 2021, on a settlement agreement betweentemporary basis and subject to refund. On October 18, 2021, Piedmont and the PSCSC Office of Regulatory Staff. TermsPublic Staff filed supplemental testimony attesting to the completion of the settlement included implementationRobeson County LNG facility and the Pender Onslow County expansion project and to the propriety of ratesincluding the capital investment for the 12-month period beginning November 2017 with a return on equity of 10.2 percent.
North Carolina Integrity Management Rider Filings
In October 2017, Piedmont filed a petition under the Integrity Management Rider (IMR) mechanism to collect an additional $8.9 millionthese two projects in annual revenues, effective December 2017, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending September 30, 2017.this proceeding. Piedmont cannot predict the outcome of this matter.
In May 2017, Piedmont filed, and the NCUC approved, a petition under the IMR mechanism to collect an additional $11.6 million in annual revenues, effective June 2017, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2017.
OTHER REGULATORY MATTERS
Atlantic Coast Pipeline, LLC
On September 2, 2014, Duke Energy, Dominion Resources (Dominion), Piedmont and Southern Company Gas announced the formation of Atlantic Coast Pipeline, LLC (ACP) to build and own the proposed Atlantic Coast Pipeline (ACP pipeline), was planned to be an approximately 600-mile interstate natural gas pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet the needs identified by Duke Energy Carolinas, Duke Energy Progress and Piedmont. The ACP pipeline development costs are estimated between $5.0 billion to $5.5 billion, excluding financing costs. Dominion will build and operate the ACP pipeline and holds a leading ownership percentage in ACP of 48 percent. Duke Energyindirectly owns a 47 percent47% interest, which is accounted for as an equity method investment through its Gas Utilities and Infrastructure segment. Southern Company
As a result of the uncertainty created by various legal rulings, the potential impact on the cost and schedule for the project, the ongoing legal challenges and the risk of additional legal challenges and delays through the construction period and Dominion’s decision to sell substantially all of its gas transmission and storage segment assets, Duke Energy's Board of Directors and management decided that it was not prudent to continue to invest in the project. On July 5, 2020, Duke Energy and Dominion announced the cancellation of the ACP pipeline project.
As part of the pretax charges to earnings of approximately $2.1 billion recorded in June 2020, within Equity in (losses) earnings of unconsolidated affiliates on the Duke Energy Condensed Consolidated Statements of Operations, Duke Energy established liabilities related to the cancellation of the ACP pipeline project. In February 2021, Duke Energy paid approximately $855 million to fund ACP's outstanding debt, relieving Duke Energy of its guarantee. At September 30, 2021, there is $36 million and $63 million within Other Current Liabilities and Other Noncurrent Liabilities, respectively, in the Gas maintains a 5 percent interest. Utilities and Infrastructure segment. The liabilities represent Duke Energy's obligation of approximately $99 million to satisfy remaining ARO requirements to restore construction sites.
See Note 13Notes 1 and 11 for additional information related to Duke Energy's ownership interest.
Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. On September 18, 2015, ACP filed an application with the FERC requesting a CPCN authorizing ACP to construct the pipeline. ACP executed a construction agreement in September 2016. ACP also requested approval of an open access tariff and the precedent agreements it entered into with future pipeline customers. In December 2016, FERC issued a draft Environmental Impact Statement (EIS) indicating that the proposed pipeline would not cause significant harm to the environment or protected populations. The FERC issued the final EIS in July 2017. On October 13, 2017, FERC issued an order approving the CPCN, subject to conditions. On October 16, 2017, ACP accepted the FERC order subject to reserving its right to file a request for rehearing or clarification on a timely basis. Construction is projected to begin in the fourth quarter of 2017, with a targeted in-service date in late 2019. The project remains subject to other pending federal and state approvals.
Sabal Trail Transmission, LLC
On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail Transmission, LLC (Sabal Trail) from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture to construct a 515-mile natural gas pipeline (Sabal Trail pipeline) to transport natural gas to Florida. Total estimated project costs are approximately $3.2 billion. The Sabal Trail pipeline traverses Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. See Note 13 for additional information related to Duke Energy's ownership interest.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. On September 7, 2016, FERC denied the intervenors' rehearing requests. On September 21, 2016, intervenors filed an appeal of FERC's CPCN orders to the U.S. Court of Appeals for the District of Columbia Circuit. On August 22, 2017, the appeals court ruled against FERC in the case for failing to include enough information on the impact of greenhouse-gas emissions carried by the pipeline and vacated the CPCN order. In response to the August 2017 court decision, the FERC issued a draft Supplemental Environmental Impact Statement (SEIS) on September 27, 2017. Comments on the SEIS are due by November 20, 2017. On October 6, 2017, FERC filed a petition with the D.C. Circuit Court of Appeals requesting a rehearing regarding the court's decision to vacate the CPCN order. On October 6, 2017, Sabal Trail and other natural gas shippers, including Duke Energy Florida, also filed a rehearing request with the D.C. Circuit Court of Appeals regarding the decision to vacate the CPCN order. It is unclear how this matter will impact the project going forward. The Sabal Trail pipeline has received other required regulatory approvals and the phase one mainline was placed in service in July 2017. On October 12, 2017, Sabal Trail filed a request with FERC to place in-service a lateral line to Duke Energy Florida's Citrus County Combined Cycle facility.
Constitution Pipeline Company, LLC
Duke Energy has a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution). Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc. Duke Energy's total anticipated contributions are approximately $229 million.
On April 22, 2016, the New York State Department of Environmental Conservation (NYSDEC) denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed legal actions in the U.S. Court of Appeals for the Second Circuit (U.S. Court of Appeals) challenging the legality and appropriateness of the NYSDEC’s decision and on August 18, 2017, the petition was denied in part and dismissed in part. On September 1, 2017, Constitution filed a petition for a rehearing of portions of the decision unrelated to the water quality certification, which was denied by the U.S. Court of Appeals. On October 11, 2017, Constitution filed a petition for declaratory order with the FERC requesting FERC to issue an order finding the NYSDEC waived its rights to issue a water quality certification by not acting on Constitution's application within the time frame required by statute, which would allow the project to proceed. Constitution has revised the target in-service date to as early as the first half of 2019 due to the NYDSEC's denial of the water quality certification and the legal actions being taken to challenge the decision, assuming the timely receipt of a Notice to Proceed from the FERC. Duke Energy cannot predict the outcome of this matter.
Since April 2016, with the actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. To the extent the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward, an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, may be recorded.
See Note 13 for additional information related to ownership interest and carrying value of the investment.transaction.
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP)IRPs with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to 20 years) and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in North Carolina Florida and Indiana earlier than their current estimated useful lives. Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives primarily because facilities doand plans to seek regulatory recovery for amounts that would not have the requisite emission control equipment to meet EPA regulations recently approved or proposed.be otherwise recovered when any of these assets are retired.
The table below contains the net carrying value of generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of September 30, 2017,2021, and exclude capitalized asset retirement costs.
| | | | | | | | | | | | | | | | | | | | | |
| |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | Remaining Net | | | | |
| Capacity | | | | | | | | Book Value | | | | |
| (in MW) | | | | | | | | (in millions) | | | | |
| Duke Energy Carolinas | | | | | | | | | | | | | |
Allen Steam Station Units 1-2(a) | 324 | | | | | | | | | $ | 19 | | | | | |
Allen Steam Station Units 4-5(b) | 516 | | | | | | | | | 362 | | | | | |
Cliffside Unit 5(b) | 544 | | | | | | | | | 367 | | | | | |
| Duke Energy Progress | | | | | | | | | | | | | |
Mayo Unit 1(b) | 704 | | | | | | | | | 640 | | | | | |
Roxboro Units 3-4(b) | 1,392 | | | | | | | | | 465 | | | | | |
| Duke Energy Florida | | | | | | | | | | | | | |
Crystal River Units 4-5(c) | 1,410 | | | | | | | | | 1,658 | | | | | |
Duke Energy Indiana (d) | | | | | | | | | | | | | |
Gibson Units 1-5(e) | 2,822 | | | | | | | | | 1,814 | | | | | |
Cayuga Units 1-2(e) | 995 | | | | | | | | | 713 | | | | | |
| Total Duke Energy | 8,707 | | | | | | | | | $ | 6,038 | | | | | |
|
| | | | | | |
| | | | Remaining Net |
|
| | Capacity |
| | Book Value |
|
| | (in MW) |
| | (in millions) |
|
| Duke Energy Carolinas | | | |
Allen Steam Station Units 1-3(a) | 585 |
| | $ | 164 |
|
| Progress Energy and Duke Energy Florida | | | |
Crystal River Units 1 and 2(b) | 873 |
| | 111 |
|
| Duke Energy Indiana | | | |
Gallagher Units 2 and 4(c) | 280 |
| | 130 |
|
| Total Duke Energy | 1,738 |
| | $ | 405 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Duke Energy Carolinas will retire Allen Steam Station Units 1 through 3 by December 31, 2024, as part of the resolution of a lawsuit involving alleged New Source Review violations.REGULATORY MATTERS |
| |
(b) | Duke Energy Florida will likely retire these coal units by 2018 to comply with environmental regulations. |
| |
(c) | Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as
(a)As part of the settlement of Edwardsport IGCC matters. |
Refer to the "Western2015 resolution of a lawsuit involving alleged New Source Review violations, Duke Energy Carolinas Modernization Plan" discussion abovemust retire Allen Steam Station Units 1 through 3 by December 31, 2024. The long-term energy options considered in the IRP could result in retirement of these units earlier than their current estimated useful lives. Unit 3 with a capacity of 270 MW and a net book value of $26 million at December 31, 2020, was retired in March 2021.
(b)These units were included in the IRP filed by Duke Energy Carolinas and Duke Energy Progress in North Carolina and South Carolina on September 1, 2020. The long-term energy options considered in the IRP could result in retirement of these units earlier than their current estimated useful lives. In 2019, Duke Energy Carolinas and Duke Energy Progress filed North Carolina rate cases that included depreciation studies that accelerate end-of-life dates for detailsthese plants. The NCUC issued orders in the 2019 rate cases of Duke Energy Progress' plannedCarolinas and Duke Energy Progress on March 31, 2021, and April 16, 2021, respectively, in which the proposals to shorten the remaining depreciable lives of these units were denied, while indicating the IRP proceeding was the appropriate proceeding for the review of generating plant retirements.
PART I(c)On January 14, 2021, Duke Energy Florida filed a settlement agreement with the FPSC, which proposed depreciation rates reflecting retirement dates for Duke Energy Florida's last 2 coal-fired generating facilities, Crystal River Units 4-5, eight years ahead of schedule in 2034 rather than in 2042. The settlement was approved by the FPSC on May 4, 2021.
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –(d)Gallagher Units 2 and 4 with a total capacity of 280 MW and a total net book value of $102 million at December 31, 2020, were retired on June 1, 2021.
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.(e)The rate case filed July 2, 2019, included proposed depreciation rates reflecting retirement dates from 2026 to 2038. The depreciation rates reflecting these updated retirement dates were approved by the IURC as part of the rate case order issued on June 29, 2020.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
5.4. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, coal ash and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all of the Duke Energy Registrants.
Remediation Activities
In addition to asset retirement obligations (ARO)AROs recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based upon site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other on the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
The following tables containtable contains information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Accounts Payable within Current Liabilities and Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 98 |
| | $ | 10 |
| | $ | 18 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 10 |
| | $ | 1 |
|
| Provisions/adjustments | (1 | ) | | 2 |
| | 1 |
| | — |
| | 1 |
| | (3 | ) | | (2 | ) | | 1 |
|
| Cash reductions | (13 | ) | | (2 | ) | | (3 | ) | | — |
| | (3 | ) | | (7 | ) | | (1 | ) | | — |
|
| Balance at end of period | $ | 84 |
| | $ | 10 |
| | $ | 16 |
| | $ | 3 |
| | $ | 12 |
| | $ | 49 |
| | $ | 7 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 94 |
| | $ | 10 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 54 |
| | $ | 12 |
| | $ | 1 |
|
| Provisions/adjustments | 34 |
| | 5 |
| | 5 |
| | 2 |
| | 3 |
| | 6 |
| | 20 |
| | — |
|
| Cash reductions | (12 | ) | | (4 | ) | | (6 | ) | | (2 | ) | | (4 | ) | | (1 | ) | | (2 | ) | | — |
|
| Balance at end of period | $ | 116 |
| | $ | 11 |
| | $ | 16 |
| | $ | 3 |
| | $ | 13 |
| | $ | 59 |
| | $ | 30 |
| | $ | 1 |
|
| | | | | | | | | | |
| (in millions) | September 30, 2021 | | December 31, 2020 | |
| Reserves for Environmental Remediation | | | | |
| Duke Energy | $ | 74 | | | $ | 75 | | |
| Duke Energy Carolinas | 19 | | | 19 | | |
| Progress Energy | 17 | | | 19 | | |
| Duke Energy Progress | 6 | | | 6 | | |
| Duke Energy Florida | 11 | | | 12 | | |
| Duke Energy Ohio | 21 | | | 22 | | |
| Duke Energy Indiana | 5 | | | 6 | | |
| Piedmont | 12 | | | 10 | | |
Additional losses in excess of recorded reserves that could be incurred for the stages of investigation, remediation and monitoring for environmental sites that have been evaluated at this time are not material except as presented in the table below.material.
|
| | | |
| (in millions) | |
| Duke Energy | $ | 58 |
|
| Duke Energy Carolinas | 20 |
|
| Duke Energy Ohio | 30 |
|
| Duke Energy Indiana | 3 |
|
| Piedmont | 2 |
|
North Carolina and South Carolina Ash Basins
In February 2014, a break in a stormwater pipe beneath an ash basin at Duke Energy Carolinas’ retired Dan River Steam Station caused a release of ash basin water and ash into the Dan River. Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river. In July 2014, Duke Energy completed remediation work identified by the EPA. Future costs related to the Dan River release, including future civil enforcement, future regulatory directives, natural resources damages, future claims or litigation and long-term environmental impact costs, cannot be reasonably estimated at this time.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The North Carolina Department of Environmental Quality (NCDEQ) has historically assessed Duke Energy Carolinas and Duke Energy Progress with Notices of Violations (NOV) for violations that were most often resolved through satisfactory corrective actions and minor, if any, fines or penalties. Subsequent to the Dan River ash release, Duke Energy Carolinas and Duke Energy Progress have been served with a higher level of NOVs, including assessed penalties for violations at L.V. Sutton Combined Cycle Plant (Sutton) and Dan River Steam Station. Duke Energy Carolinas and Duke Energy Progress cannot predict whether the NCDEQ will assess future penalties related to existing unresolved NOVs and if such penalties would be material. See "NCDEQ Notices of Violation" section below for additional discussion.
LITIGATION
DukeDuke Energy
Texas Storm Uri Tort Litigation
Duke Energy no longer has exposure to litigation matters related toand several Duke Energy renewables project companies have been named in multiple lawsuits arising out of Texas Storm Uri in mid-February 2021, and particularly, in the International Disposal Groupderegulated market managed by the Electric Reliability Council of Texas. There are 30 state court actions pending. These lawsuits seek recovery for property damages, personal injury and for wrongful death allegedly incurred by the plaintiffs as a result of power outages, which the divestiture ofplaintiffs claim was the business in December 2016. See Note 2 for additional information related to the sale of International Energy.
Ash Basin Shareholder Derivative Litigation
Five shareholder derivative lawsuits were filed in Delaware Chancery Court related to the release at Dan River and to the management of Duke Energy’s ash basins. On October 31, 2014, the five lawsuits were consolidated in a single proceeding titled In Re Duke Energy Corporation Coal Ash Derivative Litigation. On December 2, 2014, plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The Consolidated Complaint names as defendants several current and former Duke Energy officers and directors (collectively, the Duke Energy Defendants). Duke Energy is named as a nominal defendant.
The Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties by failing to adequately oversee Duke Energy’s ash basins and that these breaches of fiduciary duty may have contributed to the incident at Dan River and continued thereafter. The lawsuit also asserts claims against the Duke Energy Defendants for corporate waste (relating to the money Duke Energy has spent and will spend as a result of the fines, penalties and coal ash removal) and unjust enrichment (relatingdefendants' failures. The cases pending in state court have been consolidated into a Texas state court multidistrict litigation proceeding before a single judge to the compensation and director remuneration that was received despite these alleged breaches of fiduciary duty). The lawsuit seeks both injunctive relief againsthandle all pretrial coordination. Duke Energy and restitution fromcannot predict the Duke Energy Defendants. On April 22, 2016, plaintiffs filed an Amended Verified Consolidated Shareholder Derivative Complaint (Amended Complaint) making the same allegations as in the Consolidated Complaint. The Duke Energy Defendants filed a motion to dismiss the Amended Complaint on June 21, 2016. On December 14, 2016, the Delaware Chancery Court entered an order dismissing the Amended Complaint. Plaintiffs filed an appeal to the Delaware Supreme Court on January 9, 2017. Oral argument was held on September 27, 2017, and a decision is pending.
On October 30, 2015, shareholder Saul Bresalier filed a shareholder derivative complaint (Bresalier Complaint) in the U.S. District Court for the Districtoutcomes of Delaware. The lawsuit alleges that several current and former Duke Energy officers and directors (Bresalier Defendants) breached their fiduciary duties in connection with coal ash environmental issues, the post-merger change in Chief Executive Officer (CEO) and oversight of political contributions. Duke Energy is named as a nominal defendant. The Bresalier Complaint contends that the appointed Demand Review Committee failed to appropriately consider the shareholder’s earlier demand for litigation and improperly decided not to pursue claims against the Bresalier Defendants. On March 30, 2017, the court granted Defendants’ Motion to Dismiss on the claims relating to coal ash environmental issues and political contributions. As discussed below, a settlement agreement was approved for the merger-related claims in the Bresalier Complaint, and those claims were dismissed. On September 8, 2017, Bresalier filed a notice of appeal to the U.S. Court of Appeals for the Third Circuit (Third Circuit Court) challenging the dismissal of his coal ash and political contribution claims. Pursuant to a scheduling order issued by the Third Circuit Court, briefing will be complete on December 20, 2017.
It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with these matters.
Progress Energy Merger Shareholder Litigation
| | | | | |
| FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
On May 31, 2013, the Delaware Chancery Court consolidated four shareholder derivative lawsuits filed in 2012. The Court also appointed a lead plaintiff and counsel for plaintiffs and designated the case as In Re Duke Energy Corporation Derivative Litigation (Merger Chancery Litigation). The lawsuit names as defendants the Legacy Duke Energy Directors. Duke Energy is named as a nominal defendant. The case alleges claims for breach of fiduciary duties of loyalty and care in connection with the post-merger change in CEO.
Two shareholder Derivative Complaints, filed in 2012 in federal district court in Delaware, were consolidated as Tansey v. Rogers, et al. The case alleges claims against the Legacy Duke Energy Directors for breach of fiduciary duty and waste of corporate assets, as well as claims under Section 14(a) and 20(a) of the Exchange Act. Duke Energy is named as a nominal defendant. On December 21, 2015, Plaintiff filed a Consolidated Amended Complaint asserting the same claims contained in the original complaints.
The Legacy Duke Energy Directors reached an agreement-in-principle to settle the Merger Chancery Litigation, conditioned on dismissal as well, of the Tansey v. Rogers, et al case and the merger-related claims in the Bresalier Complaint discussed above, which was approved by the Delaware Chancery Court on July 13, 2017. The entire settlement amount was funded by insurance. The settlement amount, less court-approved attorney fees, totaled $20 million and was paid to Duke Energy in third quarter 2017.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Price Reporting Cases
Duke Energy Trading and Marketing, LLC (DETM), a non-operating Duke Energy affiliate, was a defendant, along with numerous other energy companies, in four class-action lawsuits and a fifth single-plaintiff lawsuit in a consolidated federal court proceeding in Nevada. Each of these lawsuits contained similar claims that defendants allegedly manipulated natural gas markets by various means, including providing false information to natural gas trade publications and entering into unlawful arrangements and agreements in violation of the antitrust laws of the respective states. Plaintiffs sought damages in unspecified amounts. In February 2016, DETM reached agreements in principle to settle all of the pending lawsuits. Settlement of the single-plaintiff settlement was finalized and paid in March 2016. The proposed settlement of the class action lawsuits was approved by the Court and all settlement amounts, which are not material to Duke Energy, have been paid.
Duke Energy Carolinas and Duke Energy Progress
Coal Ash Insurance Coverage Litigation
In March 2017, Duke Energy Carolinas and Duke Energy Progress filed a civil action in the North Carolina SuperiorBusiness Court against various insurance providers. The lawsuit seeks payment for coal ash-relatedash related liabilities covered by third-party liability insurance policies. The insurance policies were issued between 1971 and 1986 and provide third-party liability insurance for property damage. The civil action seeks damages for breach of contract and indemnification for costs arising from the Coal Ash Act and the EPAU.S. Environmental Protection Agency CCR rule at 15 coal-fired plants in North Carolina and South Carolina.
Duke Energy Carolinas and Duke Energy Progress have resolved claims against all, but two of the insurers, sued in this litigation and are dismissing their claims against the settling insurers. Duke Energy Carolinas and Duke Energy Progress have received approximately $418 million of coal ash insurance litigation proceeds from settlements with insurer-defendants and these proceeds will be distributed in accordance with the terms of the CCR settlement agreement. The companies are assessing their options with regard to the two remaining foreign insurers that have defaulted. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
NCDEQ State Enforcement ActionsDuke Energy Carolinas
In the first quarter of 2013, the Southern Environmental Law Center (SELC) sent notices of intent to sueRuben Villano, et al. v. Duke Energy Carolinas, LLC
On June 16, 2021, a group of 9 individuals went over a low head dam adjacent to the Dan River Steam Station in Eden, North Carolina, while water tubing. Emergency personnel rescued 4 people and Duke Energy Progress related to alleged Clean Water Act (CWA) violations from coal ash basins at two of their coal-fired power plants in North Carolina. The NCDEQ filed enforcement actions against5 others were confirmed deceased. On August 11, 2021, Duke Energy Carolinas and Duke Energy Progress alleging violationswas served with the complaint filed in Durham County Superior Court on behalf of water discharge permits and North Carolina groundwater standards.4 survivors, which was later amended to include all the decedents along with the survivors. The cases have been consolidated and are being heard before a single judge in the North Carolina Superior Court.
On August 16, 2013, the NCDEQ filed an enforcement action againstlawsuit alleges that Duke Energy Carolinas knew that the river was used for recreational purposes and that Duke Energy Progress related to their remaining plants in North Carolina, alleging violations ofdid not adequately warn about the CWA and violations of the North Carolina groundwater standards. Both of these cases have been assigned to the judge handling the enforcement actions discussed above. SELC is representing several environmental groups who have been permitted to intervene in these cases.
The court issued orders in 2016 granting Motions for Partial Summary Judgment for seven of the 14 North Carolina plants named in the enforcement actions. The litigation is concluded for these seven plants. Litigation continues for the remaining seven plants.dam. On February 13, 2017, the court issued an order denying motions for partial summary judgment brought by both the environmental groups andSeptember 30, 2021, Duke Energy Carolinas filed its Motion to Dismiss and Motion for Transfer of Venue from Durham County to Rockingham County. A hearing on these motions is set for November 15, 2021, and discovery has commenced. Duke Energy Progress. On March 15,Carolinas cannot predict the outcome of this matter.
NTE Carolinas II, LLC Litigation
In November 2017, Duke Energy Carolinas and Duke Energy Progress filedentered into a Notice of Appealstandard FERC large generator interconnection agreement (LGIA) with NTE Carolinas II, LLC (NTE), a company that proposed to challenge the trial court’s order. The parties were unable to reach an agreement at mediationbuild a combined-cycle natural gas plant in April 2017. The parties submitted briefs to the court on remaining issues to be tried and a ruling is pending.Rockingham County, North Carolina. On August 22, 2017,September 6, 2019, Duke Energy Carolinas andfiled a lawsuit in Mecklenburg County Superior Court against NTE for breach of contract, alleging that NTE's failure to pay benchmark payments for Duke Energy Progress filedCarolinas' transmission system upgrades required under the interconnection agreement constituted a Petition for Discretionary Review, requestingtermination of the interconnection agreement. Duke Energy Carolinas is seeking a monetary judgment against NTE because NTE failed to make multiple milestone payments. The lawsuit was moved to federal court in North Carolina Supreme Court to accept the appeal. On August 24, 2017, SELCCarolina. NTE filed a motion to dismiss the appeal. Duke Energy Carolinas'Carolinas’ complaint and Duke Energy Progress’ opening appellate briefs were filed on October 12, 2017.
It is not possible to predict any liability or estimate any damagesbrought counterclaims alleging anti-competitive conduct and violations of state and federal statutes. Duke Energy Carolinas or Duke Energy Progress might incur in connection with these matters.
Federal Citizens Suits
On June 13, 2016, the Roanoke River Basin Association (RRBA) filed a federal citizen suit in the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Mayo Plant. On August 19, 2016, Duke Energy Progress filed a Motion to Dismiss. On April 26, 2017, the court entered an order dismissing four of the claims in the federal citizen suit. Two claims relating to alleged violations of National Pollutant Discharge Elimination System (NPDES) permit provisions survived the motion to dismiss, and Duke Energy Progress filed its response on May 10, 2017. The parties are engaged in pre-trial discovery. Trial has been scheduled for July 9, 2018.
On March 16, 2017, RRBA served Duke Energy Progress with a Notice of Intent to Sue under the CWA for alleged violations of effluent standards and limitations at the Roxboro Plant. In anticipation of litigation, Duke Energy Progress filed a Complaint for Declaratory Relief in the U.S. District Court for the Western District of Virginia on May 11, 2017, which was subsequently dismissed. On May 16, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina which asserts two claims relating to alleged violations of NPDES permit provisions and one claim relating to the use of nearby water bodies.
On June 20, 2017, RRBA filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Mayo Plant under the EPA CCR Rule. Duke Energy Progress filed a motion to dismiss on AugustNTE's counterclaims.
On May 21, 2017.2020, in response to a NTE petition challenging Duke Energy Carolinas' termination of the LGIA, FERC issued a ruling that 1) it has exclusive jurisdiction to determine whether a transmission provider may terminate a LGIA; 2) FERC approval is required to terminate a conforming LGIA if objected to by the interconnection customer; and 3) Duke Energy may not announce the termination of a conforming LGIA unless FERC has approved the termination. FERC's Office of Enforcement also initiated an investigation of Duke Energy Carolinas into matters pertaining to the LGIA. Duke Energy Carolinas is cooperating with the Office of Enforcement but cannot predict the outcome of this investigation.
On August 2, 2017, RRBA filed a federal citizen suit in17, 2020, the U.S. District Court for the Middle District of North Carolina challenging the closure plans at the Roxboro Plant under the EPA CCR Rule.court denied both NTE’s and Duke Energy Progress filed a motionCarolinas’ Motion to dismiss on October 2, 2017.
On October 3, 2017, variousDismiss. The parties servedare in active discovery and trial is scheduled for June 20, 2022. Duke Energy Carolinas with a Noticecannot predict the outcome of Intent to Sue under the CWA for alleged violations at Duke Energy Carolinas' Belews Creek Steam Station (Belews Creek). A lawsuit may be filed sixty days after service of notice.this matter.
It is not possible to predict whether Duke Energy Carolinas or Duke Energy Progress will incur any liability or to estimate the damages, if any, they might incur in connection with these matters.
Five previously filed cases involving the Riverbend, Cape Fear, H.F. Lee, Sutton and Buck plants were dismissed or settled in 2016.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Groundwater Contamination Claims
Beginning in May 2015, a number of residents living in the vicinity of the North Carolina facilities with ash basins received letters from the NCDEQ advising them not to drink water from the private wells on their land tested by the NCDEQ as the samples were found to have certain substances at levels higher than the criteria set by the North Carolina Department of Health and Human Services (DHHS). Results of Comprehensive Site Assessments (CSAs) testing performed by Duke Energy under the Coal Ash Act have been consistent with historical data provided to state regulators over many years. The DHHS and NCDEQ sent follow-up letters on October 15, 2015, to residents near coal ash basins who had their wells tested, stating that private well samplings at a considerable distance from coal ash basins, as well as some municipal water supplies, contain similar levels of vanadium and hexavalent chromium, which led investigators to believe these constituents are naturally occurring. In March 2016, DHHS rescinded the advisories.
Duke Energy Carolinas and Duke Energy Progress have received formal demand letters from residents near Duke Energy Carolinas' and Duke Energy Progress' coal ash basins. The residents claim damages for nuisance and diminution in property value, among other things. The parties held three days of mediation discussions that ended at an impasse. On January 6, 2017, Duke Energy Carolinas and Duke Energy Progress received the plaintiffs' notice of their intent to file suits should the matter not settle. The NCDEQ preliminarily approved Duke Energy’s permanent water solution plans on January 13, 2017, and as a result shortly thereafter, Duke Energy issued a press release, providing additional details regarding the homeowner compensation package. This package consists of three components: (i) a $5,000 goodwill payment to each eligible well owner to support the transition to a new water supply, (ii) where a public water supply is available and selected by the eligible well owner, a stipend to cover 25 years of water bills and (iii) the Property Value Protection Plan. The Property Value Protection Plan is a program offered by Duke Energy designed to guarantee eligible plant neighbors the fair market value of their residential property should they decide to sell their property during the time that the plan is offered. Duke Energy Carolinas and Duke Energy Progress have recognized reserves of $19 million and $4 million, respectively. On August 23, 2017, a class action suit was filed in Wake County Superior Court, North Carolina, against Duke Energy Carolinas and Duke Energy Progress on behalf of certain property owners living near coal ash impoundments at Allen, Asheville, Belews Creek, Buck, Cliffside, Lee, Marshall, Mayo and Roxboro. The class is defined as those who are “well-eligible” under the Coal Ash Act or those to whom Duke Energy has promised a permanent replacement water supply and seeks declaratory and injunctive relief, along with compensatory damages. Plaintiffs allege that Duke Energy’s improper maintenance of coal ash impoundments caused harm, particularly through groundwater contamination. Despite NCDEQ’s preliminary approval, Plaintiffs contend that Duke Energy’s proposed permanent water solutions plan fails to comply with the Coal Ash Act. On September 28, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Motion to Dismiss and Motion to Strike the class designation.
On September 14, 2017, a complaint was filed against Duke Energy Progress in New Hanover County Superior Court by a group of homeowners residing approximately one mile from Duke Energy Progress' Sutton Steam Plant (Sutton). The homeowners allege that coal ash constituents have been migrating from ash impoundments at Sutton into their groundwater for decades and that in 2015, Duke Energy Progress discovered these releases of coal ash, but failed to notify any officials or neighbors and failed to take remedial action. The homeowners claim unspecified physical and mental injuries as a result of consuming their well water and seek actual damages for personal injury, medical monitoring and punitive damages.
It is not possible to estimate the maximum exposure of loss, if any, that may occur in connection with current claims or future claims, which might be made by these residents.
Asbestos-related Injuries and Damages Claims
Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of September 30, 2017,2021, there were 12074 asserted claims for non-malignant cases with cumulative relief sought of up to $29$15 million, and 5758 asserted claims for malignant cases with cumulative relief sought of up to $16$21 million. Based on Duke Energy Carolinas’ experience, it is expected that the ultimate resolution of most of these claims likely will be less than the amount claimed.
Duke Energy CarolinasCarolinas has recognized asbestos-related reserves of $486$508 million at September 30, 2017,2021, and $512$572 million at December 31, 2016.2020. These reserves are classified in Other within Other Noncurrent Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based upon the minimum amount of the range of lossDuke Energy Carolinas' best estimate for current and future asbestos claims through 2036,2041 and are recorded on an undiscounted basis and incorporate anticipated inflation.basis. In light of the uncertainties inherent in a longer-term forecast, management does not believe they can reasonably estimate the indemnity and medical costs that might be incurred after 20362041 related to such potential claims. It is possible Duke Energy Carolinas may incur asbestos liabilities in excess of the recorded reserves.
Duke Energy Carolinas has third-party insurance to cover certain losses related to asbestos-related injuries and damages above an aggregate self-insured retention. Duke Energy Carolinas’ cumulative payments began to exceed the self-insuranceself-insured retention in 2008. Future payments up to the policy limit will be reimbursed by the third-party insurance carrier. The insurance policy limit for potential future insurance recoveries indemnification and medical cost claim payments is $797$697 million in excess of the self-insured retention. Receivables for insurance recoveries were $570$644 million at September 30, 2017,2021, and $587$704 million at December 31, 2016.2020. These amounts are classified in Other within Other Noncurrent Assets and Receivables within Current Assets on the Condensed Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.
| | | | | |
| FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
As described in Note 1, Duke Energy adopted the new guidance for credit losses effective January 1, 2020, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. The reserve for credit losses for insurance receivables based on adoption of the new standard is $15 million for Duke Energy and Duke Energy Carolinas as of September 30, 2021, and December 31, 2020. The insurance receivable is evaluated based on the risk of default and the historical losses, current conditions and expected conditions around collectability. Management evaluates the risk of default annually based on payment history, credit rating and changes in the risk of default from credit agencies.
Duke Energy Progress and Duke Energy Florida
Class Action LawsuitSpent Nuclear Fuel Matters
On February 22, 2016, a lawsuit was filedJune 18, 2018, Duke Energy Progress and Duke Energy Florida sued the U.S. in the U.S. District Court of Federal Claims for damages incurred for the Southern Districtperiod 2014 through 2018. The lawsuit claimed the Department of Florida on behalfEnergy breached a contract in failing to accept spent nuclear fuel under the Nuclear Waste Policy Act of a putative class1982 and asserted damages for the cost of on-site storage in the amount of $100 million and $200 million for Duke Energy Progress and Duke Energy Florida, respectively. Discovery is now complete, and FP&L’s customerstrial is anticipated to be scheduled in Florida. The suit alleges the State of Florida’s nuclear power plant cost recovery statutes (NCRS) are unconstitutional and pre-empted by federal law. Plaintiffs claim they are entitled to repayment of all money paid by customers of2022. Duke Energy FloridaProgress and FP&L as a result of the NCRS, as well as an injunction against any future charges under those statutes. The constitutionality of the NCRS has been challenged unsuccessfully in a number of prior cases on alternative grounds. Duke Energy Florida and FP&L filed motions to dismiss the complaint on May 5, 2016. On September 21, 2016, the Court granted the motions to dismiss with prejudice. Plaintiffs filed a motion for reconsideration, which was denied. On January 4, 2017, plaintiffs filed a notice of appeal to the Eleventh Circuit U.S. Court of Appeals. The appeal, which has been fully briefed, was heard on August 22, 2017, and a decision is pending. Duke Energy Florida cannot predict the outcome of this appeal.matter.
Westinghouse Contract LitigationDuke Energy Florida
OnPower Purchase Dispute Arbitration
Duke Energy Florida, on behalf of its customers, entered into a PPA for the purchase of firm capacity and energy from a qualifying facility under the Public Utilities Regulatory Policies Act of 1978. Duke Energy Florida determined the qualifying facility did not perform in accordance with the PPA, and Duke Energy Florida terminated the PPA. The qualifying facility counterparty filed a confidential American Arbitration Association (AAA) arbitration demand, challenging the termination of the PPA and seeking damages.
The final arbitration hearing occurred during the week of December 7, 2020. An interim arbitral award was issued in March 28, 2014, 2021, upholding Duke Energy Florida's positions on all issues and awarding the company termination costs. In May 2021, the final arbitral award was issued awarding Duke Energy Florida its claimed fees and costs. On August 18, 2021, Duke Energy Florida filed a lawsuit against Westinghousemotion in Florida state court to confirm the U.S. District Court for the Western District of North Carolina. The lawsuit seeks recovery of $54 million in milestone payments in excess of work performed under an EPC for Levy as well as a determination by the court of the amounts due to Westinghouse as a result of the termination of the EPC. arbitral award.
Duke Energy Florida recognized an exit obligation as a result of the termination of the EPC.Indiana
Coal Ash Basin Closure Plan Appeal
On March 31, 2014, WestinghouseJanuary 27, 2020, Hoosier Environmental Council (HEC) filed a lawsuit againstPetition for Administrative Review with the Indiana Office of Environmental Adjudication challenging the Indiana Department of Environmental Management’s (IDEM's) December 10, 2019, partial approval of Duke Energy FloridaIndiana’s ash pond closure plan. After hearing oral arguments in U.S. District Court for the Western District of Pennsylvania. The Pennsylvania lawsuit alleged damages under the EPC in excess of $510 million for engineering and design work, costs to end supplier contracts and an alleged termination fee.
On June 9, 2014, the judge in the North Carolina case ruled that the litigation will proceed in the Western District of North Carolina. On July 11, 2016,early April 2021 on Duke Energy FloridaIndiana's and Westinghouse filed separate Motions for Summary Judgment. On September 29, 2016, the court issued its ruling on the parties' respectiveHEC's competing Motions for Summary Judgment, on May 4, 2021, the administrative court rejected all of HEC’s claims and issued a ruling in favor of Westinghouse on a $30 million termination fee claim and dismissing Duke Energy Florida's $54 million refund claim, but stating thatIndiana. On June 3, 2021, HEC filed an appeal in Superior Court to seek judicial review of the order. On June 25, 2021, Duke Energy Florida could useIndiana filed its response to the refund claimPetition to offset any damagesReview. On August 30, 2021, HEC served Duke Energy Indiana with its Brief in Support of Petition for termination costs. Westinghouse's claim for termination costs was unaffected by this rulingJudicial Review. On October 29, 2021, Duke Energy Indiana and continued to trial. At trial, Westinghouse reduced its claim for termination costs from $482 million to $424 million. Following a trialIDEM filed their response briefs. HEC's Reply Brief is due on the matter, the court issued its final orderor before November 22, 2021. Oral argument will be heard in December 2016 denying Westinghouse’s claim for termination costs and re-affirming its earlier ruling2021, in favor of Westinghouse on the $30 million termination fee and DukeMarion County Superior Court. Duke Energy Florida’s refund claim. Judgment was entered against Duke Energy Florida in the amount of approximately $34 million, which includes prejudgment interest. Westinghouse has appealed the trial court's order to the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit Court) and Duke Energy Florida has cross-appealed. Duke Energy Florida cannot predict the ultimate outcome of the appeal of the trial court's order.
On March 29, 2017, Westinghouse filed Chapter 11 bankruptcy in the Southern District of New York, which automatically stayed the appeal. On May 23, 2017, the bankruptcy court entered an order lifting the stay with respect to the appeal. Briefing of the appeal concluded on October 20, 2017, and the parties await a decision form the Fourth Circuit Court on whether it will allow oral argument of the appeal.
Ultimate resolution of these matters could have a material effect on the results of operations, financial position or cash flows of Duke Energy Florida. See discussion of the 2017 Settlement and the Levy Nuclear Project in Note 4 for additional information regarding recovery of costs related to Westinghouse.
MGP Cost Recovery Action
On December 30, 2011, Duke Energy Florida filed a lawsuit against FirstEnergy Corp. (FirstEnergy) to recover investigation and remediation costs incurred by Duke Energy Florida in connection with the restoration of two former MGP sites in Florida. Duke Energy Florida alleged that FirstEnergy, as the successor to Associated Gas & Electric Co., owes past and future contribution and response costs of up to $43 million for the investigation and remediation of MGP sites. On December 6, 2016, the trial court entered judgment against Duke Energy Florida in the case. In January 2017, Duke Energy Florida appealed the decision to the U.S. Court of Appeals for the 6th Circuit and briefing has been completed. Duke Energy FloridaIndiana cannot predict the outcome of this appeal.matter.
Other Litigation and Legal Proceedings
The Duke Energy Registrants are involved in other legal, tax and regulatory proceedings arising in the ordinary course of business, some of which involve significant amounts. The Duke Energy Registrants believe the final disposition of these proceedings will not have a material effect on their results of operations, cash flows or financial position.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The table below presents recorded reserves based on management’s best estimate of probable loss for legal matters, excluding asbestos-related reserves and the exit obligation discussed above related to the termination of an EPC contract. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Accounts payable and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above. |
| | | | | | | |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
|
| Reserves for Legal Matters | | | |
| Duke Energy | $ | 83 |
| | $ | 98 |
|
| Duke Energy Carolinas | 23 |
| | 23 |
|
| Progress Energy | 56 |
| | 59 |
|
| Duke Energy Progress | 13 |
| | 14 |
|
| Duke Energy Florida | 28 |
| | 28 |
|
| Duke Energy Ohio | — |
| | 4 |
|
| Piedmont | 2 |
| | 2 |
|
OTHER COMMITMENTS AND CONTINGENCIES
General
As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Condensed Consolidated Balance Sheets and have unlimiteduncapped maximum potential payments. However, the Duke Energy Registrants do not believe these guarantees will have a material effect on their results of operations, cash flows or financial position.
In addition, the Duke Energy Registrants enter into various fixed-price, noncancelable commitments to purchase or sell power or natural gas, take-or-pay arrangements, transportation, or throughput agreements and other contracts that may or may not be recognized on their respective Condensed Consolidated Balance Sheets. Some of these arrangements may be recognized at fair value on their respective Condensed Consolidated Balance Sheets if such contracts meet the definition of a derivative and the normal purchase/normal sale (NPNS)NPNS exception does not apply. In most cases, the Duke Energy Registrants’ purchase obligation contracts contain provisions for price adjustments, minimum purchase levels and other financial commitments.
6.
| | | | | |
| FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
5. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
The following table summarizes significant debt issuances (in millions). Refer
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Nine Months Ended September 30, 2021 |
| | | | | | | Duke | | Duke | | Duke | | | | | | | | |
| Maturity | | Interest | | Duke | | Energy | | Energy | | Energy | | | | | | | | |
| Issuance Date | Date | | Rate | | Energy | | (Parent) | | Carolinas | | Progress | | | | | | | | Piedmont |
| Unsecured Debt | | | | | | | | | | | | | | | | | | | |
March 2021(a) | March 2031 | | 2.500 | % | | $ | 350 | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | $ | 350 | |
June 2021(b)(c) | June 2023 | | 2.500 | % | | 500 | | | 500 | | | — | | | — | | | | | | | | | — | |
June 2021(c) | June 2031 | | 2.550 | % | | 1,000 | | | 1,000 | | | — | | | — | | | | | | | | | — | |
June 2021(c) | June 2041 | | 3.300 | % | | 750 | | | 750 | | | — | | | — | | | | | | | | | — | |
June 2021(c) | June 2051 | | 3.500 | % | | 750 | | | 750 | | | — | | | — | | | | | | | | | — | |
September 2021(d) | January 2082 | | 3.250 | % | | 500 | | | 500 | | | — | | | — | | | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | |
| First Mortgage Bonds | | | | | | | | | | | | | | | | | | |
April 2021(e) | April 2031 | | 2.550 | % | | 550 | | | — | | | 550 | | | — | | | | | | | | | — | |
April 2021(e) | April 2051 | | 3.450 | % | | 450 | | | — | | | 450 | | | — | | | | | | | | | — | |
August 2021(f) | August 2031 | | 2.000 | % | | 650 | | | — | | | — | | | 650 | | | | | | | | | — | |
August 2021(f) | August 2051 | | 2.900 | % | | 450 | | | — | | | — | | | 450 | | | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | |
| Total issuances | | | | | $ | 5,950 | | | $ | 3,500 | | | $ | 1,000 | | | $ | 1,100 | | | | | | | | | $ | 350 | |
(a)Debt issued to the "Available Credit Facilities" section below regarding amounts issued under the Three Year Revolverrepay at maturity $160 million senior unsecured notes due June 2021, pay down short-term debt and the Piedmont Term Loan facilities.for general corporate purposes. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Nine Months Ended September 30, 2017 |
| | | | | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Maturity | Interest |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| Issuance Date | Date | Rate |
| | Energy |
| | (Parent) |
| | Progress |
| | Florida |
| | Ohio |
|
| Unsecured Debt | | | | | | | | | | | | |
April 2017(a) | April 2025 | 3.364 | % | | $ | 420 |
| | $ | 420 |
| | $ | — |
| | $ | — |
| | $ | — |
|
June 2017(b) | June 2020 | 2.100 | % | | 330 |
| | 330 |
| | — |
| | — |
| | — |
|
August 2017(c) | August 2022 | 2.400 | % | | 500 |
| | 500 |
| | — |
| | — |
| | — |
|
August 2017(c) | August 2027 | 3.150 | % | | 750 |
| | 750 |
| | — |
| | — |
| | — |
|
August 2017(c) | August 2047 | 3.950 | % | | 500 |
| | 500 |
| | — |
| | — |
| | — |
|
| Secured Debt | | | | | | | | | | | | |
February 2017(d) | June 2034 | 4.120 | % | | 587 |
| | — |
| | — |
| | — |
| | — |
|
August 2017(e) | December 2036 | 4.110 | % | | 233 |
| | — |
| | — |
| | — |
| | — |
|
| First Mortgage Bonds | | | | | | | | | | | | |
January 2017(f) | January 2020 | 1.850 | % | | 250 |
| | — |
| | — |
| | 250 |
| | — |
|
January 2017(f) | January 2027 | 3.200 | % | | 650 |
| | — |
| | — |
| | 650 |
| | — |
|
March 2017(g) | June 2046 | 3.700 | % |
| 100 |
|
| — |
| | — |
| | — |
| | 100 |
|
September 2017(h) | September 2020 | 1.500 | % | (i) | 300 |
|
| — |
| | 300 |
| | — |
| | — |
|
September 2017(h) | September 2047 | 3.600 | % | | 500 |
| | — |
| | 500 |
| | — |
| | — |
|
| Total issuances | | | | $ | 5,120 |
| | $ | 2,500 |
|
| $ | 800 |
| | $ | 900 |
|
| $ | 100 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
| |
(a) | Proceeds were used to refinance $400 million of unsecured debt at maturity and to repay a portion of outstanding commercial paper. |
| |
(b) | Debt issued to repay a portion of outstanding commercial paper. |
| |
(c) | Debt issued to repay at maturity $700 million of unsecured debt, to repay outstanding commercial paper and for general corporate purposes. |
| |
(d) | Portfolio financing of four Texas and Oklahoma wind facilities. Secured by substantially all of the assets of these wind facilities and nonrecourse to Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures. |
| |
(e) | Portfolio financing of eight solar facilities located in California, Colorado and New Mexico. Secured by substantially all of the assets of these solar facilities and nonrecourse to Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures. |
| |
(f) | Debt issued to fund capital expenditures for ongoing construction and capital maintenance, to repay a $250 million aggregate principal amount of bonds at maturity and for general corporate purposes. |
| |
(g) | Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance and for general corporate purposes. |
| |
(h) | Debt issued to repay at maturity a $200 million aggregate principal amount of bonds due November 2017, pay down intercompany short-term debt and for general corporate purposes, including capital expenditures. |
(i) (b)Debt issuance has a floating interest rate.
(c)Debt issued to repay $1.75 billion of Duke Energy (Parent) 2021 debt maturities, to repay a portion of short-term debt and for general corporate purposes.
(d)Debt issued to repay in October 2021 $500 million of Duke Energy (Parent) unsecured notes. The interest rate resets every five years.
(e)Debt issued to repay at maturity $500 million first mortgage bonds due June 2021, pay down short-term debt and for general company purposes.
(f)Debt issued to repay at maturity a total of $600 million first mortgage bonds due September 2021, pay down short-term debt and for general company purposes.
CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current Maturitiesmaturities of Long-Term Debtlong-term debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings. | | | (in millions) | Maturity Date | | Interest Rate |
| | September 30, 2017 |
| (in millions) | Maturity Date | | Interest Rate | | September 30, 2021 |
| Unsecured Debt | | | | | Unsecured Debt | |
Duke Energy (Parent)(a) | | Duke Energy (Parent)(a) | October 2021 | | 5.125 | % | | 500 | |
Duke Energy Florida(b) | | Duke Energy Florida(b) | November 2021 | | 0.372 | % | | 200 | |
Duke Energy Progress(b) | | Duke Energy Progress(b) | February 2022 | | 0.305 | % | | 700 | |
| Duke Energy (Parent) | | Duke Energy (Parent) | March 2022 | | 3.227 | % | | 300 | |
Duke Energy (Parent)(b) | | Duke Energy (Parent)(b) | March 2022 | | 0.764 | % | | 300 | |
| Progress Energy | | Progress Energy | April 2022 | | 3.150 | % | | 450 | |
| Duke Energy (Parent) | June 2018 | | 6.250 | % | | $ | 250 |
| Duke Energy (Parent) | August 2022 | | 3.050 | % | | 500 | |
| Duke Energy (Parent) | June 2018 | | 2.100 | % | | 500 |
| Duke Energy (Parent) | August 2022 | | 2.400 | % | | 500 | |
| | First Mortgage Bonds | | | | | First Mortgage Bonds | |
| Duke Energy Indiana | | Duke Energy Indiana | January 2022 | | 8.850 | % | | 53 | |
| Duke Energy Carolinas | | Duke Energy Carolinas | May 2022 | | 3.350 | % | | 350 | |
| Duke Energy Progress | November 2017 | | 1.516 | % | (b) | 200 |
| Duke Energy Progress | May 2022 | | 2.800 | % | | 500 | |
| Duke Energy Carolinas | January 2018 | | 5.250 | % | | 400 |
| |
| Duke Energy Carolinas | April 2018 | | 5.100 | % | | 300 |
| |
| Duke Energy Florida | June 2018 | | 5.650 | % | | 500 |
| |
Other(a) | | | | 335 |
| |
Other(c) | | Other(c) | | 520 | |
| Current maturities of long-term debt | | | | $ | 2,485 |
| Current maturities of long-term debt | | $ | 4,873 | |
(a)Junior unsecured notes due January 2073 were redeemed on October 7, 2021.
(b)Debt has a floating interest rate.
(c)Includes capitalfinance lease obligations, amortizing debt, tax-exempt bonds with mandatory put options and small bullet maturities.
(b) Debt issuance has a floating interest rate.
| | | | | |
| FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
AVAILABLE CREDIT FACILITIES
Master Credit Facility
In March 2017,2021, Duke Energy amended its existing $8 billion Master Credit Facility to increase its capacity from $7.5 billion to $8 billion, and to extend the termination date of the facility from January 30, 2020, to March 16, 2022.2026. The amendment also added Piedmont as a borrower within the Master Credit Facility. Piedmont's separate $850 million credit facility was terminated in connection with the amendment. With the amendment, the Duke Energy Registrants, excluding Progress Energy, (Parent), have borrowing capacity under the Master Credit Facility up to a specified sublimit for each borrower. Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. The amount available under the Master Credit Facility has been reduced to backstop issuances of commercial paper, certain letters of credit and variable-rate demand tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder. Duke Energy Carolinas and Duke Energy Progress are also required to each maintain $250 million of available capacity under the Master Credit Facility as security to meet obligations under plea agreements reached with the U.S. Department of Justice in 2015 related to violations at North Carolina facilities with ash basins.
The table below includes the current borrowing sublimits and available capacity under these credit facilities.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| | | Duke | | Duke | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Energy | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | Energy | | (Parent) | | Carolinas | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Facility size(a) | $ | 8,000 | | | $ | 2,650 | | | $ | 1,275 | | | $ | 1,150 | | | $ | 850 | | | $ | 775 | | | $ | 600 | | | $ | 700 | |
| Reduction to backstop issuances | | | | | | | | | | | | | | | |
Commercial paper(b) | (1,611) | | | 389 | | | (375) | | | (253) | | | (527) | | | (419) | | | (150) | | | (276) | |
| Outstanding letters of credit | (31) | | | (25) | | | (4) | | | (2) | | | — | | | — | | | — | | | — | |
| Tax-exempt bonds | (81) | | | — | | | — | | | — | | | — | | | — | | | (81) | | | — | |
| | | | | | | | | | | | | | | |
| Available capacity under the Master Credit Facility | $ | 6,277 | | | $ | 3,014 | | | $ | 896 | | | $ | 895 | | | $ | 323 | | | $ | 356 | | | $ | 369 | | | $ | 424 | |
(a)Represents the Master Credit Facility.sublimit of each borrower.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| |
|
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Facility size(a) | $ | 8,000 |
| | $ | 2,850 |
| | $ | 1,350 |
| | $ | 1,250 |
| | $ | 1,000 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
|
| Reduction to backstop issuances | | | | | | | | | | | | | | | |
Commercial paper(b) | (1,569 | ) | | (404 | ) | | (636 | ) | | (150 | ) | | — |
| | (25 | ) | | (150 | ) | | (204 | ) |
| Outstanding letters of credit | (60 | ) | | (51 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | (2 | ) |
| Tax-exempt bonds | (81 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (81 | ) | | — |
|
| Coal ash set-aside | (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| | — |
|
| Available capacity under the Master Credit Facility | $ | 5,790 |
|
| $ | 2,395 |
|
| $ | 460 |
|
| $ | 848 |
|
| $ | 999 |
|
| $ | 425 |
|
| $ | 369 |
| | $ | 294 |
|
| |
(a) | Represents the sublimit of each borrower. |
| |
(b) | (b)Duke Energy issued $625 million of commercial paper and loaned the proceeds through the money pool to Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana. The balances are classified as Long-Term Debt Payable to Affiliated Companies on the Condensed Consolidated Balance Sheets. |
Three-Year Revolving Credit Facility
In June 2017, Duke Energy (Parent) entered into a three-year $1.0 billion revolving credit facility (the Three Year Revolver). Borrowings under this facility will be used for general corporate purposes.
As of September 30, 2017, $270 million has been drawn under the Three Year Revolver. This balance is classified as Long-Term Debt Payable to Affiliated Companies on Duke Energy'sthe Condensed Consolidated Balance Sheets. Any undrawn commitments can be drawn, and borrowings can be prepaid, at any time throughout
Other Credit Facilities
| | | | | | | | | | | |
| September 30, 2021 |
| (in millions) | Facility size | | Amount drawn |
Duke Energy (Parent) Three-Year Revolving Credit Facility(a) | $ | 1,000 | | | $ | 500 | |
(a)During March 2021, Duke Energy extended the termmaturity date of the facility. The terms and conditions of the Three Year Revolver are generally consistent with those governing Three-Year Revolving Credit Facility from May 2022 to May 2024.
Duke Energy's Master Credit Facility.
PiedmontEnergy Ohio Term Loan Facility
In June 2017, PiedmontOctober 2021, Duke Energy Ohio entered into an 18-montha two-year term loan facility with commitments totaling $250$100 million (the Piedmont Term Loan). Borrowings under the facility will be used to pay down short-term debt and for general corporate purposes.
As The term loan was fully drawn at the time of September 30, 2017, the entire $250 million has been drawn under the Piedmont Term Loan. Thisclosing in October. The balance iswill be classified as Long-Term Debt on Piedmont'sDuke Energy Ohio’s Condensed Consolidated Balance Sheets. The terms and conditions of the Piedmont
Duke Energy Kentucky Term Loan are generally consistent with those governing Duke Energy's Master Credit Facility.
Facility
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
7. ASSET RETIREMENT OBLIGATIONS
TheIn October 2021, Duke Energy Registrants record AROs when there isKentucky entered into a legal obligationtwo-year term loan facility with commitments totaling $50 million. Borrowings under the facility will be used to incur retirement costs associated withpay down short-term debt and for general corporate purposes. The term loan was fully drawn at the retirementtime of a long-lived asset and the obligation canclosing in October. The balance will be reasonably estimated. The following table presents the AROs recordedclassified as Long-Term Debt on theDuke Energy Ohio's Condensed Consolidated Balance Sheets.Sheet. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Decommissioning of Nuclear Power Facilities(a) | $ | 5,337 |
| | $ | 1,916 |
| | $ | 3,235 |
| | $ | 2,536 |
| | $ | 699 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Closure of Ash Impoundments | 4,594 |
| | 1,650 |
| | 2,124 |
| | 2,105 |
| | 19 |
| | 42 |
| | 777 |
| | — |
|
| Other | 274 |
| | 35 |
| | 80 |
| | 35 |
| | 45 |
| | 39 |
| | 16 |
| | 15 |
|
| Total ARO | $ | 10,205 |
| | $ | 3,601 |
| | $ | 5,439 |
| | $ | 4,676 |
| | $ | 763 |
| | $ | 81 |
| | $ | 793 |
| | $ | 15 |
|
| Less: current portion | 619 |
| | 304 |
| | 250 |
| | 250 |
| | — |
| | 6 |
| | 58 |
| | — |
|
| Total noncurrent ARO | $ | 9,586 |
|
| $ | 3,297 |
|
| $ | 5,189 |
|
| $ | 4,426 |
|
| $ | 763 |
|
| $ | 75 |
|
| $ | 735 |
| | $ | 15 |
|
(a) Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.Indiana Term Loan Facility
ARO Liability Rollforward
Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded AROs. The following table presents the change in liability associated with AROs for theIn October 2021, Duke Energy Registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Balance at December 31, 2016(a) | $ | 10,611 |
| | $ | 3,895 |
| | $ | 5,475 |
| | $ | 4,697 |
| | $ | 778 |
| | $ | 77 |
| | $ | 866 |
| | $ | 14 |
|
Accretion expense(b) | 329 |
| | 140 |
| | 172 |
| | 147 |
| | 25 |
| | 3 |
| | 25 |
| | 1 |
|
Liabilities settled(c) | (430 | ) | | (201 | ) | | (193 | ) | | (152 | ) | | (41 | ) | | (4 | ) | | (26 | ) | | (7 | ) |
| Liabilities incurred in the current year | 48 |
| | 5 |
| | — |
| | — |
| | — |
| | 7 |
| | 27 |
| | 7 |
|
Revisions in estimates of cash flows(d) | (353 | ) | | (238 | ) | | (15 | ) | | (16 | ) | | 1 |
| | (2 | ) | | (99 | ) | | — |
|
| Balance at September 30, 2017 | $ | 10,205 |
| | $ | 3,601 |
| | $ | 5,439 |
| | $ | 4,676 |
| | $ | 763 |
| | $ | 81 |
| | $ | 793 |
| | $ | 15 |
|
| |
(a) | Primarily relates to decommissioning nuclear power facilities, closure of ash impoundments, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets. |
| |
(b) | For the nine months ended September 30, 2017, substantially all accretion expense relates to Duke Energy's regulated electric operations and has been deferred in accordance with regulatory accounting treatment. |
| |
(c) | Primarily relates to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3. |
| |
(d) | Primarily relates to favorable contract prices for closure of ash impoundments compared to original estimates. |
Asset retirement costs associatedIndiana entered into a two-year term loan facility with commitments totaling $300 million. Borrowings under the AROsfacility will be used to pay down short-term debt and for operating plants and retired plants are includedgeneral corporate purposes. The term loan was fully drawn at the time of closing in Net property, plant and equipment and Regulatory assets within Other Noncurrent Assets, respectively,October. The balance will be classified as Long-Term Debt on theDuke Energy Indiana’s Condensed Consolidated Balance Sheets.Sheet.
8. GOODWILL AND INTANGIBLE ASSETS
6. GOODWILL
Duke Energy
The following table presents the goodwill by reportable operating segment included on Duke Energy's Condensed Consolidated Balance Sheets at September 30, 2017,2021, and December 31, 2016.2020.
| | | | | | | | | | | | | | | | | | | | | | | |
| Electric Utilities | | Gas Utilities | | Commercial | | |
| (in millions) | and Infrastructure | | and Infrastructure | | Renewables | | Total |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Goodwill balance | $ | 17,379 | | | $ | 1,924 | | | $ | 122 | | | $ | 19,425 | |
| Accumulated impairment charges | — | | | — | | | (122) | | | (122) | |
| Goodwill, adjusted for accumulated impairment charges | $ | 17,379 | | | $ | 1,924 | | | $ | — | | | $ | 19,303 | |
|
| | | | | | | | | | | | | | | |
| | Electric Utilities |
| | Gas Utilities |
| | Commercial |
| | |
| (in millions) | and Infrastructure |
| | and Infrastructure |
| | Renewables |
| | Total |
|
| Goodwill Balance at December 31, 2016 | $ | 17,379 |
| | $ | 1,924 |
| | $ | 122 |
| | $ | 19,425 |
|
Accumulated impairment charges (a) | — |
| | — |
| | (7 | ) | | (7 | ) |
| Goodwill Balance at September 30, 2017 | $ | 17,379 |
| | $ | 1,924 |
| | $ | 115 |
| | $ | 19,418 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Duke Energy evaluated the recoverability of goodwill in the third quarter of 2017 and recorded an impairment of $7 million related to the Energy Management Solutions reporting unit within the Commercial Renewables segment. The fair value of the reporting unit was determined based on the market approach, which estimates fair value based on market comparables within the energy technologies industry.GOODWILL |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Ohio
Duke Energy Ohio's Goodwill balance of $920 million, allocated $596 million to Electric Utilities and Infrastructure and $324 million to Gas Utilities and Infrastructure, is presented net of accumulated impairment charges of $216 million on the Condensed Consolidated Balance Sheets at September 30, 2017,2021, and December 31, 2016.2020.
Progress Energy
Progress Energy's Goodwill is included in the Electric Utilities and Infrastructure operating segment and there are no accumulated impairment charges.
Piedmont
Piedmont's Goodwill is included in the Gas Utilities and Infrastructure operating segment and there are no accumulated impairment charges. Effective November 1, 2016, Piedmont's fiscal year was changed from October 31 to December 31. Effective with this change, Piedmont changed the date of its annual impairment testing of goodwill from October 31 to August 31 to align with the other Duke Energy Registrants.
Impairment Testing
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont are required to perform an annual goodwill impairment test as of the same date each year and, accordingly, perform their annual impairment testing of goodwill as of August 31. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update their test between annual tests if events or circumstances occur that would more likely than not reduce the fair value of a reporting unit below its carrying value. Except for the Energy Management Solutions reporting unit,As the fair value of all other reporting units for Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont exceeded their respective carrying values at the date of the annual impairment analysis. As such,analysis, no othergoodwill impairment charges were recorded in the third quarter of 2017.
2021.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
9.7. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in accordance with applicable state and federal commission regulations. Refer to the Condensed Consolidated Balance Sheets of the Subsidiary Registrants for balances due to or due from related parties. Material amounts related to transactions with related parties included on the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Duke Energy Carolinas | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 207 | | | $ | 198 | | | $ | 653 | | | $ | 528 | |
Indemnification coverages(b) | 6 | | | 5 | | | 18 | | | 15 | |
Joint Dispatch Agreement (JDA) revenue(c) | 6 | | | 6 | | | 32 | | | 16 | |
JDA expense(c) | 68 | | | 28 | | | 133 | | | 72 | |
Intercompany natural gas purchases(d) | 14 | | | 10 | | | 43 | | | 26 | |
| Progress Energy | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 201 | | | $ | 185 | | | $ | 615 | | | $ | 520 | |
Indemnification coverages(b) | 10 | | | 9 | | | 31 | | | 27 | |
JDA revenue(c) | 68 | | | 28 | | | 133 | | | 72 | |
JDA expense(c) | 6 | | | 6 | | | 32 | | | 16 | |
Intercompany natural gas purchases(d) | 19 | | | 18 | | | 56 | | | 56 | |
| Duke Energy Progress | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 121 | | | $ | 113 | | | $ | 367 | | | $ | 301 | |
Indemnification coverages(b) | 4 | | | 4 | | | 14 | | | 13 | |
JDA revenue(c) | 68 | | | 28 | | | 133 | | | 72 | |
JDA expense(c) | 6 | | | 6 | | | 32 | | | 16 | |
Intercompany natural gas purchases(d) | 19 | | | 18 | | | 56 | | | 56 | |
| Duke Energy Florida | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 80 | | | $ | 72 | | | $ | 248 | | | $ | 219 | |
Indemnification coverages(b) | 6 | | | 5 | | | 17 | | | 14 | |
| Duke Energy Ohio | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 79 | | | $ | 80 | | | $ | 237 | | | $ | 241 | |
Indemnification coverages(b) | 1 | | | 1 | | | 3 | | | 3 | |
| Duke Energy Indiana | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 96 | | | $ | 102 | | | $ | 302 | | | $ | 300 | |
Indemnification coverages(b) | 2 | | | 2 | | | 6 | | | 6 | |
| Piedmont | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 32 | | | $ | 31 | | | $ | 101 | | | $ | 102 | |
Indemnification coverages(b) | 1 | | | 1 | | | 3 | | | 2 | |
Intercompany natural gas sales(d) | 33 | | | 28 | | | 99 | | | 82 | |
Natural gas storage and transportation costs(e) | 6 | | | 6 | | | 17 | | | 17 | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Duke Energy Carolinas | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 205 |
| | $ | 204 |
| | $ | 645 |
| | $ | 620 |
|
Indemnification coverages(b) | 5 |
| | 5 |
| | 17 |
| | 16 |
|
JDA revenue(c) | 9 |
| | 10 |
| | 42 |
| | 21 |
|
JDA expense(c) | 39 |
| | 36 |
| | 91 |
| | 127 |
|
Intercompany natural gas purchases(d) | 3 |
| | — |
| | 5 |
| | — |
|
| Progress Energy | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 208 |
| | $ | 182 |
| | $ | 555 |
| | $ | 515 |
|
Indemnification coverages(b) | 10 |
| | 9 |
| | 29 |
| | 25 |
|
JDA revenue(c) | 39 |
| | 36 |
| | 91 |
| | 127 |
|
JDA expense(c) | 9 |
| | 10 |
| | 42 |
| | 21 |
|
Intercompany natural gas purchases(d) | 19 |
| | — |
| | 57 |
| | — |
|
| Duke Energy Progress | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 114 |
| | $ | 103 |
| | $ | 321 |
| | $ | 292 |
|
Indemnification coverages(b) | 4 |
| | 4 |
| | 11 |
| | 10 |
|
JDA revenue(c) | 39 |
| | 36 |
| | 91 |
| | 127 |
|
JDA expense(c) | 9 |
| | 10 |
| | 42 |
| | 21 |
|
Intercompany natural gas purchases(d) | 19 |
| | — |
| | 57 |
| | — |
|
| Duke Energy Florida | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 94 |
| | $ | 79 |
| | $ | 234 |
| | $ | 223 |
|
Indemnification coverages(b) | 6 |
| | 5 |
| | 18 |
| | 15 |
|
| Duke Energy Ohio | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 90 |
| | $ | 89 |
| | $ | 275 |
| | $ | 261 |
|
Indemnification coverages(b) | 1 |
| | 1 |
| | 3 |
| | 4 |
|
| Duke Energy Indiana | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 93 |
| | $ | 96 |
| | $ | 281 |
| | $ | 279 |
|
Indemnification coverages(b) | 2 |
| | 2 |
| | 6 |
| | 6 |
|
| Piedmont | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 10 |
| | $ | — |
| | $ | 25 |
| | $ | — |
|
Indemnification coverages(b) | 1 |
| | — |
| | 2 |
| | — |
|
Intercompany natural gas sales(d) | 22 |
| | — |
| | 62 |
| | — |
|
| | | | | |
(a)FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
(a)The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, employee benefits, information technology, legal and accounting fees, as well as other third-party costs. These amounts are primarily recorded in Operation, maintenance and other and Impairment of assets and other charges on the Condensed Consolidated Statements of Operations and Comprehensive Income. | |
(b) | The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
(c) | Duke Energy Carolinas and Duke Energy Progress participate in a Joint Dispatch Agreement (JDA), which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power and expenses from the purchase of power pursuant to the JDA are recorded in Operating Revenues and Fuel used in electric generation and purchased power, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
(d) | Piedmont provides long-term natural gas delivery service to certain Duke Energy Carolinas and Duke Energy Progress natural gas-fired generation facilities. Piedmont records the sales in Regulated natural gas revenues, and Duke Energy Carolinas and Duke Energy Progress record the related purchases in Fuel used in electric generation and purchased power on their respective Condensed Consolidated Statements of Operations and Comprehensive Income. The amounts are not eliminated in accordance with rate-based accounting regulations. For the three and nine months ended September 30, 2016, which was prior to the Piedmont acquisition, Piedmont recorded $19 million and $57 million, respectively, of natural gas sales with Duke Energy Progress and $1 million and $3 million, respectively, with Duke Energy Carolinas. |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)of Operations and Comprehensive Income.
(b)The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(c)Duke Energy Carolinas and Duke Energy Progress participate in a JDA, which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power and expenses from the purchase of power pursuant to the JDA are recorded in Operating Revenues and Fuel used in electric generation and purchased power, respectively, on the Condensed Consolidated Statements of Operations and Comprehensive Income.
(d)Piedmont provides long-term natural gas delivery service to certain Duke Energy Carolinas and Duke Energy Progress natural gas-fired generation facilities. Piedmont records the sales in Operating revenues, and Duke Energy Carolinas and Duke Energy Progress record the related purchases as a component of Fuel used in electric generation and purchased power on their respective Condensed Consolidated Statements of Operations and Comprehensive Income.
(e)Piedmont has related party transactions as a customer of its equity method investments in Pine Needle LNG Company, LLC, Hardy Storage Company, LLC and Cardinal Pipeline Company, LLC natural gas storage and transportation facilities. These expenses are included in Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income.
In addition to the amounts presented above, the Subsidiary Registrants have other affiliate transactions, including rental of office space, participation in a money pool arrangement, other operational transactions, such as pipeline lease arrangements, and their proportionate share of certain charged expenses. See Note 6 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2016, for more information regarding the money pool. These transactions of the Subsidiary Registrants were not material forare incurred in the threeordinary course of business and nine months ended September 30, 2017, and 2016.are eliminated in consolidation.
As discussed in Note 13,11, certain trade receivables have been sold by Duke Energy Ohio and Duke Energy Indiana to CRC, an affiliate formed by a subsidiary of Duke Energy. The proceeds obtained from the sales of receivables are largely cash but alsodo include a subordinated note from the affiliateCRC for a portion of the purchase price.
Equity Method Investments
Piedmont has related party transactions as a customer of its equity method investments in natural gas storage and transportation facilities. The following table presents expenses for the three and nine months ended September 30, 2017, and 2016, which are included in Cost of natural gas on Piedmont's Condensed Consolidated Statements of Operations and Comprehensive Income. |
| | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | Type of expense | 2017 | 2016 | | 2017 | 2016 |
| Cardinal | Transportation Costs | $ | 2 |
| $ | 3 |
| | $ | 6 |
| $ | 7 |
|
| Pine Needle | Natural Gas Storage Costs | 2 |
| 3 |
| | 6 |
| 8 |
|
| Hardy Storage | Natural Gas Storage Costs | 2 |
| 2 |
| | 7 |
| 7 |
|
| Total | | $ | 6 |
| $ | 8 |
| | $ | 19 |
| $ | 22 |
|
Piedmont had accounts payable to its equity method investments of $2 million at September 30, 2017, and December 31, 2016, related to these transactions. These amounts are included in Accounts payable on the Condensed Consolidated Balance Sheets.
Intercompany Income Taxes
Duke Energy and the Subsidiary Registrants file a consolidated federal income tax return and other state and jurisdictional returns. The Subsidiary Registrants have a tax sharing agreement with Duke Energy for the allocation of consolidated tax liabilities and benefits. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. The following table includes the balance of intercompany income tax receivables and payables for the Subsidiary Registrants.
| | | | | | | | | | | | | | | | | | | | | | | |
| Duke | | Duke | Duke | Duke | Duke | |
| Energy | Progress | Energy | Energy | Energy | Energy | |
| (in millions) | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
| September 30, 2021 | | | | | | | |
| Intercompany income tax receivable | $ | — | | $ | 36 | | $ | — | | $ | 8 | | $ | 1 | | $ | — | | $ | 14 | |
| Intercompany income tax payable | 133 | | — | | 51 | | — | | — | | 17 | | — | |
| | | | | | | |
| December 31, 2020 | | | | | | | |
| Intercompany income tax receivable | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 9 | | $ | 10 | |
| Intercompany income tax payable | 31 | | 33 | | 46 | | 35 | | 2 | | — | | — | |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| | Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
| (in millions) | Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| September 30, 2017 | | | | | | | |
| Intercompany income tax receivable | $ | — |
| $ | 170 |
| $ | — |
| $ | 120 |
| $ | — |
| $ | — |
| $ | 89 |
|
| Intercompany income tax payable | 173 |
| — |
| 46 |
| — |
| 18 |
| 104 |
| — |
|
| | | | | | | | |
| December 31, 2016 | | | | | | | |
| Intercompany income tax receivable | $ | 1 |
| $ | — |
| $ | — |
| $ | 37 |
| $ | — |
| $ | — |
| $ | — |
|
| Intercompany income tax payable | — |
| 37 |
| 90 |
| — |
| 1 |
| 3 |
| 38 |
|
10.8. DERIVATIVES AND HEDGING
The Duke Energy Registrants use commodity and interest rate contracts to manage commodity price risk and interest rate risk. The primary use of commodity derivatives is to hedge the generation portfolio against changes in the prices of electricity and natural gas. Piedmont enters into natural gas supply contracts to provide diversification, reliability and natural gas cost benefits to its customers. Interest rate swapsderivatives are used to manage interest rate risk associated with borrowings.
All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Condensed Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the Condensed Consolidated Statements of Cash Flows.
INTEREST RATE RISK
The Duke Energy Registrants are exposed to changes in interest rates as a result of their issuance or anticipated issuance of variable-rate and fixed-rate debt and commercial paper. Interest rate risk is managed by limiting variable-rate exposures to a percentage of total debt and by monitoring changes in interest rates. To manage risk associated with changes in interest rates, the Duke Energy Registrants may enter into interest rate swaps, U.S. Treasury lock agreements and other financial contracts. In anticipation of certain fixed-rate debt issuances, a series of forward-starting interest rate swaps or Treasury locks may be executed to lock in components of current market interest rates. These instruments are later terminated prior to or upon the issuance of the corresponding debt.
| | | | | |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Cash Flow Hedges
For a derivative designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction impacts earnings. Amounts for interest rate contracts are reclassified to earnings as interest expense over the term of the related debt. Gains and losses reclassified out of AOCIaccumulated other comprehensive loss for the three and nine months ended September 30, 2017,2021, and 2020, were not material. Duke Energy's interest rate derivatives designated as hedges include interest rate swaps used to hedge existing debt within the Commercial Renewables business.segment and forward-starting interest rate swaps not accounted for under regulatory accounting.
Undesignated Contracts
Undesignated contracts primarily include contracts not designated as a hedge because they are accounted for under regulatory accounting andor contracts that do not qualify for hedge accounting.
Duke Energy’s interest rate swaps for its regulated operations employ regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the swaps are deferred as regulatory liabilities or regulatory assets, respectively. Regulatory assets and liabilities are amortized consistent with the treatment of the related costs in the ratemaking process. The accrual of interest on the swaps is recorded as Interest Expense.
In August 2016,Expense on the Duke Energy unwound $1.4 billion of forward-starting interest rate swaps associated with the Piedmont acquisition financing. The swaps were considered undesignated as they did not qualify for hedge accounting. For the three and nine months ended September 30, 2016, losses on the swaps of $22 million and $190 million, respectively, were included within Interest Expense on Duke Energy'sRegistrant's Condensed Consolidated Statements of Operations. See Note 2 for additional information related to the Piedmont acquisition.Operations and Comprehensive Income.
The following table shows notional amounts of outstanding derivatives related to interest rate risk. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
|
Cash flow hedges(a) | $ | 703 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Undesignated contracts | 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
|
| Total notional amount | $ | 1,630 |
|
| $ | 400 |
|
| $ | 500 |
|
| $ | 250 |
|
| $ | 250 |
|
| $ | 27 |
|
| | | | December 31, 2016 | | September 30, 2021 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | | Duke | | Duke | | Duke | | Duke |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio |
Cash flow hedges(a) | $ | 750 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| |
| Cash flow hedges | | Cash flow hedges | $ | 2,094 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Undesignated contracts | 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
| Undesignated contracts | 1,371 | | | 350 | | | 900 | | | 400 | | | 500 | | | 27 | |
| Total notional amount | $ | 1,677 |
| | $ | 400 |
| | $ | 500 |
| | $ | 250 |
| | $ | 250 |
| | $ | 27 |
| |
Total notional amount(a) | | Total notional amount(a) | $ | 3,465 | | | $ | 350 | | | $ | 900 | | | $ | 400 | | | $ | 500 | | | $ | 27 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | Duke | | | | Duke | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio |
| Cash flow hedges | $ | 632 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Undesignated contracts | 1,177 | | | 400 | | | 750 | | | 750 | | | — | | | 27 | |
Total notional amount(a) | $ | 1,809 | | | $ | 400 | | | $ | 750 | | | $ | 750 | | | $ | — | | | $ | 27 | |
| |
(a) | Duke Energy includes amounts related to consolidated VIEs of $703 million and $750 million as of September 30, 2017, and December 31, 2016, respectively. |
(a)Duke Energy includes amounts related to consolidated VIEs of $594 million in cash flow hedges and $94 million in undesignated contracts as of September 30, 2021, and $632 million in cash flow hedges as of December 31, 2020.
COMMODITY PRICE RISK
The Duke Energy Registrants are exposed to the impact of changes in the prices of electricity purchased and sold in bulk power markets and coal and natural gas purchases, including Piedmont's natural gas supply contracts. Exposure to commodity price risk is influenced by a number of factors including the term of contracts, the liquidity of markets and delivery locations. To manage risk associated with commodity prices, the Duke Energy Registrants may enter into long-term power purchase or sales contracts and long-term natural gas supply agreements.
Cash Flow Hedges
For derivatives designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction impacts earnings. Gains and losses reclassified out of accumulated other comprehensive loss for the three and nine months ended September 30, 2021, and 2020, were not material. Duke Energy’s commodity derivatives designated as hedges include long-term electricity sales in the Commercial Renewables segment.
Undesignated Contracts
For the Subsidiary Registrants, bulk power electricity and coal and natural gas purchases flow through fuel adjustment clauses, formula-based contracts or other cost-sharing mechanisms. Differences between the costs included in rates and the incurred costs, including undesignated derivative contracts, are largely deferred as regulatory assets or regulatory liabilities. Piedmont policies allow for the use of financial instruments to hedge commodity price risks. The strategy and objective of these hedging programs are to use the financial instruments to reduce natural gas costs volatility for customers.
| | | | | |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Volumes
The tables below include volumes of outstanding commodity derivatives. Amounts disclosed represent the absolute value of notional volumes of commodity contracts excluding NPNS. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown. |
| | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
|
| Electricity (gigawatt-hours) | 112 |
| | — |
| | — |
| | — |
| | — |
| | 112 |
| | — |
|
| Natural gas (millions of dekatherms) | 786 |
| | 103 |
| | 193 |
| | 124 |
| | 69 |
| | 1 |
| | 489 |
|
| | | | | | | | | | | | | | | | | September 30, 2021 |
| | December 31, 2016 | | | Duke | | Duke | | | Duke | | Duke | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | | | Duke | | Energy | | Progress | | Energy | | | Energy | | Energy | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | | | Energy | | Carolinas | | Energy | | Progress | | | Ohio | | Indiana | | Piedmont |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
| |
| Electricity (gigawatt-hours) | 147 |
| | — |
| | — |
| | — |
| | — |
| | 147 |
| | — |
| |
Electricity (GWh)(a) | | Electricity (GWh)(a) | 29,044 | | | — | | | — | | | — | | | | 3,004 | | | 15,881 | | | — | |
| Natural gas (millions of dekatherms) | 890 |
| | 91 |
| | 269 |
| | 118 |
| | 151 |
| | 1 |
| | 529 |
| Natural gas (millions of dekatherms) | 772 | | | 230 | | | 190 | | | 190 | | | | — | | | 7 | | | 345 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | Duke | | | | Duke | | | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | | | Energy | | Energy | | |
| Energy | | Carolinas | | Energy | | Progress | | | | Ohio | | Indiana | | Piedmont |
Electricity (GWh)(a) | 35,409 | | | — | | | — | | | — | | | | | 2,559 | | | 10,802 | | | — | |
| Natural gas (millions of dekatherms) | 678 | | | 145 | | | 158 | | | 158 | | | | | — | | | 2 | | | 373 | |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes(a)Duke Energy includes 10,159 GWh and 22,048 GWh related to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
cash flow hedges as of September 30, 2021, and December 31, 2020, respectively.
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED ON THE CONDENSED CONSOLIDATED BALANCE SHEETS
The following tables show the fair value and balance sheet location of derivative instruments. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | September 30, 2017 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | $ | 48 |
| | $ | 6 |
| | $ | 10 |
| | $ | 5 |
| | $ | 4 |
| | $ | 2 |
| | $ | 28 |
| | $ | 2 |
|
| Noncurrent | | 6 |
| | 2 |
| | 4 |
| | 3 |
| | 1 |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Commodity Contracts | | $ | 54 |
| | $ | 8 |
| | $ | 14 |
| | $ | 8 |
| | $ | 5 |
| | $ | 2 |
| | $ | 28 |
| | $ | 2 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Noncurrent | | $ | 14 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | 1 |
| | — |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 15 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 69 |
|
| $ | 8 |
|
| $ | 15 |
|
| $ | 8 |
|
| $ | 6 |
|
| $ | 2 |
|
| $ | 28 |
| | $ | 2 |
|
| | | Derivative Liabilities | | September 30, 2017 | |
| Derivative Assets | | Derivative Assets | | September 30, 2021 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | Duke | | Duke | | Duke | | Duke | | Duke | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| (in millions) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Commodity Contracts | | | | | | | | | | | | | | | | | Commodity Contracts | |
| | Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | Not Designated as Hedging Instruments | |
| Current | | $ | 29 |
| | $ | 1 |
| | $ | 11 |
| | $ | 2 |
| | $ | 9 |
| | $ | — |
| | $ | — |
| | $ | 18 |
| Current | | $ | 359 | | | $ | 171 | | | $ | 135 | | | $ | 135 | | | $ | — | | | $ | 4 | | | $ | 36 | | | $ | 12 | |
| Noncurrent | | 113 |
| | 1 |
| | 7 |
| | 1 |
| | — |
| | — |
| | — |
| | 105 |
| Noncurrent | | 177 | | | 100 | | | 78 | | | 78 | | | — | | | — | | | — | | | — | |
| Total Derivative Liabilities – Commodity Contracts | | $ | 142 |
| | $ | 2 |
| | $ | 18 |
| | $ | 3 |
| | $ | 9 |
| | $ | — |
| | $ | — |
| | $ | 123 |
| |
| Total Derivative Assets – Commodity Contracts | | Total Derivative Assets – Commodity Contracts | | $ | 536 | | | $ | 271 | | | $ | 213 | | | $ | 213 | | | $ | — | | | $ | 4 | | | $ | 36 | | | $ | 12 | |
| Interest Rate Contracts | | | | | | | | | | | | | | | | | Interest Rate Contracts | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | Designated as Hedging Instruments | |
| Current | | $ | 7 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Current | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Noncurrent | | 9 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Noncurrent | | 3 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | Not Designated as Hedging Instruments | |
| Current | | 24 |
| | 23 |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| Current | | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Noncurrent | | 9 |
| | — |
| | 4 |
| | 4 |
| | — |
| | 4 |
| | — |
| | — |
| |
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 49 |
| | $ | 23 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | — |
| |
| Total Derivative Liabilities | | $ | 191 |
|
| $ | 25 |
|
| $ | 22 |
|
| $ | 7 |
|
| $ | 9 |
|
| $ | 5 |
|
| $ | — |
| | $ | 123 |
| |
| | Total Derivative Assets – Interest Rate Contracts | | Total Derivative Assets – Interest Rate Contracts | | $ | 7 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | Total Derivative Assets | | Total Derivative Assets | | $ | 543 | | | $ | 271 | | | $ | 215 | | | $ | 215 | | | $ | — | | | $ | 4 | | | $ | 36 | | | $ | 12 | |
| | | | | |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | September 30, 2021 |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Commodity Contracts | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | $ | 37 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | — | |
| Noncurrent | | 120 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | $ | 33 | | | $ | 12 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2 | | | $ | 20 | |
| Noncurrent | | 128 | | | — | | | — | | | — | | | — | | | — | | | — | | | 128 | |
| Total Derivative Liabilities – Commodity Contracts | | $ | 318 | | | $ | 12 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 2 | | | $ | 148 | |
| Interest Rate Contracts | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | $ | 45 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Noncurrent | | 29 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | 19 | | | 6 | | | 12 | | | — | | | 12 | | | 1 | | | — | | | — | |
| Noncurrent | | 4 | | | — | | | — | | | — | | | — | | | 4 | | | — | | | — | |
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 97 | | | $ | 6 | | | $ | 12 | | | $ | — | | | $ | 12 | | | $ | 5 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total Derivative Liabilities | | $ | 415 | | | $ | 18 | | | $ | 12 | | | $ | — | | | $ | 12 | | | $ | 5 | | | $ | 2 | | | $ | 148 | |
PART I | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2020 |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Commodity Contracts | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | $ | 30 | | | $ | 14 | | | $ | 9 | | | $ | 9 | | | $ | — | | | $ | 1 | | | $ | 6 | | | $ | 1 | |
| Noncurrent | | 13 | | | 6 | | | 6 | | | 6 | | | — | | | — | | | — | | | — | |
| Total Derivative Assets – Commodity Contracts | | $ | 43 | | | $ | 20 | | | $ | 15 | | | $ | 15 | | | $ | — | | | $ | 1 | | | $ | 6 | | | $ | 1 | |
| Interest Rate Contracts | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | $ | 18 | | | $ | — | | | $ | 18 | | | $ | 18 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
| Total Derivative Assets – Interest Rate Contracts | | $ | 18 | | | $ | — | | | $ | 18 | | | $ | 18 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Total Derivative Assets | | $ | 61 | | | $ | 20 | | | $ | 33 | | | $ | 33 | | | $ | — | | | $ | 1 | | | $ | 6 | | | $ | 1 | |
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
| | | | | |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | $ | 108 |
| | $ | 23 |
| | $ | 61 |
| | $ | 35 |
| | $ | 26 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
|
| Noncurrent | | 32 |
| | 10 |
| | 21 |
| | 10 |
| | 11 |
| | 1 |
| | — |
| | — |
|
| Total Derivative Assets – Commodity Contracts | | $ | 140 |
| | $ | 33 |
| | $ | 82 |
| | $ | 45 |
| | $ | 37 |
| | $ | 5 |
| | $ | 16 |
| | $ | 3 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Noncurrent | | $ | 19 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | 3 |
| | — |
| | 3 |
| | 1 |
| | 2 |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 22 |
| | $ | — |
| | $ | 3 |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 162 |
| | $ | 33 |
| | $ | 85 |
| | $ | 46 |
| | $ | 39 |
| | $ | 5 |
| | $ | 16 |
| | $ | 3 |
|
| | | Derivative Liabilities | | December 31, 2016 | Derivative Liabilities | | December 31, 2020 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | Duke | | Duke | | Duke | | Duke | | Duke | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| (in millions) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Commodity Contracts | | | | | | | | | | | | | | | | | Commodity Contracts | |
| Designated as Hedging Instruments | | Designated as Hedging Instruments | |
| Current | | Current | | $ | 14 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Noncurrent | | Noncurrent | | 70 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | Not Designated as Hedging Instruments | |
| Current | | $ | 43 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 2 |
| | $ | 35 |
| Current | | $ | 30 | | | $ | 13 | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 15 | |
| Noncurrent | | 166 |
| | 1 |
| | 7 |
| | 1 |
| | — |
| | — |
| | — |
| | 152 |
| Noncurrent | | 137 | | | 3 | | | 27 | | | 12 | | | — | | | — | | | — | | | 107 | |
| Total Derivative Liabilities – Commodity Contracts | | $ | 209 |
| | $ | 1 |
| | $ | 19 |
| | $ | 1 |
| | $ | 12 |
| | $ | — |
| | $ | 2 |
| | $ | 187 |
| Total Derivative Liabilities – Commodity Contracts | | $ | 251 | | | $ | 16 | | | $ | 29 | | | $ | 14 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 122 | |
| Interest Rate Contracts | | | | | | | | | | | | | | | | | Interest Rate Contracts | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | Designated as Hedging Instruments | |
| Current | | $ | 8 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Current | | $ | 15 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Noncurrent | | 8 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Noncurrent | | 48 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | — |
| Not Designated as Hedging Instruments | |
| Current | | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| Current | | 5 | | | 4 | | | — | | | — | | | — | | | 1 | | | — | | | — | |
| Noncurrent | | 26 |
| | 15 |
| | 6 |
| | 6 |
| | — |
| | 5 |
| | — |
| | — |
| Noncurrent | | 5 | | | — | | | — | | | — | | | — | | | 5 | | | — | | | — | |
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 43 |
| | $ | 15 |
| | $ | 6 |
| | $ | 6 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | — |
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 73 | | | $ | 4 | | | $ | — | | | $ | — | | | $ | — | | | $ | 6 | | | $ | — | | | $ | — | |
| | Total Derivative Liabilities | | $ | 252 |
| | $ | 16 |
| | $ | 25 |
| | $ | 7 |
| | $ | 12 |
| | $ | 6 |
| | $ | 2 |
| | $ | 187 |
| Total Derivative Liabilities | | $ | 324 | | | $ | 20 | | | $ | 29 | | | $ | 14 | | | $ | — | | | $ | 6 | | | $ | 1 | | | $ | 122 | |
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Condensed Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The Grossgross amounts offset in the tables below show the effect of these netting arrangements on financial position, and include collateral posted to offset the net position. The amounts shown are calculated by counterparty. Accounts receivable or accounts payable may also be available to offset exposures in the event of bankruptcy. These amounts are not included in the tables below.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | September 30, 2021 |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 363 | | | $ | 171 | | | $ | 137 | | | $ | 137 | | | $ | — | | | $ | 4 | | | $ | 36 | | | $ | 12 | |
| Gross amounts offset | | (143) | | | (87) | | | (56) | | | (56) | | | — | | | — | | | — | | | — | |
| Net amounts presented in Current Assets: Other | | $ | 220 | | | $ | 84 | | | $ | 81 | | | $ | 81 | | | $ | — | | | $ | 4 | | | $ | 36 | | | $ | 12 | |
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 180 | | | $ | 100 | | | $ | 78 | | | $ | 78 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Gross amounts offset | | (71) | | | (45) | | | (26) | | | (26) | | | — | | | — | | | — | | | — | |
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 109 | | | $ | 55 | | | $ | 52 | | | $ | 52 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | September 30, 2017 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 49 |
| | $ | 6 |
| | $ | 11 |
| | $ | 5 |
| | $ | 5 |
| | $ | 2 |
| | $ | 28 |
| | $ | 2 |
|
| Gross amounts offset | | (3 | ) | | — |
| | (3 | ) | | (1 | ) | | (2 | ) | | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 46 |
| | $ | 6 |
| | $ | 8 |
| | $ | 4 |
| | $ | 3 |
| | $ | 2 |
| | $ | 28 |
| | $ | 2 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 20 |
| | $ | 2 |
| | $ | 4 |
| | $ | 3 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 18 |
| | $ | 1 |
| | $ | 3 |
| | $ | 2 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | September 30, 2017 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 60 |
| | $ | 24 |
| | $ | 11 |
| | $ | 2 |
| | $ | 9 |
| | $ | 1 |
| | $ | — |
| | $ | 18 |
|
| Gross amounts offset | | (4 | ) | | (1 | ) | | (3 | ) | | (1 | ) | | (2 | ) | | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 56 |
| | $ | 23 |
| | $ | 8 |
| | $ | 1 |
| | $ | 7 |
| | $ | 1 |
| | $ | — |
| | $ | 18 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 131 |
| | $ | 1 |
| | $ | 11 |
| | $ | 5 |
| | $ | — |
| | $ | 4 |
| | $ | — |
| | $ | 105 |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 129 |
| | $ | — |
| | $ | 10 |
| | $ | 4 |
| | $ | — |
| | $ | 4 |
| | $ | — |
| | $ | 105 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 111 |
| | $ | 23 |
| | $ | 64 |
| | $ | 36 |
| | $ | 28 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
|
| Gross amounts offset | | (11 | ) | | — |
| | (11 | ) | | — |
| | (11 | ) | | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 100 |
| | $ | 23 |
| | $ | 53 |
| | $ | 36 |
| | $ | 17 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 51 |
| | $ | 10 |
| | $ | 21 |
| | $ | 10 |
| | $ | 11 |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 49 |
| | $ | 9 |
| | $ | 20 |
| | $ | 9 |
| | $ | 11 |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | December 31, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 52 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 12 |
| | $ | 1 |
| | $ | 2 |
| | $ | 35 |
|
| Gross amounts offset | | (11 | ) | | — |
| | (11 | ) | | — |
| | (11 | ) | | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 41 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | 2 |
| | $ | 35 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 200 |
| | $ | 16 |
| | $ | 13 |
| | $ | 7 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 152 |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 198 |
| | $ | 15 |
| | $ | 12 |
| | $ | 6 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 152 |
|
OBJECTIVE CREDIT CONTINGENT FEATURES
Certain derivative contracts contain objective credit contingent features. These features include the requirement to post cash collateral or letters of credit if specific events occur, such as a credit rating downgrade below investment grade. The following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk-related payment provisions. |
| | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Aggregate fair value of derivatives in a net liability position | $ | 40 |
| | $ | 25 |
| | $ | 15 |
| | $ | 6 |
| | $ | 9 |
|
| Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
|
| Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 40 |
| | 25 |
| | 15 |
| | 6 |
| | 9 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Aggregate fair value of derivatives in a net liability position | $ | 34 |
| | $ | 16 |
| | $ | 18 |
| | $ | 6 |
| | $ | 12 |
|
| Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
|
| Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 34 |
| | 16 |
| | 18 |
| | 6 |
| | 12 |
|
The Duke Energy Registrants have elected to offset cash collateral and fair values of derivatives. For amounts to be netted, the derivative and cash collateral must be executed with the same counterparty under the same master netting arrangement. |
| | | | |
| FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
11. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | September 30, 2021 |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 134 | | | $ | 18 | | | $ | 12 | | | $ | — | | | $ | 12 | | | $ | 1 | | | $ | 2 | | | $ | 20 | |
| Gross amounts offset | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Net amounts presented in Current Liabilities: Other | | $ | 134 | | | $ | 18 | | | $ | 12 | | | $ | — | | | $ | 12 | | | $ | 1 | | | $ | 2 | | | $ | 20 | |
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 281 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 4 | | | $ | — | | | $ | 128 | |
| Gross amounts offset | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 281 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 4 | | | $ | — | | | $ | 128 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2020 |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 48 | | | $ | 14 | | | $ | 27 | | | $ | 27 | | | $ | — | | | $ | 1 | | | $ | 6 | | | $ | 1 | |
| Gross amounts offset | | (3) | | | (2) | | | (2) | | | (2) | | | — | | | — | | | — | | | — | |
| Net amounts presented in Current Assets: Other | | $ | 45 | | | $ | 12 | | | $ | 25 | | | $ | 25 | | | $ | — | | | $ | 1 | | | $ | 6 | | | $ | 1 | |
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 13 | | | $ | 6 | | | $ | 6 | | | $ | 6 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Gross amounts offset | | (5) | | | (1) | | | (4) | | | (4) | | | — | | | — | | | — | | | — | |
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 8 | | | $ | 5 | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | December 31, 2020 |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 64 | | | $ | 17 | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | 1 | | | $ | 1 | | | $ | 15 | |
| Gross amounts offset | | (3) | | | (2) | | | (2) | | | (2) | | | — | | | — | | | — | | | — | |
| Net amounts presented in Current Liabilities: Other | | $ | 61 | | | $ | 15 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 1 | | | $ | 15 | |
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 260 | | | $ | 3 | | | $ | 27 | | | $ | 12 | | | $ | — | | | $ | 5 | | | $ | — | | | $ | 107 | |
| Gross amounts offset | | (5) | | | (1) | | | (4) | | | (4) | | | — | | | — | | | — | | | — | |
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 255 | | | $ | 2 | | | $ | 23 | | | $ | 8 | | | $ | — | | | $ | 5 | | | $ | — | | | $ | 107 | |
9.INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Duke Energy Registrants classify theirEnergy’s investments in debt and equity securities as either trading or available-for-sale.
TRADING SECURITIES
Piedmont's investments in debt and equity securities held in rabbi trusts associated with certain deferred compensation plans are classified as trading securities. The fair value of these investments was $1 million and $5 million as of September 30, 2017, and December 31, 2016, respectively.
AVAILABLE-FOR-SALE (AFS) SECURITIES
All other investments in debt and equity securities are classified as AFS.
Duke Energy’s available-for-sale securities are primarily comprised of investments held in (i) the nuclear decommissioning trust fund (NDTF)NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) the grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to Other Post-Retirement Benefit Obligations (OPEB)OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as AFS and investments in equity securities as fair value through net income (FV-NI).
For investments in debt securities classified as AFS, the unrealized gains and losses are included in other comprehensive income until realized, at which time they are reported through net income. For investments in equity securities classified as FV-NI, both realized and unrealized gains and losses are reported through net income. Substantially all of Duke Energy’s investments in debt and equity securities qualify for regulatory accounting, and accordingly, all associated realized and unrealized gains and losses on these investments are deferred as a regulatory asset or liability.
Duke Energy classifies all otherthe majority of investments in debt and equity securities as long term, unless otherwise noted.
| | | | | |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Investment Trusts
The investments within the NDTF investments and the Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana grantor trusts (Investment Trusts)Investment Trusts are managed by independent investment managers with discretion to buy, sell and invest pursuant to the objectives set forth by the investment manager agreements and trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. As a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt and equity securities within the Investment Trusts are considered other-than-temporary impairments (OTTIs) and are recognized immediately.
Investments within the Investment Trusts generally qualify for regulatory accounting, and accordingly realized and unrealized gains and losses are deferred as a regulatory asset or liability.
Substantially all amounts of the Duke Energy Registrants' gross unrealized holding losses as of September 30, 2017, and December 31, 2016, are considered OTTIs on investments within Investment Trusts that have been recognized immediately as aand deferred to regulatory asset.accounts where appropriate.
Other AFS Securities
Unrealized gains and losses on all other AFS securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired.has a credit loss. The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value should be considered other-than-temporary.is related to a credit loss. If an OTTIa credit loss exists, the unrealized credit loss is included in earnings. There were no material credit losses as of September 30, 2017,2021, and December 31, 2016.2020.
Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets.
DUKE ENERGY
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | September 30, 2017 | | December 31, 2016 | | September 30, 2021 | | December 31, 2020 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | | Gross | | Gross | | | Gross | | Gross | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized | | Unrealized | | Estimated | | Unrealized | | Unrealized | | Estimated |
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| | Holding | | Holding | | Fair | | Holding | | Holding | | Fair |
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| (in millions) | Gains | | Losses | | Value | | Gains | | Losses | | Value |
| NDTF | | | | | | | | | | | | NDTF | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 129 |
| | $ | — |
| | $ | — |
| | $ | 111 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 164 | | | $ | — | | | $ | — | | | $ | 177 | |
| Equity securities | 2,549 |
| | 28 |
| | 4,627 |
| | 2,092 |
| | 54 |
| | 4,106 |
| Equity securities | 4,700 | | | 35 | | | 6,754 | | | 4,138 | | | 54 | | | 6,235 | |
| Corporate debt securities | 16 |
| | 2 |
| | 600 |
| | 10 |
| | 8 |
| | 528 |
| Corporate debt securities | 44 | | | 5 | | | 847 | | | 76 | | | 1 | | | 806 | |
| Municipal bonds | 5 |
| | 2 |
| | 334 |
| | 3 |
| | 10 |
| | 331 |
| Municipal bonds | 13 | | | 1 | | | 296 | | | 22 | | | — | | | 370 | |
| U.S. government bonds | 10 |
| | 4 |
| | 984 |
| | 10 |
| | 8 |
| | 984 |
| U.S. government bonds | 34 | | | 8 | | | 1,605 | | | 51 | | | — | | | 1,361 | |
| | Other debt securities | — |
| | 1 |
| | 120 |
| | — |
| | 3 |
| | 124 |
| Other debt securities | 4 | | | 1 | | | 195 | | | 8 | | | — | | | 180 | |
| Total NDTF | $ | 2,580 |
| | $ | 37 |
| | $ | 6,794 |
| | $ | 2,115 |
| | $ | 83 |
| | $ | 6,184 |
| |
| Total NDTF Investments | | Total NDTF Investments | $ | 4,795 | | | $ | 50 | | | $ | 9,861 | | | $ | 4,295 | | | $ | 55 | | | $ | 9,129 | |
| Other Investments | | | | | | | | | | | | Other Investments | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 15 |
| | $ | — |
| | $ | — |
| | $ | 25 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 87 | | | $ | — | | | $ | — | | | $ | 127 | |
| Equity securities | 52 |
| | — |
| | 115 |
| | 38 |
| | — |
| | 104 |
| Equity securities | 83 | | | — | | | 145 | | | 79 | | | — | | | 146 | |
| Corporate debt securities | 1 |
| | — |
| | 64 |
| | 1 |
| | 1 |
| | 66 |
| Corporate debt securities | 4 | | | 1 | | | 130 | | | 8 | | | — | | | 110 | |
| Municipal bonds | 3 |
| | 1 |
| | 83 |
| | 2 |
| | 1 |
| | 82 |
| Municipal bonds | 3 | | | 1 | | | 69 | | | 5 | | | — | | | 86 | |
| U.S. government bonds | — |
| | — |
| | 44 |
| | — |
| | 1 |
| | 51 |
| U.S. government bonds | — | | | — | | | 50 | | | — | | | — | | | 42 | |
| Other debt securities | — |
| | — |
| | 37 |
| | — |
| | 2 |
| | 42 |
| Other debt securities | — | | | — | | | 34 | | | — | | | — | | | 47 | |
| Total Other Investments | $ | 56 |
| | $ | 1 |
| | $ | 358 |
| | $ | 41 |
| | $ | 5 |
| | $ | 370 |
| Total Other Investments | $ | 90 | | | $ | 2 | | | $ | 515 | | | $ | 92 | | | $ | — | | | $ | 558 | |
| Total Investments | $ | 2,636 |
| | $ | 38 |
| | $ | 7,152 |
| | $ | 2,156 |
| | $ | 88 |
| | $ | 6,554 |
| Total Investments | $ | 4,885 | | | $ | 52 | | | $ | 10,376 | | | $ | 4,387 | | | $ | 55 | | | $ | 9,687 | |
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | September 30, 2017 |
|
| Due in one year or less | $ | 92 |
|
| Due after one through five years | 584 |
|
| Due after five through 10 years | 514 |
|
| Due after 10 years | 1,076 |
|
| Total | $ | 2,266 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2021, and 2020, were as follows.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| (in millions) | September 30, 2021 | | September 30, 2020 | | September 30, 2021 | | September 30, 2020 |
| FV-NI: | | | | | | | |
| Realized gains | $ | 34 | | | $ | 13 | | | $ | 320 | | | $ | 338 | |
| Realized losses | 40 | | | 16 | | | 100 | | | 148 | |
| AFS: | | | | | | | |
| Realized gains | 17 | | | 26 | | | 51 | | | 73 | |
| Realized losses | 15 | | | 19 | | | 46 | | | 38 | |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Realized gains | $ | 37 |
| | $ | 82 |
| | $ | 170 |
| | $ | 200 |
|
| Realized losses | 25 |
| | 42 |
| | 124 |
| | 134 |
|
| | | | | |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | September 30, 2017 | | December 31, 2016 | | September 30, 2021 | | December 31, 2020 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | | Gross | | Gross | | | Gross | | Gross | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized | | Unrealized | | Estimated | | Unrealized | | Unrealized | | Estimated |
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| | Holding | | Holding | | Fair | | Holding | | Holding | | Fair |
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| (in millions) | Gains | | Losses | | Value | | Gains | | Losses | | Value |
| NDTF | | | | | | | | | | | | NDTF | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 34 |
| | $ | — |
| | $ | — |
| | $ | 18 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 60 | | | $ | — | | | $ | — | | | $ | 30 | |
| Equity securities | 1,395 |
| | 14 |
| | 2,553 |
| | 1,157 |
| | 28 |
| | 2,245 |
| Equity securities | 2,725 | | | 14 | | | 3,912 | | | 2,442 | | | 23 | | | 3,685 | |
| Corporate debt securities | 9 |
| | 2 |
| | 395 |
| | 5 |
| | 6 |
| | 354 |
| Corporate debt securities | 27 | | | 3 | | | 495 | | | 49 | | | 1 | | | 510 | |
| Municipal bonds | 1 |
| | — |
| | 52 |
| | 1 |
| | 2 |
| | 67 |
| Municipal bonds | 1 | | | — | | | 24 | | | 6 | | | — | | | 91 | |
| U.S. government bonds | 3 |
| | 3 |
| | 466 |
| | 2 |
| | 5 |
| | 458 |
| U.S. government bonds | 18 | | | 2 | | | 752 | | | 25 | | | — | | | 475 | |
| Other debt securities | — |
| | 1 |
| | 113 |
| | — |
| | 3 |
| | 116 |
| Other debt securities | 4 | | | 1 | | | 190 | | | 7 | | | — | | | 174 | |
| Total NDTF | $ | 1,408 |
| | $ | 20 |
|
| $ | 3,613 |
| | $ | 1,165 |
| | $ | 44 |
| | $ | 3,258 |
| |
| Other Investments | | | | | | | | | | | | |
| Other debt securities | — |
| | — |
| | — |
| | — |
| | 1 |
| | 3 |
| |
| Total Investments | $ | 1,408 |
| | $ | 20 |
| | $ | 3,613 |
| | $ | 1,165 |
| | $ | 45 |
| | $ | 3,261 |
| |
| Total NDTF Investments | | Total NDTF Investments | $ | 2,775 | | | $ | 20 | | | $ | 5,433 | | | $ | 2,529 | | | $ | 24 | | | $ | 4,965 | |
|
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | September 30, 2017 |
|
| Due in one year or less | $ | 5 |
|
| Due after one through five years | 218 |
|
| Due after five through 10 years | 264 |
|
| Due after 10 years | 539 |
|
| Total | $ | 1,026 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2021, and 2020, were as follows. | | | | Three Months Ended | | Nine Months Ended | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | September 30, | | Three Months Ended | | Nine Months Ended |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| (in millions) | September 30, 2021 | | September 30, 2020 | | September 30, 2021 | | September 30, 2020 |
| FV-NI: | | FV-NI: | |
| Realized gains | $ | 20 |
| | $ | 58 |
| | $ | 110 |
| | $ | 125 |
| Realized gains | $ | 25 | | | $ | 10 | | | $ | 243 | | | $ | 46 | |
| Realized losses | 13 |
| | 28 |
| | 76 |
| | 84 |
| Realized losses | 29 | | | 12 | | | 68 | | | 82 | |
| AFS: | | AFS: | |
| Realized gains | | Realized gains | 10 | | | 20 | | | 35 | | | 50 | |
| Realized losses | | Realized losses | 10 | | | 17 | | | 32 | | | 30 | |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
PROGRESS ENERGY
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | Estimated | | Unrealized | | Unrealized | | Estimated |
| Holding | | Holding | | Fair | | Holding | | Holding | | Fair |
| (in millions) | Gains | | Losses | | Value | | Gains | | Losses | | Value |
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 104 | | | $ | — | | | $ | — | | | $ | 147 | |
| Equity securities | 1,975 | | | 21 | | | 2,842 | | | 1,696 | | | 31 | | | 2,550 | |
| Corporate debt securities | 17 | | | 2 | | | 352 | | | 27 | | | — | | | 296 | |
| Municipal bonds | 12 | | | 1 | | | 272 | | | 16 | | | — | | | 279 | |
| U.S. government bonds | 16 | | | 6 | | | 853 | | | 26 | | | — | | | 886 | |
| | | | | | | | | | | |
| Other debt securities | — | | | — | | | 5 | | | 1 | | | — | | | 6 | |
| Total NDTF Investments | $ | 2,020 | | | $ | 30 | | | $ | 4,428 | | | $ | 1,766 | | | $ | 31 | | | $ | 4,164 | |
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 18 | | | $ | — | | | $ | — | | | $ | 106 | |
| | | | | | | | | | | |
| Municipal bonds | 2 | | | — | | | 26 | | | 3 | | | — | | | 26 | |
| Total Other Investments | $ | 2 | | | $ | — | | | $ | 44 | | | $ | 3 | | | $ | — | | | $ | 132 | |
| Total Investments | $ | 2,022 | | | $ | 30 | | | $ | 4,472 | | | $ | 1,769 | | | $ | 31 | | | $ | 4,296 | |
| | | | | |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 95 |
| | $ | — |
| | $ | — |
| | $ | 93 |
|
| Equity securities | 1,154 |
| | 14 |
| | 2,074 |
| | 935 |
| | 26 |
| | 1,861 |
|
| Corporate debt securities | 7 |
| | — |
| | 205 |
| | 5 |
| | 2 |
| | 174 |
|
| Municipal bonds | 4 |
| | 2 |
| | 282 |
| | 2 |
| | 8 |
| | 264 |
|
| U.S. government bonds | 7 |
| | 1 |
| | 518 |
| | 8 |
| | 3 |
| | 526 |
|
| Other debt securities | — |
| | — |
| | 7 |
| | — |
| | — |
| | 8 |
|
| Total NDTF | $ | 1,172 |
| | $ | 17 |
| | $ | 3,181 |
| | $ | 950 |
| | $ | 39 |
| | $ | 2,926 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 11 |
| | $ | — |
| | $ | — |
| | $ | 21 |
|
| Municipal bonds | 3 |
| | — |
| | 47 |
| | 2 |
| | — |
| | 44 |
|
| Total Other Investments | $ | 3 |
| | $ | — |
| | $ | 58 |
| | $ | 2 |
| | $ | — |
| | $ | 65 |
|
| Total Investments | $ | 1,175 |
| | $ | 17 |
| | $ | 3,239 |
| | $ | 952 |
| | $ | 39 |
| | $ | 2,991 |
|
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | September 30, 2017 |
|
| Due in one year or less | $ | 74 |
|
| Due after one through five years | 309 |
|
| Due after five through 10 years | 194 |
|
| Due after 10 years | 482 |
|
| Total | $ | 1,059 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2021, and 2020, were as follows. | | | | Three Months Ended | | Nine Months Ended | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | September 30, | | Three Months Ended | Nine Months Ended |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| (in millions) | September 30, 2021 | | September 30, 2020 | | September 30, 2021 | | September 30, 2020 |
| FV-NI: | | FV-NI: | |
| Realized gains | $ | 16 |
| | $ | 21 |
| | $ | 58 |
| | $ | 71 |
| Realized gains | $ | 9 | | | $ | 3 | | | $ | 77 | | | $ | 292 | |
| Realized losses | 12 |
| | 13 |
| | 47 |
| | 49 |
| Realized losses | 11 | | | 4 | | | 32 | | | 66 | |
| AFS: | | AFS: | |
| Realized gains | | Realized gains | 7 | | | 6 | | | 14 | | | 17 | |
| Realized losses | | Realized losses | 6 | | | 2 | | | 12 | | | 7 | |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | September 30, 2017 | | December 31, 2016 | | September 30, 2021 | | December 31, 2020 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | | Gross | | Gross | | | Gross | | Gross | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized | | Unrealized | | Estimated | | Unrealized | | Unrealized | | Estimated |
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| | Holding | | Holding | | Fair | | Holding | | Holding | | Fair |
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| (in millions) | Gains | | Losses | | Value | | Gains | | Losses | | Value |
| NDTF | | | | | | | | | | | | NDTF | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 46 |
| | $ | — |
| | $ | — |
| | $ | 45 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 92 | | | $ | — | | | $ | — | | | $ | 76 | |
| Equity securities | 882 |
| | 11 |
| | 1,683 |
| | 704 |
| | 21 |
| | 1,505 |
| Equity securities | 1,882 | | | 21 | | | 2,736 | | | 1,617 | | | 31 | | | 2,459 | |
| Corporate debt securities | 5 |
| | — |
| | 144 |
| | 4 |
| | 1 |
| | 120 |
| Corporate debt securities | 17 | | | 2 | | | 287 | | | 27 | | | — | | | 296 | |
| Municipal bonds | 4 |
| | 2 |
| | 281 |
| | 2 |
| | 8 |
| | 263 |
| Municipal bonds | 12 | | | 1 | | | 272 | | | 16 | | | — | | | 279 | |
| U.S. government bonds | 5 |
| | 1 |
| | 303 |
| | 5 |
| | 2 |
| | 275 |
| U.S. government bonds | 16 | | | 2 | | | 466 | | | 26 | | | — | | | 412 | |
| Other debt securities | — |
| | — |
| | 4 |
| | — |
| | — |
| | 5 |
| Other debt securities | — | | | — | | | 5 | | | 1 | | | — | | | 6 | |
| Total NDTF | $ | 896 |
| | $ | 14 |
| | $ | 2,461 |
| | $ | 715 |
| | $ | 32 |
| | $ | 2,213 |
| |
| Total NDTF Investments | | Total NDTF Investments | $ | 1,927 | | | $ | 26 | | | $ | 3,858 | | | $ | 1,687 | | | $ | 31 | | | $ | 3,528 | |
| Other Investments | | | | | | | | | | | | Other Investments | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | |
| Total Other Investments | | Total Other Investments | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | |
| Total Investments | $ | 896 |
| | $ | 14 |
| | $ | 2,462 |
| | $ | 715 |
| | $ | 32 |
| | $ | 2,214 |
| Total Investments | $ | 1,927 | | | $ | 26 | | | $ | 3,874 | | | $ | 1,687 | | | $ | 31 | | | $ | 3,529 | |
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | September 30, 2017 |
|
| Due in one year or less | $ | 16 |
|
| Due after one through five years | 209 |
|
| Due after five through 10 years | 136 |
|
| Due after 10 years | 371 |
|
| Total | $ | 732 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2021, and 2020, were as follows. | | | | Three Months Ended | | Nine Months Ended | | | | | | | | | | | | | | | | | | | | |
| | September 30, | | September 30, | | Three Months Ended | Nine Months Ended |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| (in millions) | September 30, 2021 | | September 30, 2020 | | September 30, 2021 | | September 30, 2020 |
| FV-NI: | | FV-NI: | |
| Realized gains | $ | 14 |
| | $ | 18 |
| | $ | 49 |
| | $ | 60 |
| Realized gains | $ | 9 | | | $ | 3 | | | $ | 76 | | | $ | 43 | |
| Realized losses | 11 |
| | 11 |
| | 41 |
| | 42 |
| Realized losses | 11 | | | 4 | | | 31 | | | 51 | |
| AFS: | | AFS: | |
| Realized gains | | Realized gains | 6 | | | 6 | | | 13 | | | 17 | |
| Realized losses | | Realized losses | 5 | | | 2 | | | 11 | | | 7 | |
| | | | | |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in AFS securities.debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | | September 30, 2017 | | December 31, 2016 | | September 30, 2021 | | December 31, 2020 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | | Gross | | Gross | | | Gross | | Gross | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized | | Unrealized | | Estimated | | Unrealized | | Unrealized | | Estimated |
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| | Holding | | Holding | | Fair | | Holding | | Holding | | Fair |
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
| (in millions) | Gains | | Losses | | Value | | Gains | | Losses | | Value |
| NDTF | | | | | | | | | | | | NDTF | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 49 |
| | $ | — |
| | $ | — |
| | $ | 48 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 12 | | | $ | — | | | $ | — | | | $ | 71 | |
| Equity securities | 272 |
| | 3 |
| | 391 |
| | 231 |
| | 5 |
| | 356 |
| Equity securities | 93 | | | — | | | 106 | | | 79 | | | — | | | 91 | |
| Corporate debt securities | 2 |
| | — |
| | 61 |
| | 1 |
| | 1 |
| | 54 |
| Corporate debt securities | — | | | — | | | 65 | | | — | | | — | | | — | |
| Municipal bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| |
| | U.S. government bonds | 2 |
| | — |
| | 215 |
| | 3 |
| | 1 |
| | 251 |
| U.S. government bonds | — | | | 4 | | | 387 | | | — | | | — | | | 474 | |
| Other debt securities | — |
| | — |
| | 3 |
| | — |
| | — |
| | 3 |
| |
Total NDTF(a) | $ | 276 |
| | $ | 3 |
| | $ | 720 |
| | $ | 235 |
| | $ | 7 |
| | $ | 713 |
| |
| Total NDTF Investments(a) | | Total NDTF Investments(a) | $ | 93 | | | $ | 4 | | | $ | 570 | | | $ | 79 | | | $ | — | | | $ | 636 | |
| Other Investments | | | | | | | | | | | | Other Investments | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 4 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | | | $ | 1 | |
| | Municipal bonds | 3 |
| | — |
| | 47 |
| | 2 |
| | — |
| | 44 |
| Municipal bonds | 2 | | | — | | | 26 | | | 3 | | | — | | | 26 | |
| Total Other Investments | $ | 3 |
| | $ | — |
| | $ | 47 |
| | $ | 2 |
| | $ | — |
| | $ | 48 |
| Total Other Investments | $ | 2 | | | $ | — | | | $ | 27 | | | $ | 3 | | | $ | — | | | $ | 27 | |
| Total Investments | $ | 279 |
| | $ | 3 |
| | $ | 767 |
| | $ | 237 |
| | $ | 7 |
| | $ | 761 |
| Total Investments | $ | 95 | | | $ | 4 | | | $ | 597 | | | $ | 82 | | | $ | — | | | $ | 663 | |
| |
(a) | (a)During the nine months ended September 30, 2017, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioning activity of the Crystal River Unit 3 nuclear plant. |
The table below summarizes the maturity datenine months ended September 30, 2021, and the year ended December 31, 2020, Duke Energy Florida received reimbursements from the NDTF for debt securities. |
| | | |
| (in millions) | September 30, 2017 |
|
| Due in one year or less | $ | 58 |
|
| Due after one through five years | 100 |
|
| Due after five through 10 years | 58 |
|
| Due after 10 years | 111 |
|
| Total | $ | 327 |
|
Realized gains and losses, which were determined on a specific identification basis, from salescosts related to ongoing decommissioning activity of AFS securities were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Realized gains | $ | 2 |
| | $ | 3 |
| | $ | 9 |
| | $ | 11 |
|
| Realized losses | 1 |
| | 2 |
| | 6 |
| | 7 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DUKE ENERGY INDIANA
The following table presents the estimated fair value of investments in AFS securities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses |
| | Value |
| | Gains |
| | Losses |
| | Value |
|
| Investments | | | | | | | | | | | |
| Equity securities | $ | 44 |
| | $ | — |
| | $ | 91 |
| | $ | 33 |
| | $ | — |
| | $ | 79 |
|
| Corporate debt securities | — |
| | — |
| | 3 |
| | — |
| | — |
| | 2 |
|
| Municipal bonds | — |
| | 1 |
| | 28 |
| | — |
| | 1 |
| | 28 |
|
| U.S. government bonds | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
|
| Total Investments | $ | 44 |
| | $ | 1 |
| | $ | 122 |
| | $ | 33 |
| | $ | 1 |
| | $ | 110 |
|
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | September 30, 2017 |
|
| Due in one year or less | $ | 4 |
|
| Due after one through five years | 12 |
|
| Due after five through 10 years | 8 |
|
| Due after 10 years | 7 |
|
| Total | $ | 31 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities were insignificant for the three and nine months ended September 30, 2017,2021, and 2016.2020, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Nine Months Ended |
| (in millions) | September 30, 2021 | | September 30, 2020 | | September 30, 2021 | | September 30, 2020 |
| FV-NI: | | | | | | | |
| Realized gains | $ | — | | | $ | — | | | $ | 1 | | | $ | 249 | |
| Realized losses | — | | | — | | | 1 | | | 15 | |
| AFS: | | | | | | | |
| Realized gains | 1 | | | — | | | 1 | | | — | |
| Realized losses | 1 | | | — | | | 1 | | | — | |
12.DUKE ENERGY INDIANA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are measured at FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | Estimated | | Unrealized | | Unrealized | | Estimated |
| Holding | | Holding | | Fair | | Holding | | Holding | | Fair |
| (in millions) | Gains | | Losses | | Value | | Gains | | Losses | | Value |
| Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 19 | | | $ | — | | | $ | — | | | $ | 1 | |
| Equity securities | 56 | | | — | | | 90 | | | 58 | | | — | | | 97 | |
| Corporate debt securities | — | | | — | | | 5 | | | — | | | — | | | 3 | |
| Municipal bonds | 1 | | | 1 | | | 36 | | | 1 | | | — | | | 38 | |
| U.S. government bonds | — | | | — | | | 5 | | | — | | | — | | | 4 | |
| | | | | | | | | | | |
| Total Investments | $ | 57 | | | $ | 1 | | | $ | 155 | | | $ | 59 | | | $ | — | | | $ | 143 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the three and nine months ended September 30, 2021, and 2020, were immaterial.
| | | | | |
| FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DEBT SECURITY MATURITIES
The table below summarizes the maturity date for debt securities.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Indiana |
| Due in one year or less | $ | 151 | | | $ | 3 | | | $ | 121 | | | $ | 22 | | | $ | 99 | | | $ | 5 | |
| Due after one through five years | 954 | | | 343 | | | 548 | | | 244 | | | 304 | | | 18 | |
| Due after five through 10 years | 639 | | | 268 | | | 286 | | | 247 | | | 39 | | | 8 | |
| Due after 10 years | 1,482 | | | 847 | | | 553 | | | 517 | | | 36 | | | 15 | |
| Total | $ | 3,226 | | | $ | 1,461 | | | $ | 1,508 | | | $ | 1,030 | | | $ | 478 | | | $ | 46 | |
10. FAIR VALUE MEASUREMENTS
Fair value is the exchange price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value definition focuses on an exit price versus the acquisition cost. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.
Fair value measurements are classified in three levels based on the fair value hierarchy:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market is one in which transactions for an asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.
Level 2 – A fair value measurement utilizing inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, for an asset or liability. Inputs include (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active (iii) and inputs other than quoted market prices that are observable for the asset or liability, suchhierarchy as interest rate curves and yield curves observable at commonly quoted intervals, volatilities and credit spreads. A Level 2 measurement cannot have more than an insignificant portion of its valuation based on unobservable inputs. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in less-than-active markets.
Level 3 – Any fair value measurement that includes unobservable inputs for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 measurements may include longer-term instruments that extend into periods in which observable inputs are not available.
Not Categorized –defined by GAAP. Certain investments are not categorized within the Fair Valuefair value hierarchy. These investments are measured at fair value using the net asset value (NAV) per share practical expedient. The NAV is derived based on the fair valueinvestment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the underlying investments but may not be readily redeemable at that fair value.same issuer.
Fair value accounting guidance permits entities to elect to measure certain financial instruments that are not required to be accounted for at fair value, such as equity method investments or the company’s own debt, at fair value. The Duke Energy Registrants have not elected to record any of these items at fair value.
Transfers between levels represent assets or liabilities that were previously (i) categorized at a higher level for which the inputs to the estimate became less observable or (ii) classified at a lower level for which the inputs became more observable during the period. The Duke Energy Registrant’s policy is to recognize transfers between levels of the fair value hierarchy at the end of the period. There were no transfers between levels during the three and nine months ended September 30, 2017, and 2016.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Valuation methods of the primary fair value measurements disclosed below are as follows.
Investments in equity securities
The majority of investments in equity securities are valued using Level 1 measurements. Investments in equity securities are typically valued at the closing price in the principal active market as of the last business day of the quarter. Principal active markets for equity prices include published exchanges such as the New York Stock Exchange (NYSE) and Nasdaq Stock Market. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. There was no after-hours market activity that was required to be reflected in the reported fair value measurements.
Investments in debt securities
Most investments in debt securities are valued using Level 2 measurements because the valuations use interest rate curves and credit spreads applied to the terms of the debt instrument (maturity and coupon interest rate) and consider the counterparty credit rating. If the market for a particular fixed-income security is relatively inactive or illiquid, the measurement is Level 3.
Commodity derivatives
Commodity derivatives with clearinghouses are classified as Level 1. Other commodityCommodity derivatives including Piedmont's natural gas supply contracts,with observable forward curves are primarily valued using internally developed discounted cash flow models that incorporate forward price, adjustments for liquidity (bid-ask spread) and credit or non-performance risk (after reflecting credit enhancements suchclassified as collateral), and are discounted to present value. Pricing inputs are derived from published exchange transaction prices and other observable data sources. In the absence of an active market, the last available price may be used.Level 2. If forward price curves are not observable for the full term of the contract and the unobservable period had more than an insignificant impact on the valuation, the commodity derivative is classified as Level 3. In isolation, increases (decreases) in natural gas forward prices result in favorable (unfavorable) fair value adjustments for natural gas purchase contracts; and increases (decreases) in electricity forward prices result in unfavorable (favorable) fair value adjustments for electricity sales contracts. Duke Energy regularly evaluates and validates pricing inputs used to estimate the fair value of natural gas commodity contracts by a market participant price verification procedure. This procedure provides a comparison of internal forward commodity curves to market participant generated curves.
Interest rate derivatives
Most over-the-counter interest rate contract derivatives are valued using financial models that utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward interest rate curves, notional amounts, interest rates and credit quality of the counterparties.
Other fair value considerations
See Note 2 related to the acquisition of Piedmont in 2016. See Note 11 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016,2020, for a discussion of the valuation of goodwill and intangible assets.
| | | | | |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 10.8. See Note 119 for additional information related to investments by major security type for the Duke Energy Registrants.
| | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| (in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | Not Categorized |
| NDTF cash and cash equivalents | $ | 164 | | $ | 164 | | $ | — | | $ | — | | $ | — | |
| NDTF equity securities | 6,754 | | 6,705 | | — | | — | | 49 | |
| NDTF debt securities | 2,943 | | 998 | | 1,945 | | — | | — | |
| Other equity securities | 145 | | 145 | | — | | — | | — | |
| Other debt securities | 283 | | 45 | | 238 | | — | | — | |
| Other cash and cash equivalents | 87 | | 87 | | — | | — | | — | |
| | | | | |
| Derivative assets | 543 | | 27 | | 490 | | 26 | | — | |
| Total assets | 10,919 | | 8,171 | | 2,673 | | 26 | | 49 | |
| | | | | |
| Derivative liabilities | (415) | | (2) | | (256) | | (157) | | — | |
| Net assets (liabilities) | $ | 10,504 | | $ | 8,169 | | $ | 2,417 | | $ | (131) | | $ | 49 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| (in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | Not Categorized |
| NDTF cash and cash equivalents | $ | 177 | | $ | 177 | | $ | — | | $ | — | | $ | — | |
| NDTF equity securities | 6,235 | | 6,189 | | — | | — | | 46 | |
| NDTF debt securities | 2,717 | | 874 | | 1,843 | | — | | — | |
| Other equity securities | 146 | | 146 | | — | | — | | — | |
| Other debt securities | 285 | | 37 | | 248 | | — | | — | |
| Other cash and cash equivalents | 127 | | 127 | | — | | — | | — | |
| Derivative assets | 61 | | 1 | | 53 | | 7 | | — | |
| Total assets | 9,748 | | 7,551 | | 2,144 | | 7 | | 46 | |
| | | | | |
| Derivative liabilities | (324) | | — | | (240) | | (84) | | — | |
| Net assets (liabilities) | $ | 9,424 | | $ | 7,551 | | $ | 1,904 | | $ | (77) | | $ | 46 | |
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
|
| NDTF equity securities | $ | 4,627 |
| $ | 4,549 |
| $ | — |
| $ | — |
| $ | 78 |
|
| NDTF debt securities | 2,167 |
| 617 |
| 1,550 |
| — |
| — |
|
| Other trading and AFS equity securities | 116 |
| 116 |
| — |
| — |
| — |
|
| Other AFS debt securities | 243 |
| 59 |
| 184 |
| — |
| — |
|
| Derivative assets | 69 |
| 4 |
| 35 |
| 30 |
| — |
|
| Total assets | 7,222 |
| 5,345 |
| 1,769 |
| 30 |
| 78 |
|
| Derivative liabilities | (191 | ) | — |
| (68 | ) | (123 | ) | — |
|
| Net assets (liabilities) | $ | 7,031 |
| $ | 5,345 |
| $ | 1,701 |
| $ | (93 | ) | $ | 78 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
|
| | | | | | | | | | | | | | | |
| | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
|
| NDTF equity securities | $ | 4,106 |
| $ | 4,029 |
| $ | — |
| $ | — |
| $ | 77 |
|
| NDTF debt securities | 2,078 |
| 632 |
| 1,446 |
| — |
| — |
|
| Other trading and AFS equity securities | 104 |
| 104 |
| — |
| — |
| — |
|
| Other trading and AFS debt securities | 266 |
| 75 |
| 186 |
| 5 |
| — |
|
| Derivative assets | 162 |
| 5 |
| 136 |
| 21 |
| — |
|
| Total assets | 6,716 |
| 4,845 |
| 1,768 |
| 26 |
| 77 |
|
| Derivative liabilities | (252 | ) | (2 | ) | (63 | ) | (187 | ) | — |
|
| Net assets (liabilities) | $ | 6,464 |
| $ | 4,843 |
| $ | 1,705 |
| $ | (161 | ) | $ | 77 |
|
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. Amounts included in earnings for derivatives are primarily included in Cost of natural gas on the Duke Energy Registrants' Condensed Consolidated Statements of Operations and Comprehensive Income. Amounts included in changes of net assets on the Duke Energy Registrants' Condensed Consolidated Balance Sheets are included in regulatory assets or liabilities. All derivative assets and liabilities are presented on a net basis. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 | | Three Months Ended September 30, 2016 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
| | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | — |
| | $ | (91 | ) | | $ | (91 | ) | | $ | 4 |
| | $ | 34 |
| | $ | 38 |
|
| Purchases, sales, issuances and settlements: | | | | |
|
| | | | | | |
| Settlements | — |
| | (12 | ) | | (12 | ) | | — |
| | (9 | ) | | (9 | ) |
| Total gains (losses) included on the Condensed Consolidated Balance Sheet | — |
| | 10 |
| | 10 |
| | — |
| | (2 | ) | | (2 | ) |
| Balance at end of period | $ | — |
| | $ | (93 | ) | | $ | (93 | ) | | $ | 4 |
| | $ | 23 |
| | $ | 27 |
|
| | | | | | | | | | | | | | | | Derivatives (net) |
| | Nine Months Ended September 30, 2017 | | Nine Months Ended September 30, 2016 | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
| | Investments |
| | Derivatives (net) |
| | Total |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Balance at beginning of period | $ | 5 |
| | $ | (166 | ) | | $ | (161 | ) | | $ | 5 |
| | $ | 10 |
| | $ | 15 |
| Balance at beginning of period | $ | (131) | | | $ | (92) | | | $ | (77) | | | $ | (102) | |
| Total pretax realized or unrealized gains included in comprehensive income | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| |
| | Total pretax realized or unrealized losses included in comprehensive income | | Total pretax realized or unrealized losses included in comprehensive income | (11) | | | (102) | | | (86) | | | (102) | |
| Purchases, sales, issuances and settlements: | | | | | | | | | | | | Purchases, sales, issuances and settlements: | |
| Purchases | — |
| | 55 |
| | 55 |
| | — |
| | 34 |
| | 34 |
| Purchases | — | | | — | | | 21 | | | 14 | |
| Sales | (6 | ) | | — |
| | (6 | ) | | (1 | ) | | — |
| | (1 | ) | |
| | Settlements | — |
| | (30 | ) | | (30 | ) | | — |
| | (22 | ) | | (22 | ) | Settlements | 4 | | | (3) | | | (4) | | | (18) | |
| Total gains included on the Condensed Consolidated Balance Sheet | — |
| | 48 |
| | 48 |
| | — |
| | 1 |
| | 1 |
| |
| | Total gains (losses) included on the Condensed Consolidated Balance Sheet | | Total gains (losses) included on the Condensed Consolidated Balance Sheet | 7 | | | (6) | | | 15 | | | 5 | |
| Balance at end of period | $ | — |
| | $ | (93 | ) | | $ | (93 | ) | | $ | 4 |
| | $ | 23 |
| | $ | 27 |
| Balance at end of period | $ | (131) | | | $ | (203) | | | $ | (131) | | | $ | (203) | |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
| | | | | |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | |
| | September 30, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
|
| NDTF equity securities | $ | 2,553 |
| $ | 2,475 |
| $ | — |
| $ | — |
| $ | 78 |
|
| NDTF debt securities | 1,060 |
| 178 |
| 882 |
| — |
| — |
|
| Derivative assets | 8 |
| — |
| 8 |
| — |
| — |
|
| Total assets | 3,621 |
| 2,653 |
| 890 |
| — |
| 78 |
|
| Derivative liabilities | (25 | ) | — |
| (25 | ) | — |
| — |
|
| Net assets | $ | 3,596 |
| $ | 2,653 |
| $ | 865 |
| $ | — |
| $ | 78 |
|
| | | | December 31, 2016 | | September 30, 2021 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
| (in millions) | Total Fair Value | Level 1 | Level 2 | | Not Categorized |
| NDTF cash and cash equivalents | | NDTF cash and cash equivalents | $ | 60 | | $ | 60 | | $ | — | | | $ | — | |
| NDTF equity securities | $ | 2,245 |
| $ | 2,168 |
| $ | — |
| $ | — |
| $ | 77 |
| NDTF equity securities | 3,912 | | 3,863 | | — | | | 49 | |
| NDTF debt securities | 1,013 |
| 178 |
| 835 |
| — |
| — |
| NDTF debt securities | 1,461 | | 359 | | 1,102 | | | — | |
| Other AFS debt securities | 3 |
| — |
| — |
| 3 |
| — |
| |
| | Derivative assets | 33 |
| — |
| 33 |
| — |
| — |
| Derivative assets | 271 | | — | | 271 | | | — | |
| Total assets | 3,294 |
| 2,346 |
| 868 |
| 3 |
| 77 |
| Total assets | 5,704 | | 4,282 | | 1,373 | | | 49 | |
| Derivative liabilities | (16 | ) | — |
| (16 | ) | — |
| — |
| Derivative liabilities | (18) | | — | | (18) | | | — | |
| Net assets | $ | 3,278 |
| $ | 2,346 |
| $ | 852 |
| $ | 3 |
| $ | 77 |
| Net assets | $ | 5,686 | | $ | 4,282 | | $ | 1,355 | | | $ | 49 | |
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | | | | | | | |
| | Investments |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 | 2016 | | 2017 | 2016 |
| Balance at beginning of period | $ | — |
| $ | 3 |
| | $ | 3 |
| $ | 3 |
|
| Total pretax realized or unrealized gains included in comprehensive income | — |
| — |
| | 1 |
| — |
|
| Purchases, sales, issuances and settlements: | | | | | |
| Sales | — |
| — |
| | (4 | ) | — |
|
| Balance at end of period | $ | — |
| $ | 3 |
| | $ | — |
| $ | 3 |
|
| | | | | | | | | | | | | | | |
| December 31, 2020 |
| (in millions) | Total Fair Value | Level 1 | Level 2 | | Not Categorized |
| NDTF cash and cash equivalents | $ | 30 | | $ | 30 | | $ | — | | | $ | — | |
| NDTF equity securities | 3,685 | | 3,639 | | — | | | 46 | |
| NDTF debt securities | 1,250 | | 192 | | 1,058 | | | — | |
| | | | | |
| Derivative assets | 20 | | — | | 20 | | | — | |
| Total assets | 4,985 | | 3,861 | | 1,078 | | | 46 | |
| Derivative liabilities | (20) | | — | | (20) | | | — | |
| Net assets | $ | 4,965 | | $ | 3,861 | | $ | 1,058 | | | $ | 46 | |
PROGRESS ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 2,074 |
| $ | 2,074 |
| $ | — |
| | $ | 1,861 |
| $ | 1,861 |
| $ | — |
|
| NDTF debt securities | 1,107 |
| 439 |
| 668 |
| | 1,065 |
| 454 |
| 611 |
|
| Other AFS debt securities | 58 |
| 11 |
| 47 |
| | 65 |
| 21 |
| 44 |
|
| Derivative assets | 15 |
| 1 |
| 14 |
| | 85 |
| — |
| 85 |
|
| Total assets | 3,254 |
| 2,525 |
| 729 |
| | 3,076 |
| 2,336 |
| 740 |
|
| Derivative liabilities | (22 | ) | — |
| (22 | ) | | (25 | ) | — |
| (25 | ) |
| Net assets | $ | 3,232 |
| $ | 2,525 |
| $ | 707 |
| | $ | 3,051 |
| $ | 2,336 |
| $ | 715 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 | | |
| (in millions) | Total Fair Value | Level 1 | Level 2 | | Total Fair Value | Level 1 | Level 2 | | | | | | |
| NDTF cash and cash equivalents | $ | 104 | | $ | 104 | | $ | — | | | $ | 147 | | $ | 147 | | $ | — | | | | | | | |
| NDTF equity securities | 2,842 | | 2,842 | | — | | | 2,550 | | 2,550 | | — | | | | | | | |
| NDTF debt securities | 1,482 | | 639 | | 843 | | | 1,467 | | 682 | | 785 | | | | | | | |
| Other debt securities | 26 | | — | | 26 | | | 26 | | — | | 26 | | | | | | | |
| Other cash and cash equivalents | 18 | | 18 | | — | | | 106 | | 106 | | — | | | | | | | |
| | | | | | | | | | | | | |
| Derivative assets | 215 | | — | | 215 | | | 33 | | — | | 33 | | | | | | | |
| Total assets | 4,687 | | 3,603 | | 1,084 | | | 4,329 | | 3,485 | | 844 | | | | | | | |
| | | | | | | | | | | | | |
| Derivative liabilities | (12) | | — | | (12) | | | (29) | | — | | (29) | | | | | | | |
| Net assets | $ | 4,675 | | $ | 3,603 | | $ | 1,072 | | | $ | 4,300 | | $ | 3,485 | | $ | 815 | | | | | | | |
DUKE ENERGY PROGRESS
The following table providestables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 | | |
| (in millions) | Total Fair Value | Level 1 | Level 2 | | Total Fair Value | Level 1 | Level 2 | | | | | | |
| NDTF cash and cash equivalents | $ | 92 | | $ | 92 | | $ | — | | | $ | 76 | | $ | 76 | | $ | — | | | | | | | |
| NDTF equity securities | 2,736 | | 2,736 | | — | | | 2,459 | | 2,459 | | — | | | | | | | |
| NDTF debt securities | 1,030 | | 278 | | 752 | | | 993 | | 237 | | 756 | | | | | | | |
| | | | | | | | | | | | | |
| Other cash and cash equivalents | 16 | | 16 | | — | | | 1 | | 1 | | — | | | | | | | |
| Derivative assets | 215 | | — | | 215 | | | 33 | | — | | 33 | | | | | | | |
| Total assets | 4,089 | | 3,122 | | 967 | | | 3,562 | | 2,773 | | 789 | | | | | | | |
| Derivative liabilities | — | | — | | — | | | (14) | | — | | (14) | | | | | | | |
| Net assets | $ | 4,089 | | $ | 3,122 | | $ | 967 | | | $ | 3,548 | | $ | 2,773 | | $ | 775 | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
|
| NDTF equity securities | $ | 1,683 |
| $ | 1,683 |
| $ | — |
| | $ | 1,505 |
| $ | 1,505 |
| $ | — |
|
| NDTF debt securities | 778 |
| 231 |
| 547 |
| | 708 |
| 207 |
| 501 |
|
| Other AFS debt securities | 1 |
| 1 |
| — |
| | 1 |
| 1 |
| — |
|
| Derivative assets | 8 |
| 1 |
| 7 |
| | 46 |
| — |
| 46 |
|
| Total assets | 2,470 |
| 1,916 |
| 554 |
| | 2,260 |
| 1,713 |
| 547 |
|
| Derivative liabilities | (7 | ) | — |
| (7 | ) | | (7 | ) | — |
| (7 | ) |
| Net assets | $ | 2,463 |
| $ | 1,916 |
| $ | 547 |
| | $ | 2,253 |
| $ | 1,713 |
| $ | 540 |
|
| | | | | |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
DUKE ENERGY FLORIDA
The following table providestables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. | | | | September 30, 2017 | | December 31, 2016 | | September 30, 2021 | | December 31, 2020 | |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| (in millions) | Total Fair Value | Level 1 | Level 2 | | Total Fair Value | Level 1 | Level 2 | |
| NDTF cash and cash equivalents | | NDTF cash and cash equivalents | $ | 12 | | $ | 12 | | $ | — | | | $ | 71 | | $ | 71 | | $ | — | | |
| NDTF equity securities | $ | 391 |
| $ | 391 |
| $ | — |
| | $ | 356 |
| $ | 356 |
| $ | — |
| NDTF equity securities | 106 | | 106 | | — | | | 91 | | 91 | | — | | |
| NDTF debt securities | 329 |
| 208 |
| 121 |
| | 357 |
| 247 |
| 110 |
| NDTF debt securities | 452 | | 361 | | 91 | | | 474 | | 445 | | 29 | | |
| Other AFS debt securities | 47 |
| — |
| 47 |
| | 48 |
| 4 |
| 44 |
| |
| Derivative assets | 6 |
| — |
| 6 |
| | 39 |
| — |
| 39 |
| |
| Other debt securities | | Other debt securities | 26 | | — | | 26 | | | 26 | | — | | 26 | | |
| Other cash and cash equivalents | | Other cash and cash equivalents | 1 | | 1 | | — | | | 1 | | 1 | | — | | |
| | Total assets | 773 |
| 599 |
| 174 |
| | 800 |
| 607 |
| 193 |
| Total assets | 597 | | 480 | | 117 | | | 663 | | 608 | | 55 | | |
| | Derivative liabilities | (9 | ) | — |
| (9 | ) | | (12 | ) | — |
| (12 | ) | Derivative liabilities | (12) | | — | | (12) | | | — | | — | | — | | |
| Net assets | $ | 764 |
| $ | 599 |
| $ | 165 |
| | $ | 788 |
| $ | 607 |
| $ | 181 |
| Net assets | $ | 585 | | $ | 480 | | $ | 105 | | | $ | 663 | | $ | 608 | | $ | 55 | | |
DUKE ENERGY OHIO
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.Sheets were not material at September 30, 2021, and December 31, 2020. |
| | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 2 |
| Level 3 |
|
| Derivative assets | $ | 2 |
| $ | — |
| $ | 2 |
| | $ | 5 |
| $ | — |
| $ | 5 |
|
| Derivative liabilities | (5 | ) | (5 | ) | — |
| | (6 | ) | (6 | ) | — |
|
| Net (liabilities) assets | $ | (3 | ) | $ | (5 | ) | $ | 2 |
| | $ | (1 | ) | $ | (6 | ) | $ | 5 |
|
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 | | |
| (in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | | Total Fair Value | Level 1 | Level 2 | Level 3 | | | | | |
| Other equity securities | $ | 90 | | $ | 90 | | $ | — | | $ | — | | | $ | 97 | | $ | 97 | | $ | — | | $ | — | | | | | | |
| Other debt securities | 46 | | — | | 46 | | — | | | 45 | | — | | 45 | | — | | | | | | |
| Other cash and cash equivalents | 19 | | 19 | | — | | — | | | 1 | | 1 | | — | | — | | | | | | |
| Derivative assets | 36 | | 12 | | — | | 24 | | | 6 | | — | | — | | 6 | | | | | | |
| Total assets | 191 | | 121 | | 46 | | 24 | | | 149 | | 98 | | 45 | | 6 | | | | | | |
| Derivative liabilities | (2) | | (2) | | — | | — | | | (1) | | (1) | | — | | — | | | | | | |
| Net assets | $ | 189 | | $ | 119 | | $ | 46 | | $ | 24 | | | $ | 148 | | $ | 97 | | $ | 45 | | $ | 6 | | | | | | |
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
| | | | Derivatives (net) | | Derivatives (net) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Balance at beginning of period | $ | 3 |
| | $ | 5 |
| | $ | 5 |
| | $ | 3 |
| Balance at beginning of period | $ | 22 | | | $ | 10 | | | $ | 6 | | | $ | 11 | |
| | Purchases, sales, issuances and settlements: | | | | | | | | Purchases, sales, issuances and settlements: | |
| Purchases | — |
| | — |
| | 3 |
| | 5 |
| Purchases | — | | | — | | | 18 | | | 10 | |
| | Settlements | (1 | ) | | (2 | ) | | (3 | ) | | (4 | ) | Settlements | (3) | | | (3) | | | (12) | | | (13) | |
| Total losses included on the Condensed Consolidated Balance Sheet | — |
| | — |
| | (3 | ) | | (1 | ) | |
| | Total gains included on the Condensed Consolidated Balance Sheet | | Total gains included on the Condensed Consolidated Balance Sheet | 5 | | | 1 | | | 12 | | | — | |
| Balance at end of period | $ | 2 |
| | $ | 3 |
| | $ | 2 |
| | $ | 3 |
| Balance at end of period | $ | 24 | | | $ | 8 | | | $ | 24 | | | $ | 8 | |
PIEDMONT
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DUKE ENERGY INDIANA
The following table providestables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| (in millions) | Total Fair Value | Level 1 | Level 2 | | | Total Fair Value | Level 1 | Level 2 | |
| | | | | | | | | |
| | | | | | | | | |
| Derivative assets | $ | 12 | | $ | 12 | | $ | — | | | | $ | 1 | | $ | 1 | | $ | — | | |
| | | | | | | | | |
| Derivative liabilities | (148) | | — | | (148) | | | | (122) | | — | | (122) | | |
| Net (liabilities) assets | $ | (136) | | $ | 12 | | $ | (148) | | | | $ | (121) | | $ | 1 | | $ | (122) | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Other AFS equity securities | $ | 91 |
| $ | 91 |
| $ | — |
| $ | — |
| | $ | 79 |
| $ | 79 |
| $ | — |
| $ | — |
|
| Other AFS debt securities | 31 |
| — |
| 31 |
| — |
| | 31 |
| — |
| 31 |
| — |
|
| Derivative assets | 28 |
| — |
| — |
| 28 |
| | 16 |
| — |
| — |
| 16 |
|
| Total assets | 150 |
| 91 |
| 31 |
| 28 |
| | 126 |
| 79 |
| 31 |
| 16 |
|
| Derivative liabilities | — |
| — |
| — |
| — |
| | (2 | ) | (2 | ) | — |
| — |
|
| Net assets | $ | 150 |
| $ | 91 |
| $ | 31 |
| $ | 28 |
| | $ | 124 |
| $ | 77 |
| $ | 31 |
| $ | 16 |
|
| | | | | |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | | | | | | | | | |
| | Derivatives (net) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Balance at beginning of period | $ | 51 |
| | $ | 29 |
| | $ | 16 |
| | $ | 7 |
|
| Purchases, sales, issuances and settlements: |
| | | | | | |
| Purchases | — |
| | — |
| | 52 |
| | 29 |
|
| Settlements | (11 | ) | | (7 | ) | | (27 | ) | | (18 | ) |
| Total (losses) gains included on the Condensed Consolidated Balance Sheet | (12 | ) | | (2 | ) | | (13 | ) | | 2 |
|
| Balance at end of period | $ | 28 |
| | $ | 20 |
| | $ | 28 |
| | $ | 20 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Derivatives (net) |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
| Balance at beginning of period | $ | — | | | $ | (105) | | | $ | — | | | $ | (117) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total (losses) gains and settlements | — | | | (6) | | | — | | | 6 | |
| Balance at end of period | $ | — | | | $ | (111) | | | $ | — | | | $ | (111) | |
PIEDMONT
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 3 |
|
| Other trading equity securities | $ | 1 |
| $ | 1 |
| $ | — |
| | $ | 4 |
| $ | 4 |
| $ | — |
|
| Other trading debt securities | — |
| — |
| — |
| | 1 |
| 1 |
| — |
|
| Derivative assets | 2 |
| 2 |
| — |
| | 3 |
| 3 |
| — |
|
| Total assets | 3 |
| 3 |
| — |
| | 8 |
| 8 |
| — |
|
| Derivative liabilities | (123 | ) | — |
| (123 | ) | | (187 | ) | — |
| (187 | ) |
| Net (liabilities) assets | $ | (120 | ) | $ | 3 |
| $ | (123 | ) | | $ | (179 | ) | $ | 8 |
| $ | (187 | ) |
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | | | | | | | | | |
| | Derivatives (net) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Balance at beginning of period | $ | (145 | ) | | $ | (190 | ) | | $ | (187 | ) | | $ | (149 | ) |
| Total gains (losses) and settlements | 22 |
| | (5 | ) | | 64 |
| | (46 | ) |
| Balance at end of period | $ | (123 | ) | | $ | (195 | ) | | $ | (123 | ) | | $ | (195 | ) |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3. |
| | | | | | | | | | | | |
| | September 30, 2017 |
| | Fair Value | | | | | |
| Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range |
| Duke Energy Ohio | |
| | | | | |
| Financial Transmission Rights (FTRs) | $ | 2 |
| RTO auction pricing | FTR price – per megawatt-hour (MWh) | $ | — |
| - | $ | 1.08 |
|
| Duke Energy Indiana | |
| | | | | |
| FTRs | 28 |
| RTO auction pricing | FTR price – per MWh | (0.82 | ) | - | 6.19 |
|
| Piedmont | | | | | | |
| Natural gas contracts | (123 | ) | Discounted cash flow | Forward natural gas curves – price per million British thermal unit (MMBtu) | 2.12 |
| - | 3.36 |
|
| Duke Energy | | | | | | |
| Total Level 3 derivatives | $ | (93 | ) | | | | | |
| | | | | | | | | | | | | | | September 30, 2021 |
| | December 31, 2016 | | | Weighted |
| | Fair Value | | | | | | Fair Value | | Average |
| Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | Range |
| Duke Energy | | Duke Energy | | | |
| | Electricity contracts | | Electricity contracts | $ | (157) | | RTO forward pricing | Forward electricity curves – price per MWh | $ | 18.02 | | - | $ | 143.85 | | $ | 38.43 | |
| | Duke Energy Ohio | |
| | | | | Duke Energy Ohio | | |
| | FTRs | $ | 5 |
| RTO auction pricing | FTR price – per MWh | $ | 0.77 |
| - | $ | 3.52 |
| FTRs | 2 | | RTO auction pricing | FTR price – per MWh | 0.06 | | - | 1.27 | | 0.71 | |
| | Duke Energy Indiana | |
| | | | | Duke Energy Indiana | | |
| FTRs | 16 |
| RTO auction pricing | FTR price – per MWh | (0.83 | ) | - | 9.32 |
| FTRs | 24 | | RTO auction pricing | FTR price – per MWh | (1.11) | | - | 8.55 | | 1.61 | |
| Piedmont | | | | | | |
| Natural gas contracts | (187 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 2.31 |
| - | 4.18 |
| |
| | Duke Energy | | | | | | Duke Energy | |
| Total Level 3 derivatives | $ | (166 | ) | | | | | Total Level 3 derivatives | $ | (131) | | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | | | | | Weighted |
| Fair Value | | | | | | Average |
| Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | Range |
| Duke Energy | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Electricity contracts | $ | (84) | | Discounted cash flow | Forward electricity curves – price per MWh | $ | 14.68 | | - | $151.84 | $28.84 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Duke Energy Ohio | | | | | | | |
| | | | | | | |
| | | | | | | |
| FTRs | 1 | | RTO auction pricing | FTR price – per MWh | 0.25 | | - | 1.68 | | 0.79 | |
| | | | | | | |
| Duke Energy Indiana | | | | | | | |
| FTRs | 6 | | RTO auction pricing | FTR price – per MWh | (2.40) | | - | 7.41 | | 1.05 | |
| | | | | | | |
| | | | | | | |
| Duke Energy | | | | | | | |
| Total Level 3 derivatives | $ | (77) | | | | | | | |
OTHER FAIR VALUE DISCLOSURES
The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Estimates determined are not necessarily indicative of amounts that could have been settled in current markets. Fair value of long-term debt uses Level 2 measurements.
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 | | December 31, 2020 |
| (in millions) | Book Value | | Fair Value | | Book Value | | Fair Value |
Duke Energy(a) | $ | 62,802 | | | $ | 69,381 | | | $ | 59,863 | | | $ | 69,292 | |
| Duke Energy Carolinas | 12,975 | | | 14,964 | | | 12,218 | | | 14,917 | |
| Progress Energy | 19,488 | | | 22,593 | | | 19,264 | | | 23,470 | |
| Duke Energy Progress | 9,848 | | | 10,915 | | | 9,258 | | | 10,862 | |
| Duke Energy Florida | 7,549 | | | 8,932 | | | 7,915 | | | 9,756 | |
| Duke Energy Ohio | 3,092 | | | 3,517 | | | 3,089 | | | 3,650 | |
| Duke Energy Indiana | 4,092 | | | 4,883 | | | 4,091 | | | 5,204 | |
| Piedmont | 2,968 | | | 3,320 | | | 2,780 | | | 3,306 | |
(a)Book value of long-term debt includes $1.3 billion at September 30, 2021, and December 31, 2020, of net unamortized debt discount and premium of purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt.
|
| | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| (in millions) | Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
|
| Duke Energy | $ | 51,414 |
| | $ | 53,985 |
| | $ | 47,895 |
| | $ | 49,161 |
|
| Duke Energy Carolinas | 9,525 |
| | 10,653 |
| | 9,603 |
| | 10,494 |
|
| Progress Energy | 17,637 |
| | 19,615 |
| | 17,541 |
| | 19,107 |
|
| Duke Energy Progress | 7,557 |
| | 8,075 |
| | 7,011 |
| | 7,357 |
|
| Duke Energy Florida | 6,696 |
| | 7,475 |
| | 6,125 |
| | 6,728 |
|
| Duke Energy Ohio | 2,067 |
| | 2,242 |
| | 1,884 |
| | 2,020 |
|
| Duke Energy Indiana | 3,785 |
| | 4,407 |
| | 3,786 |
| | 4,260 |
|
| Piedmont | 2,036 |
| | 2,193 |
| | 1,821 |
| | 1,933 |
|
| | | | | |
| FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
At both September 30, 2017,2021, and December 31, 2016,2020, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper and nonrecourse notes payable of VIEs are not materially different from their carrying amounts because of the short-term nature of these instruments and/or because the stated rates approximate market rates.
13.11. VARIABLE INTEREST ENTITIES
A VIE is an entity that is evaluated for consolidation using more than a simple analysis of voting control. The analysis to determine whether an entity is a VIE considers contracts with an entity, credit support for an entity, the adequacy of the equity investment of an entity and the relationship of voting power to the amount of equity invested in an entity. This analysis is performed either upon the creation of a legal entity or upon the occurrence of an event requiring re-evaluation, such as a significant change in an entity’s assets or activities. A qualitative analysis of control determines the party that consolidates a VIE. This assessment is based on (i) what party has the power to direct the activities of the VIE that most significantly impact its economic performance and (ii) what party has rights to receive benefits or is obligated to absorb losses that could potentially be significant to the VIE. The analysis of the party that consolidates a VIE is a continual reassessment.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
CONSOLIDATED VIEs
The obligations of the consolidated VIEs discussed in the following paragraphs are nonrecourse to the Duke Energy registrants.Registrants. The registrants have no requirement to provide liquidity to, purchase assets of or guarantee performance of these VIEs unless noted in the following paragraphs.
No financial support was provided to any of the consolidated VIEs during the nine months ended September 30, 2017,2021, and the year ended December 31, 2016,2020, or is expected to be provided in the future that was not previously contractually required.
Receivables Financing – DERF / DEPR / DERF/DEPR/DEFR
Duke Energy Receivables Finance Company, LLC (DERF), Duke Energy Progress Receivables, LLC (DEPR)DERF, DEPR and Duke Energy Florida Receivables, LLC (DEFR)DEFR are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR and DEFR are wholly owned limited liability companiesLLCs with separate legal existence from their parent companies, and their assets are not generally available to creditors of their parent companies. On a revolving basis, DERF, DEPR and DEFR buy certain accounts receivable arising from the sale of electricity and related services from their parent companies.
DERF, DEPR and DEFR borrow amounts under credit facilities to buy these receivables. Borrowing availability from the credit facilities is limited to the amount of qualified receivables purchased.purchased, which generally exclude receivables past due more than a predetermined number of days and reserves for expected past-due balances. The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the credit facilities for DERF and DEPR are reflected on the Condensed Consolidated Balance Sheets as Long-Term Debt. Amounts borrowed under the credit facilities for DEFR are reflected on the Condensed Consolidated Balance Sheets as Current maturities of long-term debt.
The most significant activity that impacts the economic performance of DERF, DEPR and DEFR are the decisions made to manage delinquent receivables. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are considered the primary beneficiaries and consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.
Receivables Financing – CRC
CRC is a bankruptcy remote, special purpose entity indirectly owned by Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising from the sale of electricity, natural gas and related services from Duke Energy Ohio and Duke Energy Indiana. CRC borrows amounts under a credit facility to buy the receivables from Duke Energy Ohio and Duke Energy Indiana. Borrowing availability from the credit facility is limited to the amount of qualified receivables sold to CRC.CRC, which generally exclude receivables past due more than a predetermined number of days and reserves for expected past-due balances. The sole source of funds to satisfy the related debt obligation is cash collections from the receivables. Amounts borrowed under the credit facility are reflected on Duke Energy's Condensed Consolidated Balance Sheets as Long-Term Debt.
The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are typically 75 percentapproximately 75% cash and 25 percent25% in the form of a subordinated note from CRC. The subordinated note is a retained interest in the receivables sold. Depending on collection experience, additional equity infusions to CRC may be required by Duke Energy to maintain a minimum equity balance of $3 million.
CRC is considered a VIE because (i) equity capitalization is insufficient to support its operations, (ii) power to direct the activities that most significantly impact the economic performance of the entity areis not performedheld by the equity holder and (iii) deficiencies in net worth of CRC are funded by Duke Energy. The most significant activities that impact the economic performance of CRC are decisions made to manage delinquent receivables. Duke Energy is considered the primary beneficiary and consolidates CRC as it makes these decisions. Neither Duke Energy Ohio nor Duke Energy Indiana consolidate CRC.
Receivables Financing – Credit Facilities
The following table summarizes the amounts and expiration dates of the credit facilities and associated restricted receivables described above. | | | | Duke Energy | | Duke Energy |
| | | | Duke Energy |
| | Duke Energy |
| | Duke Energy |
| | | Duke Energy | | Duke Energy | | Duke Energy |
| | | | Carolinas |
| | Progress |
| | Florida |
| | Carolinas | | Progress | | Florida |
| (in millions) | CRC |
| | DERF |
| | DEPR |
| | DEFR |
| (in millions) | CRC | | DERF | | DEPR | | DEFR |
| Expiration date | December 2018 |
| | December 2018 |
| | February 2019 |
| | April 2019 |
| Expiration date | February 2023 | | December 2022 | | April 2023 | | April 2023 |
| Credit facility amount | $ | 325 |
| | $ | 425 |
| | $ | 300 |
| | $ | 225 |
| Credit facility amount | $ | 350 | | | $ | 475 | | | $ | 350 | | | $ | 250 | |
| Amounts borrowed at September 30, 2017 | 325 |
| | 425 |
| | 300 |
| | 225 |
| |
| Amounts borrowed at December 31, 2016 | 325 |
| | 425 |
| | 300 |
| | 225 |
| |
| Amounts borrowed at September 30, 2021 | | Amounts borrowed at September 30, 2021 | 350 | | | 475 | | | 350 | | | 250 | |
| Amounts borrowed at December 31, 2020 | | Amounts borrowed at December 31, 2020 | 350 | | | 364 | | | 250 | | | 250 | |
| Restricted Receivables at September 30, 2021 | | Restricted Receivables at September 30, 2021 | 535 | | | 915 | | | 532 | | | 443 | |
| Restricted Receivables at December 31, 2020 | | Restricted Receivables at December 31, 2020 | 547 | | | 696 | | | 500 | | | 397 | |
Nuclear Asset-Recovery Bonds – DEFPF
Duke Energy Florida Project Finance, LLC (DEFPF)DEFPF is a bankruptcy remote, wholly owned special purpose subsidiary of Duke Energy Florida. DEFPF was formed in 2016 for the sole purpose of issuing nuclear asset-recovery bonds to finance Duke Energy Florida's unrecovered regulatory asset related to Crystal River Unit 3.
| | | | | |
| FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
In June 2016, DEFPF issued $1,294 million of senior secured bonds and used the proceeds to acquire nuclear asset-recovery property from Duke Energy Florida. The nuclear asset-recovery property acquired includes the right to impose, bill, collect and adjust a non-bypassable nuclear asset-recovery charge from all Duke Energy Florida retail customers until the bonds are paid in full and all financing costs have been recovered. The nuclear asset-recovery bonds are secured by the nuclear asset-recovery property and cash collections from the nuclear asset-recovery charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to Duke Energy Florida.
DEFPF is considered a VIE primarily because the equity capitalization is insufficient to support its operations. Duke Energy Florida has the power to direct the significant activities of the VIE as described above and therefore Duke Energy Florida is considered the primary beneficiary and consolidates DEFPF.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The following table summarizes the impact of DEFPF on Duke Energy Florida's Condensed Consolidated Balance Sheets. | | | (in millions) | September 30, 2017 |
| December 31, 2016 |
| (in millions) | September 30, 2021 | December 31, 2020 |
| Receivables of VIEs | $ | 6 |
| $ | 6 |
| Receivables of VIEs | $ | 6 | | $ | 4 | |
| Current Assets: Regulatory assets | 51 |
| 50 |
| |
| Regulatory Assets: Current | | Regulatory Assets: Current | 54 | | 53 | |
| Current Assets: Other | 20 |
| 53 |
| Current Assets: Other | 17 | | 39 | |
| Other Noncurrent Assets: Regulatory assets | 1,101 |
| 1,142 |
| Other Noncurrent Assets: Regulatory assets | 896 | | 937 | |
| Current Liabilities: Other | 3 |
| 17 |
| Current Liabilities: Other | 2 | | 10 | |
| Current maturities of long-term debt | 53 |
| 62 |
| Current maturities of long-term debt | 56 | | 55 | |
| Long-Term Debt | 1,164 |
| 1,217 |
| Long-Term Debt | 946 | | 1,002 | |
Commercial Renewables
Certain of Duke Energy’s renewable energy facilities are VIEs due to Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. Assets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. Additionally, Duke Energy has VIEs associated with tax equity arrangements entered into with third-party investors in order to finance the cost of renewable assets eligible for tax credits. The activities that most significantly impactimpacted the economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs engineering, procurement and constructionEngineering, Procurement and Construction agreements, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy is considered the primary beneficiary and consolidates the entities as it is responsible for all of these decisions.
The table below presents material balances reported on Duke Energy's Condensed Consolidated Balance Sheets related to
renewablesCommercial Renewables VIEs.
| | | (in millions) | September 30, 2017 |
| December 31, 2016 |
| (in millions) | September 30, 2021 | December 31, 2020 |
| Current Assets: Other | $ | 399 |
| $ | 223 |
| Current Assets: Other | $ | 330 | | $ | 257 | |
| Property, plant and equipment, cost | 3,923 |
| 3,419 |
| |
| Property, Plant and Equipment: Cost | | Property, Plant and Equipment: Cost | 7,315 | | 6,394 | |
| Accumulated depreciation and amortization | (556 | ) | (453 | ) | Accumulated depreciation and amortization | (1,414) | | (1,242) | |
| Other Noncurrent Assets: Other | | Other Noncurrent Assets: Other | 110 | | 67 | |
| Current maturities of long-term debt | 162 |
| 198 |
| Current maturities of long-term debt | 165 | | 167 | |
| Long-Term Debt | 1,780 |
| 1,097 |
| Long-Term Debt | 1,552 | | 1,569 | |
| Deferred income taxes | 223 |
| 275 |
| |
| Other Noncurrent Liabilities: AROs | | Other Noncurrent Liabilities: AROs | 167 | | 148 | |
| Other Noncurrent Liabilities: Other | 247 |
| 252 |
| Other Noncurrent Liabilities: Other | 341 | | 316 | |
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| Duke Energy | | Duke | | Duke |
| Pipeline | | Commercial | | | | | | Energy | | Energy |
| (in millions) | Investments | | Renewables | | | | Total | | Ohio | | Indiana |
| Receivables from affiliated companies | $ | — | | | $ | — | | | | | $ | — | | | $ | 47 | | | $ | 77 | |
| | | | | | | | | | | |
| Investments in equity method unconsolidated affiliates | 15 | | | 465 | | | | | 480 | | | — | | | — | |
| Deferred tax asset | 58 | | | — | | | | | 58 | | | — | | | — | |
| Total assets | $ | 73 | | | $ | 465 | | | | | $ | 538 | | | $ | 47 | | | $ | 77 | |
| | | | | | | | | | | |
| Other current liabilities | 61 | | | 3 | | | | | 64 | | | — | | | — | |
| | | | | | | | | | | |
| Other noncurrent liabilities | 63 | | | 3 | | | | | 66 | | | — | | | — | |
| Total liabilities | $ | 124 | | | $ | 6 | | | | | $ | 130 | | | $ | — | | | $ | — | |
| Net (liabilities) assets | $ | (51) | | | $ | 459 | | | | | $ | 408 | | | $ | 47 | | | $ | 77 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2017 |
| | Duke Energy | | Duke |
| | Duke |
|
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
| (in millions) | Investments |
| | Renewables |
| | VIEs(a) |
| | Total |
| | Ohio |
| | Indiana |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 46 |
| | $ | 75 |
|
| Investments in equity method unconsolidated affiliates | 895 |
| | 172 |
| | 39 |
| | 1,106 |
| | — |
| | — |
|
| Other noncurrent assets | 18 |
| | — |
| | — |
| | 18 |
| | — |
| | — |
|
| Total assets | $ | 913 |
| | $ | 172 |
| | $ | 39 |
| | $ | 1,124 |
| | $ | 46 |
| | $ | 75 |
|
| Other current liabilities | — |
| | — |
| | 3 |
| | 3 |
| | — |
| | — |
|
| Deferred income taxes | 29 |
| | — |
| | — |
| | 29 |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 12 |
| | 12 |
| | — |
| | — |
|
| Total liabilities | $ | 29 |
| | $ | — |
| | $ | 15 |
| | $ | 44 |
| | $ | — |
| | $ | — |
|
| Net assets | $ | 884 |
| | $ | 172 |
| | $ | 24 |
| | $ | 1,080 |
| | $ | 46 |
| | $ | 75 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Duke Energy holds a 50 percent equity interest in Duke-American Transmission Company, LLC (DATC). As of December 31, 2016, DATC was considered a VIE due to having insufficient equity to finance its own activities without subordinated financial support. However, DATC has sufficient equity to finance its own activities as of September 30, 2017, and, therefore, is no longer considered a VIE. Duke Energy's investment in DATC was $45 million at September 30, 2017.VARIABLE INTEREST ENTITIES |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Duke Energy | | Duke | | Duke |
| Pipeline | | Commercial | | | | | | Energy | | Energy |
| (in millions) | Investments | | Renewables | | | | Total | | Ohio | | Indiana |
| Receivables from affiliated companies | $ | — | | | $ | — | | | | | $ | — | | | $ | 83 | | | $ | 110 | |
| | | | | | | | | | | |
| Investments in equity method unconsolidated affiliates | — | | | 530 | | | | | 530 | | | — | | | — | |
| Other noncurrent assets | 31 | | | — | | | | | 31 | | | — | | | — | |
| Total assets | $ | 31 | | | $ | 530 | | | | | $ | 561 | | | $ | 83 | | | $ | 110 | |
| | | | | | | | | | | |
| Other current liabilities | 928 | | | 5 | | | | | 933 | | | — | | | — | |
| | | | | | | | | | | |
| Other noncurrent liabilities | 8 | | | 10 | | | | | 18 | | | — | | | — | |
| Total liabilities | $ | 936 | | | $ | 15 | | | | | $ | 951 | | | $ | — | | | $ | — | |
| Net assets (liabilities) | $ | (905) | | | $ | 515 | | | | | $ | (390) | | | $ | 83 | | | $ | 110 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | Duke Energy | | Duke |
| | Duke |
| | |
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
| | |
| (in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
| | Piedmont(a) |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 82 |
| | $ | 101 |
| | $ | — |
|
| Investments in equity method unconsolidated affiliates | 487 |
| | 174 |
| | 90 |
| | 751 |
| | — |
| | — |
| | 139 |
|
| Other noncurrent assets | 12 |
| | — |
| | — |
| | 12 |
| | — |
| | — |
| | — |
|
| Total assets | $ | 499 |
| | $ | 174 |
| | $ | 90 |
| | $ | 763 |
| | $ | 82 |
| | $ | 101 |
| | $ | 139 |
|
| Other current liabilities | — |
| | — |
| | 3 |
| | 3 |
| | — |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 13 |
| | 13 |
| | — |
| | — |
| | 4 |
|
| Total liabilities | $ | — |
| | $ | — |
| | $ | 16 |
| | $ | 16 |
| | $ | — |
| | $ | — |
| | 4 |
|
| Net assets | $ | 499 |
| | $ | 174 |
| | $ | 74 |
| | $ | 747 |
| | $ | 82 |
| | $ | 101 |
| | $ | 135 |
|
| |
(a) | In April 2017, Piedmont transferred its non-consolidated VIE investments to a wholly owned subsidiary of Duke Energy. See "Pipeline Investments" section below for additional detail. |
The Duke Energy Registrants are not aware of any situations where the maximum exposure to loss significantly exceeds the carrying values shown above except for the power purchase agreement with OVEC, which iscertain renewable energy project entities guarantees for debt services and operations and maintenance, as discussed below, and various guarantees, some of which are reflected in the table above as Other noncurrent liabilities. For more information on various guarantees, refer to Note 5.below.
Pipeline Investments
Duke Energy has investments in various joint ventures withto construct and operate pipeline projects currently under construction.projects. These entities are considered VIEs due to having insufficient equity to finance their own activities without subordinated financial support. Duke Energy does not have the power to direct the activities that most significantly impact the economic performance, the obligation to absorb losses or the right to receive benefits of these VIEs and therefore does not consolidate these entities.
The table below presents Duke Energy's ownership interest and investment balances in these joint ventures. |
| | | | | | | | | | |
| | | | VIE Investment Amount (in millions) |
| | Ownership | | September 30, | | December 31, |
| Entity Name | Interest | | 2017 | | 2016 |
| ACP | 47 | % | | $ | 595 |
| | $ | 265 |
|
| Sabal Trail | 7.5 | % | | 218 |
| | 140 |
|
| Constitution | 24 | % | | 82 |
| | 82 |
|
| Total | | | $ | 895 |
| | $ | 487 |
|
At December 31, 2016, Piedmont hadEnergy has a 7 percent47% ownership interest in ACP. For the three and nine months ended September 30, 2020, the ACP andinvestment was considered a 24 percent ownership interest in Constitution. In April 2017, Piedmont transferredsignificant subsidiary because its ownership interests in ACP and Constitution to a wholly owned subsidiaryloss exceeded 10% of Duke Energy at book value.Energy’s income. ACP's net loss for the three and nine months ended September 30, 2020, was $163 million and $4,505 million, respectively.
In October 2017, ACP executed a $3.4 billion revolving credit facility with a stated maturity date of October 2021.2020, Duke Energy entered into a guarantee agreement to support its sharedetermined that it would no longer invest in the construction of the ACP revolving credit facility.pipeline. In February 2021, Duke Energy's maximum exposureEnergy paid approximately $855 million to loss under the termsfund ACP's outstanding debt, relieving Duke Energy of the guarantee is limited to 47 percent of the outstanding borrowings under the credit facility. Through October 2017, ACP has borrowed $570 million against the revolving credit facility.its guarantee. See Notes 1 and 3 for further information regarding this transaction.
Commercial Renewables
Duke Energy has investments in various renewable energy project entities. SomeDuke Energy has a 50% ownership in a VIE, which owns a portfolio of these entities are VIEs due towind projects. This entity is a VIE as a result of Duke Energy issuing guarantees for debt service and operations and maintenance reserves in support of debt financings. Duke Energy does not consolidate these VIEsthis VIE because power to direct and control key activities is shared jointly by Duke Energy and the other owners.
Other VIEs
owner. Duke Energy holdsalso has equity ownership in an entity, which owns a 50 percent equity interest in Pioneer Transmission, LLC (Pioneer). Pioneer is considered a VIE dueportfolio of fuel cell projects. Duke Energy does not consolidate the fuel cell portfolio as it does not have the power to having insufficient equity to finance its own activities without subordinated financial support. Thedirect the activities that most significantly impact Pioneer'sthe economic performance are decisions related toof the development of new transmission facilities. The power to direct these activities is jointly and equally shared by Duke Energy and the other joint venture partner, American Electric Power; therefore, Duke Energy does not consolidate Pioneer.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
entity.
OVEC
Duke Energy Ohio’s 9 percent9% ownership interest in OVEC is considered a non-consolidated VIE due to OVEC having insufficient equity to finance its activities without subordinated financial support. The activities that most significantly impact OVEC's economic performance include fuel strategy and supply activities and decisions associated with ongoing operations and maintenance-related activities. Duke Energy Ohio does not have the unilateral power to direct these activities, and therefore, does not consolidate OVEC.
As a counterparty to an inter-company power agreementInter-Company Power Agreement (ICPA), Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuation in power prices and changes in OVEC's cost of business, including costs associated with its 2,256 MW of coal-fired generation capacity. Deteriorationbusiness. Duke Energy cannot predict the outcome in the credit quality or bankruptcy of one or more parties to the ICPA could increase the costs of OVEC. In addition, certain proposed environmental rulemaking could result in future increased cost allocations.this matter. See Note 3 for additional information.
CRC
See discussion under Consolidated VIEs for additional information related to CRC.
Amounts included in Receivables from affiliated companies in the above table for Duke Energy Ohio and Duke Energy Indiana reflect their retained interest in receivables sold to CRC. These subordinated notes held by Duke Energy Ohio and Duke Energy Indiana are stated at fair value. Carrying values of retained interests are determined by allocating carrying value of the receivables between assets sold and interests retained based on relative fair value. The allocated bases of the subordinated notes are not materially different than their face value because (i) the receivables generally turn over in less than two months, (ii) credit losses are reasonably predictable due to the broad customer base and lack of significant concentration and (iii) the equity in CRC is subordinate to all retained interests and thus would absorb losses first. The hypothetical effect on fair value of the retained interests assuming both a 10 percent and a 20 percent unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. Interest accrues to Duke Energy Ohio and Duke Energy Indiana on the retained interests using the acceptable yield method. This method generally approximates the stated rate on the notes since the allocated basis and the face value are nearly equivalent. An impairment charge is recorded against the carrying value of both retained interests and purchased beneficial interest whenever it is determined that an OTTI has occurred.
Key assumptions used in estimating fair value are detailed in the following table. |
| | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Anticipated credit loss ratio | 0.5 | % | | 0.5 | % | | 0.3 | % | | 0.3 | % |
| Discount rate | 2.0 | % | | 1.5 | % | | 2.0 | % | | 1.5 | % |
| Receivable turnover rate | 13.4 | % | | 13.3 | % | | 10.7 | % | | 10.6 | % |
The following table shows the gross and net receivables sold.
| | | | | | | | | | | | | | | | | | | | | | | |
| Duke Energy Ohio | | Duke Energy Indiana |
| (in millions) | September 30, 2021 | | December 31, 2020 | | September 30, 2021 | | December 31, 2020 |
| Receivables sold | $ | 218 | | | $ | 270 | | | $ | 328 | | | $ | 344 | |
| Less: Retained interests | 47 | | | 83 | | | 77 | | | 110 | |
| Net receivables sold | $ | 171 | | | $ | 187 | | | $ | 251 | | | $ | 234 | |
| | | | | |
| FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
|
| | | | | | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| (in millions) | September 30, 2017 |
| | December 31, 2016 |
| | September 30, 2017 |
| | December 31, 2016 |
|
| Receivables sold | $ | 209 |
| | $ | 267 |
| | $ | 304 |
| | $ | 306 |
|
| Less: Retained interests | 46 |
| | 82 |
| | 75 |
| | 101 |
|
| Net receivables sold | $ | 163 |
| | $ | 185 |
| | $ | 229 |
| | $ | 205 |
|
The following table shows sales and cash flows related to receivables sold. | | | | Duke Energy Ohio | | Duke Energy Indiana | | Duke Energy Ohio | | Duke Energy Indiana |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, | | September 30, | | September 30, | | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 | | 2021 | | 2020 |
| Sales | | | | | | | | | | | | | | | | Sales | |
| Receivables sold | $ | 438 |
| | $ | 481 |
| | $ | 1,392 |
| | $ | 1,442 |
| | $ | 720 |
| | $ | 722 |
| | $ | 2,047 |
| | $ | 1,980 |
| Receivables sold | $ | 486 | | | $ | 462 | | | $ | 1,490 | | | $ | 1,428 | | | $ | 794 | | | $ | 717 | | | $ | 2,176 | | | $ | 1,947 | |
| Loss recognized on sale | 2 |
| | 2 |
| | 7 |
| | 7 |
| | 3 |
| | 3 |
| | 9 |
| | 8 |
| Loss recognized on sale | 2 | | | 2 | | | 7 | | | 8 | | | 4 | | | 3 | | | 10 | | | 9 | |
| Cash flows | | | | | | | | | | | | | | | | Cash flows | |
| Cash proceeds from receivables sold | $ | 434 |
| | $ | 468 |
| | $ | 1,421 |
| | $ | 1,432 |
| | $ | 713 |
| | $ | 703 |
| | $ | 2,064 |
| | $ | 1,958 |
| Cash proceeds from receivables sold | $ | 490 | | | $ | 449 | | | $ | 1,519 | | | $ | 1,439 | | | $ | 798 | | | $ | 689 | | | $ | 2,199 | | | $ | 1,941 | |
| Collection fees received | 1 |
| | 1 |
| | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | 1 |
| Collection fees received | — | | | 1 | | | 1 | | | 1 | | | — | | | — | | | 1 | | | 1 | |
| Return received on retained interests | — |
| | 1 |
| | 2 |
| | 2 |
| | 2 |
| | 2 |
| | 5 |
| | 4 |
| Return received on retained interests | 1 | | | 1 | | | 3 | | | 3 | | | 1 | | | 1 | | | 4 | | | 4 | |
Cash flows from sales of receivables are reflected within Cash Flows From Operating Activities and Cash Flows from Investing Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed Consolidated Statements of Cash Flows.
PART I12. REVENUE
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –Duke Energy earns substantially all of its revenues through its reportable segments, Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.Electric Utilities and Infrastructure
Combined NotesElectric Utilities and Infrastructure earns the majority of its revenues through retail and wholesale electric service through the generation, transmission, distribution and sale of electricity. Duke Energy generally provides retail and wholesale electric service customers with their full electric load requirements or with supplemental load requirements when the customer has other sources of electricity.
The majority of wholesale revenues are full requirements contracts where the customers purchase the substantial majority of their energy needs and do not have a fixed quantity of contractually required energy or capacity. As such, related forecasted revenues are considered optional purchases. Supplemental requirements contracts that include contracted blocks of energy and capacity at contractually fixed prices have the following estimated remaining performance obligations:
| | | | | | | | | | | | | | | | | | | | | | | |
| Remaining Performance Obligations |
| (in millions) | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total |
| | | | | | | |
| Progress Energy | $ | 24 | | $ | 107 | | $ | 44 | | $ | 45 | | $ | 7 | | $ | 51 | | $ | 278 | |
| Duke Energy Progress | 2 | | 8 | | 8 | | 8 | | — | | — | | 26 | |
| Duke Energy Florida | 22 | | 99 | | 36 | | 37 | | 7 | | 51 | | 252 | |
| | | | | | | |
| Duke Energy Indiana | — | | 1 | | 9 | | 14 | | 15 | | 25 | | 64 | |
Revenues for block sales are recognized monthly as energy is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates.
Gas Utilities and Infrastructure
Gas Utilities and Infrastructure earns its revenue through retail and wholesale natural gas service through the transportation, distribution and sale of natural gas. Duke Energy generally provides retail and wholesale natural gas service customers with all natural gas load requirements. Additionally, while natural gas can be stored, substantially all natural gas provided by Duke Energy is consumed by customers simultaneously with receipt of delivery.
Fixed-capacity payments under long-term contracts for the Gas Utilities and Infrastructure segment include minimum margin contracts and supply arrangements with municipalities and power generation facilities. Revenues for related sales are recognized monthly as natural gas is delivered and stand-ready service is provided, consistent with invoiced amounts and unbilled estimates. Estimated remaining performance obligations are as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Remaining Performance Obligations |
| (in millions) | 2021 | 2022 | 2023 | 2024 | 2025 | Thereafter | Total |
| | | | | | | |
| Piedmont | $ | 17 | | $ | 67 | | $ | 64 | | $ | 61 | | $ | 60 | | $ | 336 | | $ | 605 | |
Commercial Renewables
Commercial Renewables earns the majority of its revenues through long-term PPAs and generally sells all of its wind and solar facility output, electricity and Renewable Energy Certificates (RECs) to customers. Some of these PPAs have been accounted for as leases. For PPAs that are not accounted for as leases, the delivery of electricity and the delivery of RECs are considered separate performance obligations.
Other
The remainder of Duke Energy’s operations is presented as Other, which does not include material revenues from contracts with customers.
| | | | | |
| FINANCIAL STATEMENTS | REVENUE |
Disaggregated Revenues
Disaggregated revenues are presented as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2021 |
| | Duke | | Duke | Duke | Duke | Duke | |
| (in millions) | Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
| By market or type of customer | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
| Electric Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 2,955 | | $ | 892 | | $ | 1,525 | | $ | 619 | | $ | 906 | | $ | 223 | | $ | 316 | | $ | — | |
| General | 1,873 | | 685 | | 826 | | 400 | | 426 | | 119 | | 240 | | — | |
| Industrial | 861 | | 360 | | 264 | | 195 | | 69 | | 35 | | 202 | | — | |
| Wholesale | 619 | | 111 | | 399 | | 324 | | 75 | | 19 | | 89 | | — | |
| Other revenues | 252 | | 72 | | 198 | | 118 | | 80 | | 17 | | 23 | | — | |
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 6,560 | | $ | 2,120 | | $ | 3,212 | | $ | 1,656 | | $ | 1,556 | | $ | 413 | | $ | 870 | | $ | — | |
| | | | | | | | |
| Gas Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 129 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 62 | | $ | — | | $ | 66 | |
| Commercial | 78 | | — | | — | | — | | — | | 24 | | — | | 58 | |
| Industrial | 30 | | — | | — | | — | | — | | 3 | | — | | 26 | |
| Power Generation | — | | — | | — | | — | | — | | — | | — | | 23 | |
| Other revenues | 33 | | — | | — | | — | | — | | 4 | | — | | 9 | |
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 270 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 93 | | $ | — | | $ | 182 | |
| | | | | | | | |
| Commercial Renewables | | | | | | | | |
| Revenue from contracts with customers | $ | 56 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
| Other | | | | | | | | |
| Revenue from contracts with customers | $ | 8 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| Total revenue from contracts with customers | $ | 6,894 | | $ | 2,120 | | $ | 3,212 | | $ | 1,656 | | $ | 1,556 | | $ | 506 | | $ | 870 | | $ | 182 | |
| | | | | | | | |
Other revenue sources(a) | $ | 57 | | $ | (16) | | $ | 21 | | $ | 11 | | $ | 5 | | $ | — | | $ | 16 | | $ | 13 | |
| Total revenues | $ | 6,951 | | $ | 2,104 | | $ | 3,233 | | $ | 1,667 | | $ | 1,561 | | $ | 506 | | $ | 886 | | $ | 195 | |
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
| | | | | |
| FINANCIAL STATEMENTS | REVENUE |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 |
| | Duke | | Duke | Duke | Duke | Duke | |
| (in millions) | Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
| By market or type of customer | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
| Electric Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 2,936 | | $ | 883 | | $ | 1,550 | | $ | 616 | | $ | 934 | | $ | 213 | | $ | 289 | | $ | — | |
| General | 1,804 | | 664 | | 805 | | 384 | | 421 | | 119 | | 212 | | — | |
| Industrial | 797 | | 342 | | 245 | | 179 | | 66 | | 35 | | 175 | | — | |
| Wholesale | 603 | | 117 | | 412 | | 358 | | 54 | | 10 | | 64 | | — | |
| Other revenues | 238 | | 62 | | 167 | | 75 | | 92 | | 23 | | 22 | | — | |
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 6,378 | | $ | 2,068 | | $ | 3,179 | | $ | 1,612 | | $ | 1,567 | | $ | 400 | | $ | 762 | | $ | — | |
| | | | | | | | |
| Gas Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 112 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 55 | | $ | — | | $ | 57 | |
| Commercial | 64 | | — | | — | | — | | — | | 20 | | — | | 44 | |
| Industrial | 24 | | — | | — | | — | | — | | 3 | | — | | 22 | |
| Power Generation | — | | — | | — | | — | | — | | — | | — | | 10 | |
| Other revenues | 16 | | — | | — | | — | | — | | 3 | | — | | 11 | |
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 216 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 81 | | $ | — | | $ | 144 | |
| | | | | | | | |
| Commercial Renewables | | | | | | | | |
| Revenue from contracts with customers | $ | 57 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
| Other | | | | | | | | |
| Revenue from contracts with customers | $ | 7 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| Total revenue from contracts with customers | $ | 6,658 | | $ | 2,068 | | $ | 3,179 | | $ | 1,612 | | $ | 1,567 | | $ | 481 | | $ | 762 | | $ | 144 | |
| | | | | | | | |
Other revenue sources(a) | $ | 63 | | $ | (10) | | $ | 18 | | $ | 14 | | $ | — | | $ | (8) | | $ | (1) | | $ | 18 | |
| Total revenues | $ | 6,721 | | $ | 2,058 | | $ | 3,197 | | $ | 1,626 | | $ | 1,567 | | $ | 473 | | $ | 761 | | $ | 162 | |
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
| | | | | |
| FINANCIAL STATEMENTS | REVENUE |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2021 |
| | Duke | | Duke | Duke | Duke | Duke | |
| (in millions) | Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
| By market or type of customer | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
| Electric Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 7,753 | | $ | 2,368 | | $ | 3,903 | | $ | 1,657 | | $ | 2,246 | | $ | 589 | | $ | 894 | | $ | — | |
| General | 4,805 | | 1,685 | | 2,170 | | 1,036 | | 1,134 | | 329 | | 619 | | — | |
| Industrial | 2,228 | | 872 | | 700 | | 500 | | 200 | | 99 | | 558 | | — | |
| Wholesale | 1,644 | | 341 | | 1,056 | | 901 | | 155 | | 45 | | 202 | | — | |
| Other revenues | 712 | | 208 | | 509 | | 272 | | 237 | | 61 | | 64 | | — | |
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 17,142 | | $ | 5,474 | | $ | 8,338 | | $ | 4,366 | | $ | 3,972 | | $ | 1,123 | | $ | 2,337 | | $ | — | |
| | | | | | | | |
| Gas Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 747 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 241 | | $ | — | | $ | 505 | |
| Commercial | 373 | | — | | — | | — | | — | | 99 | | — | | 273 | |
| Industrial | 110 | | — | | — | | — | | — | | 14 | | — | | 96 | |
| Power Generation | — | | — | | — | | — | | — | | — | | — | | 69 | |
| Other revenues | 100 | | — | | — | | — | | — | | 21 | | — | | 34 | |
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,330 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 375 | | $ | — | | $ | 977 | |
| | | | | | | | |
| Commercial Renewables | | | | | | | | |
| Revenue from contracts with customers | $ | 163 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
| Other | | | | | | | | |
| Revenue from contracts with customers | $ | 20 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
| Total Revenue from contracts with customers | $ | 18,655 | | $ | 5,474 | | $ | 8,338 | | $ | 4,366 | | $ | 3,972 | | $ | 1,498 | | $ | 2,337 | | $ | 977 | |
| | | | | | | | |
Other revenue sources(a) | $ | 204 | | $ | (44) | | $ | 79 | | $ | 51 | | $ | 15 | | $ | (4) | | $ | 29 | | $ | 39 | |
| Total revenues | $ | 18,859 | | $ | 5,430 | | $ | 8,417 | | $ | 4,417 | | $ | 3,987 | | $ | 1,494 | | $ | 2,366 | | $ | 1,016 | |
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
| | | | | |
| FINANCIAL STATEMENTS | REVENUE |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 |
| | Duke | | Duke | Duke | Duke | Duke | |
| (in millions) | Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
| By market or type of customer | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
| Electric Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 7,451 | | $ | 2,316 | | $ | 3,792 | | $ | 1,578 | | $ | 2,214 | | $ | 558 | | $ | 785 | | $ | — | |
| General | 4,691 | | 1,720 | | 2,080 | | 1,001 | | 1,079 | | 336 | | 554 | | — | |
| Industrial | 2,148 | | 871 | | 673 | | 487 | | 186 | | 103 | | 502 | | — | |
| Wholesale | 1,535 | | 332 | | 1,018 | | 877 | | 141 | | 22 | | 163 | | — | |
| Other revenues | 713 | | 184 | | 476 | | 208 | | 268 | | 62 | | 63 | | — | |
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 16,538 | | $ | 5,423 | | $ | 8,039 | | $ | 4,151 | | $ | 3,888 | | $ | 1,081 | | $ | 2,067 | | $ | — | |
| | | | | | | | |
| Gas Utilities and Infrastructure | | | | | | | | |
| Residential | $ | 631 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 214 | | $ | — | | $ | 417 | |
| Commercial | 308 | | — | | — | | — | | — | | 86 | | — | | 222 | |
| Industrial | 92 | | — | | — | | — | | — | | 12 | | — | | 80 | |
| Power Generation | — | | — | | — | | — | | — | | — | | — | | 27 | |
| Other revenues | 58 | | — | | — | | — | | — | | 12 | | — | | 46 | |
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,089 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 324 | | $ | — | | $ | 792 | |
| | | | | | | | |
| Commercial Renewables | | | | | | | | |
| Revenue from contracts with customers | $ | 170 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
| Other | | | | | | | | |
| Revenue from contracts with customers | $ | 20 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
| Total Revenue from contracts with customers | $ | 17,817 | | $ | 5,423 | | $ | 8,039 | | $ | 4,151 | | $ | 3,888 | | $ | 1,405 | | $ | 2,067 | | $ | 792 | |
| | | | | | | | |
Other revenue sources(a) | $ | 274 | | $ | (7) | | $ | 78 | | $ | 56 | | $ | 9 | | $ | (11) | | $ | 3 | | $ | 79 | |
| Total revenues | $ | 18,091 | | $ | 5,416 | | $ | 8,117 | | $ | 4,207 | | $ | 3,897 | | $ | 1,394 | | $ | 2,070 | | $ | 871 | |
(a)Other revenue sources include revenues from leases, derivatives and alternative revenue programs that are not considered revenues from contracts with customers. Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over or under collection of related revenues.
| | | | | |
| FINANCIAL STATEMENTS | REVENUE |
As described in Note 1, Duke Energy adopted the new guidance for credit losses effective January 1, 2020, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. The following table presents the reserve for credit losses for trade and other receivables based on adoption of the new standard.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, 2020 and 2021 |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
| Balance at June 30, 2020 | $ | 102 | | $ | 14 | | $ | 29 | | $ | 14 | | $ | 14 | | $ | 5 | | $ | 3 | | $ | 6 | |
| Write-Offs | 12 | | (2) | | 15 | | 13 | | 2 | | — | | — | | — | |
| Credit Loss Expense | (9) | | — | | (16) | | (15) | | — | | — | | — | | 3 | |
| Other Adjustments | 28 | | 10 | | 9 | | 9 | | — | | — | | — | | — | |
| Balance at September 30, 2020 | $ | 133 | | $ | 22 | | $ | 37 | | $ | 21 | | $ | 16 | | $ | 5 | | $ | 3 | | $ | 9 | |
| | | | | | | | |
| Balance at June 30, 2021 | $ | 123 | | $ | 42 | | $ | 36 | | $ | 21 | | $ | 16 | | $ | 4 | | $ | 3 | | $ | 13 | |
| Write-Offs | (13) | | (3) | | (6) | | (3) | | (3) | | — | | — | | (4) | |
| Credit Loss Expense | 11 | | 4 | | 6 | | 3 | | 3 | | — | | — | | 2 | |
| Other Adjustments | 2 | | (1) | | — | | — | | — | | — | | — | | 4 | |
| Balance at September 30, 2021 | $ | 123 | | $ | 42 | | $ | 36 | | $ | 21 | | $ | 16 | | $ | 4 | | $ | 3 | | $ | 15 | |
| | | | | | | | |
| Nine Months Ended September 30, 2020 and 2021 |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
| Balance at December 31, 2019 | $ | 76 | | $ | 10 | | $ | 16 | | $ | 8 | | $ | 7 | | $ | 4 | | $ | 3 | | $ | 6 | |
| Cumulative Change in Accounting Principle | 5 | | 1 | | 2 | | 1 | | 1 | | — | | — | | 1 | |
| Write-Offs | (7) | | (8) | | 8 | | 8 | | — | | — | | — | | (5) | |
| Credit Loss Expense | 24 | | 9 | | 2 | | (5) | | 8 | | 1 | | — | | 7 | |
| Other Adjustments | 35 | | 10 | | 9 | | 9 | | — | | — | | — | | — | |
| Balance at September 30, 2020 | $ | 133 | | $ | 22 | | $ | 37 | | $ | 21 | | $ | 16 | | $ | 5 | | $ | 3 | | $ | 9 | |
| | | | | | | | |
| Balance at December 31, 2020 | $ | 146 | | $ | 23 | | $ | 37 | | $ | 23 | | $ | 14 | | $ | 4 | | $ | 3 | | $ | 12 | |
| Write-Offs | (39) | | (10) | | (20) | | (11) | | (9) | | — | | — | | (7) | |
| Credit Loss Expense | 40 | | 20 | | 19 | | 9 | | 10 | | — | | — | | 6 | |
| Other Adjustments | (24) | | 9 | | — | | — | | 1 | | — | | — | | 4 | |
| Balance at September 30, 2021 | $ | 123 | | $ | 42 | | $ | 36 | | $ | 21 | | $ | 16 | | $ | 4 | | $ | 3 | | $ | 15 | |
Trade and other receivables are evaluated based on an estimate of the risk of loss over the life of the receivable and current and historical conditions using supportable assumptions. Management evaluates the risk of loss for trade and other receivables by comparing the historical write-off amounts to total revenue over a specified period. Historical loss rates are adjusted due to the impact of current conditions, as well as forecasted conditions over a reasonable time period. The calculated write-off rate can be applied to the receivable balance for which an established reserve does not already exist. Management reviews the assumptions and risk of loss periodically for trade and other receivables.
The aging of trade receivables is presented in the table below. Duke Energy considers receivables greater than 30 days outstanding past due.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2021 |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Unbilled Revenue(a)(b) | $ | 826 | | $ | 308 | | $ | 242 | | $ | 125 | | $ | 117 | | $ | 5 | | $ | 27 | | $ | 7 | |
| 0-30 days | 2,201 | | 689 | | 910 | | 521 | | 388 | | 65 | | 41 | | 80 | |
| 30-60 days | 194 | | 74 | | 63 | | 37 | | 26 | | 7 | | 5 | | 6 | |
| 60-90 days | 57 | | 30 | | 14 | | 6 | | 8 | | 1 | | 1 | | 3 | |
| 90+ days | 161 | | 68 | | 27 | | 5 | | 22 | | 31 | | 10 | | 9 | |
Deferred Payment Arrangements(c) | 113 | | 66 | | 29 | | 21 | | 8 | | 2 | | — | | 6 | |
| Trade and Other Receivables | $ | 3,552 | | $ | 1,235 | | $ | 1,285 | | $ | 715 | | $ | 569 | | $ | 111 | | $ | 84 | | $ | 111 | |
| | | | | |
| FINANCIAL STATEMENTS | REVENUE |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Unbilled Revenue(a)(b) | $ | 969 | | $ | 328 | | $ | 283 | | $ | 167 | | $ | 116 | | $ | 2 | | $ | 16 | | $ | 86 | |
| 0-30 days | 1,789 | | 445 | | 707 | | 398 | | 307 | | 60 | | 26 | | 149 | |
| 30-60 days | 185 | | 80 | | 54 | | 25 | | 29 | | 8 | | 3 | | 8 | |
| 60-90 days | 22 | | 1 | | 10 | | 4 | | 6 | | 2 | | 1 | | 3 | |
| 90+ days | 119 | | 16 | | 32 | | 9 | | 23 | | 30 | | 12 | | 9 | |
Deferred Payment Arrangements(c) | 215 | | 96 | | 80 | | 52 | | 28 | | — | | — | | 7 | |
| Trade and Other Receivables | $ | 3,299 | | $ | 966 | | $ | 1,166 | | $ | 655 | | $ | 509 | | $ | 102 | | $ | 58 | | $ | 262 | |
(a)Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy or natural gas delivered but not yet billed and are included within Receivables and Receivables of VIEs on the Condensed Consolidated Financial Statements – (Unaudited) – (Continued)Balance Sheets.
Collection fees received in connection with servicing transferred accounts receivable are included in Operation, maintenance and other on (b)Duke Energy Ohio’sOhio and Duke Energy Indiana’sIndiana sell, on a revolving basis, nearly all of their retail accounts receivable, including receivables for unbilled revenues, to an affiliate, CRC, and account for the transfers of receivables as sales. Accordingly, the receivables sold are not reflected on the Condensed Consolidated StatementsBalance Sheets of OperationsDuke Energy Ohio and Comprehensive Income. The loss recognized on salesDuke Energy Indiana. See Note 11 for further information. These receivables for unbilled revenues are $64 million and $115 million for Duke Energy Ohio and Duke Energy Indiana, respectively, as of receivables is calculated monthly by multiplying receivables sold during the monthSeptember 30, 2021, and $87 million and $134 million for Duke Energy Ohio and Duke Energy Indiana, respectively, as of December 31, 2020.
(c)Due to certain customer financial hardships created by the required discount. The required discount is derived monthly utilizingCOVID-19 pandemic and resulting stay-at-home orders, Duke Energy permitted customers to defer payment of past-due amounts through an installment payment plan over a three-year weighted average formula that considers charge-off history, late charge history and turnover history on the sold receivables, as well as a component for the time valueperiod of money. The discount rate, or component for the time value of money, is the prior month-end LIBOR plus a fixed rate of 1.00 percent.several months.
14. COMMON STOCK13. STOCKHOLDERS' EQUITY
Basic Earnings Per Share (EPS)EPS is computed by dividing net income attributableavailable to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities and accumulated preferred dividends, by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income attributableavailable to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities and accumulated preferred dividends, by the diluted weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options and equity forward sale agreements, were exercised or settled. Duke Energy’s participating securities are restricted stock units that are entitled to dividends declared on Duke Energy common stock during the restricted stock unit’s vesting periods. Dividends declared on preferred stock are recorded on the Condensed Consolidated Statements of Operations as a reduction of net income to arrive at net income available to Duke Energy common stockholders. Dividends accumulated on preferred stock are an adjustment to net income used in the calculation of basic and diluted EPS.
The following table presents Duke Energy’s basic and diluted EPS calculations, and reconciles the weighted average number of common shares outstanding and common and preferred share dividends declared.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions, except per share amounts) | 2021 | | 2020 | | 2021 | | 2020 |
| Net income available to Duke Energy common stockholders | $ | 1,366 | | | $ | 1,265 | | | $ | 3,070 | | | $ | 1,347 | |
| Accumulated preferred stock dividends adjustment | 12 | | | 12 | | | 12 | | | 13 | |
| Less: Impact of participating securities | 1 | | | 1 | | | 3 | | | 2 | |
| Income from continuing operations available to Duke Energy common stockholders | $ | 1,377 | | | $ | 1,276 | | | $ | 3,079 | | | $ | 1,358 | |
| | | | | | | |
| Weighted average common shares outstanding – basic and diluted | 769 | | | 735 | | | 769 | | | 735 | |
| | | | | | | |
| | | | | | | |
| EPS available to Duke Energy common stockholders | | | | | | | |
| Basic and diluted | $ | 1.79 | | | $ | 1.74 | | | $ | 4.00 | | | $ | 1.85 | |
| | | | | | | |
Potentially dilutive items excluded from the calculation(a) | 2 | | | 2 | | | 2 | | | 2 | |
| Dividends declared per common share | $ | 0.985 | | | $ | 0.965 | | | $ | 2.915 | | | $ | 2.855 | |
Dividends declared on Series A preferred stock per depositary share(b) | $ | 0.359 | | | $ | 0.359 | | | $ | 1.078 | | | $ | 1.078 | |
Dividends declared on Series B preferred stock per share(c) | $ | 24.375 | | | $ | 24.375 | | | $ | 48.750 | | | $ | 49.292 | |
(a)Performance stock awards were not included in the dilutive securities calculation because the performance measures related to the diluted weighted average numberawards had not been met.
(b)5.75% Series A Cumulative Redeemable Perpetual Preferred Stock dividends are payable quarterly in arrears on the 16th day of common shares outstanding.March, June, September and December. The preferred stock has a $25 liquidation preference per depositary share.
(c)4.875% Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock dividends are payable semiannually in arrears on the 16th day of March and September. The preferred stock has a $1,000 liquidation preference per share.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions, except per-share amounts) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities | $ | 954 |
| | $ | 998 |
| | $ | 2,356 |
| | $ | 2,194 |
|
| Weighted average shares outstanding – basic | 700 |
| | 689 |
| | 700 |
| | 689 |
|
| Equity Forwards | — |
| | 2 |
| | — |
| | 1 |
|
| Weighted average shares outstanding – diluted | 700 | | 691 | | 700 | | 690 |
| Earnings per share from continuing operations attributable to Duke Energy common stockholders | | | | | | | |
| Basic | $ | 1.36 |
| | $ | 1.44 |
| | $ | 3.37 |
| | $ | 3.19 |
|
| Diluted | $ | 1.36 |
| | $ | 1.44 |
| | $ | 3.37 |
| | $ | 3.18 |
|
Potentially dilutive items excluded from the calculation(a) | 2 |
| | 2 |
| | 2 | | 2 |
| Dividends declared per common share | $ | 0.89 |
| | $ | 0.855 |
| | $ | 2.60 |
| | $ | 2.505 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Performance stock awards were not included in the dilutive securities calculation because the performance measures related to the awards had not been met.EMPLOYEE BENEFIT PLANS |
Equity Forwards
In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into equity forward sale agreements with Barclays (the Equity Forwards). The Equity Forwards required Duke Energy to either physically settle the transactions by issuing 10.6 million shares, or net settle in whole or in part through the delivery or receipt of cash or shares. As of September 30, 2016, share dilution resulting from the agreements was determined under the treasury stock method.
Duke Energy physically settled the Equity Forwards in full in October 2016 following the close of the Piedmont acquisition. See Note 2 for additional information related to the Piedmont acquisition.
15. STOCK-BASED COMPENSATION
For employee awards, equity classified stock-based compensation cost is measured at the service inception date or the grant date, based on the estimated achievement of certain performance metrics or the fair value of the award, and is recognized as expense or capitalized as a component of property, plant and equipment over the requisite service period.
Pretax stock-based compensation costs, the tax benefit associated with stock-based compensation expense and stock-based compensation costs capitalized are included in the following table.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Restricted stock unit awards | $ | 10 |
| | $ | 8 |
| | $ | 30 |
| | $ | 25 |
|
| Performance awards | 7 |
| | 4 |
| | 20 |
| | 14 |
|
| Pretax stock-based compensation cost | $ | 17 |
| | $ | 12 |
| | $ | 50 |
| | $ | 39 |
|
| Tax benefit associated with stock-based compensation expense | $ | 6 |
| | $ | 5 |
| | $ | 18 |
| | $ | 14 |
|
| Stock-based compensation costs capitalized | 1 |
| | — |
| | 2 |
| | 2 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Prior to Duke Energy acquiring Piedmont, Piedmont had an incentive compensation plan for eligible officers and other participants. Piedmont's total pretax stock-based compensation costs were approximately $2 million and $5 million for the three and nine months ended September 30, 2016, respectively. The tax benefit associated with Piedmont's stock-based compensation expense for the three and nine months ended September 30, 2016, was immaterial.
16.14. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy maintains,and certain subsidiaries maintain, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. Duke Energy’sEnergy's policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants. The following table includes information related to the Duke Energy Registrants' contributions to its U.S. qualified defined benefit pension plans. |
| | | | | | | | | | | |
| | | | Duke |
| | |
| | Duke |
| | Energy |
| | |
| (in millions) | Energy |
| | Ohio |
| | Piedmont |
|
| Anticipated 2017 contributions | $ | 19 |
| | $ | 4 |
| | $ | 11 |
|
| Contributions made during the nine months ended September 30, 2017 | 8 |
| | 4 |
| | — |
|
| Remaining estimated contributions to be made in 2017 | $ | 11 |
| | $ | — |
| | $ | 11 |
|
Duke Energy did not make any contributions to its U.S. qualified definedmonitors lump-sum benefit pension plans during the nine months ended September 30, 2016.
Net periodic benefit costs disclosed in the tables below represent the cost of the respective benefit plan for the periods presented. However, portions of the net periodic benefit costs disclosed in the tables below have been capitalized as a component of property, plant and equipment. Amounts presented in the tables below for the Subsidiary Registrants represent the amounts of pension and other post-retirement benefit costs allocated by Duke Energy for employees of the Subsidiary Registrants. Additionally, the Subsidiary Registrants are allocated their proportionate share of pension and post-retirement benefit costs for employees of Duke Energy’s shared services affiliate that provides support to the Subsidiary Registrants. These allocated amounts are included in the governance and shared service costs discussed in Note 9. Duke Energy uses a December 31 measurement date forpayment activity associated with its defined benefit retirement plan assetsplans. Duke Energy does not believe it is probable that total lump-sum benefit payments will exceed the settlement threshold, defined as the sum of service cost and obligations.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notesinterest cost on projected benefit obligation components of net periodic pension costs, for any of its defined benefit retirement plans in 2021. If Duke Energy believed it were probable that total lump-sum benefit payments would exceed the settlement threshold in 2021, then a settlement charge reflecting the recognition of a pro-rata portion of previously unrecognized actuarial losses, equal to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
the percentage of reduction in the projected benefit obligation resulting from total lump-sum benefit payments, would be recognized.
QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for qualified pension plans. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 40 |
| | $ | 12 |
| | $ | 12 |
| | $ | 6 |
| | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 3 |
|
| Interest cost on projected benefit obligation | 82 |
| | 20 |
| | 25 |
| | 12 |
| | 13 |
| | 4 |
| | 7 |
| | 3 |
|
| Expected return on plan assets | (136 | ) | | (35 | ) | | (43 | ) | | (21 | ) | | (21 | ) | | (7 | ) | | (11 | ) | | (6 | ) |
| Amortization of actuarial loss | 36 |
| | 8 |
| | 14 |
| | 6 |
| | 7 |
| | 1 |
| | 3 |
| | 3 |
|
| Amortization of prior service credit | (6 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) |
| Other | 2 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 18 |
| | $ | 3 |
| | $ | 8 |
| | $ | 3 |
| | $ | 4 |
| | $ | (1 | ) | | $ | 1 |
| | $ | 2 |
|
| | | | Three Months Ended September 30, 2016 | | Three Months Ended September 30, 2021 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke | | Duke | | Duke | | Duke | | Duke | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Service cost | $ | 36 |
| | $ | 12 |
| | $ | 11 |
| | $ | 6 |
| | $ | 4 |
| | $ | 1 |
| | $ | 2 |
| | $ | 3 |
| Service cost | $ | 43 | | | $ | 14 | | | $ | 13 | | | $ | 7 | | | $ | 5 | | | $ | 2 | | | $ | 2 | | | $ | 1 | |
| Interest cost on projected benefit obligation | 83 |
| | 21 |
| | 27 |
| | 12 |
| | 14 |
| | 5 |
| | 7 |
| | 2 |
| Interest cost on projected benefit obligation | 55 | | | 13 | | | 17 | | | 8 | | | 10 | | | 2 | | | 5 | | | 2 | |
| Expected return on plan assets | (128 | ) | | (35 | ) | | (42 | ) | | (21 | ) | | (21 | ) | | (6 | ) | | (10 | ) | | (6 | ) | Expected return on plan assets | (139) | | | (36) | | | (47) | | | (21) | | | (25) | | | (7) | | | (10) | | | (5) | |
| Amortization of actuarial loss | 33 |
| | 8 |
| | 14 |
| | 6 |
| | 7 |
| | 1 |
| | 3 |
| | 2 |
| Amortization of actuarial loss | 33 | | | 7 | | | 10 | | | 5 | | | 5 | | | 2 | | | 3 | | | 2 | |
| Amortization of prior service credit | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | (1 | ) | | — |
| | — |
| | (1 | ) | Amortization of prior service credit | (7) | | | (2) | | | (1) | | | — | | | (1) | | | — | | | — | | | (1) | |
| Other | 2 |
| | 1 |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| |
| Amortization of settlement charges | | Amortization of settlement charges | 2 | | | 1 | | | 1 | | | — | | | — | | | — | | | — | | | 1 | |
| Net periodic pension costs | $ | 22 |
| | $ | 5 |
| | $ | 10 |
| | $ | 3 |
| | $ | 4 |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| Net periodic pension costs | $ | (13) | | | $ | (3) | | | $ | (7) | | | $ | (1) | | | $ | (6) | | | $ | (1) | | | $ | — | | | $ | — | |
| | | | Nine Months Ended September 30, 2017 | | Three Months Ended September 30, 2020 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke | | Duke | | Duke | | Duke | | Duke | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Service cost | $ | 120 |
| | $ | 36 |
| | $ | 36 |
| | $ | 18 |
| | $ | 15 |
| | $ | 3 |
| | $ | 6 |
| | $ | 9 |
| Service cost | $ | 41 | | | $ | 12 | | | $ | 12 | | | $ | 6 | | | $ | 5 | | | $ | 1 | | | $ | 2 | | | $ | 1 | |
| Interest cost on projected benefit obligation | 246 |
| | 60 |
| | 75 |
| | 36 |
| | 39 |
| | 14 |
| | 21 |
| | 9 |
| Interest cost on projected benefit obligation | 67 | | | 16 | | | 21 | | | 10 | | | 12 | | | 4 | | | 6 | | | 2 | |
| Expected return on plan assets | (408 | ) | | (106 | ) | | (129 | ) | | (63 | ) | | (63 | ) | | (21 | ) | | (33 | ) | | (18 | ) | Expected return on plan assets | (143) | | | (36) | | | (48) | | | (22) | | | (25) | | | (7) | | | (11) | | | (5) | |
| Amortization of actuarial loss | 108 |
| | 24 |
| | 42 |
| | 18 |
| | 21 |
| | 3 |
| | 9 |
| | 9 |
| Amortization of actuarial loss | 32 | | | 7 | | | 10 | | | 4 | | | 6 | | | 2 | | | 3 | | | 2 | |
| Amortization of prior service credit | (18 | ) | | (6 | ) | | (3 | ) | | — |
| | — |
| | — |
| | — |
| | (3 | ) | Amortization of prior service credit | (8) | | | (2) | | | — | | | — | | | — | | | — | | | — | | | (2) | |
| Other | 6 |
| | — |
| | 3 |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
| |
| Amortization of settlement charges | | Amortization of settlement charges | 11 | | | 6 | | | 5 | | | 5 | | | 1 | | | — | | | 1 | | | 1 | |
| Net periodic pension costs | $ | 54 |
| | $ | 8 |
| | $ | 24 |
| | $ | 10 |
| | $ | 12 |
| | $ | (1 | ) | | $ | 3 |
| | $ | 7 |
| Net periodic pension costs | $ | — | | | $ | 3 | | | $ | — | | | $ | 3 | | | $ | (1) | | | $ | — | | | $ | 1 | | | $ | (1) | |
| | | | Nine Months Ended September 30, 2016 | | Nine Months Ended September 30, 2021 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | | Duke | | Duke | | Duke | | Duke | | Duke | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Service cost | $ | 109 |
| | $ | 36 |
| | $ | 32 |
| | $ | 18 |
| | $ | 14 |
| | $ | 3 |
| | $ | 6 |
| | $ | 8 |
| Service cost | $ | 131 | | | $ | 42 | | | $ | 38 | | | $ | 22 | | | $ | 16 | | | $ | 4 | | | $ | 7 | | | $ | 4 | |
| Interest cost on projected benefit obligation | 249 |
| | 64 |
| | 80 |
| | 37 |
| | 42 |
| | 15 |
| | 21 |
| | 7 |
| Interest cost on projected benefit obligation | 165 | | | 38 | | | 52 | | | 23 | | | 29 | | | 9 | | | 14 | | | 6 | |
| Expected return on plan assets | (386 | ) | | (106 | ) | | (126 | ) | | (62 | ) | | (63 | ) | | (20 | ) | | (31 | ) | | (18 | ) | Expected return on plan assets | (418) | | | (106) | | | (141) | | | (63) | | | (76) | | | (21) | | | (30) | | | (15) | |
| Amortization of actuarial loss | 99 |
| | 24 |
| | 41 |
| | 17 |
| | 21 |
| | 3 |
| | 9 |
| | 6 |
| Amortization of actuarial loss | 100 | | | 22 | | | 29 | | | 14 | | | 15 | | | 5 | | | 10 | | | 7 | |
| Amortization of prior service credit | (12 | ) | | (6 | ) | | (3 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | (2 | ) | Amortization of prior service credit | (22) | | | (6) | | | (2) | | | (1) | | | (1) | | | — | | | (1) | | | (6) | |
| Other | 6 |
| | 2 |
| | 2 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| |
| Amortization of settlement charges | | Amortization of settlement charges | 6 | | | 4 | | | 2 | | | 1 | | | — | | | — | | | — | | | 1 | |
| Net periodic pension costs | $ | 65 |
| | $ | 14 |
| | $ | 26 |
| | $ | 10 |
| | $ | 14 |
| | $ | 1 |
| | $ | 5 |
| | $ | 1 |
| Net periodic pension costs | $ | (38) | | | $ | (6) | | | $ | (22) | | | $ | (4) | | | $ | (17) | | | $ | (3) | | | $ | — | | | $ | (3) | |
| | | | | |
| FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2020 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| Service cost | $ | 124 | | | $ | 38 | | | $ | 36 | | | $ | 20 | | | $ | 16 | | | $ | 3 | | | $ | 6 | | | $ | 4 | |
| Interest cost on projected benefit obligation | 202 | | | 47 | | | 64 | | | 29 | | | 35 | | | 12 | | | 17 | | | 7 | |
| Expected return on plan assets | (429) | | | (108) | | | (143) | | | (66) | | | (76) | | | (21) | | | (32) | | | (16) | |
| Amortization of actuarial loss | 96 | | | 21 | | | 30 | | | 13 | | | 17 | | | 5 | | | 9 | | | 7 | |
| Amortization of prior service credit | (24) | | | (6) | | | (2) | | | (1) | | | (1) | | | — | | | (1) | | | (7) | |
| Amortization of settlement charges | 16 | | | 8 | | | 6 | | | 6 | | | 1 | | | — | | | 1 | | | 1 | |
| Net periodic pension costs | $ | (15) | | | $ | — | | | $ | (9) | | | $ | 1 | | | $ | (8) | | | $ | (1) | | | $ | — | | | $ | (4) | |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
NON-QUALIFIED PENSION PLANS
The following tables include the components of netNet periodic pension costs for non-qualified pension plans were not material for registrants with non-qualified pension costs. |
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 4 |
| | — |
| | 1 |
| | 1 |
| | 1 |
|
| Amortization of actuarial loss | 2 |
| | — |
| | 1 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 6 |
| | $ | — |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 4 |
| | — |
| | 2 |
| | — |
| | — |
|
| Amortization of actuarial loss | 2 |
| | — |
| | 1 |
| | 1 |
| | 1 |
|
| Amortization of prior service credit | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 6 |
|
| $ | — |
|
| $ | 3 |
|
| $ | 1 |
|
| $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 10 |
| | 1 |
| | 3 |
| | 2 |
| | 2 |
|
| Amortization of actuarial loss | 6 |
| | — |
| | 3 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 16 |
| | $ | 1 |
| | $ | 6 |
| | $ | 2 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 11 |
| | 1 |
| | 4 |
| | 1 |
| | 1 |
|
| Amortization of actuarial loss | 6 |
| | — |
| | 2 |
| | 1 |
| | 1 |
|
| Amortization of prior service credit | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 18 |
|
| $ | 1 |
|
| $ | 6 |
|
| $ | 2 |
|
| $ | 2 |
|
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides,Net periodic costs for OPEB plans were not material for the three and the Subsidiary Registrants participate in, some health carenine months ended September 30, 2021, and life insurance benefits for retired employees on a contributory and non-contributory basis.2020.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The following tables include the components of net periodic other post-retirement benefit costs. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 9 |
| | 2 |
| | 4 |
| | 2 |
| | 2 |
| | — |
| | 1 |
| | — |
|
| Expected return on plan assets | (3 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss | 2 |
| | — |
| | 5 |
| | 3 |
| | 2 |
| | — |
| | — |
| | — |
|
| Amortization of prior service credit | (29 | ) | | (2 | ) | | (21 | ) | | (14 | ) | | (8 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (20 | ) | | $ | (2 | ) | | $ | (12 | ) | | $ | (9 | ) | | $ | (4 | ) | | $ | — |
| | $ | 1 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Interest cost on accumulated post-retirement benefit obligation | 9 |
| | 2 |
| | 4 |
| | 2 |
| | 3 |
| | — |
| | 1 |
| | — |
|
| Expected return on plan assets | (2 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 2 |
| | — |
| | 5 |
| | 3 |
| | 2 |
| | (1 | ) | | — |
| | — |
|
| Amortization of prior service credit | (35 | ) | | (4 | ) | | (26 | ) | | (16 | ) | | (8 | ) | | — |
| | (1 | ) | | — |
|
| Net periodic other post-retirement benefit costs | $ | (26 | ) | | $ | (4 | ) | | $ | (17 | ) | | $ | (11 | ) | | $ | (3 | ) | | $ | (1 | ) | | $ | — |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 27 |
| | 6 |
| | 11 |
| | 6 |
| | 6 |
| | — |
| | 1 |
| | — |
|
| Expected return on plan assets | (10 | ) | | (6 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 6 |
| | (2 | ) | | 15 |
| | 9 |
| | 6 |
| | (1 | ) | | — |
| | — |
|
| Amortization of prior service credit | (87 | ) | | (6 | ) | | (63 | ) | | (41 | ) | | (23 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (61 | ) | | $ | (8 | ) | | $ | (37 | ) | | $ | (26 | ) | | $ | (11 | ) | | $ | (1 | ) | | $ | 1 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 2 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Interest cost on accumulated post-retirement benefit obligation | 26 |
| | 6 |
| | 11 |
| | 6 |
| | 6 |
| | 1 |
| | 3 |
| | 1 |
|
| Expected return on plan assets | (9 | ) | | (6 | ) | | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
| Amortization of actuarial loss (gain) | 5 |
| | (2 | ) | | 16 |
| | 9 |
| | 7 |
| | (2 | ) | | (1 | ) | | — |
|
| Amortization of prior service credit | (106 | ) | | (10 | ) | | (77 | ) | | (50 | ) | | (26 | ) | | — |
| | (1 | ) | | — |
|
| Net periodic other post-retirement benefit costs | $ | (82 | ) | | $ | (12 | ) | | $ | (50 | ) | | $ | (35 | ) | | $ | (13 | ) | | $ | (1 | ) | | $ | — |
| | $ | 1 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
DEFINED CONTRIBUTION RETIREMENT PLANS
EMPLOYEE SAVINGS PLANS
Duke Energy sponsors, and the Subsidiary Registrants participate in, employee savings plans that cover substantially all U.S. employees. The following table presents employer contributions made by Duke Energy and expensed by the Subsidiary Registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Three Months Ended September 30, | | | | | | | | | | | | | | | |
| 2017 | $ | 43 |
| | $ | 14 |
| | $ | 12 |
| | $ | 9 |
| | $ | 4 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
|
| 2016 | 39 |
| | 13 |
| | 12 |
| | 8 |
| | 3 |
| | 1 |
| | 2 |
| | 2 |
|
| Nine Months Ended September 30, | | | | | | | | | | | | |
| 2017 | $ | 147 |
| | $ | 49 |
| | $ | 42 |
| | $ | 30 |
| | $ | 13 |
| | $ | 3 |
| | $ | 7 |
| | $ | 5 |
|
| 2016 | 130 |
| | 44 |
| | 39 |
| | 27 |
| | 11 |
| | 3 |
| | 6 |
| | 5 |
|
MONEY PURCHASE PENSION PLAN
Duke Energy provides, and Piedmont participates in, the Money Purchase Pension (MPP) plan, which is a defined contribution pension plan that allows certain employees to direct investments and assume risk of investment returns. In January 2017, a $2 million contribution was made to the MPP plan.
17.15. INCOME TAXES
EFFECTIVE TAX RATES
The effective tax ratesETRs from continuing operations for each of the Duke Energy Registrants are included in the following table. |
| | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Duke Energy | 27.6 | % | | 34.0 | % | | 30.4 | % | | 31.7 | % |
| Duke Energy Carolinas | 32.9 | % | | 34.3 | % | | 34.1 | % | | 34.4 | % |
| Progress Energy | 29.1 | % | | 32.8 | % | | 31.9 | % | | 34.7 | % |
| Duke Energy Progress | 31.7 | % | | 31.4 | % | | 32.4 | % | | 33.5 | % |
| Duke Energy Florida | 34.8 | % | | 36.0 | % | | 36.1 | % | | 37.0 | % |
| Duke Energy Ohio | 33.3 | % | | 36.8 | % | | 34.4 | % | | 32.5 | % |
| Duke Energy Indiana | 38.3 | % | | 35.2 | % | | 39.0 | % | | 34.0 | % |
Piedmont(a) | 47.6 | % | | 40.0 | % | | 36.1 | % | | 37.7 | % |
(a) Piedmont is in a net loss position for the three months ended September 30, 2017, and 2016. | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2021 | | 2020 | | 2021 | | 2020 |
| Duke Energy | 6.6 | % | | 7.8 | % | | 6.7 | % | | (6.4) | % |
| Duke Energy Carolinas | 2.9 | % | | 12.0 | % | | 3.6 | % | | 13.6 | % |
| Progress Energy | 12.9 | % | | 10.4 | % | | 11.5 | % | | 13.4 | % |
| Duke Energy Progress | 6.3 | % | | 3.1 | % | | 5.9 | % | | 10.0 | % |
| Duke Energy Florida | 19.1 | % | | 21.4 | % | | 19.1 | % | | 20.3 | % |
| Duke Energy Ohio | 13.4 | % | | 16.7 | % | | 15.3 | % | | 16.6 | % |
| Duke Energy Indiana | 15.8 | % | | 19.6 | % | | 16.3 | % | | 19.4 | % |
| Piedmont | 25.0 | % | | 16.7 | % | | 8.4 | % | | 3.7 | % |
The decrease in the effective tax rate (ETR)ETR for Duke Energy for the three months ended September 30, 2017, is2021, was primarily due to higher research credits, tax benefitsan increase in the amortization of legal entity restructuring and prior year unfavorable impacts of finalizing federal tax audits. excess deferred taxes.
The decreaseincrease in the ETR for Duke Energy for the nine months ended September 30, 2017, is2021, was primarily due to higher research credits, tax benefitsthe cancellation of legal entity restructuring and higher production tax credits related to wind projects placedthe ACP pipeline project recorded in service;the prior year, partially offset by lower investment tax credits due to lower solar investments.an increase in the amortization of excess deferred taxes.
The decrease in the ETR for Duke Energy Carolinas for the three and nine months ended September 30, 2017, is2021, was primarily due to an increase in the favorable impactamortization of research credits, provisionexcess deferred taxes.
The increase in the ETR for Progress Energy for the three months ended September 30, 2021, was primarily due to return true ups, and lower North Carolina corporate tax rates.a decrease in the amortization of excess deferred taxes.
The decrease in the ETR for Progress Energy for the three and nine months ended September 30, 2017, is2021, was primarily due to an increase in the favorable impactamortization of research credits and lower North Carolina corporate tax rates.excess deferred taxes.
The increase in the ETR for Duke Energy Progress for the three months ended September 30, 2021, was primarily due to a decrease in the amortization of excess deferred taxes.
The decrease in the ETR for Duke Energy Progress for the nine months ended September 30, 2017, is2021, was primarily due to an increase in the favorable impactamortization of research credits and lower North Carolina corporate tax rates.excess deferred taxes.
The decrease in the ETR for Duke Energy Florida for the three and nine months ended September 30, 2017, is2021, was primarily due to unfavorable tax adjustments in the favorable impact of research credits.prior year.
The decrease in the ETR for Duke Energy Ohio for the three months ended September 30, 2017, is primarily due to the favorable impact of research credits. The increase in the ETR for Duke Energy Ohio for theand nine months ended September 30, 2017, is2021, was primarily due to an immaterial out of period adjustmentincrease in the prior year related toamortization of excess deferred tax balances associated with property, plant and equipment.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
taxes.
The increasedecrease in the ETR for Duke Energy Indiana for the three months ended September 30, 2017, is primarily due to state tax credits recorded in the prior year. The increase in the ETR for Duke Energy Indiana for theand nine months ended September 30, 2017, is2021, was primarily due to an immaterial out of period adjustmentincrease in the prior year related toamortization of excess deferred tax balances associated with property, plant and equipment.taxes.
| | | | | |
| FINANCIAL STATEMENTS | INCOME TAXES |
The increase in the ETR for Piedmont for the three months ended September 30, 2017, is2021, was primarily due to a certain favorable tax return true ups and lower North Carolina corporate tax rates in relation to pretax losses. credits.
The decreaseincrease in the ETR for Piedmont for the nine months ended September 30, 2017, is2021, was primarily due to favorable tax return true ups and lower North Carolina corporate tax rates.a decrease in AFUDC equity.
TAXES ON FOREIGN EARNINGS
As of December 31, 2015, Duke Energy's intention was to indefinitely reinvest any future undistributed foreign earnings earned after December 31, 2014. In February 2016, Duke Energy announced it had initiated a process to divest the International Disposal Group and, accordingly, no longer intended to indefinitely reinvest post-2014 undistributed foreign earnings. This change in the company's intent, combined with the extension of bonus depreciation by Congress in late 2015, allowed Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with historical unremitted foreign earnings by approximately $95 million for the nine months ended September 30, 2016. Due to the classification of the International Disposal Group as discontinued operations, income tax amounts related to the International Disposal Group's foreign earnings are presented within (Loss) Income from Discontinued Operations, net of tax on the Condensed Consolidated Statements of Operations. See Note 2 for additional information related to the sale of the International Disposal Group.
18.16. SUBSEQUENT EVENTS
For information on additional subsequent events related to business segments, regulatory matters, commitments and contingencies and VIEs,debt and credit facilities, see Notes 3, 4 5 and 13.5.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) and Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont) (collectively referred to as the Subsidiary Registrants).Piedmont. However, none of the registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.
DUKE ENERGY
Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the United States (U.S.)U.S. primarily through its wholly owned subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont. When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of the Subsidiary Registrants, which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants. Piedmont's results of operations are included in Duke Energy's results for the three and nine months ended September 30, 2017, but not for the three and nine months ended September 30, 2016, as Piedmont's earnings are only included in Duke Energy's consolidated results subsequent to the acquisition date. See below for additional information regarding the acquisition.
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2017,2021, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016, Piedmont's Annual Report on Form 10-K for the year ended October 31, 2016, and the transition report filed by Piedmont on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016, to December 31, 2016.2020.
Executive Overview
Hurricane IrmaAdvancing Our Clean Energy Transformation
During the third quarter, we continued to execute on our clean energy transformation, delivering strong, sustainable value for shareholders, customers, communities and employees.
•In October 2021, North Carolina House Bill 951 was signed into law after legislative leaders announced bipartisan support for new state policy that would accelerate a clean energy transition for generation serving customers in the Carolinas, including providing a framework for a goal of 70% carbon reduction in electric generation from 2005 levels by 2030 and carbon neutrality by 2050 while continuing to prioritize affordability and reliability for our customers, who are located in both North and South Carolina. The legislation establishes a framework overseen by the NCUC to advance state CO2 emission reductions through the use of least cost planning, including stakeholder involvement, and also introduces modernized recovery mechanisms, including multi-year rate plans, that promote more efficient recovery of investments and align incentives between the company and the state’s energy policy objectives. The goals for a clean energy transition are generally consistent with Duke Energy Carolinas' and Duke Energy Progress' resource planning filings with the PSCSC.
•Also in October 2021, the Southeast Energy Exchange Market (SEEM) received clearance from the FERC. The new SEEM platform will facilitate sub-hourly, bilateral trading, allowing participants to buy and sell power close to the time the energy is consumed, utilizing available unreserved transmission. Southeastern electricity customers are expected to see cost, reliability and environmental benefits.
•In a significant move to support the company’s path to net-zero strategy, in September 2021 we completed the first phase of the investment of a 19.9% minority interest in Duke Energy Indiana by an affiliate of GIC, transferring 11.05% interest in exchange for approximately $1.025 billion. The proceeds from the $2.05 billion investment are expected to address common equity needs through 2025 to partially fund the company’s $59 billion capital and investment expenditure plan. This plan includes grid improvement, investments in clean energy and an improved customer experience – keys to our strategy to reduce carbon emissions from electricity generation to net-zero by 2050.
•In September 2017, Hurricane Irma caused widespread damage across2021, we announced Ledyard Windpower, a 207-MW project and our first wind farm in Iowa. Once in operation next year, this project will increase the Southeast region, at its peak leaving approximately 1.3 million Duke Energy Florida customers without power. Duke Energy's restoration effortscompany’s U.S. wind capacity to over 3,100 MW.
•In August 2021, we announced a partnership with Accenture and Microsoft to develop a novel technology platform with the intent of measuring baseline methane emissions from natural gas distribution systems with a high level of accuracy in near real time. Once deployed, we expect the use of satellite technology and the new platform will increase the speed of a field response team’s ability to this devastating storm utilized a team of over 12,000 lineidentify and service crewsrepair methane leaks along distribution lines and hundreds of employee volunteers. Storm restoration costs (including capital) for the Duke Energy Florida service territory are currently estimated at approximately $500 million. The vast majority of these costs have been deferred to the balance sheet for future recovery from customers in Florida, per existing state statute. Lost revenues associated with Hurricane Irma were approximately $20 million insystems.
Regulatory Activity. During the third quarter of 2017.2021, we continued to move our regulatory strategy forward. See Note 3 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
•In October 2021, Duke Energy Ohio filed a request to review the company’s electric distribution rates, seeking approval to increase current electric distribution rates by approximately $55 million. Duke Energy Ohio has invested more than $800 million in a variety of capital projects across southwest Ohio since it last requested a regulatory review of its electric distribution rates in 2017. Also, in October 2021, Duke Energy Kentucky reached a constructive natural gas rate case settlement with the Attorney General, subject to review and approval of the KPSC.
•In September 2021, Piedmont Natural Gas, the Public Staff of the NCUC, the Carolina Utility Customers Association, Inc., and the Carolina Industrial Group for Fair Utility Rates IV, filed a stipulation resolving all issues between these parties related to Piedmont’s rate case filed in March 2021. This constructive outcome provided for a return on equity of 9.60% and 51.60% equity component of the capital structure resulting in an overall rate of return of 6.90%, with an increase in pretax income (base rates) of approximately $67 million. The Stipulation is subject to the review and approval of the NCUC.
•We received approximately $418 million of coal ash insurance litigation proceeds from our settlements with insurer-defendants. Proceeds will be distributed in accordance with the terms of the CCR settlement agreement.
Matters Impacting Future Results
The matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.
| | | | | |
| MD&A | MATTERS IMPACTING FUTURE RESULTS |
Regulatory Matters
Coal Ash Costs
As a result of the NCDEQ settlement on December 31, 2019, Duke Energy Carolinas and Duke Energy Progress agreed to excavate seven of the nine remaining coal ash basins in North Carolina with ash moved to on-site lined landfills. At the two remaining basins, uncapped basin ash will be excavated and moved to off-site lined landfills. The majority of spend is expected to occur over the next 15-20 years. In January 2021, Duke Energy Carolinas and Duke Energy Progress reached a settlement agreement on recovery of coal ash costs as outlined in Note 3, "Regulatory Matters." The company agreed not to seek recovery of approximately $1 billion of deferred coal ash expenditures and Duke Energy Carolinas and Duke Energy Progress took a charge of approximately $500 million each in 2020. On March 31, 2021, and April 16, 2021, the NCUC approved the coal ash settlement for Duke Energy Carolinas and Duke Energy Progress, respectively.
Duke Energy Indiana has interpreted the CCR rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. In 2020, the Hoosier Environmental Council filed a petition challenging the Indiana Department of Environmental Management's (IDEM) partial approval of five of Duke Energy Indiana’s ash pond site closure plans at Gallagher Station. The petition does not challenge the other 13 basin closures approved by IDEM at other Indiana stations. Interpretation of the requirements of the CCR rule is subject to further legal challenges and regulatory approvals, which could result in additional ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash.
MGP
Duke Energy Ohio and other parties have filed with the PUCO a Stipulation and Recommendation that would resolve all open issues regarding manufactured gas plant remediation costs incurred between 2013 and 2019, including Duke Energy Ohio's request for additional deferral authority beyond 2019, and the pending issues related to the Tax Act as it relates to Duke Energy Ohio's natural gas operations. These impacts, if approved by the PUCO, are not expected to have a material impact on Duke Energy Ohio's financial statements. Failure to approve the Stipulation and Recommendation, disallowance of costs incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact.
For additional information, see Notes 3 and 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters" for additional information.“Regulatory Matters” and "Commitments and Contingencies," respectively.
Regulatory ActivityCommercial Renewables
In the third quarter of 2017, Duke Energy advanced regulatory activity underway in multiple jurisdictions, achieving several key milestones.
In August 2017, Duke Energy Carolinas filed a base rate case with the North Carolina Utilities Commission. The rate request was driven by capital investments in new, highly efficient natural gas combined-cyclecontinues to monitor recoverability of renewable merchant plants and other plant upgrades, coal ash basin closure activities and grid improvement projects. Hearings are scheduled to commence in February 2018.
In Florida, Duke Energy worked closely with stakeholders to build upon and extend the existing settlement agreement from 2013. In late August, Duke Energy Florida reached a favorable agreement with numerous partieslocated in the state, including the consumer advocate,Electric Reliability Council of Texas West market and that agreement was approved by the Florida Public Service Commission (FPSC) in late October. As outlined in the settlement, Duke Energy Florida agreedPJM West market, due to no longer recover any remaining costs associated withfluctuating market pricing and long-term forecasted energy prices. Based on the canceled Levy Nuclear Project and as a result incurred a pretax impairment charge of $135 million duringmost recent recoverability test, the third quarter.
See Note 4 tocarrying value approximated the Condensed Consolidated Financial Statements, "Regulatory Matters" for additional information.
2016 Acquisition of Piedmont Natural Gas
On October 3, 2016, Duke Energy completed the acquisition of Piedmont for a totalaggregate estimated future undiscounted cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $2.0 billion at the time of the acquisition. The acquisition provides a foundation for Duke Energy to establish a broader, long-term strategic natural gas infrastructure growth platform to complement the existing natural gas pipeline investments and regulated natural gas business in the Midwest.
Duke Energy incurred pretax nonrecurring transaction and integration costs associated with the acquisition of $23 million and $69 millionflows for the three and nine months ended September 30, 2017, respectively, and $65 million and $256 million forassets under review. A continued decline in energy market pricing or other factors unfavorably impacting the three and nine months ended September 30, 2016, respectively. Acquisition-related costseconomics would likely result in the prior year were principally due to losses on forward-starting interest rate swaps related to the acquisition financinga future impairment. Impairment of $22 million and $190 million for the three and nine months ended September 30, 2016, respectively.these assets could result in adverse impacts. For additional information, on the swaps see Note 10 to the Condensed Consolidated Financial Statements, "Derivatives and Hedging."
Duke Energy expects to incur system integration and other acquisition-related transition costs, primarily through 2018, that are necessary to achieve certain anticipated cost savings, efficiencies and other benefits. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions"Business Segments."
In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the ability for these solar and Dispositions," for additional information regardingwind facilities to generate and sell electricity into the transaction.
2016 SaleElectric Reliability Council of International Energy
Texas market. Lost revenues and higher than expected purchased power costs have negatively impacted the operating results of these generating units. The financial impact of the storm is expected to be material to the Commercial Renewables segment's 2021 operating results. In December 2016, addition, Duke Energy sold its Latin American generation businesses (International Disposal Group)has been named in two separate transactions for a combined enterprise valuemultiple lawsuits arising out of $2.4 billion. The transactions generated cash proceeds of $1.9 billion, excluding transaction costs, which were primarily used to reduce Duke Energy holding company debt. Due to the transactions, results of the International Disposal Group are classified as discontinued operations. See Notethis winter storm. For more information, see Notes 2 and 4 to the Condensed Consolidated Financial Statements, "Acquisitions"Business Segments" and Dispositions""Commitments and Contingencies," respectively.
COVID-19
Duke Energy continues to monitor the impacts of the COVID-19 pandemic on its results of operations, financial position and cash flows as a result of the economic slowdown caused by reduced operations of businesses and governmental agencies and the corresponding reduction in the demand for additional information.energy. Duke Energy has experienced improvement in energy sales, aging of receivables and operating results in recent periods and continues efforts to partially offset these impacts. Additionally, in light of learnings from COVID-19 regarding workforce deployment and technology capabilities, the company has reviewed the long-term real estate and future workforce strategy. The review has resulted in an initiative that will reduce physical workspace and includes reassessments of lease terms and lease modifications, termination penalties, as well as, asset impairments on property, plant and equipment and a change in workforce roles and responsibilities. For more information, see Notes 1 and 3 to the Condensed Consolidated Financial Statements, "Organization and Basis of Presentation" and "Regulatory Matters," respectively.
Activist Investor
On May 17, 2021, Elliott, who has indicated it holds an economic interest in outstanding Duke Energy common stock, publicly released a letter it had sent to the Board, which advocated for consideration of certain governance and strategic proposals. On May 17, 2021, management issued a response to Elliott. On July 19, 2021, Elliott publicly released a second letter to the Board and Duke Energy issued a response. Duke Energy is unable to predict the outcome of this matter.
Other Matters
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2020, for discussion of risks associated with the Tax Act.
Results of Operations
Non-GAAP Measures
Management’s Discussion and Analysis includes financial information prepared in accordance with generally accepted accounting principles (GAAP)GAAP in the U.S., as well as certain non-GAAP financial measures.measures such as adjusted earnings and adjusted EPS discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted earnings per share (EPS).EPS. Adjusted earnings and adjusted diluted EPS represent income from continuing operations attributableavailable to Duke Energy Corporation common stockholders in dollar and per share amounts, adjusted for the dollar and per-shareper share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance.
Management believes the presentation of adjusted earnings and adjusted diluted EPS provides useful information to investors, as it provides them with an additional relevant comparison of Duke Energy’s performance across periods. Management uses these non-GAAP financial measures for planning and forecasting and for reporting financial results to the Duke Energy Board of Directors, employees, stockholders, analysts and investors. Adjusted diluted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are Net Income Attributable to Duke Energy Corporation (GAAPGAAP Reported Earnings)Earnings (Loss) and Diluted EPS Attributable to Duke Energy Corporation common stockholders (GAAPGAAP Reported EPS),Earnings (Loss) Per Share, respectively.
Special items included in the periods presented below include the following, items, which management believes do not reflect ongoing costs:
Costs to Achieve Mergers represent charges that result from strategic acquisitions.
Cost Savings Initiatives represent severance charges related to companywide initiatives, excluding merger integration, to standardize processes and systems, leverage technology•Workplace and workforce optimization.realignment represents costs attributable to business transformation, including long-term real estate strategy changes and workforce realignment.
Commercial Renewables Impairments represents other-than-temporary and asset impairments.
Florida Settlement•Regulatory Settlements represents an impairment charge related to the Levy nuclear project based on a2018 South Carolina rate cases, charges related to the CCR settlement and insurance proceeds distributed in accordance with that agreement approved by regulators.and Duke Energy Carolinas and Duke Energy Progress partial settlements in the 2019 North Carolina rate cases.
Adjusted earnings also include operating results•Gas Pipeline Investments represents costs related to the cancellation of the International Disposal Group,ACP pipeline and additional exit obligations.
•Severance represents the reversal of 2018 severance charges, which have been classifiedwere deferred as discontinued operations. Management believes inclusiona result of partial settlements in the operating results ofDuke Energy Carolinas and the Disposal Group within adjusted earnings and adjusted diluted EPS results in a better reflection of Duke Energy's financial performance during the period.Energy Progress 2019 North Carolina rate cases.
Three Months Ended September 30, 2017,2021, as compared to September 30, 20162020
GAAP Reportedreported EPS was $1.36$1.79 for the third quarter of 20172021 compared to $1.70 fora $1.74 in the third quarter of 2016. The decrease in2020. In addition to the drivers below, GAAP Reportedreported EPS was primarilyincreased due to less favorable weather, an impairment at Duke Energy Florida andthe cancellation of the ACP pipeline in the prior year income from discontinued operations including International Energy whichand partial settlements in the 2019 North Carolina rate cases in the prior year. This was sold in 2016; partially offset by a lower effective taxan impairment charge related to the 2018 South Carolina rate lower costs associatedcases and charges related to the CCR settlement and insurance proceeds distributed in accordance with the Piedmont acquisition and growth from investments.that agreement.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s third quarter 20172021 adjusted diluted EPS was $1.59$1.88 compared to $1.68$1.87 for the third quarter of 2016. 2020. The increase in adjusted EPS was primarily due to positive rate case contributions and higher volumes. This was partially offset by higher operation and maintenance expenses, higher income tax expense and share dilution from equity issuances.
The following table reconciles non-GAAP measures, including adjusted
diluted EPS, to their most directly comparable GAAP measures.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| | 2017 | | 2016 |
| (in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 954 |
| | $ | 1.36 |
| | $ | 1,176 |
| | $ | 1.70 |
|
| Adjustments: | | | | | | | |
Costs to Achieve Mergers(a) | 14 |
| | 0.03 |
| | 52 |
| | 0.07 |
|
Cost Savings Initiatives(b) | — |
| | — |
| | 12 |
| | 0.02 |
|
Commercial Renewables Impairments (c) | 56 |
| | 0.08 |
| | 45 |
| | 0.07 |
|
Florida Settlement (d) | 84 |
| | 0.12 |
| | — |
| | — |
|
Discontinued Operations(e) | 2 |
| | — |
| | (122 | ) | | (0.18 | ) |
| Adjusted Earnings/Adjusted Diluted EPS | $ | 1,110 |
| | $ | 1.59 |
| | $ | 1,163 |
| | $ | 1.68 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| 2021 | | 2020 |
| (in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS |
| | | | | | | |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 1,366 | | | $ | 1.79 | | | $ | 1,265 | | | $ | 1.74 | |
| Adjustments: | | | | | | | |
Workplace and Workforce Realignment(a) | 7 | | | — | | | — | | | — | |
Regulatory Settlements(b) | 64 | | | 0.09 | | | 27 | | | 0.04 | |
Gas Pipeline Investments(c) | (2) | | | — | | | 69 | | | 0.09 | |
| Adjusted Earnings/Adjusted EPS | $ | 1,435 | | | $ | 1.88 | | | $ | 1,361 | | | $ | 1.87 | |
(a)Net of tax benefit of $2 million.
PART I
| |
(a) | Net of $9(b)Net of tax benefit of $19 million and $8 million tax benefit in 2017 and $32 million tax benefit in 2016. |
| |
(b) | Net of $7 million tax benefit in 2016. |
| |
(c) | Net of $28 million tax benefit in 2017 and $26 million tax benefit in 2016. |
| |
(d) | Net of $51 million tax benefit in 2017. |
| |
(e) | The 2016 amount represents tax adjustments related to previously sold businesses not related to the International Disposal Group. |
The decrease in adjusted earnings for the three months ended September 30, 2017, compared to2021, and 2020, respectively.
(c)Net of tax expense of $1 million and tax benefit of $21 million for the same period in 2016 was primarily due to:three months ended September 30, 2021, and 2020, respectively.
Lower regulated electric revenues due to less favorable weather in the current year, including lost revenues related to Hurricane Irma;
The prior year operating results of the International Disposal Group, which was sold in December 2016; and
Higher financing costs, primarily due to the Piedmont acquisition.
Partially offset by:
Higher regulated electric revenues from increased pricing and riders driven by new rates in Duke Energy Progress South Carolina, base rate adjustments in Florida, and energy efficiency rider revenues in North Carolina;
Additional earnings from incremental investments in the Atlantic Coast Pipeline (ACP) natural gas pipeline; and
Lower income taxes due to prior year unfavorable tax adjustments and benefits in the current year from legal entity restructuring.
Nine Months Ended September 30, 2017,2021, as compared to September 30, 20162020
Duke Energy's GAAP Reported EPS was $3.36$4.00 for the nine months ended September 30, 2017,2021, compared to $3.44$1.85 for the nine months ended September 30, 2016. The decrease2020. In addition to the drivers below, GAAP reported EPS increased due to the cancellation of the ACP pipeline in GAAP Reported EPS was driven by less favorable weather compared to the prior year, an impairment at Duke Energy Florida and prior year income from discontinued operations including International Energy which was sold in 2016; partially offset by lower costs associated with the Piedmont acquisition, lower severance charges, effective cost controlworkplace and growth from investments.workforce realignment costs.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s adjusted diluted EPS was $4.30 for the nine months ended September 30, 2017, was $3.632021, compared to $3.88$4.09 for the nine months ended September 30, 2016. 2020. The increase in adjusted EPS was primarily due to positive rate case contributions and higher volumes, partially offset by higher income tax expense and share dilution from equity issuances.
The following table reconciles non-GAAP measures, including adjusted
diluted EPS, to their most directly comparable GAAP measures.
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| | 2017 | | 2016 |
| (in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 2,356 |
| | $ | 3.36 |
| | $ | 2,379 |
| | $ | 3.44 |
|
| Adjustments: | | | | | | | |
Costs to Achieve Mergers(a) | 43 |
| | 0.06 |
| | 195 |
| | 0.28 |
|
Cost Savings Initiatives(b) | — |
| | — |
| | 39 |
| | 0.06 |
|
Commercial Renewables Impairments (c) | 56 |
| | 0.08 |
| | 45 |
| | 0.07 |
|
Florida Settlement (d) | 84 |
| | 0.12 |
| | — |
| | — |
|
Discontinued Operations(e) | 4 |
| | 0.01 |
| | 21 |
| | 0.03 |
|
| Adjusted Earnings/Adjusted Diluted EPS | $ | 2,543 |
| | $ | 3.63 |
| | $ | 2,679 |
| | $ | 3.88 |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| 2021 | | 2020 |
| (in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 3,070 | | | $ | 4.00 | | | $ | 1,347 | | | $ | 1.85 | |
| Adjustments: | | | | | | | |
Workplace and Workforce Realignment(a) | 142 | | | 0.19 | | | — | | | — | |
Regulatory Settlements(b) | 64 | | | 0.09 | | | 27 | | | 0.04 | |
Gas Pipeline Investments(c) | 15 | | | 0.02 | | | 1,695 | | | 2.30 | |
Severance(d) | — | | | — | | | (75) | | | (0.10) | |
| Adjusted Earnings/Adjusted EPS | $ | 3,291 | | | $ | 4.30 | | | $ | 2,994 | | | $ | 4.09 | |
| |
(a) | Net of $26(a)Net of tax benefit of $42 million. (b)Net of tax benefit of $19 million and $8 million tax benefit in 2017 and $120 million tax benefit in 2016. |
| |
(b) | Net of $24 million tax benefit in 2016. |
| |
(c) | Net of $28 million tax benefit in 2017 and $26 million tax benefit in 2016. |
| |
(d) | Net of $51 million tax benefit in 2017. |
| |
(e) | The 2016 amount includes an impairment charge related to certain assets in Central America that were sold in 2016, partially offset by a tax benefit related to previously sold businesses not related to the International Disposal Group. |
The decrease in adjusted earnings for the nine months ended September 30, 2017, compared to2021, and 2020, respectively.
(c)Net of tax benefit of $4 million and $395 million for the same period in 2016 was primarily due to:nine months ended September 30, 2021, and 2020, respectively.
Lower regulated electric revenues due to unfavorable weather compared to the prior year; and(d)Net of tax expense of $23 million.
The prior year operating results of the International Disposal Group, which was sold in December 2016. The 2016 operating results included a benefit from the revaluation of deferred income taxes. See Note 17 to the Condensed Consolidated Financial Statements, "Income Taxes," for additional information.
Partially offset by:
Higher regulated electric revenues from increased pricing and riders driven by new rates in Duke Energy Progress South Carolina, base rate adjustments in Florida and energy efficiency rider revenues in North Carolina, as well as growth in weather-normal retail volumes;
Lower operations, maintenance and other expense, net of amounts recoverable in rates, at Electric Utilities and Infrastructure resulting from ongoing cost efficiency efforts and lower year-to-date storm costs than the prior year;
Higher allowance for funds used during construction (AFUDC) equity due to capital investments at the electric utilities; and
Additional earnings from incremental investments in the ACP and Sabal Trail natural gas pipelines.
SEGMENT RESULTSMatters Impacting Future Results
Management evaluates segment performance basedThe matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.
| | | | | |
| MD&A | MATTERS IMPACTING FUTURE RESULTS |
Regulatory Matters
Coal Ash Costs
As a result of the NCDEQ settlement on segment income. Segment incomeDecember 31, 2019, Duke Energy Carolinas and Duke Energy Progress agreed to excavate seven of the nine remaining coal ash basins in North Carolina with ash moved to on-site lined landfills. At the two remaining basins, uncapped basin ash will be excavated and moved to off-site lined landfills. The majority of spend is definedexpected to occur over the next 15-20 years. In January 2021, Duke Energy Carolinas and Duke Energy Progress reached a settlement agreement on recovery of coal ash costs as income from continuing operations netoutlined in Note 3, "Regulatory Matters." The company agreed not to seek recovery of income attributableapproximately $1 billion of deferred coal ash expenditures and Duke Energy Carolinas and Duke Energy Progress took a charge of approximately $500 million each in 2020. On March 31, 2021, and April 16, 2021, the NCUC approved the coal ash settlement for Duke Energy Carolinas and Duke Energy Progress, respectively.
Duke Energy Indiana has interpreted the CCR rule to noncontrolling interests. Segment income includes intercompany revenuesidentify the coal ash basin sites impacted and expenseshas assessed the amounts of coal ash subject to the rule and a method of compliance. In 2020, the Hoosier Environmental Council filed a petition challenging the Indiana Department of Environmental Management's (IDEM) partial approval of five of Duke Energy Indiana’s ash pond site closure plans at Gallagher Station. The petition does not challenge the other 13 basin closures approved by IDEM at other Indiana stations. Interpretation of the requirements of the CCR rule is subject to further legal challenges and regulatory approvals, which could result in additional ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are eliminated on the Condensed Consolidated Financial Statements.
Duenot subject to the Piedmont acquisitionCCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash.
MGP
Duke Energy Ohio and other parties have filed with the PUCO a Stipulation and Recommendation that would resolve all open issues regarding manufactured gas plant remediation costs incurred between 2013 and 2019, including Duke Energy Ohio's request for additional deferral authority beyond 2019, and the sale of International Energy in the fourth quarter of 2016, Duke Energy's segment structure was realigned to include the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. Prior period information has been recast to conformpending issues related to the current segment structure. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for further information on the Piedmont acquisition and International Energy sale and Note 3, “Business Segments,” for additional information on Duke Energy’s segments.
Electric Utilities and Infrastructure |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 6,129 |
| | $ | 6,340 |
| | $ | (211 | ) | | $ | 16,234 |
| | $ | 16,430 |
| | $ | (196 | ) |
| Operating Expenses | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 1,872 |
| | 2,016 |
| | (144 | ) | | 4,875 |
| | 5,102 |
| | (227 | ) |
| Operation, maintenance and other | 1,297 |
| | 1,291 |
| | 6 |
| | 3,833 |
| | 3,819 |
| | 14 |
|
| Depreciation and amortization | 777 |
| | 729 |
| | 48 |
| | 2,228 |
| | 2,139 |
| | 89 |
|
| Property and other taxes | 277 |
| | 274 |
| | 3 |
| | 808 |
| | 799 |
| | 9 |
|
| Impairment charges | 132 |
| | 9 |
| | 123 |
| | 134 |
| | 12 |
| | 122 |
|
| Total operating expenses | 4,355 |
| | 4,319 |
| | 36 |
| | 11,878 |
| | 11,871 |
| | 7 |
|
| Gains on Sales of Other Assets and Other, net | — |
| | 1 |
| | (1 | ) | | 4 |
| | 3 |
| | 1 |
|
| Operating Income | 1,774 |
| | 2,022 |
| | (248 | ) | | 4,360 |
| | 4,562 |
| | (202 | ) |
| Other Income and Expenses | 67 |
| | 75 |
| | (8 | ) | | 222 |
| | 215 |
| | 7 |
|
| Interest Expense | 305 |
| | 287 |
| | 18 |
| | 925 |
| | 829 |
| | 96 |
|
| Income Before Income Taxes | 1,536 |
| | 1,810 |
| | (274 | ) | | 3,657 |
| | 3,948 |
| | (291 | ) |
| Income Tax Expense | 516 |
| | 621 |
| | (105 | ) | | 1,273 |
| | 1,391 |
| | (118 | ) |
| Segment Income | $ | 1,020 |
| | $ | 1,189 |
| | $ | (169 | ) | | $ | 2,384 |
| | $ | 2,557 |
| | $ | (173 | ) |
| | | | | | | | | | | |
|
|
| Duke Energy Carolinas gigawatt-hours (GWh) sales | 24,135 |
| | 25,508 |
| | (1,373 | ) | | 66,159 |
| | 67,890 |
| | (1,731 | ) |
| Duke Energy Progress GWh sales | 18,827 |
| | 20,033 |
| | (1,206 | ) | | 50,026 |
| | 54,011 |
| | (3,985 | ) |
| Duke Energy Florida GWh sales | 12,132 |
| | 12,440 |
| | (308 | ) | | 31,177 |
| | 31,542 |
| | (365 | ) |
| Duke Energy Ohio GWh sales | 6,672 |
| | 7,214 |
| | (542 | ) | | 18,632 |
| | 19,117 |
| | (485 | ) |
| Duke Energy Indiana GWh sales | 8,795 |
| | 9,073 |
| | (278 | ) | | 24,975 |
| | 26,624 |
| | (1,649 | ) |
| Total Electric Utilities and Infrastructure GWh sales | 70,561 |
| | 74,268 |
| | (3,707 | ) | | 190,969 |
| | 199,184 |
| | (8,215 | ) |
| Net proportional megawatt (MW) capacity in operation | | | | |
|
| | 48,909 |
| | 49,411 |
| | (502 | ) |
Three Months Ended September 30, 2017,Tax Act as Compared to September 30, 2016
Electric Utilities and Infrastructure’s results were impacted by less favorable weather and an impairment at Duke Energy Florida, partially offset by growth from investments. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $163 million decrease in fuel revenues due to lower retail sales volumes; and
a $160 million decrease in retail sales, net of fuel revenues, due to less favorable weather in the current year, including lost revenues related to Hurricane Irma.
Partially offset by:
a $90 million increase in retail pricing dueit relates to Duke Energy Florida's base rate adjustments forOhio's natural gas operations. These impacts, if approved by the Osprey acquisition and Hines Chillers and thePUCO, are not expected to have a material impact on Duke Energy Progress South Carolina rate case, as well as increased rider revenues relatedOhio's financial statements. Failure to energy efficiency programs, Duke Energy Florida's nuclear asset securitization,approve the Stipulation and Midwest capital investments.
Operating Expenses. The variance was driven primarily by:
a $123 million increase in impairment charges primarily dueRecommendation, disallowance of costs incurred, failure to write-off of remaining unrecovered Levy Nuclear Project costs at Duke Energy Florida incomplete the current year; and
a $48 million increase in depreciation and amortization expense primarily due to additional plant in service.
Partially offset by:
a $144 million decrease in fuel expense, including purchased power, driven by lower retail sales.
Interest Expense. The increase was primarily due to higher debt outstanding in the current year to fund growth.
Income Tax Expense. The variance was primarily due to a decrease in pretax income and higher research credits, partially offsetwork by the North Carolina corporate tax rate reductiondeadline or failure to obtain an extension from the PUCO could result in the prior year. The effective tax rates for the three months ended September 30, 2017, and 2016 were 33.6 percent and 34.3 percent, respectively.
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Electric Utilities and Infrastructure’s results were impacted by less favorable weather compared to the prior year and an impairment at Duke Energy Florida, partially offset by growth from investments and higher weather-normal retail sales volumes. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $380 million decrease in retail sales, net of fuel revenues, due to unfavorable weather compared to the prior year, including lost revenues related to Hurricane Irma; and
a $256 million decrease in fuel revenues primarily due to lower retail sales volumes.
Partially offset by:
a $346 million increase in rider revenues related to energy efficiency programs, Duke Energy Florida's nuclear asset securitization, Midwest transmission and distribution capital investments, and Duke Energy Indiana's Edwardsport Integrated Gasification Combined Cycle (IGCC) plant, as well as an increase in retail pricing due to Duke Energy Florida's base rate adjustments for the Osprey acquisition and Hines Chillers and the Duke Energy Progress South Carolina rate case; and
a $59 million increase in weather-normal sales volumes to retail customers.
Operating Expenses. The variance was driven primarily by:
a $122 million increase in impairment charges primarily due to the write-off of remaining unrecovered Levy Nuclear Project costs in the current year at Duke Energy Florida; and
an $89 million increase in depreciation and amortization expense primarily due to additional plant in service;
Partially offset by:
a $227 million decrease in fuel expense, including purchased power, primarily due to lower retail sales and changes in generation mix.
Interest Expense. The increase was primarily due to higher debt outstanding in the current year and Duke Energy Florida's Crystal River 3 (CR3) regulatory asset debt return ending in June 2016 upon securitization.
Income Tax Expense. The variance was primarily due to a decrease in pretax income and higher research credits, partially offset by the North Carolina corporate tax rate reduction. The effective tax rates for the nine months ended September 30, 2017, and 2016 were 34.8 percent and 35.2 percent, respectively.
Matters Impacting Future Electric Utilities and Infrastructure Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Electric Utilitiesimpact.
For additional information, see Notes 3 and Infrastructure's financial position, results of operations and cash flows. See Note 4 and Note 7 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and "Asset Retirement Obligations,"Commitments and Contingencies," respectively, for additional information.respectively.
On May 18, 2016, the North Carolina Department of Environmental Quality (NCDEQ) issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Electric Utilities and Infrastructure's estimated asset retirement obligations (AROs) related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses and the closure method scope and remedial methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Electric Utilities and Infrastructure's financial position. See Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.Commercial Renewables
Duke Energy is a partycontinues to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits and potential fines and penalties could have an adverse impact on Electric Utilities and Infrastructure's financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Duke Energy Progress filed a petition with the North Carolina Utilities Commission (NCUC) requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC will address this request in Duke Energy Progress' currently pending rate case. A final order from the NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could result in an adverse impact on Electric Utilities and Infrastructure's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Duke Energy has several rate cases pending. Duke Energy Kentucky filed an electric rate case with the Kentucky Public Service Commission (KPSC) on September 1, 2017, to recover costs of capital investments in generation, transmission and distribution systems and to recover other incremental expenses since its previous rate case. Duke Energy Carolinas and Duke Energy Progress filed general rate cases with the NCUC on August 25, 2017, and June 1, 2017, respectively, to recover costs of complying with Coal Combustion Residuals (CCR) regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. In March 2017, Duke Energy Ohio filed an electric distribution base rate case application and supporting testimony with the Public Utility Commission of Ohio (PUCO). Electric Utilities and Infrastructure's earnings could be impacted adversely if these rate increases are delayed or denied by the KPSC, NCUC or PUCO. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On August 29, 2017, Duke Energy Florida filed a 2017 Second Revised and Restated Settlement Agreement (2017 Settlement) with the FPSC. The 2017 Settlement was approved by the FPSC on October 25, 2017. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information about the 2017 Settlement. In accordance with the 2017 Settlement, Duke Energy Florida will not seek recovery of any costs associated with the ongoing Westinghouse contract litigation, which is currently being appealed. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” for additional information about the litigation. An unfavorable appeals ruling on that matter could have an adverse impact on Electric Utilities and Infrastructure’s financial position, results of operations and cash flows.
In September 2017, Hurricane Irma caused extensive damage and widespread power outages within the Duke Energy Florida service territory. Duke Energy Florida has not completed the final accumulation of storm restoration costs incurred. Total storm restoration costs, including capital, are currently estimated at approximately $500 million. In accordance with a regulatory order with FPSC, certain incremental operation and maintenance storm restoration costs are classified as a regulatory asset recognizing the probablemonitor recoverability of these costs under FPSC's storm rule. The Company will make a petition by the end of 2017 to FPSC for recovery of costs. Duke Energy Florida's cash flows could be impacted by the timing of cost recovery. See Note 4, "Regulatory Matters," to the Condensed Consolidated Financial Statements for additional information.
Gas Utilities and Infrastructure |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 272 |
| | $ | 89 |
| | $ | 183 |
| | $ | 1,243 |
| | $ | 358 |
| | $ | 885 |
|
| Operating Expenses | | | | | | | | | | | |
| Cost of natural gas | 68 |
| | 6 |
| | 62 |
| | 402 |
| | 64 |
| | 338 |
|
| Operation, maintenance and other | 93 |
| | 30 |
| | 63 |
| | 291 |
| | 90 |
| | 201 |
|
| Depreciation and amortization | 57 |
| | 19 |
| | 38 |
| | 171 |
| | 59 |
| | 112 |
|
| Property and other taxes | 25 |
| | 12 |
| | 13 |
| | 81 |
| | 44 |
| | 37 |
|
| Total operating expenses | 243 |
| | 67 |
| | 176 |
| | 945 |
| | 257 |
| | 688 |
|
| Operating Income | 29 |
| | 22 |
| | 7 |
| | 298 |
| | 101 |
| | 197 |
|
| Other Income and Expenses | 22 |
| | 7 |
| | 15 |
| | 60 |
| | 13 |
| | 47 |
|
| Interest Expense | 26 |
| | 6 |
| | 20 |
| | 78 |
| | 19 |
| | 59 |
|
| Income Before Income Taxes | 25 |
| | 23 |
| | 2 |
| | 280 |
| | 95 |
| | 185 |
|
| Income Tax Expense | 6 |
| | 8 |
| | (2 | ) | | 101 |
| | 32 |
| | 69 |
|
| Segment Income | $ | 19 |
| | $ | 15 |
| | $ | 4 |
| | $ | 179 |
| | $ | 63 |
| | $ | 116 |
|
| | | | | | | | | | | | |
Piedmont LDC throughput (dekatherms) (a) | 107,490,775 |
| | — |
| | 107,490,775 |
| | 334,781,316 |
| | — |
| | 334,781,316 |
|
| Duke Energy Midwest LDC throughput (Mcf) | 9,904,644 |
| | 9,568,340 |
| | 336,304 |
| | 52,940,410 |
| | 57,023,986 |
| | (4,083,576 | ) |
(a) Includes throughput subsequent to Duke Energy's acquisition of Piedmont on October 3, 2016.
Three Months Ended September 30, 2017, as Compared to September 30, 2016
Gas Utilities and Infrastructure’s higher results were primarily due to increased investments in the ACP pipeline. Piedmont's losses included in Gas Utilities and Infrastructure's results were $5 million for the three months ended September 30, 2017. All variances are related to the inclusion of Piedmont's results of operations as a result of Duke Energy's acquisition of Piedmont on October 3, 2016, except for the following:
Other Income and Expenses. The variance was driven primarily by increased investments in the ACP pipeline.
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Gas Utilities and Infrastructure’s higher results were due to the inclusion of Piedmont's earnings in the current year as a result of Duke Energy's acquisition of Piedmont on October 3, 2016, as well as growth from investments in ACP and Sabal Trail pipelines. Piedmont's earnings included in Gas Utilities and Infrastructure's results were $95 million for the nine months ended September 30, 2017. All variances are related to the inclusion of Piedmont's results of operations, except for the following:
Other Income and Expenses. The variance was driven primarily by increased investments in the ACP and Sabal Trail pipelines.
Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution), a natural gas pipeline project slated to transport natural gas supplies to major northeastern markets. On April 22, 2016, the New York State Department of Environmental Conservation denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution has stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. To the extent the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward, an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, may be recorded. With the project on hold, funding of project costs has ceased until resolution of legal actions. At September 30, 2017, Duke Energy's investment in Constitution was $82 million.
Rapidly rising interest rates without timely or adequate updates to the regulated allowed return on equity or failure to achieve the anticipated benefits of the Piedmont merger, including cost savings and growth targets, could significantly impact the estimated fair value of reporting units in Gas Utilities and Infrastructure. In the event of a significant decline in the estimated fair value of the reporting units, goodwill impairment charges could be recorded. The carrying value of goodwill within Gas Utilities and Infrastructure was approximately $1,924 million at September 30, 2017.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 95 |
| | $ | 139 |
| | $ | (44 | ) | | $ | 333 |
| | $ | 365 |
| | $ | (32 | ) |
| Operating Expenses | | | | | | | | | | | |
| Operation, maintenance and other | 56 |
| | 98 |
| | (42 | ) | | 191 |
| | 253 |
| | (62 | ) |
| Depreciation and amortization | 39 |
| | 34 |
| | 5 |
| | 116 |
| | 96 |
| | 20 |
|
| Property and other taxes | 9 |
| | 8 |
| | 1 |
| | 26 |
| | 20 |
| | 6 |
|
| Impairment charges | 76 |
| | — |
| | 76 |
| | 76 |
| | — |
| | 76 |
|
| Total operating expenses | 180 |
| | 140 |
| | 40 |
| | 409 |
| | 369 |
| | 40 |
|
| Gains on Sales of Other Assets and Other, net | 1 |
| | 2 |
| | (1 | ) | | 5 |
| | 4 |
| | 1 |
|
| Operating (Loss) Income | (84 | ) | | 1 |
| | (85 | ) | | (71 | ) | | — |
| | (71 | ) |
| Other Income and Expenses | (10 | ) | | (76 | ) | | 66 |
| | (12 | ) | | (78 | ) | | 66 |
|
| Interest Expense | 22 |
| | 15 |
| | 7 |
| | 64 |
| | 38 |
| | 26 |
|
| Loss Before Income Taxes | (116 | ) | | (90 | ) | | (26 | ) | | (147 | ) | | (116 | ) | | (31 | ) |
| Income Tax Benefit | (65 | ) | | (65 | ) | | — |
| | (146 | ) | | (127 | ) | | (19 | ) |
| Less: Loss Attributable to Noncontrolling Interests | (2 | ) | | (1 | ) | | (1 | ) | | (3 | ) | | (2 | ) | | (1 | ) |
| Segment (Loss) Income | $ | (49 | ) |
| $ | (24 | ) | | $ | (25 | ) | | $ | 2 |
| | $ | 13 |
| | $ | (11 | ) |
| | | | | | | | | | | | |
| Renewable plant production, GWh | 1,760 |
| | 1,801 |
| | (41 | ) | | 6,276 |
| | 5,619 |
| | 657 |
|
| Net proportional MW capacity in operation | | | | |
|
| | 2,908 |
| | 2,725 |
| | 183 |
|
Three Months Ended September 30, 2017, as Compared to September 30, 2016
Commercial Renewables' results were impacted by lower investment tax credits (ITCs), higher interest expense on new debt financings and higher losses from Duke Energy's REC Solar investment. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decrease was primarily due to lower engineering, procurement and construction revenues from REC Solar.
Operating Expenses. The increase was primarily due to a $69 million pretax impairment charge in the current year related to a wholly owned non-contracted wind project, partially offset by lower operations and maintenance expense at REC Solar. For additional information see Note 3 to the Condensed Consolidated Financial Statements, “Business Segments.”
Other Income and Expenses. The variance was primarily due to a $71 million pretax impairment charge in the prior year related to certain equity method investments. For additional information see Note 3 to the Condensed Consolidated Financial Statements, “Business Segments.”
Interest Expense. The increase was primarily due to new project financings.
Income Tax Benefit. Lower ITCs due to lower solar investments in the current year were offset by higher production tax credits (PTCs) related to wind projects placed in service.
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Commercial Renewables' results were impacted by lower ITCs, higher interest expense on new debt financings and higher losses from REC Solar, partially offset by increased PTCs. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decrease was primarily due to lower engineering, procurement and construction revenues from REC Solar.
Operating Expenses. The increase was primarily due to a $69 million pretax impairment charge in the current year related to a wholly owned non-contracted wind project and higher operating expenses related to new wind and solar projects placed in service, partially offset by lower operations and maintenance expense at REC Solar. For additional information see Note 3 to the Condensed Consolidated Financial Statements, “Business Segments.”
Other Income and Expenses. The variance was primarily due to a $71 million pretax impairment charge in the prior year related to certain equity method investments. For additional information see Note 3 to the Condensed Consolidated Financial Statements, “Business Segments.”
Interest Expense. The variance was primarily due to new project financings and less capitalized interest due to fewer projects under construction.
Income Tax Benefit.The variance was primarily due to an increase in PTCs related to wind projects placed in service, partially offset by lower ITCs due to lower solar investments in the current year.
Matters Impacting Future Commercial Renewables Results
Changes or variability in assumptions used in calculating the fair value of the Commercial Renewables reporting units for goodwill testing purposes including but not limited to legislative actions related to tax credit extensions, long-term growth rates and discount rates could significantly impact the estimated fair value of the Commercial Renewables reporting units. In the event of a significant decline in the estimated fair value of the Commercial Renewables reporting units, goodwill or other asset impairment charges could be recorded. The carrying value of goodwill within Commercial Renewables was approximately $115 million at September 30, 2017.
Persistently low market pricing for wind resources, primarilyrenewable merchant plants located in the Electric Reliability Council of Texas West market and in the PJM West market, due to fluctuating market pricing and long-term forecasted energy prices. Based on the most recent recoverability test, the carrying value approximated the aggregate estimated future expirationundiscounted cash flows for the assets under review. A continued decline in energy market pricing or other factors unfavorably impacting the economics would likely result in a future impairment. Impairment of tax incentives including ITCs and PTCsthese assets could result in adverse impacts to the future results of Commercial Renewables.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 35 |
| | $ | 32 |
| | $ | 3 |
| | $ | 103 |
| | $ | 91 |
| | $ | 12 |
|
| Operating Expenses | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 13 |
| | 14 |
| | (1 | ) | | 42 |
| | 37 |
| | 5 |
|
| Operation, maintenance and other | 21 |
| | 70 |
| | (49 | ) | | 47 |
| | 145 |
| | (98 | ) |
| Depreciation and amortization | 27 |
| | 37 |
| | (10 | ) | | 79 |
| | 108 |
| | (29 | ) |
| Property and other taxes | 3 |
| | 8 |
| | (5 | ) | | 10 |
| | 25 |
| | (15 | ) |
| Impairment charges | — |
| | — |
| | — |
| | 7 |
| | 2 |
| | 5 |
|
| Total operating expenses | 64 |
| | 129 |
| | (65 | ) | | 185 |
| | 317 |
| | (132 | ) |
| Gains on Sales of Other Assets and Other, net | 4 |
| | 3 |
| | 1 |
| | 15 |
| | 14 |
| | 1 |
|
| Operating Loss | (25 | ) | | (94 | ) | | 69 |
| | (67 | ) | | (212 | ) | | 145 |
|
| Other Income and Expenses | 51 |
| | 24 |
| | 27 |
| | 100 |
| | 60 |
| | 40 |
|
| Interest Expense | 150 |
| | 157 |
| | (7 | ) | | 423 |
| | 553 |
| | (130 | ) |
| Loss Before Income Taxes | (124 | ) | | (227 | ) | | 103 |
| | (390 | ) | | (705 | ) | | 315 |
|
| Income Tax Benefit | (93 | ) | | (49 | ) | | (44 | ) | | (193 | ) | | (276 | ) | | 83 |
|
| Less: Income Attributable to Noncontrolling Interests | 3 |
| | 3 |
| | — |
| | 8 |
| | 7 |
| | 1 |
|
| Net Expense | $ | (34 | ) | | $ | (181 | ) | | $ | 147 |
| | $ | (205 | ) | | $ | (436 | ) | | $ | 231 |
|
Three Months Ended September 30, 2017, as Compared to September 30, 2016
Other's lower net expense was driven by tax benefits, insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger, prior year donations to the Duke Energy Foundation and lower severance expenses. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to prior year donations to the Duke Energy Foundation, less captive insurance losses for Bison Insurance Company Limited and prior year severance expense related to cost savings initiatives.
Other Income and Expenses. The increase was driven by insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger and higher earnings from the equity method investment in National Methanol Company (NMC).
Interest Expense. The decrease was driven by prior year losses on forward-starting interest rate swaps related to Piedmont pre-acquisition financing, partially offset by additional long-term debt outstanding in the current year. For additional information see Notes 2 and 10 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.
Income Tax Benefit. The variance was primarily due to higher tax benefits resulting from legal entity restructuring, the 2016 North Carolina corporate tax rate reduction and prior year unfavorable impacts of finalizing federal tax audits, partially offset by lower pretax losses.
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Other's lower net expense was driven by prior year losses on forward-starting interest rate swaps, prior year donations to the Duke Energy Foundation, insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger and decreased severance expenses. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The decrease was primarily due to prior year severance expenses related to cost savings initiatives, prior year donations to the Duke Energy Foundation and lower franchise taxes resulting from a North Carolina law change.
Other Income and Expenses. The increase was driven by insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger and higher earnings from the equity method investment in NMC.
Interest Expense. The decrease was primarily by prior year losses on forward-starting interest rate swaps related to Piedmont pre-acquisition financing, partially offset by higher interest costs on $3.75 billion of debt issued in August 2016 to fund the acquisition. For additional information see Notes 2 and 10 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.
Income Tax Benefit. The variance was primarily due to a decrease in pretax losses, partially offset by tax benefits resulting from legal entity restructuring and the net impact of North Carolina corporate tax rate reductions in 2017 and 2016.
Matters Impacting Future Other Results
Included in Other is Duke Energy Ohio's 9 percent ownership interest in the Ohio Valley Electric Corporation (OVEC), which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an inter-company power agreement (ICPA), Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. Deterioration in the credit quality or bankruptcy of one or more parties to the ICPA could increase the costs of OVEC. In addition, certain proposed environmental rulemaking costs could result in future increased cost allocations. For information on Duke Energy's regulatory filings related to OVEC, see Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters.”
The retired Beckjord generating station (Beckjord), a nonregulated facility retired during 2014, is not subject to the U.S. Environmental Protection Agency (EPA) rule related to the disposal of CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with on-site storage of coal ash, the costs could have an adverse impact on Other's financial position, results of operations and cash flows.
Earnings from an equity method investment in NMC reflect sales of methanol and methyl tertiary butyl ether (MTBE), which generate margins that are directionally correlated with Brent crude oil prices. Weakness in the market price of Brent crude oil and related commodities may result in a decline in earnings. In October 2017, Duke Energy's economic ownership interest in NMC decreased from 25 percent to 17.5 percent.
On November 2, 2017, the U.S. House of Representatives issued its proposal for comprehensive tax reform. The U.S. Senate has not yet issued its related proposal. There is uncertainty as to whether any form of tax reform will become law and, if so, what provisions may be included in the final tax reform. Any substantial revision to the U.S. tax code, including a loss of the ability to deduct interest expense, could adversely impact Duke Energy's future earnings, cash flows or financial position.
(LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
| | 2017 |
| | 2016 |
| | Variance |
|
| (Loss) Income From Discontinued Operations, net of tax | $ | (2 | ) | | $ | 180 |
| | $ | (182 | ) | | $ | (4 | ) | | $ | 190 |
| | $ | (194 | ) |
Three Months Ended September 30, 2017, as Compared to September 30, 2016
The variance was primarily driven by a $122 million income tax benefit in the prior year resulting from immaterial out of period deferred tax liability adjustments, as well as earnings from the International Disposal Group, which was sold in December 2016.impacts. For additional information, see Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions"Business Segments."
In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the ability for these solar and Dispositions."
Nine Months Ended September 30, 2017, as Comparedwind facilities to September 30, 2016
generate and sell electricity into the Electric Reliability Council of Texas market. Lost revenues and higher than expected purchased power costs have negatively impacted the operating results of these generating units. The variance was primarily driven by a $122 million income tax benefitfinancial impact of the storm is expected to be material to the Commercial Renewables segment's 2021 operating results. In addition, Duke Energy has been named in the prior year resulting from immaterialmultiple lawsuits arising out of period deferred tax liability adjustments, as well as operating earnings from the International Disposal Group, partially offset by an impairment charged related to certain assets in Central America that were sold in 2016.this winter storm. For additionalmore information, see NoteNotes 2 and 4 to the Condensed Consolidated Financial Statements, "Acquisitions"Business Segments" and Dispositions."Commitments and Contingencies,"
respectively.
PART I
COVID-19
DUKE ENERGY CAROLINAS
Management’s DiscussionDuke Energy continues to monitor the impacts of the COVID-19 pandemic on its results of operations, financial position and Analysis should be readcash flows as a result of the economic slowdown caused by reduced operations of businesses and governmental agencies and the corresponding reduction in conjunction with the accompanyingdemand for energy. Duke Energy has experienced improvement in energy sales, aging of receivables and operating results in recent periods and continues efforts to partially offset these impacts. Additionally, in light of learnings from COVID-19 regarding workforce deployment and technology capabilities, the company has reviewed the long-term real estate and future workforce strategy. The review has resulted in an initiative that will reduce physical workspace and includes reassessments of lease terms and lease modifications, termination penalties, as well as, asset impairments on property, plant and equipment and a change in workforce roles and responsibilities. For more information, see Notes 1 and 3 to the Condensed Consolidated Financial Statements, "Organization and NotesBasis of Presentation" and "Regulatory Matters," respectively.
Activist Investor
On May 17, 2021, Elliott, who has indicated it holds an economic interest in outstanding Duke Energy common stock, publicly released a letter it had sent to the Board, which advocated for consideration of certain governance and strategic proposals. On May 17, 2021, management issued a response to Elliott. On July 19, 2021, Elliott publicly released a second letter to the nine months ended September 30, 2017,Board and 2016Duke Energy issued a response. Duke Energy is unable to predict the outcome of this matter.
Other Matters
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual ReportReports on Form 10-K for the year ended December 31, 2016.2020, for discussion of risks associated with the Tax Act.
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 5,581 |
| | $ | 5,641 |
| | $ | (60 | ) |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 1,394 |
| | 1,391 |
| | 3 |
|
| Operation, maintenance and other | 1,431 |
| | 1,481 |
| | (50 | ) |
| Depreciation and amortization | 804 |
| | 802 |
| | 2 |
|
| Property and other taxes | 206 |
| | 206 |
| | — |
|
| Total operating expenses | 3,835 |
| | 3,880 |
| | (45 | ) |
| Losses on Sales of Other Assets and Other, net | — |
| | (1 | ) | | 1 |
|
| Operating Income | 1,746 |
| | 1,760 |
| | (14 | ) |
| Other Income and Expenses | 99 |
| | 121 |
| | (22 | ) |
| Interest Expense | 314 |
| | 316 |
| | (2 | ) |
| Income Before Income Taxes | 1,531 |
| | 1,565 |
| | (34 | ) |
| Income Tax Expense | 522 |
| | 539 |
| | (17 | ) |
| Net Income | $ | 1,009 |
| | $ | 1,026 |
| | $ | (17 | ) |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | |
Increase (Decrease) over prior yearMD&A | 2017 |
|
Residential sales | (6.7 | )% |
General service sales | (2.1 | )% |
Industrial sales | (0.5 | )% |
Wholesale power sales | 3.9 | % |
Joint dispatch sales | 87.6 | % |
Total sales | (2.5 | )% |
Average number of customers | 1.5 | %DUKE ENERGY |
Results of Operations
Non-GAAP Measures
Management’s Discussion and Analysis includes financial information prepared in accordance with GAAP in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings and adjusted EPS discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted EPS. Adjusted earnings and adjusted EPS represent income from continuing operations available to Duke Energy Corporation common stockholders in dollar and per share amounts, adjusted for the dollar and per share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. The most directly comparable GAAP measures for adjusted earnings and adjusted EPS are GAAP Reported Earnings (Loss) and GAAP Reported Earnings (Loss) Per Share, respectively.
Special items included in the periods presented below include the following, which management believes do not reflect ongoing costs:
•Workplace and workforce realignment represents costs attributable to business transformation, including long-term real estate strategy changes and workforce realignment.
•Regulatory Settlements represents an impairment charge related to the 2018 South Carolina rate cases, charges related to the CCR settlement and insurance proceeds distributed in accordance with that agreement and Duke Energy Carolinas and Duke Energy Progress partial settlements in the 2019 North Carolina rate cases.
•Gas Pipeline Investments represents costs related to the cancellation of the ACP pipeline and additional exit obligations.
•Severance represents the reversal of 2018 severance charges, which were deferred as a result of partial settlements in the Duke Energy Carolinas and the Duke Energy Progress 2019 North Carolina rate cases.
Three Months Ended September 30, 2021, as compared to September 30, 2020
GAAP reported EPS was $1.79 for the third quarter of 2021 compared to a $1.74 in the third quarter of 2020. In addition to the drivers below, GAAP reported EPS increased due to the cancellation of the ACP pipeline in the prior year and partial settlements in the 2019 North Carolina rate cases in the prior year. This was partially offset by an impairment charge related to the 2018 South Carolina rate cases and charges related to the CCR settlement and insurance proceeds distributed in accordance with that agreement.
As discussed above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s third quarter 2021 adjusted EPS was $1.88 compared to $1.87 for the third quarter of 2020. The increase in adjusted EPS was primarily due to positive rate case contributions and higher volumes. This was partially offset by higher operation and maintenance expenses, higher income tax expense and share dilution from equity issuances.
The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable GAAP measures.
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| 2021 | | 2020 |
| (in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS |
| | | | | | | |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 1,366 | | | $ | 1.79 | | | $ | 1,265 | | | $ | 1.74 | |
| Adjustments: | | | | | | | |
Workplace and Workforce Realignment(a) | 7 | | | — | | | — | | | — | |
Regulatory Settlements(b) | 64 | | | 0.09 | | | 27 | | | 0.04 | |
Gas Pipeline Investments(c) | (2) | | | — | | | 69 | | | 0.09 | |
| Adjusted Earnings/Adjusted EPS | $ | 1,435 | | | $ | 1.88 | | | $ | 1,361 | | | $ | 1.87 | |
(a)Net of tax benefit of $2 million.
(b)Net of tax benefit of $19 million and $8 million for the three months ended September 30, 2021, and 2020, respectively.
(c)Net of tax expense of $1 million and tax benefit of $21 million for the three months ended September 30, 2021, and 2020, respectively.
Nine Months Ended September 30, 2017,2021, as Comparedcompared to September 30, 20162020
Operating Revenues.The varianceGAAP Reported EPS was driven primarily by:
a $213 million decrease in retail sales, net of fuel revenues, due to less favorable weather in the current year.
Partially offset by:
an $89 million increase in rider revenues and retail pricing primarily related to energy efficiency programs;
a $30 million increase in weather-normal sales volumes to retail customers, net of fuel revenues;
a $15 million increase in wholesale power revenues, net of sharing and fuel revenues, primarily due to additional volumes for customers served under long-term contracts; and
an $8 million increase in fuel revenues primarily due to changes in generation mix.
Operating Expenses. The variance was primarily due to a $50 million decrease in operation, maintenance and other expense primarily due to lower expenses at generating plants, lower storm restoration costs and lower severance expenses, partially offset by higher energy efficiency program costs and higher distribution maintenance expenses.
Other Income and Expenses. The variance was primarily due to a decrease in recognition of post in-service equity returns for projects that had been completed prior to being reflected in customer rates.
Income Tax Expense. The variance was primarily due to a decrease in pretax income and the favorable impact of research credits. The effective tax rates$4.00 for the nine months ended September 30, 2017, and 2016 were 34.1 percent and 34.4 percent, respectively.
Matters Impacting Future Results
An order from regulatory authorities disallowing recovery of costs related2021, compared to closure of ash impoundments could have an adverse impact on Duke Energy Carolinas' financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Duke Energy Carolinas' estimated AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' financial position. See Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
Duke Energy Carolinas filed a general rate case on August 25, 2017, to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Duke Energy Carolinas' earnings could be adversely impacted if the rate increase is delayed or denied by the NCUC.
PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes$1.85 for the nine months ended September 30, 2017, and 2016 and2020. In addition to the Annual Report on Form 10-K for the year ended December 31, 2016.
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 7,435 |
| | $ | 7,645 |
| | $ | (210 | ) |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 2,588 |
| | 2,832 |
| | (244 | ) |
| Operation, maintenance and other | 1,650 |
| | 1,699 |
| | (49 | ) |
| Depreciation and amortization | 958 |
| | 904 |
| | 54 |
|
| Property and other taxes | 386 |
| | 375 |
| | 11 |
|
| Impairment charges | 137 |
| | 4 |
| | 133 |
|
| Total operating expenses | 5,719 |
| | 5,814 |
| | (95 | ) |
| Gains on Sales of Other Assets and Other, net | 19 |
| | 18 |
| | 1 |
|
| Operating Income | 1,735 |
| | 1,849 |
| | (114 | ) |
| Other Income and Expenses | 65 |
| | 79 |
| | (14 | ) |
| Interest Expense | 595 |
| | 497 |
| | 98 |
|
| Income Before Income Taxes | 1,205 |
| | 1,431 |
| | (226 | ) |
| Income Tax Expense | 384 |
| | 496 |
| | (112 | ) |
| Net Income | 821 |
| | 935 |
| | (114 | ) |
| Less: Net Income Attributable to Noncontrolling Interests | 7 |
| | 8 |
| | (1 | ) |
| Net Income Attributable to Parent | $ | 814 |
| | $ | 927 |
| | $ | (113 | ) |
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Operating Revenues. The variance was driven primarily by:
a $256 million decrease in fuel revenuesdrivers below, GAAP reported EPS increased due to lower retail sales and changesthe cancellation of the ACP pipeline in generation mix at Duke Energy Progress, as well as decreased capacity rates to retail customers at Duke Energy Florida,the prior year, partially offset by an increase in fuel rates to retail customers;workplace and workforce realignment costs.
a $132 million decrease in retail sales, net of fuel revenues, due to less favorable weather in the current year, including lost revenues related to Hurricane Irma atAs discussed above, management also evaluates financial performance based on adjusted EPS. Duke Energy Florida.
Partially offset by:
an $81 million increase in retail pricing due to the base rate adjustment for the Osprey acquisition and the completion of the Hines Energy Complex Chiller Uprate Project, as well as the Duke Energy Progress South Carolina rate case; and
a $79 million increase in rider revenues related to energy efficiency programs at Duke Energy Progress, as well as nuclear asset securitization beginning in July 2016 and extended uprate project revenues beginning in 2017 at Duke Energy Florida.
Operating Expenses. The varianceEnergy’s adjusted EPS was driven primarily by:
a $244 million decrease in fuel expense primarily due to lower retail sales and changes in generation mix at Duke Energy Progress, as well as decreased purchased power and lower capacity costs, partially offset by higher generation and deferred fuel costs at Duke Energy Florida; and
a $49 million decrease in operation, maintenance and other expense due to lower storm restoration costs at Duke Energy Progress, lower planned outage costs and lower severance expenses, partially offset by higher storm restoration costs at Duke Energy Florida.
Partially offset by:
a $133 million increase in impairment charges primarily due to the write-off of remaining unrecovered Levy Nuclear Project costs in the current year at Duke Energy Florida; and
a $54 million increase in depreciation and amortization expense primarily due to nuclear regulatory asset amortization, as well as additional plant in service at Duke Energy Florida.
Interest Expense. The variance was primarily due to higher debt outstanding, as well as interest charges on North Carolina fuel overcollections at Duke Energy Progress and lower debt returns driven by the CR3 regulatory asset debt return ending in June 2016 upon securitization at Duke Energy Florida.
Income Tax Expense. The variance was primarily due to a decrease in pretax income. The effective tax rates$4.30 for the nine months ended September 30, 2017, and 2016 were 31.9 percent and 34.7 percent, respectively. The decrease in the effective tax rate was primarily due2021, compared to the favorable impact of research credits and lower North Carolina corporate tax rates.
Matters Impacting Future Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Progress Energy’s financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Progress Energy's estimated AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's financial position. See Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Progress Energy’s financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC will address this request in Duke Energy Progress' currently pending rate case. A final order from the NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could result in an adverse impact on Progress Energy's financial position, results of operations and cash flows.
Duke Energy Progress filed a general rate case with the NCUC on June 1, 2017. Duke Energy Progress will seek to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Progress Energy's earnings could be adversely impacted if the rate increase is delayed or denied by the NCUC.
On August 29, 2017, Duke Energy Florida filed the 2017 Settlement with the FPSC. The 2017 Settlement was approved by the FPSC on October 25, 2017. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information about the 2017 Settlement. In accordance with the 2017 Settlement, Duke Energy Florida will not seek recovery of any costs associated with the ongoing Westinghouse contract litigation, which is currently being appealed. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” for additional information about the litigation. An unfavorable appeals ruling on that matter could have an adverse impact on Duke Energy Florida’s financial position, results of operations and cash flows.
In September 2017, Hurricane Irma caused extensive damage and widespread power outages within the Duke Energy Florida service territory. Duke Energy Florida has not completed the final accumulation of storm restoration costs incurred. Total storm restoration costs, including capital, are currently estimated at approximately $500 million. In accordance with a regulatory order with FPSC, certain incremental operation and maintenance storm restoration costs are classified as a regulatory asset recognizing the probable recoverability of these costs under FPSC's storm rule. The Company will make a petition by the end of 2017 to FPSC for recovery of costs. Duke Energy Florida's cash flows could be impacted by the timing of cost recovery. See Note 4, "Regulatory Matters," to the Condensed Consolidated Financial Statements for additional information.
DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes$4.09 for the nine months ended September 30, 2017,2020. The increase in adjusted EPS was primarily due to positive rate case contributions and 2016higher volumes, partially offset by higher income tax expense and the Annual Report on Form 10-K for the year ended December 31, 2016.share dilution from equity issuances.
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 3,878 |
| | $ | 4,103 |
| | $ | (225 | ) |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 1,214 |
| | 1,441 |
| | (227 | ) |
| Operation, maintenance and other | 1,032 |
| | 1,067 |
| | (35 | ) |
| Depreciation and amortization | 536 |
| | 526 |
| | 10 |
|
| Property and other taxes | 120 |
| | 119 |
| | 1 |
|
| Impairment charges | — |
| | 1 |
| | (1 | ) |
| Total operating expenses | 2,902 |
| | 3,154 |
| | (252 | ) |
| Gains on Sales of Other Assets and Other, net | 3 |
| | 2 |
| | 1 |
|
| Operating Income | 979 |
| | 951 |
| | 28 |
|
| Other Income and Expenses | 47 |
| | 47 |
| | — |
|
| Interest Expense | 217 |
| | 188 |
| | 29 |
|
| Income Before Income Taxes | 809 |
| | 810 |
| | (1 | ) |
| Income Tax Expense | 262 |
| | 271 |
| | (9 | ) |
| Net Income | $ | 547 |
| | $ | 539 |
| | $ | 8 |
|
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | |
Increase (Decrease) over prior periodMD&A | 2017 |
|
Residential sales | (4.6 | )% |
General service sales | (2.0 | )% |
Industrial sales | 0.5 | % |
Wholesale power sales | (5.6 | )% |
Joint dispatch sales | (35.3 | )% |
Total sales | (7.4 | )% |
Average number of customers | 1.3 | %DUKE ENERGY |
Nine Months Ended September 30, 2017, as Compared
The following table reconciles non-GAAP measures, including adjusted EPS, to September 30, 2016their most directly comparable GAAP measures.
Operating Revenues. The variance was driven primarily by: | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| 2021 | | 2020 |
| (in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 3,070 | | | $ | 4.00 | | | $ | 1,347 | | | $ | 1.85 | |
| Adjustments: | | | | | | | |
Workplace and Workforce Realignment(a) | 142 | | | 0.19 | | | — | | | — | |
Regulatory Settlements(b) | 64 | | | 0.09 | | | 27 | | | 0.04 | |
Gas Pipeline Investments(c) | 15 | | | 0.02 | | | 1,695 | | | 2.30 | |
Severance(d) | — | | | — | | | (75) | | | (0.10) | |
| Adjusted Earnings/Adjusted EPS | $ | 3,291 | | | $ | 4.30 | | | $ | 2,994 | | | $ | 4.09 | |
a $242(a)Net of tax benefit of $42 million.
(b)Net of tax benefit of $19 million decrease in fuel revenues due to lower retail sales and changes in generation mix; and
a $73$8 million decrease in retail sales, net of fuel revenues, due to less favorable weather in the current year.
Partially offset by:
a $41 million increase in rider revenues primarily due to energy efficiency programs;
a $29 million increase in retail pricing due to the Duke Energy Progress South Carolina rate case;
a $21 million increase in wholesale power revenues, net of fuel, primarily due to higher peak demand.
Operating Expenses. The variance was driven primarily by:
a $227 million decrease in fuel expense primarily due to lower retail sales and changes in generation mix; and
a $35 million decrease in operation, maintenance and other expense primarily due to lower storm restoration costs.
Interest Expense. The increase was primarily due to higher debt outstanding, as well as interest charges on North Carolina fuel overcollections.
Income Tax Expense. The variance was primarily due to the favorable impact of research credits and lower North Carolina corporate tax rates. The effective tax rates for the nine months ended September 30, 2017,2021, and 2016 were 32.4 percent2020, respectively.
(c)Net of tax benefit of $4 million and 33.5 percent, respectively. The decrease in the effective tax rate was primarily due to the favorable impact of research credits and lower North Carolina corporate tax rates.
Matters Impacting Future Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Duke Energy Progress’ financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Duke Energy Progress' estimated AROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, the closure work progresses, and the closure method scope and remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' financial position. See Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC will address this request in Duke Energy Progress' currently pending rate case. A final order from the NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could result in an adverse impact on Duke Energy Progress' financial position, results of operations and cash flows.
Duke Energy Progress filed a general rate case with the NCUC on June 1, 2017. Duke Energy Progress will seek to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Duke Energy Progress' earnings could be adversely impacted if the rate increase is delayed or denied by the NCUC.
DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes$395 million for the nine months ended September 30, 2017,2021, and 2016 and the Annual Report on Form 10-K for the year ended December 31, 2016.2020, respectively.
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 3,551 |
| | $ | 3,538 |
| | $ | 13 |
|
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 1,374 |
| | 1,391 |
| | (17 | ) |
| Operation, maintenance and other | 610 |
| | 623 |
| | (13 | ) |
| Depreciation and amortization | 423 |
| | 378 |
| | 45 |
|
| Property and other taxes | 265 |
| | 256 |
| | 9 |
|
| Impairment charges | 137 |
| | 4 |
| | 133 |
|
| Total operating expenses | 2,809 |
| | 2,652 |
| | 157 |
|
| Operating Income | 742 |
| | 886 |
| | (144 | ) |
| Other Income and Expenses | 45 |
| | 30 |
| | 15 |
|
| Interest Expense | 211 |
| | 143 |
| | 68 |
|
| Income Before Income Taxes | 576 |
| | 773 |
| | (197 | ) |
| Income Tax Expense | 208 |
| | 286 |
| | (78 | ) |
| Net Income | $ | 368 |
| | $ | 487 |
| | $ | (119 | ) |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Wholesale power sales include both billed and unbilled sales. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
Increase (Decrease) over prior period | 2017 |
|
Residential sales | (3.6 | )% |
General service sales | (1.3 | )% |
Industrial sales | (1.4 | )% |
Wholesale and other | 18.5 | % |
Total sales | (1.2 | )% |
Average number of customers | 1.5 | % |
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Operating Revenues. The variance was driven primarily by:
a $52 million increase in retail pricing primarily due to the base rate adjustment for the Osprey acquisition and the completion of the Hines Energy Complex Chiller Uprate Project;
a $38 million increase in rider revenues primarily due to nuclear asset securitization beginning in July 2016 and extended power uprate project revenues beginning in 2017; and
a $30 million increase in weather-normal sales volumes to retail customers in the current year.
Partially offset by:
a $59 million decrease in retail sales, net of fuel revenues, due to less favorable weather in the current year, including lost revenues related to Hurricane Irma;
a $31 million decrease in wholesale power revenues primarily due to contracts that expired in the prior year; and
a $14 million decrease in fuel and capacity revenues primarily due to a decrease in capacity rates to retail customers, partially offset by an increase in fuel rates to retail customers.
Operating Expenses. The variance was driven primarily by:
a $133 million increase in impairment charges primarily due to the write-off of remaining unrecovered Levy Nuclear Project costs in the current year; and
a $45 million increase in depreciation and amortization expense primarily due to nuclear regulatory asset amortization, as well as additional plant in service.
Partially offset by:
a $17 million decrease in fuel expense primarily due to decreased purchased power and lower capacity costs, partially offset by higher generation and deferred fuel costs; and
a $13 million decrease in operation, maintenance and other expense primarily due to lower planned outage costs and lower severance expenses, partially offset by higher storm restoration costs in the current year.
Other Income and Expenses. The variance was driven by higher AFUDC equity.
Interest Expense. The variance was primarily due to higher debt outstanding and lower debt returns driven by the CR3 regulatory asset debt return ending in June 2016 upon securitization.
Income Tax Expense. The variance was primarily due to a decrease in pretax income. The effective tax rates for the nine months ended September 30, 2017, and 2016 were 36.1 percent and 37.0 percent, respectively.
Matters Impacting Future Results
In September 2017, Hurricane Irma caused extensive damage and widespread power outages within the Duke Energy Florida service territory. Duke Energy Florida has not completed the final accumulation of storm restoration costs incurred. Total storm restoration costs, including capital, are currently estimated at approximately $500 million. In accordance with a regulatory order with FPSC, certain incremental operation and maintenance storm restoration costs are classified as a regulatory asset recognizing the probable recoverability of these costs under FPSC's storm rule. The Company will make a petition by the end of 2017 to FPSC for recovery of costs. Duke Energy Florida's cash flows could be impacted by the timing of cost recovery. See Note 4, "Regulatory Matters," to the Condensed Consolidated Financial Statements for additional information.
On August 29, 2017, Duke Energy Florida filed the 2017 Settlement with the FPSC. The 2017 Settlement was approved by the FPSC on October 25, 2017. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information about the 2017 Settlement. In accordance with the 2017 Settlement, Duke Energy Florida will not seek recovery of any costs associated with the ongoing Westinghouse contract litigation, which is currently being appealed. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies” for additional information about the litigation. An unfavorable appeals ruling on that matter could have an adverse impact on Duke Energy Florida’s financial position, results of operations and cash flows.
DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2017, and 2016 and the Annual Report on Form 10-K for the year ended December 31, 2016.
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | | | | | |
| Regulated electric | $ | 1,036 |
| | $ | 1,053 |
| | $ | (17 | ) |
| Regulated natural gas | 360 |
| | 358 |
| | 2 |
|
| Nonregulated electric and other | 30 |
| | 22 |
| | 8 |
|
| Total operating revenues | 1,426 |
| | 1,433 |
| | (7 | ) |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power – regulated | 283 |
| | 340 |
| | (57 | ) |
| Fuel used in electric generation and purchased power – nonregulated | 42 |
| | 37 |
| | 5 |
|
| Cost of natural gas | 69 |
| | 64 |
| | 5 |
|
| Operation, maintenance and other | 385 |
| | 367 |
| | 18 |
|
| Depreciation and amortization | 193 |
| | 175 |
| | 18 |
|
| Property and other taxes | 204 |
| | 195 |
| | 9 |
|
| Impairment charges | 1 |
| | — |
| | 1 |
|
| Total operating expenses | 1,177 |
| | 1,178 |
| | (1 | ) |
| Gains on Sales of Other Assets and Other, net | 1 |
| | 2 |
| | (1 | ) |
| Operating Income | 250 |
| | 257 |
| | (7 | ) |
| Other Income and Expenses | 12 |
| | 6 |
| | 6 |
|
| Interest Expense | 67 |
| | 63 |
| | 4 |
|
| Income from Continuing Operations Before Income Taxes | 195 |
| | 200 |
| | (5 | ) |
| Income Tax Expense from Continuing Operations | 67 |
| | 65 |
| | 2 |
|
| Income from Continuing Operations | 128 |
| | 135 |
| | (7 | ) |
| (Loss) Income from Discontinued Operations, net of tax | (1 | ) | | 36 |
| | (37 | ) |
| Net Income | $ | 127 |
| | $ | 171 |
| | $ | (44 | ) |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
Increase (Decrease) over prior year | 2017 |
|
Residential sales | (5.8 | )% |
General service sales | (3.2 | )% |
Industrial sales | (1.3 | )% |
Wholesale power sales | 127.3 | % |
Total sales | (2.5 | )% |
Average number of customers | 0.8 | % |
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Operating Revenues. The variance was driven primarily by:
a $59 million decrease in fuel revenues primarily due to lower electric fuel prices and sales volumes, partially offset by higher costs passed through to natural gas customers due to higher natural gas prices; and
a $16 million decrease in electric retail sales, net of fuel revenues, due to less favorable weather in the current year.
Partially offset by:
a $40 million increase in rider revenues primarily due to energy efficiency programs and a rate increase for the distribution capital investment rider, partially offset by a decrease in the percentage of income payment plan rider due to a rate decrease;
a $17 million increase in PJM Interconnection, LLC (PJM) transmission revenues; and
a $9 million increase in other revenues related to OVEC.
Operating Expenses. The variance was driven primarily by:
an $18 million increase in operation, maintenance and other expense due to higher energy efficiency program costs and higher transmission and distribution operations costs;
an $18 million increase in depreciation and amortization expense due to additional plant in service and a true up related to Smart Grid assets in the prior year;
a $9 million increase in property and other taxes primarily due to higher property taxes;
a $5 million increase in nonregulated fuel expenses related to OVEC; and
a $5 million increase in natural gas costs due to higher natural gas prices.
Partially offset by:
a $57 million decrease in fuel expense driven by lower sales volumes and lower electric fuel costs.
Other Income and Expenses. The increase was primarily driven by higher AFUDC equity.
Interest Expense. The increase was primarily driven by interest related to new debt issued in June 2016.
Discontinued Operations, (d)Net of Tax. The variance was driven by a prior year income tax benefit resulting from immaterial outexpense of period deferred tax liability adjustments related to the Midwest Generation Disposal Group.$23 million.
Matters Impacting Future Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
Duke Energy Ohio’s nonregulated Beckjord station, a facility retired during 2014, is not subject to the EPA rule related to the disposal of CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with on-site storage of coal ash at the facility, the costs could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows.
Duke Energy Ohio has a 9 percent ownership interest in OVEC, which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an ICPA, Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio’s ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. Deterioration in the credit quality or bankruptcy of one or more parties to the ICPA could increase the costs of OVEC. In addition, certain proposed environmental rulemaking costs could result in future increased cost allocations.
On March 2, 2017, Duke Energy Ohio filed an electric distribution base rate application with the PUCO to address recovery of electric distribution system capital investments and any increase in expenditures subsequent to previous rate cases. The application also includes requests to continue certain current riders and establish new riders related to LED Outdoor Lighting Service and regulatory mandates. Duke Energy Ohio's earnings could be adversely impacted if the rate case and requested riders are delayed or denied by the PUCO. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
On September 1, 2017, Duke Energy Kentucky filed a base rate case with the KPSC to recover costs of capital investments in generation, transmission and distribution systems and to recover other incremental expenses since its last rate case filed in 2006. Duke Energy Kentucky’s earnings could be adversely impacted if the rate increase is delayed or denied by the KPSC.
DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the nine months ended September 30, 2017, and 2016 and the Annual Report on Form 10-K for the year ended December 31, 2016.
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 2,302 |
| | $ | 2,225 |
| | $ | 77 |
|
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 744 |
| | 690 |
| | 54 |
|
| Operation, maintenance and other | 541 |
| | 526 |
| | 15 |
|
| Depreciation and amortization | 336 |
| | 345 |
| | (9 | ) |
| Property and other taxes | 56 |
| | 67 |
| | (11 | ) |
| Impairment charges | — |
| | 8 |
| | (8 | ) |
| Total operating expenses | 1,677 |
| | 1,636 |
| | 41 |
|
| Gains on Sales of Other Assets and Other, net | 1 |
| | — |
| | 1 |
|
| Operating Income | 626 |
| | 589 |
| | 37 |
|
| Other Income and Expenses | 27 |
| | 15 |
| | 12 |
|
| Interest Expense | 132 |
| | 136 |
| | (4 | ) |
| Income Before Income Taxes | 521 |
| | 468 |
| | 53 |
|
| Income Tax Expense | 203 |
| | 159 |
| | 44 |
|
| Net Income | $ | 318 |
| | $ | 309 |
| | $ | 9 |
|
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
Increase (Decrease) over prior year | 2017 |
|
Residential sales | (5.5 | )% |
General service sales | (2.5 | )% |
Industrial sales | 0.1 | % |
Wholesale power sales | (19.8 | )% |
Total sales | (6.2 | )% |
Average number of customers | 0.8 | % |
Nine Months Ended September 30, 2017, as Compared to September 30, 2016
Operating Revenues.The variance was driven primarily by:
a $64 million increase in rider revenues related to the Edwardsport IGCC plant and energy efficiency programs; and
a $47 million increase in fuel revenues primarily due to higher purchased power costs passed through to customers and higher financial transmission right (FTR) revenues.
Partially offset by:
an $18 million decrease in retail sales due to less favorable weather in the current year; and
a $15 million decrease in wholesale power revenues, net of fuel, primarily due to a decrease in demand rates and contracts that expired in the current year.
Operating Expenses.The variance was driven primarily by:
a $54 million increase in fuel and purchased power expense, primarily due to higher purchased power volumes and prices; and
a $15 million increase in operation, maintenance and other expense due to growth in energy efficiency programs and higher transmission costs.
Partially offset by:
an $11 million decrease in property and other taxes primarily due to utilization of ITCs;
a $9 million decrease in depreciation and amortization primarily due to the 2017 deferral of certain asset retirement obligations and the completion of the amortization of a regulated asset for costs associated with the termination of a gasification services agreement in 2000, partially offset by new IGCC rider rates that result in a lower deferral amount and higher depreciation due to additional plant in service; and
an $8 million decrease in impairments and other charges primarily due to the early retirement of certain metering equipment in the prior year.
Other Income and Expenses. The increase was primarily driven by higher AFUDC equity.
Income Tax Expense. The variance was primarily due to an increase in pretax income. The effective tax rates for the nine months ended September 30, 2017, and 2016 were 39.0 percent and 34.0 percent, respectively. The increase in the effective tax rate was primarily due to an immaterial out of period adjustment in the prior year related to deferred tax balances associated with property, plant and equipment.
Matters Impacting Future Results
The matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.
| | | | | |
| MD&A | MATTERS IMPACTING FUTURE RESULTS |
Regulatory Matters
Coal Ash Costs
As a result of the NCDEQ settlement on December 31, 2019, Duke Energy Carolinas and Duke Energy Progress agreed to excavate seven of the nine remaining coal ash basins in North Carolina with ash moved to on-site lined landfills. At the two remaining basins, uncapped basin ash will be excavated and moved to off-site lined landfills. The majority of spend is expected to occur over the next 15-20 years. In January 2021, Duke Energy Carolinas and Duke Energy Progress reached a settlement agreement on recovery of coal ash costs as outlined in Note 3, "Regulatory Matters." The company agreed not to seek recovery of approximately $1 billion of deferred coal ash expenditures and Duke Energy Carolinas and Duke Energy Progress took a charge of approximately $500 million each in 2020. On March 31, 2021, and April 17, 2015,16, 2021, the EPA published inNCUC approved the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. coal ash settlement for Duke Energy Carolinas and Duke Energy Progress, respectively.
Duke Energy Indiana has interpreted the CCR rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the rule and a method of compliance. In 2020, the Hoosier Environmental Council filed a petition challenging the Indiana Department of Environmental Management's (IDEM) partial approval of five of Duke Energy Indiana's interpretationIndiana’s ash pond site closure plans at Gallagher Station. The petition does not challenge the other 13 basin closures approved by IDEM at other Indiana stations. Interpretation of the requirements of the CCR rule is subject to potentialfurther legal challenges and further regulatory approvals, which could result in additional ash basin closure requirements, higher costs of compliance and greater AROs. Additionally, Duke Energy Indiana has retired facilities that are not subject to the CCR rule. Duke Energy Indiana may incur costs at these facilities to comply with environmental regulations or to mitigate risks associated with on-site storage of coal ash. An order from regulatory authorities disallowing recovery of
MGP
Duke Energy Ohio and other parties have filed with the PUCO a Stipulation and Recommendation that would resolve all open issues regarding manufactured gas plant remediation costs incurred between 2013 and 2019, including Duke Energy Ohio's request for additional deferral authority beyond 2019, and the pending issues related to closure of ash basins couldthe Tax Act as it relates to Duke Energy Ohio's natural gas operations. These impacts, if approved by the PUCO, are not expected to have an adversea material impact on Duke Energy Indiana'sOhio's financial position, resultsstatements. Failure to approve the Stipulation and Recommendation, disallowance of operationscosts incurred, failure to complete the work by the deadline or failure to obtain an extension from the PUCO could result in an adverse impact.
For additional information, see Notes 3 and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.Matters” and "Commitments and Contingencies," respectively.
The Indiana Utility Regulatory Commission (IURC) approved a settlement agreement between Commercial Renewables
Duke Energy Indianacontinues to monitor recoverability of renewable merchant plants located in the Electric Reliability Council of Texas West market and multiple parties that resolves all disputes, claimsin the PJM West market, due to fluctuating market pricing and issues fromlong-term forecasted energy prices. Based on the IURC proceedings related to post-commercial operating performance and recoverymost recent recoverability test, the carrying value approximated the aggregate estimated future undiscounted cash flows for the assets under review. A continued decline in energy market pricing or other factors unfavorably impacting the economics would likely result in a future impairment. Impairment of ongoing operating and capital costs at the Edwardsport IGCC generating facility. The settlement agreement imposed a cost cap for retail recoverable operations and maintenance costs through 2017. An inability to manage operating coststhese assets could result in accordance with caps imposed pursuantadverse impacts. For additional information, see Note 2 to the agreement couldCondensed Consolidated Financial Statements, "Business Segments."
In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the ability for these solar and wind facilities to generate and sell electricity into the Electric Reliability Council of Texas market. Lost revenues and higher than expected purchased power costs have an adversenegatively impacted the operating results of these generating units. The financial impact on of the storm is expected to be material to the Commercial Renewables segment's 2021 operating results. In addition, Duke Energy Indiana's financial position,has been named in multiple lawsuits arising out of this winter storm. For more information, see Notes 2 and 4 to the Condensed Consolidated Financial Statements, "Business Segments" and "Commitments and Contingencies," respectively.
COVID-19
Duke Energy continues to monitor the impacts of the COVID-19 pandemic on its results of operations, financial position and cash flows.flows as a result of the economic slowdown caused by reduced operations of businesses and governmental agencies and the corresponding reduction in the demand for energy. Duke Energy has experienced improvement in energy sales, aging of receivables and operating results in recent periods and continues efforts to partially offset these impacts. Additionally, in light of learnings from COVID-19 regarding workforce deployment and technology capabilities, the company has reviewed the long-term real estate and future workforce strategy. The review has resulted in an initiative that will reduce physical workspace and includes reassessments of lease terms and lease modifications, termination penalties, as well as, asset impairments on property, plant and equipment and a change in workforce roles and responsibilities. For more information, see Notes 1 and 3 to the Condensed Consolidated Financial Statements, "Organization and Basis of Presentation" and "Regulatory Matters," respectively.
Activist Investor
On May 17, 2021, Elliott, who has indicated it holds an economic interest in outstanding Duke Energy common stock, publicly released a letter it had sent to the Board, which advocated for consideration of certain governance and strategic proposals. On May 17, 2021, management issued a response to Elliott. On July 19, 2021, Elliott publicly released a second letter to the Board and Duke Energy issued a response. Duke Energy is unable to predict the outcome of this matter.
Other Matters
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Duke Energy Registrants' Annual Reports on Form 10-K for the year ended December 31, 2020, for discussion of risks associated with the Tax Act.
Results of Operations
Non-GAAP Measures
Management’s Discussion and Analysis includes financial information prepared in accordance with GAAP in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings and adjusted EPS discussed below. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be readviewed as a supplement to, and not a substitute for, financial measures presented in conjunctionaccordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the Condensed Consolidated Financial Statementsmeasures in the same manner.
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and Notesadjusted EPS. Adjusted earnings and adjusted EPS represent income from continuing operations available to Duke Energy Corporation common stockholders in dollar and per share amounts, adjusted for the dollar and per share impact of special items. As discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance. The most directly comparable GAAP measures for adjusted earnings and adjusted EPS are GAAP Reported Earnings (Loss) and GAAP Reported Earnings (Loss) Per Share, respectively.
Special items included in the periods presented below include the following, which management believes do not reflect ongoing costs:
•Workplace and workforce realignment represents costs attributable to business transformation, including long-term real estate strategy changes and workforce realignment.
•Regulatory Settlements represents an impairment charge related to the 2018 South Carolina rate cases, charges related to the CCR settlement and insurance proceeds distributed in accordance with that agreement and Duke Energy Carolinas and Duke Energy Progress partial settlements in the 2019 North Carolina rate cases.
•Gas Pipeline Investments represents costs related to the cancellation of the ACP pipeline and additional exit obligations.
•Severance represents the reversal of 2018 severance charges, which were deferred as a result of partial settlements in the Duke Energy Carolinas and the Duke Energy Progress 2019 North Carolina rate cases.
Three Months Ended September 30, 2021, as compared to September 30, 2020
GAAP reported EPS was $1.79 for the third quarter of 2021 compared to a $1.74 in the third quarter of 2020. In addition to the drivers below, GAAP reported EPS increased due to the cancellation of the ACP pipeline in the prior year and partial settlements in the 2019 North Carolina rate cases in the prior year. This was partially offset by an impairment charge related to the 2018 South Carolina rate cases and charges related to the CCR settlement and insurance proceeds distributed in accordance with that agreement.
As discussed above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s third quarter 2021 adjusted EPS was $1.88 compared to $1.87 for the third quarter of 2020. The increase in adjusted EPS was primarily due to positive rate case contributions and higher volumes. This was partially offset by higher operation and maintenance expenses, higher income tax expense and share dilution from equity issuances.
The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable GAAP measures.
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, |
| 2021 | | 2020 |
| (in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS |
| | | | | | | |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 1,366 | | | $ | 1.79 | | | $ | 1,265 | | | $ | 1.74 | |
| Adjustments: | | | | | | | |
Workplace and Workforce Realignment(a) | 7 | | | — | | | — | | | — | |
Regulatory Settlements(b) | 64 | | | 0.09 | | | 27 | | | 0.04 | |
Gas Pipeline Investments(c) | (2) | | | — | | | 69 | | | 0.09 | |
| Adjusted Earnings/Adjusted EPS | $ | 1,435 | | | $ | 1.88 | | | $ | 1,361 | | | $ | 1.87 | |
(a)Net of tax benefit of $2 million.
(b)Net of tax benefit of $19 million and $8 million for the three months ended September 30, 2021, and 2020, respectively.
(c)Net of tax expense of $1 million and tax benefit of $21 million for the three months ended September 30, 2021, and 2020, respectively.
Nine Months Ended September 30, 2021, as compared to September 30, 2020
GAAP Reported EPS was $4.00 for the nine months ended September 30, 2017, Piedmont's Annual Report on Form 10-K2021, compared to $1.85 for the nine months ended September 30, 2020. In addition to the drivers below, GAAP reported EPS increased due to the cancellation of the ACP pipeline in the prior year, partially offset by workplace and workforce realignment costs.
As discussed above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s adjusted EPS was $4.30 for the nine months ended October 31, 2016,September 30, 2021, compared to $4.09 for the nine months ended September 30, 2020. The increase in adjusted EPS was primarily due to positive rate case contributions and higher volumes, partially offset by higher income tax expense and share dilution from equity issuances.
The following table reconciles non-GAAP measures, including adjusted EPS, to their most directly comparable GAAP measures.
| | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, |
| 2021 | | 2020 |
| (in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 3,070 | | | $ | 4.00 | | | $ | 1,347 | | | $ | 1.85 | |
| Adjustments: | | | | | | | |
Workplace and Workforce Realignment(a) | 142 | | | 0.19 | | | — | | | — | |
Regulatory Settlements(b) | 64 | | | 0.09 | | | 27 | | | 0.04 | |
Gas Pipeline Investments(c) | 15 | | | 0.02 | | | 1,695 | | | 2.30 | |
Severance(d) | — | | | — | | | (75) | | | (0.10) | |
| Adjusted Earnings/Adjusted EPS | $ | 3,291 | | | $ | 4.30 | | | $ | 2,994 | | | $ | 4.09 | |
(a)Net of tax benefit of $42 million.
(b)Net of tax benefit of $19 million and $8 million for the nine months ended September 30, 2021, and 2020, respectively.
(c)Net of tax benefit of $4 million and $395 million for the nine months ended September 30, 2021, and 2020, respectively.
(d)Net of tax expense of $23 million.
SEGMENT RESULTS
The remaining information presented in this discussion of results of operations is on a GAAP basis. Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests and preferred stock dividends. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. See Note 2 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
Electric Utilities and Infrastructure
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance | | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 6,569 | | | $ | 6,379 | | | $ | 190 | | | $ | 17,185 | | | $ | 16,596 | | | $ | 589 | |
| Operating Expenses | | | | | | | | | | | |
| Fuel used in electric generation and purchased power | 1,864 | | | 1,869 | | | (5) | | | 4,760 | | | 4,703 | | | 57 | |
| Operation, maintenance and other | 1,363 | | | 1,326 | | | 37 | | | 3,907 | | | 3,891 | | | 16 | |
| Depreciation and amortization | 1,084 | | | 1,053 | | | 31 | | | 3,154 | | | 3,023 | | | 131 | |
| Property and other taxes | 330 | | | 286 | | | 44 | | | 949 | | | 885 | | | 64 | |
| Impairment of assets and other charges | 202 | | | 20 | | | 182 | | | 203 | | | 23 | | | 180 | |
| Total operating expenses | 4,843 | | | 4,554 | | | 289 | | | 12,973 | | | 12,525 | | | 448 | |
| Gains on Sales of Other Assets and Other, net | 9 | | | 3 | | | 6 | | | 11 | | | 11 | | | — | |
| Operating Income | 1,735 | | | 1,828 | | | (93) | | | 4,223 | | | 4,082 | | | 141 | |
| Other Income and Expenses, net | 220 | | | 67 | | | 153 | | | 421 | | | 241 | | | 180 | |
| Interest Expense | 365 | | | 308 | | | 57 | | | 1,066 | | | 991 | | | 75 | |
| Income Before Income Taxes | 1,590 | | | 1,587 | | | 3 | | | 3,578 | | | 3,332 | | | 246 | |
| Income Tax Expense | 160 | | | 206 | | | (46) | | | 393 | | | 493 | | | (100) | |
| Less: Income Attributable to Noncontrolling Interest | 5 | | | — | | | 5 | | | 5 | | | — | | | 5 | |
| Segment Income | $ | 1,425 | | | $ | 1,381 | | | $ | 44 | | | $ | 3,180 | | | $ | 2,839 | | | $ | 341 | |
| | | | | | | | | | | |
| Duke Energy Carolinas GWh sales | 25,033 | | | 23,726 | | | 1,307 | | | 67,357 | | | 64,045 | | | 3,312 | |
| Duke Energy Progress GWh sales | 19,219 | | | 19,035 | | | 184 | | | 51,555 | | | 49,512 | | | 2,043 | |
| Duke Energy Florida GWh sales | 12,983 | | | 12,973 | | | 10 | | | 32,731 | | | 32,390 | | | 341 | |
| Duke Energy Ohio GWh sales | 6,844 | | | 6,678 | | | 166 | | | 18,586 | | | 17,763 | | | 823 | |
| Duke Energy Indiana GWh sales | 8,788 | | | 8,463 | | | 325 | | | 23,880 | | | 22,842 | | | 1,038 | |
| Total Electric Utilities and Infrastructure GWh sales | 72,867 | | | 70,875 | | | 1,992 | | | 194,109 | | | 186,552 | | | 7,557 | |
| Net proportional MW capacity in operation | | | | | | | 49,749 | | | 50,371 | | | (622) | |
| | | | | |
| MD&A | SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE |
Three Months Ended September 30, 2021, as compared to September 30, 2020
Electric Utilities and Infrastructure’s higher segment income is due to higher revenues from rate cases in various jurisdictions, weather-normal sales volumes, and coal ash insurance litigation proceeds partially offset by an impairment charge related to the South Carolina rate cases and higher operating expenses. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
•a $144 million increase in retail base rate pricing due to general rate cases in North Carolina and Indiana net of rider impacts as well as multiyear rate adjustments in Florida; and
•a $114 million increase in weather-normal retail sales volumes.
Partially offset by
•a $48 million decrease in storm revenues at Duke Energy Florida due to full recovery of Hurricane Dorian costs in the prior year; and
•a $17 million decrease in retail sales due to less favorable weather in the current year.
Operating Expenses. The variance was driven primarily by:
•a $182 million increase in impairment of assets and other charges primarily due to the 2018 South Carolina rate case settlements at Duke Energy Carolinas and Duke Energy Progress, partially offset by a prior year impairment of Duke Energy Carolina's Clemson assets;
•a $44 million increase in property and other taxes primarily due to higher property taxes at Duke Energy Carolinas and Duke Energy Ohio and a prior year sales and use tax refund at Duke Energy Carolinas;
•a $37 million increase in operation, maintenance and other primarily driven by higher employee-related costs, partially offset by lower storm and outage costs; and
•a $31 million increase in depreciation and amortization primarily due to resolution of rate cases and higher plant in service, partially offset by lower depreciation related to the extension of the lives of nuclear facilities.
Other Income and Expense, net. The increase is primarily due to coal ash insurance litigation proceeds at Duke Energy Carolinas and Duke Energy Progress and lower non-service pension costs.
Interest Expense. The variance was primarily due to lower debt return on coal ash at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Indiana.
Income Tax Expense.The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes. The ETRs for the three months ended September 30, 2021, and 2020, were 10.1% and 13.0%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
Nine Months Ended September 30, 2021, as compared to September 30, 2020
Electric Utilities and Infrastructure’s variance is due to higher revenues from rate cases in various jurisdictions, higher retail sales volumes, and coal ash insurance litigation proceeds, partially offset by an impairment charge related to the South Carolina rate cases, higher depreciation and amortization and interest expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
•a $297 million increase in retail base rate pricing due to general rate cases in Indiana and North Carolina net of rider impacts as well as multiyear settlement rate adjustments in Florida;
•a $188 million increase in weather-normal retail sales volumes;
•an $86 million increase in retail sales, net of fuel revenues, due to favorable weather;
•a $61 million increase in fuel revenues primarily driven by higher sales volumes; and
•a $21 million increase in wholesale revenues primarily due to higher rates at Duke Energy Indiana and higher volumes at Duke Energy Progress, partially offset by a restructured capacity contract at Duke Energy Florida.
Partially offset by:
•a $103 million decrease in storm revenues due to full recovery of Hurricane Dorian costs in the prior year.
| | | | | |
| MD&A | SEGMENT RESULTS — ELECTRIC UTILITIES AND INFRASTRUCTURE |
Operating Expenses. The variance was driven primarily by:
•a $180 million increase in impairment of assets and other charges primarily due to the 2018 South Carolina rate case settlements at Duke Energy Carolinas and Duke Energy Progress, partially offset by a prior year impairment of Duke Energy Carolinas' Clemson assets;
•a $131 million increase in depreciation and amortization primarily due to resolution of rate cases and higher plant in service, partially offset by lower depreciation related to the extension of the lives of nuclear facilities;
•a $64 million increase in property and other taxes primarily due to higher property taxes at Duke Energy Carolinas and Duke Energy Ohio, and a prior year sales and use tax refund at Duke Energy Carolinas;
•a $57 million increase in fuel used in electric generation and purchased power primarily due to higher sales volumes; and
•a $16 million increase in operations, maintenance and other driven by higher employee-related expenses, partially offset by decreased storm amortization at Duke Energy Florida and lower COVID-19 costs.
Other Income and Expenses, net. The increase is primarily due to coal ash insurance litigation proceeds at Duke Energy Carolinas and Duke Energy Progress and lower non-service pension costs.
Interest Expense. The variance was primarily due to lower debt return on coal ash at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Indiana.
Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes, partially offset by an increase in pretax income. The ETRs for the nine months ended September 30, 2021, and 2020, were 11.0% and 14.8%, respectively. The decrease in the ETR was primarily due to an increase in the amortization of excess deferred taxes.
Gas Utilities and Infrastructure
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance | | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 289 | | | $ | 241 | | | $ | 48 | | | $ | 1,391 | | | $ | 1,194 | | | $ | 197 | |
| Operating Expenses | | | | | | | | | | | |
| Cost of natural gas | 75 | | | 41 | | | 34 | | | 430 | | | 300 | | | 130 | |
| Operation, maintenance and other | 102 | | | 103 | | | (1) | | | 302 | | | 312 | | | (10) | |
| Depreciation and amortization | 74 | | | 65 | | | 9 | | | 216 | | | 193 | | | 23 | |
| Property and other taxes | 30 | | | 26 | | | 4 | | | 92 | | | 82 | | | 10 | |
| Impairment of assets and other charges | — | | | 7 | | | (7) | | | — | | | 7 | | | (7) | |
| Total operating expenses | 281 | | | 242 | | | 39 | | | 1,040 | | | 894 | | | 146 | |
| | | | | | | | | | | |
| Operating Income (Loss) | 8 | | | (1) | | | 9 | | | 351 | | | 300 | | | 51 | |
| Other Income and Expenses | | | | | | | | | | | |
| Equity in earnings (losses) of unconsolidated affiliates | 10 | | | (71) | | | 81 | | | 2 | | | (2,004) | | | 2,006 | |
| Other income and expenses, net | 15 | | | 16 | | | (1) | | | 50 | | | 42 | | | 8 | |
| Total other income and expenses | 25 | | | (55) | | | 80 | | | 52 | | | (1,962) | | | 2,014 | |
| Interest Expense | 37 | | | 35 | | | 2 | | | 105 | | | 103 | | | 2 | |
| (Loss) Income Before Income Taxes | (4) | | | (91) | | | 87 | | | 298 | | | (1,765) | | | 2,063 | |
| Income Tax (Benefit) Expense | (1) | | | (18) | | | 17 | | | 39 | | | (365) | | | 404 | |
| | | | | | | | | | | |
| Segment (Loss) Income | $ | (3) | | | $ | (73) | | | $ | 70 | | | $ | 259 | | | $ | (1,400) | | | $ | 1,659 | |
| | | | | | | | | | | |
| Piedmont LDC throughput (dekatherms) | 134,549,588 | | | 115,549,371 | | | 19,000,217 | | | 390,210,785 | | | 360,861,306 | | | 29,349,479 | |
| Duke Energy Midwest LDC throughput (Mcf) | 10,268,918 | | | 9,678,342 | | | 590,576 | | | 62,220,827 | | | 58,570,583 | | | 3,650,244 | |
Three Months Ended September 30, 2021, as compared to September 30, 2020
Gas Utilities and Infrastructure’s results were impacted primarily by the cancellation of the ACP pipeline in the prior year. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven primarily by:
•a $34 million increase due to higher natural gas costs passed through to customers, higher volumes, and higher off-system sales natural gas costs; and
•a $12 million increase due to growth in base rates and riders at Piedmont and growth in riders in the Midwest.
| | | | | |
| MD&A | SEGMENT RESULTS — GAS UTILITIES AND INFRASTRUCTURE |
Operating Expenses.The variance was driven primarily by:
•a $34 million increase in cost of natural gas due to higher natural gas prices, higher volumes, and increased off-system sales natural gas costs; and
•a $9 million increase in depreciation due to additional plant in service.
Equity in earnings (losses) of unconsolidated affiliates. The variance was primarily driven by the cancellation of the ACP pipeline in the prior year.
Income Tax Benefit. The decrease in tax benefit was primarily due to a decrease in pretax losses.The ETRs for the three months ended September 30, 2021, and 2020, were 25.0% and 19.8%, respectively. The increase in the ETR was primarily due to certain favorable tax credits.
Nine Months Ended September 30, 2021, as compared to September 30, 2020
Gas Utilities and Infrastructure’s results were impacted primarily by the cancellation of the ACP pipeline in the prior year and margin growth. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven primarily by:
•a $130 million increase due to higher natural gas costs passed through to customers, higher volumes, and increased off-system sales natural gas costs;
•a $15 million increase due to Tennessee base rate case increases;
•an $11 million increase due to North Carolina IMR; and
•a $10 million increase due to revenue from the Capital Expenditure Program (CEP) rider related to 2019 and 2020 activity.
Operating Expenses.The variance was driven primarily by:
•a $130 million increase in cost of natural gas due to higher natural gas prices, higher volumes, and increased off-system sales natural gas costs; and
•a $23 million increase in depreciation due to additional plant in service.
Equity in earnings (losses) of unconsolidated affiliates. The variance was driven primarily by the cancellation of the ACP pipeline in the prior year.
Income Tax Expense. The increase in tax expense was primarily due to the cancellation of the ACP pipeline project recorded in the prior year. The ETRs for the nine months ended September 30, 2021, and 2020, were 13.1% and 20.7%, respectively. The decrease in the ETR was primarily due to the cancellation of the ACP pipeline project recorded in the prior year.
Commercial Renewables
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance | | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 117 | | | $ | 126 | | | $ | (9) | | | $ | 355 | | | $ | 378 | | | $ | (23) | |
| Operating Expenses | | | | | | | | | | | |
| Operation, maintenance and other | 90 | | | 72 | | | 18 | | | 240 | | | 204 | | | 36 | |
| Depreciation and amortization | 58 | | | 52 | | | 6 | | | 167 | | | 148 | | | 19 | |
| Property and other taxes | 10 | | | 8 | | | 2 | | | 28 | | | 24 | | | 4 | |
| Impairment of assets and other charges | — | | | — | | | — | | | — | | | 6 | | | (6) | |
| Total operating expenses | 158 | | | 132 | | | 26 | | | 435 | | | 382 | | | 53 | |
| | | | | | | | | | | |
| Operating Loss | (41) | | | (6) | | | (35) | | | (80) | | | (4) | | | (76) | |
| Other Income and Expenses, net | (2) | | | (1) | | | (1) | | | (24) | | | — | | | (24) | |
| Interest Expense | 20 | | | 18 | | | 2 | | | 53 | | | 49 | | | 4 | |
| Loss Before Income Taxes | (63) | | | (25) | | | (38) | | | (157) | | | (53) | | | (104) | |
| Income Tax Benefit | (6) | | | (15) | | | 9 | | | (56) | | | (52) | | | (4) | |
| Add: Loss Attributable to Noncontrolling Interests | 135 | | | 70 | | | 65 | | | 253 | | | 208 | | | 45 | |
| Segment Income | $ | 78 | | | $ | 60 | | | $ | 18 | | | $ | 152 | | | $ | 207 | | | $ | (55) | |
| | | | | | | | | | | |
| Renewable plant production, GWh | 2,567 | | | 2,563 | | | 4 | | | 7,942 | | | 7,660 | | | 282 | |
Net proportional MW capacity in operation(a) | | | | | | | 4,630 | | | 3,984 | | | 646 | |
(a)Certain projects are included in tax equity structures where investors have differing interests in the project's economic attributes. One hundred percent of the tax equity project's capacity is included in the table above.
| | | | | |
| MD&A | SEGMENT RESULTS — COMMERCIAL RENEWABLES |
Three Months Ended September 30, 2021, as compared to September 30, 2020
Commercial Renewables' results were favorable to prior year primarily driven by the growth of new project investments. Since the prior year period, Commercial Renewables has placed in service approximately 650 MW.
Operating Revenues. The variance was primarily driven by an $8 million decrease due to lower wind resource and operating downtime.
Operating Expenses. The variance was primarily driven by a $12 million increase in operating expenses, depreciation expense and property tax expense associated with the growth of new project investments placed in service, $8 million increase for higher engineering and construction costs within the distributed energy portfolio and $3 million increase attributed to maintenance at several facilities.
Income Tax Benefit. The decrease in the tax benefit was primarily driven by an increase in taxes associated with tax equity investments and a decrease in production tax credits generated partially offset by an increase in pretax losses.
Loss Attributable to Noncontrolling Interests. The increase was primarily driven by the growth of new wind and solar project investments financed with tax equity.
Nine Months Ended September 30, 2021, as compared to September 30, 2020
Commercial Renewables' results were unfavorable to prior year primarily driven by the impacts from Texas Storm Uri, which resulted in a $35 million pretax loss, as well as unfavorable wind resource and fewer projects being placed in service in the current year.
Operating Revenues. The variance was primarily driven by a $20 million decrease due to lower wind resource and operating downtime and a $15 million decrease for lower market prices in the current year impacting the wind portfolio. This was partially offset by an $8 million increase for market sales in excess of market purchases during Texas Storm Uri and a $4 million increase due to growth of new projects.
Operating Expenses. The increase was primarily due to $33 million for higher operating expenses, depreciation expense and property tax expense as a result of the growth in new projects placed in service since prior year, $11 million increase for higher operating expenses attributed to maintenance at several wind and solar facilities, an $11 million increase for higher engineering and construction costs within the distributed energy portfolio and a $2 million increase associated with Texas Storm Uri. This was partially offset by a $6 million decrease related to an impairment charge in the prior year for a non-contracted wind project.
Other Income and Expenses, net. The variance was primarily driven by a $29 million loss in equity earnings due to the impacts of Texas Storm Uri, partially offset by $4 million in equity earnings from the wind and distributed asset portfolios.
Income Tax Benefit. The increase in the tax benefit was primarily driven by an increase in pretax losses partially offset by an increase in taxes associated with tax equity investments and a decrease in production tax credits generated.
Loss Attributable to Noncontrolling Interests. The variance was primarily driven by a $57 million net increase from the growth of new project investments financed with tax equity, partially offset by a $12 million loss resulting from Texas Storm Uri.
Other
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance | | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 28 | | | $ | 24 | | | $ | 4 | | | $ | 81 | | | $ | 73 | | | $ | 8 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| Operating Expenses | 46 | | | 37 | | | 9 | | | 282 | | | (15) | | | 297 | |
| Losses on Sales of Other Assets and Other, net | (1) | | | — | | | (1) | | | (1) | | | — | | | (1) | |
| Operating (Loss) Income | (19) | | | (13) | | | (6) | | | (202) | | | 88 | | | (290) | |
| Other Income and Expenses, net | 25 | | | 43 | | | (18) | | | 78 | | | 55 | | | 23 | |
| Interest Expense | 163 | | | 160 | | | 3 | | | 470 | | | 498 | | | (28) | |
| Loss Before Income Taxes | (157) | | | (130) | | | (27) | | | (594) | | | (355) | | | (239) | |
| Income Tax Benefit | (63) | | | (66) | | | 3 | | | (166) | | | (149) | | | (17) | |
| Less: Income Attributable to Noncontrolling Interests | 1 | | | — | | | 1 | | | 1 | | | — | | | 1 | |
| Less: Preferred Dividends | 39 | | | 39 | | | — | | | 92 | | | 93 | | | (1) | |
| Net Loss | $ | (134) | | | $ | (103) | | | $ | (31) | | | $ | (521) | | | $ | (299) | | | $ | (222) | |
Three Months Ended September 30, 2021, as compared to September 30, 2020
The higher net loss was driven by interest income related to a tax refund recorded in the prior year, impairments to optimize the company’s real estate portfolio and reduce office space as parts of the business move to a hybrid and remote workforce strategy and a lower income tax benefit due to higher tax optimization achieved in the prior year partially offset by higher pretax loss.
Operating Expenses. The increase was primarily driven by asset impairments to optimize the company's real estate portfolio and reduce office space as parts of the business move to a hybrid and remote workforce strategy.
Other Income and Expenses, net. The variance was primarily due to higher interest income in the prior year related to a tax refund of AMT credit carryforwards.
Interest Expense. The variance was primarily due to higher outstanding long-term debt.
| | | | | |
| MD&A | SEGMENT RESULTS - OTHER |
Nine Months Ended September 30, 2021, as compared to September 30, 2020
The higher net loss was driven by asset impairments to optimize the company's real estate portfolio and reduce office space as parts of the business move to a hybrid and remote workforce strategy as well as a reversal of severance costs in the prior year.
Operating Expenses. The increase was primarily due to asset impairments to optimize the company's real estate portfolio and reduce office space as parts of the business move to a hybrid and remote workforce strategy as well as a reversal of severance costs in the prior year.
Other Income and Expenses, net. The variance was primarily due to higher equity earnings from the NMC investment and market returns on investments that fund certain employee benefit obligations, partially offset by lower interest income in the prior year related to a tax refund of AMT credit carryforwards.
Interest Expense. The variance was primarily due to lower interest rates.
Income Tax Benefit. The increase in the tax benefit was primarily driven by an increase in pretax losses, partially offset by lower state tax expense in the prior year. The ETRs for the nine months ended September 30, 2021, and 2020, were 27.9% and 42.0%, respectively. The decrease in the ETR was primarily due to lower state tax expense in the prior year.
DUKE ENERGY CAROLINAS
Results of Operations
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 5,430 | | | $ | 5,416 | | | $ | 14 | |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 1,218 | | | 1,326 | | | (108) | |
| Operation, maintenance and other | 1,347 | | | 1,218 | | | 129 | |
| Depreciation and amortization | 1,088 | | | 1,090 | | | (2) | |
| Property and other taxes | 248 | | | 213 | | | 35 | |
| Impairment of assets and other charges | 238 | | | 22 | | | 216 | |
| Total operating expenses | 4,139 | | | 3,869 | | | 270 | |
| Gains on Sales of Other Assets and Other, net | 1 | | | 1 | | | — | |
| Operating Income | 1,292 | | | 1,548 | | | (256) | |
| Other Income and Expenses, net | 218 | | | 128 | | | 90 | |
| Interest Expense | 400 | | | 370 | | | 30 | |
| Income Before Income Taxes | 1,110 | | | 1,306 | | | (196) | |
| Income Tax Expense | 40 | | | 178 | | | (138) | |
| Net Income | $ | 1,070 | | | $ | 1,128 | | | $ | (58) | |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
| | | | | |
| Increase (Decrease) over prior year | 2021 |
| Residential sales | 4.9 | % |
| General service sales | 2.0 | % |
| Industrial sales | 5.8 | % |
| Wholesale power sales | 6.0 | % |
| Joint dispatch sales | 23.0 | % |
| Total sales | 5.2 | % |
| Average number of customers | 2.4 | % |
Nine Months Ended September 30, 2021, as compared to September 30, 2020
Operating Revenues.The variance was driven primarily by:
•an $88 million increase in weather-normal retail sales volumes;
•a $57 million increase in retail sales due to more favorable weather; and
•a $22 million increase due to higher pricing from the North Carolina retail rate case, net of a return of EDIT to customers.
Partially offset by:
•a $115 million decrease in fuel revenues due to lower prices, partially offset by higher retail sales volumes; and
•a $40 million decrease in rider revenues primarily due to energy efficiency programs.
| | | | | |
| MD&A | DUKE ENERGY CAROLINAS |
Operating Expenses. The variance was driven primarily by:
•a $216 million increase in impairment of assets and other charges due to the 2018 South Carolina rate case settlement and optimization of the company's real estate portfolio and reduction of office space as parts of the business move to a hybrid and remote workforce strategy, partially offset by a prior year Clemson University Combined Heat and Power Plant impairment;
•a $129 million increase in operation, maintenance and other expense primarily due to higher employee-related expenses and a severance cost adjustment in the prior year related to the 2019 North Carolina retail rate case, and higher costs associated with the implementation of Customer Connect; and
•a $35 million increase in property and other taxes primarily due to property tax valuation adjustments and a prior year sales and use tax refund.
Partially offset by:
•a $108 million decrease in fuel used in electric generation and purchased power primarily associated with the recovery of fuel expenses, partially offset by higher natural gas prices and changes in the generation mix.
Other Income and Expense, net. The variance was primarily due to coal ash insurance proceeds and lower non-service pension costs.
Interest Expense. The variance was driven by amortization of carrying costs related to excess deferred taxes, and lower debt return on coal ash projects.
Income Tax Expense.The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes and a decrease in pretax income.
PROGRESS ENERGY
Results of Operations
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 8,417 | | | $ | 8,117 | | | $ | 300 | |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 2,702 | | | 2,628 | | | 74 | |
| Operation, maintenance and other | 1,863 | | | 1,789 | | | 74 | |
| Depreciation and amortization | 1,430 | | | 1,356 | | | 74 | |
| Property and other taxes | 419 | | | 419 | | | — | |
| Impairment of assets and other charges | 79 | | | 1 | | | 78 | |
| Total operating expenses | 6,493 | | | 6,193 | | | 300 | |
| Gains on Sales of Other Assets and Other, net | 9 | | | 9 | | | — | |
| Operating Income | 1,933 | | | 1,933 | | | — | |
| Other Income and Expenses, net | 167 | | | 89 | | | 78 | |
| Interest Expense | 592 | | | 599 | | | (7) | |
| Income Before Income Taxes | 1,508 | | | 1,423 | | | 85 | |
| Income Tax Expense | 174 | | | 190 | | | (16) | |
| Net Income | 1,334 | | | 1,233 | | | 101 | |
| | | | | |
| | | | | |
| Less: Net Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | |
| Net Income Attributable to Parent | $ | 1,333 | | | $ | 1,232 | | | $ | 101 | |
Nine Months Ended September 30, 2021, as compared to September 30, 2020
Operating Revenues. The variance was driven primarily by:
•a $146 million increase in fuel cost recovery driven by higher fuel prices, higher volumes in the current year and accelerated recovery of retired Crystal River coal units;
•a $136 million increase in retail pricing due to the North Carolina rate case and base rate adjustments at Duke Energy Florida related to annual increases from the 2017 Settlement Agreement and the Form 10‑QTsolar base rate adjustment;
•a $73 million increase in weather-normal retail sales volumes;
•a $32 million increase in other revenues at Duke Energy Florida primarily due to higher transmission revenues and higher customer charges that were waived due to COVID-19 in the prior year; and
•a $19 million increase in rider revenues at Duke Energy Florida primarily due to increased retail sales volumes.
Partially offset by:
•a $103 million decrease in storm revenues at Duke Energy Florida due to full recovery of Hurricane Dorian costs in the prior year.
Operating Expenses. The variance was driven primarily by:
•a $78 million increase in impairment of assets and other charges primarily due to the 2018 South Carolina rate case settlement at Duke Energy Progress and optimization of the company's real estate portfolio and reduction of office space as parts of December 31, 2016,the business move to a hybrid and remote workforce strategy;
•a $74 million increase in fuel used in electric generation and purchased power primarily due to higher demand, changes in generation mix and recognition of RECs used for compliance at Duke Energy Progress, and outside fuel purchases during a major plant outage;
•a $74 million increase in operation, maintenance and other expense driven by a prior year severance cost adjustment related to the transition period from November 1, 2016,2019 North Carolina retail rate case, outage costs and other employee-related costs, partially offset by reduced storm amortization at Duke Energy Florida; and
•a $74 million increase in depreciation and amortization primarily due to December 31, 2016.accelerated depreciation of retired Crystal River coal units and an increase in plant base at Duke Energy Florida, partially offset by the extension of the lives at nuclear facilities at Duke Energy Progress.
Other Income and Expenses, net. The increase is primarily due to coal ash insurance litigation proceeds at Duke Energy Progress, lower non-service pension costs and unrealized gains on the nuclear decommissioning trust fund at Duke Energy Florida.
Income Tax Expense. The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes, partially offset by an increase in pretax income.
DUKE ENERGY PROGRESS
Results of Operations
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 4,417 | | | $ | 4,207 | | | $ | 210 | |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 1,368 | | | 1,337 | | | 31 | |
| Operation, maintenance and other | 1,092 | | | 970 | | | 122 | |
| Depreciation and amortization | 811 | | | 833 | | | (22) | |
| Property and other taxes | 129 | | | 129 | | | — | |
| Impairment of assets and other charges | 60 | | | 5 | | | 55 | |
| Total operating expenses | 3,460 | | | 3,274 | | | 186 | |
| Gains on Sales of Other Assets and Other, net | 8 | | | 8 | | | — | |
| Operating Income | 965 | | | 941 | | | 24 | |
| Other Income and Expenses, net | 111 | | | 52 | | | 59 | |
| Interest Expense | 226 | | | 203 | | | 23 | |
| Income Before Income Taxes | 850 | | | 790 | | | 60 | |
| Income Tax Expense | 50 | | | 79 | | | (29) | |
| Net Income | $ | 800 | | | $ | 711 | | | $ | 89 | |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
| | | | | |
| Increase (Decrease) over prior period | 2021 |
| Residential sales | 6.5 | % |
| General service sales | 3.9 | % |
| Industrial sales | 2.7 | % |
| Wholesale power sales | 5.2 | % |
| Joint dispatch sales | (2.6) | % |
| Total sales | 4.1 | % |
| Average number of customers | 0.4 | % |
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | | | | | |
| Regulated natural gas | $ | 877 |
| | $ | 815 |
| | $ | 62 |
|
| Nonregulated natural gas and other | 7 |
| | 8 |
| | (1 | ) |
| Total operating revenues | 884 |
| | 823 |
| | 61 |
|
| Operating Expenses | | | | | |
| Cost of natural gas | 333 |
| | 289 |
| | 44 |
|
| Operation, maintenance and other | 226 |
| | 221 |
| | 5 |
|
| Depreciation and amortization | 109 |
| | 103 |
| | 6 |
|
| Property and other taxes | 38 |
| | 33 |
| | 5 |
|
| Impairment charges | 7 |
| | — |
| | 7 |
|
| Total operating expenses | 713 |
| | 646 |
| | 67 |
|
| Operating Income | 171 |
| | 177 |
| | (6 | ) |
| Equity in earnings of unconsolidated affiliates | 8 |
| | 25 |
| | (17 | ) |
| Other income and expenses, net | (1 | ) | | (1 | ) | | — |
|
| Total other income and expenses | 7 |
| | 24 |
| | (17 | ) |
| Interest Expense | 59 |
| | 50 |
| | 9 |
|
| Income Before Income Taxes | 119 |
| | 151 |
| | (32 | ) |
| Income Tax Expense | 43 |
| | 57 |
| | (14 | ) |
| Net Income | $ | 76 |
| | $ | 94 |
| | $ | (18 | ) |
Operating Revenues. The variance was driven primarily by:
•a $72 million increase due to higher pricing from the North Carolina retail rate case, net of a return of EDIT to customers;
•a $54 million increase in weather-normal retail sales volumes in the current year;
•a $46 million increase in retail sales due to more favorable weather;
•a $24 million increase in fuel cost recovery driven by higher fuel prices and volumes in the current year; and
•a $15 million increase in wholesale revenues due to higher capacity volumes, partially offset by lower recovery of coal ash costs.
Operating Expenses. The variance was driven primarily by:
•a $122 million increase in operation, maintenance and other expense primarily due to higher employee-related costs and a severance cost adjustment in the prior year related to the 2019 North Carolina retail rate case, increased outage costs and energy efficiency program costs;
•a $55 million increase in impairment of assets and other charges primarily due to the 2018 South Carolina rate case settlement at Duke Energy Progress and optimization of the company's real estate portfolio and reduction of office space as parts of the business move to a hybrid and remote workforce strategy; and
•a $31 million increase in fuel used in electric generation and purchased power primarily due to higher demand and changes in generation mix as well as recognition of RECs used for compliance.
Partially offset by:
•a $22 million decrease in depreciation and amortization expense, primarily driven by the extension of the lives of nuclear facilities.
Other Income and Expense, net. The increase is primarily due to coal ash insurance litigation proceeds and lower non-service pension costs.
Interest Expense. The variance was driven primarily by lower debt return on coal ash projects.
Income Tax Expense.The decrease in tax expense was primarily due to an increase in the amortization of excess deferred taxes, partially offset by an increase in pretax income.
DUKE ENERGY FLORIDA
Results of Operations
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 3,987 | | | $ | 3,897 | | | $ | 90 | |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 1,335 | | | 1,291 | | | 44 | |
| Operation, maintenance and other | 760 | | | 806 | | | (46) | |
| Depreciation and amortization | 619 | | | 523 | | | 96 | |
| Property and other taxes | 290 | | | 290 | | | — | |
| Impairment of assets and other charges | 19 | | | (4) | | | 23 | |
| Total operating expenses | 3,023 | | | 2,906 | | | 117 | |
| Gains on Sales of Other Assets and Other, net | 1 | | | — | | | 1 | |
| Operating Income | 965 | | | 991 | | | (26) | |
| Other Income and Expenses, net | 54 | | | 36 | | | 18 | |
| Interest Expense | 239 | | | 245 | | | (6) | |
| Income Before Income Taxes | 780 | | | 782 | | | (2) | |
| Income Tax Expense | 149 | | | 159 | | | (10) | |
| Net Income | $ | 631 | | | $ | 623 | | | $ | 8 | |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Wholesale power sales include both billed and unbilled sales. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
| | | | | |
| Increase (Decrease) over prior period | 2021 |
| Residential sales | (0.5) | % |
| General service sales | 3.1 | % |
| Industrial sales | 8.1 | % |
| Wholesale and other | 20.1 | % |
| Total sales | 1.1 | % |
| Average number of customers | 1.9 | % |
Nine Months Ended September 30, 2021, as compared to September 30, 2020
Operating Revenues. The variance was driven primarily by:
•a $122 million increase in fuel and capacity revenues primarily due to higher retail sales volumes and accelerated recovery of the retired coal units Crystal River 1 and 2;
•a $64 million increase in retail pricing due to base rate adjustments related to annual increases from the 2017 Settlement Agreement and the solar base rate adjustment;
•a $32 million increase in other revenues primarily due to lower revenues in the prior year due to the moratorium on customer late payments and service charges in response to the COVID-19 pandemic, lower outdoor lighting equipment rentals in the prior year, and higher transmission revenues due to prior year customer settlement and the increased network billing rates;
•a $19 million increase in rider revenues primarily due to increased volumes; and
•a $16 million increase in weather-normal retail sales volumes.
Partially offset by:
•a $103 million decrease in storm revenues due to full recovery of Hurricane Dorian costs in the prior year;
•a $37 million decrease in retail sales, net of fuel revenues, due to unfavorable weather in the current year; and
•an $18 million decrease in wholesale power revenues, net of fuel, primarily due to a restructured capacity contract.
Operating Expenses. The variance was driven primarily by:
•a $96 million increase in depreciation and amortization primarily due to accelerated depreciation of retired coal units Crystal River 1 and 2 and an increase in plant base;
•a $44 million increase in fuel used in electric generation and purchased power primarily due to higher natural gas prices, and outside fuel purchases during a major plant outage at the Hines facility; and
•a $23 million increase in impairment of assets and other charges to optimize the company's real estate portfolio and reduce office space as parts of the business move to a hybrid and remote workforce strategy.
Partially offset by:
•a $46 million decrease in operation, maintenance and other expense primarily due to decreased storm amortization costs, partially offset by outage maintenance costs at Hines.
Other Income and Expense, net. The increase is primarily due to lower non-service pension costs and gains on the nuclear decommissioning trust fund.
Income Tax Expense. The decrease in tax expense was primarily due to unfavorable tax adjustments in the prior year.
DUKE ENERGY OHIO
Results of Operations
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance |
| Operating Revenues | | | | | |
| Regulated electric | $ | 1,119 | | | $ | 1,070 | | | $ | 49 | |
| Regulated natural gas | 375 | | | 324 | | | 51 | |
| | | | | |
| Total operating revenues | 1,494 | | | 1,394 | | | 100 | |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 294 | | | 258 | | | 36 | |
| | | | | |
| Cost of natural gas | 76 | | | 46 | | | 30 | |
| Operation, maintenance and other | 335 | | | 333 | | | 2 | |
| Depreciation and amortization | 228 | | | 208 | | | 20 | |
| Property and other taxes | 266 | | | 244 | | | 22 | |
| Impairment of assets and other charges | 5 | | | — | | | 5 | |
| Total operating expenses | 1,204 | | | 1,089 | | | 115 | |
| | | | | |
| Operating Income | 290 | | | 305 | | | (15) | |
| Other Income and Expenses, net | 14 | | | 11 | | | 3 | |
| Interest Expense | 82 | | | 75 | | | 7 | |
| Income Before Income Taxes | 222 | | | 241 | | | (19) | |
| Income Tax Expense | 34 | | | 40 | | | (6) | |
| | | | | |
| | | | | |
| Net Income | $ | 188 | | | $ | 201 | | | $ | (13) | |
The following table shows the percent changes in GWh sales of electricity, dekatherms of natural gas delivered and average number of electric and natural gas customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
| | | | | | | | |
| Electric | Natural Gas |
| Increase (Decrease) over prior year | 2021 | 2021 |
| Residential sales | 2.6 | % | 6.8 | % |
| General service sales | 3.8 | % | 9.8 | % |
| Industrial sales | 5.5 | % | 4.2 | % |
| Wholesale electric power sales | 104.7 | % | n/a |
| Other natural gas sales | n/a | 2.5 | % |
| Total sales | 4.6 | % | 6.2 | % |
| Average number of customers | 0.5 | % | 0.8 | % |
Nine Months Ended September 30, 2021, as compared to September 30, 2020
Operating Revenues. The variance was driven primarily by:
•a $31 million increase in fuel related revenues primarily due to higher natural gas prices and increased volumes;
•a $27 million increase in revenues related to OVEC collections and OVEC sales into PJM;
•a $16 million increase in PJM transmission revenues as a result of increased capital spend;
•an $11 million increase in retail pricing primarily due to the Duke Energy Kentucky general rate case; and
•a $6 million increase in revenues due to favorable weather.
Operating Expenses. The variance was driven primarily by:
•a $66 million increase in fuel expense primarily driven by higher retail prices and increased volumes for natural gas and purchased power;
•a $22 million increase in property and other taxes primarily due to increased plant in service, higher kilowatt and natural gas distribution taxes due to increased usage and a lower Network Integration Transmission Service tax deferral;
•a $20 million increase in depreciation and amortization primarily driven by an increase in distribution plant in service; and
•a $5 million increase in impairment of assets and other charges to optimize the company's real estate portfolio and reduce office space as parts of the business moves to a hybrid and remote workforce strategy.
Income Tax Expense. The decrease in tax expense was primarily due to a decrease in pretax income.
DUKE ENERGY INDIANA
Results of Operations
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance |
| Operating Revenues | $ | 2,366 | | | $ | 2,070 | | | $ | 296 | |
| Operating Expenses | | | | | |
| Fuel used in electric generation and purchased power | 710 | | | 577 | | | 133 | |
| Operation, maintenance and other | 543 | | | 564 | | | (21) | |
| Depreciation and amortization | 458 | | | 415 | | | 43 | |
| Property and other taxes | 57 | | | 57 | | | — | |
| Impairment of assets and other charges | 8 | | | — | | | 8 | |
| Total operating expenses | 1,776 | | | 1,613 | | | 163 | |
| | | | | |
| Operating Income | 590 | | | 457 | | | 133 | |
| Other Income and Expenses, net | 31 | | | 28 | | | 3 | |
| Interest Expense | 148 | | | 114 | | | 34 | |
| Income Before Income Taxes | 473 | | | 371 | | | 102 | |
| Income Tax Expense | 77 | | | 72 | | | 5 | |
| Net Income | $ | 396 | | | $ | 299 | | | $ | 97 | |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized.
| | | | | |
| Increase (Decrease) over prior year | 2021 |
| Residential sales | 3.0 | % |
| General service sales | 4.6 | % |
| Industrial sales | 5.5 | % |
| Wholesale power sales | 7.8 | % |
| Total sales | 4.5 | % |
| Average number of customers | 1.0 | % |
Nine Months Ended September 30, 2021, as compared to September 30, 2020
Operating Revenues.The variance was driven primarily by:
•a $128 million increase primarily due to higher base rate pricing from the Indiana retail rate case, net of lower rider revenues;
•a $109 million increase in fuel revenues primarily due to higher fuel cost recovery driven by customer demand and fuel prices;
•a $29 million increase in weather-normal retail sales volumes driven by higher nonresidential customer demand; and
•a $24 million increase in wholesale revenues primarily related to the true up of wholesale transmission revenues and higher rates in the current year.
Operating Expenses.The variance was driven primarily by:
•a $133 million increase in fuel used in electric generation and purchased power expense primarily due to higher purchased power expense, higher coal and natural gas costs and higher amortization of deferred fuel costs;
•a $43 million increase in depreciation and amortization primarily due to a change in depreciation rates from the Indiana retail rate case, amortization of deferred coal ash pond ARO and additional plant in service; and
•an $8 million increase in impairment of assets and other charges to optimize the company’s real estate portfolio and reduce office space as parts of the business move to a hybrid workforce strategy.
Partially offset by:
•a $21 million decrease in operation, maintenance and other primarily due to major outage costs incurred in the prior year and outage delays in the current year.
Interest Expense. The variance is primarily due to higher post-in-service carrying costs interest resulting from the Indiana retail rate case and higher prior year coal ash spend debt returns on the Indiana Department of Environmental Management's approved ash basin closure projects.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income partially offset by an increase in the amortization of excess deferred taxes.
PIEDMONT
Results of Operations
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| (in millions) | 2021 | | 2020 | | Variance |
| | | | | |
| | | | | |
| | | | | |
| Operating Revenues | $ | 1,016 | | | $ | 871 | | | $ | 145 | |
| Operating Expenses | | | | | |
| Cost of natural gas | 354 | | | 254 | | | 100 | |
| Operation, maintenance and other | 231 | | | 234 | | | (3) | |
| Depreciation and amortization | 150 | | | 133 | | | 17 | |
| Property and other taxes | 44 | | | 37 | | | 7 | |
| Impairment of assets and other charges | 9 | | | 7 | | | 2 | |
| Total operating expenses | 788 | | | 665 | | | 123 | |
| | | | | |
| Operating Income | 228 | | | 206 | | | 22 | |
| Other Income and Expenses, net | 51 | | | 44 | | | 7 | |
| Interest Expense | 88 | | | 89 | | | (1) | |
| Income Before Income Taxes | 191 | | | 161 | | | 30 | |
| Income Tax Expense | 16 | | | 6 | | | 10 | |
| Net Income | $ | 175 | | | $ | 155 | | | $ | 20 | |
The following table shows the percent changes in dekatherms delivered and average number of customers. The percentages for all throughput deliveries represent billed and unbilled sales. Amounts are not weather-normalized.
|
| | | | |
| Increase (Decrease) over prior year | 2017 |
2021 |
| Residential deliveries | (19.216.0 | )% |
| Commercial deliveries | (11.814.3 | )% |
| Industrial deliveries | (4.35.4 | )% |
| Power generation deliveries | (11.06.7 | )% |
| For resale | (6.920.0 | )% |
| Total throughput deliveries | (10.58.1 | )% |
| Secondary market volumes | 6.2(0.9) | % |
| Average number of customers | 1.62.0 | % |
Piedmont's throughput was 334,781,316 dekatherms and 374,214,204 dekatherms for the nine months ended September 30, 2017, and 2016, respectively. Due to the margin decoupling mechanism in North Carolina and weather normalization adjustment (WNA) mechanisms in South Carolina and Tennessee, changes in throughput deliveries do not have a material impact on Piedmont's revenues or earnings. The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The WNAweather normalization adjustment mechanisms mostly offset the impact of weather on bills rendered, but do not ensure full recovery of approved margin during periods when winter weather is significantly warmer or colder than normal.
Nine Months Ended September 30, 2017,2021, as Comparedcompared to September 30, 20162020
Operating Revenues.The variance was driven primarily by:
•a $44$100 million increase due to higher natural gas costs passed through to customers primarilyand increased off-system sales natural gas costs;
•a $15 million increase due to higher natural gas prices;Tennessee base rate case increases; and
a $17•an $11 million increase in revenuesdue to residential and commercial customers, net ofNorth Carolina IMR.
Operating Expenses.The variance was driven primarily by:
•a $100 million increase due to higher natural gas costs passed through to customers primarily due to Integrity Management Rider (IMR) rate adjustments and customer growth, partially offset by wholesale marketing revenue.
Operating Expenses.The variance was driven by:
a $44 million increase in costs ofincreased off-system sales natural gas primarily due to higher natural gas prices;costs;
an $11•a $17 million increase in depreciation expense and property and franchise taxes due to additional plant in service and software projects in service; and
•a $7 million increase in property and other taxes due to an impairment of software resulting from planned accounting systemhigher current year property taxes in North Carolina and process integrationSouth Carolina.
Other Income and Expense, net. The variance is primarily driven by favorable AFUDC equity and intercompany interest income.
Income Tax Expense. The increase in 2018.
Equity in Earnings of Unconsolidated Affiliates. The decreasetax expense was primarily due to equity earnings from the investment in SouthStar Energy Services, LLC (SouthStar) in the prior year. Piedmont sold its 15 percent membership interest in SouthStar on October 3, 2016.
Income Tax Expense. The variance was primarily due to a decreasean increase in pretax income. The effective tax rates for the nine months ended September 30, 2017, and 2016 were 36.1 percent and 37.7 percent, respectively. The decrease in the effective tax rate was primarily due to favorable tax return true ups and lower North Carolina corporate tax rates.
| | | | | |
| MD&A | LIQUIDITY AND CAPITAL RESOURCES |
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt and equity issuances and its existing cash and cash equivalents to fund its liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. See Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016, for2020, included a summary and detailed discussion of projected primary sources and uses of cash for 20172021 to 2019.2023.
The Subsidiary Registrants generally maintain minimal cash balances and use short-term borrowings to meet their working capital needs and other cash requirements. The Subsidiary Registrants, excluding Progress Energy (Parent), support their short-term borrowing needs through participation withIn January 2021, Duke Energy entered into a definitive agreement with an affiliate of GIC, for GIC to make an indirect minority interest investment of 19.9% in Duke Energy Indiana. The investment will be completed following two closings for an aggregate purchase price of approximately $2 billion. The first closing occurred on September 8, 2021, and certainDuke Energy Indiana Holdco, LLC, the holding company for Duke Energy Indiana, issued 11.05% of its other subsidiariesmembership interests in a money pool arrangement. The companies with short-term funds may provide short-term loans to affiliates participating under this arrangement.
exchange for 50% of the total investment amount. Duke Energy andhas the Subsidiary Registrants, excluding Progress Energy (Parent), may also use short-term debt, including commercial paper and the money pool, as a bridgediscretion to long-term debt financings. The levels of borrowing may vary significantly over the course of the year due todetermine the timing of long-term debt financingsthe second closing, but the closing will occur no later than January 2023. At the second closing, Duke Energy Indiana Holdco, LLC will issue additional membership interests for the remaining 50% of the total investment amount, and the impact of fluctuationsGIC's minority interest ownership in cash flows from operations. From time to time, Duke Energy’s current liabilities may exceed current assets resultingEnergy Indiana Holdco, LLC will be 19.9%. Proceeds from the useminority interest investment are expected to address common equity needs through 2025 to partially fund Duke Energy's $59 billion capital and investment expenditure plan.
As of short-term debt as aSeptember 30, 2021, Duke Energy had approximately $548 million of cash on hand, $6.3 billion available under its $8 billion Master Credit Facility and $500 million available under the $1 billion Three-Year Revolving Credit Facility. Duke Energy expects to have sufficient liquidity in the form of cash on hand, cash from operations and available credit capacity to support its funding source to meet scheduled maturities of long-term debt, as well as cash needs, which can fluctuate due to the seasonality of its business.
CREDIT FACILITIES AND REGISTRATION STATEMENTS
needs. Refer to Note 65 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding Duke Energy's debt issuances and maturities, and available credit facilities including the Master Credit Facility.
Shelf Registration
In September 2016, Duke Energy filed a registration statement (Form S-3) with the U.S. Securities and Exchange Commission (SEC). Under this Form S-3, which is uncapped, the Duke Energy Registrants, excluding Progress Energy, may issue debt and other securities in the future at amounts, prices and with terms to be determined at the time of future offerings. The registration statement also allows for the issuance of common stock by Duke Energy.
In January 2017, Duke Energy amended its Form S-3 to add Piedmont as a registrant and included in the amendment a prospectus for Piedmont under which it may issue debt securities in the same manner as other Duke Energy Registrants.
DEBT MATURITIES
Refer to Note 6 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant components of Current Maturities of Long-Term Debt on the Condensed Consolidated Balance Sheets.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operations of Electric Utilities and Infrastructure and Gas Utilities and Infrastructure are primarily driven by sales of electricity and natural gas, respectively, and costs of operations. These cash flows from operations are relatively stable and comprise a substantial portion of Duke Energy’s operating cash flows. Weather conditions, working capital and commodity price fluctuations, and unanticipated expenses including unplanned plant outages, storms, legal costs and related settlements can affect the timing and level of cash flows from operations. Duke Energy believes it has sufficient liquidity resources through the commercial paper markets, and ultimately the Master Credit and Revolving Facilities, to support these operations, including Hurricane Irma storm restoration costs. Cash flows from operations are subject to a number of other factors, including but not limited to regulatory constraints, economic trends and market volatility (see “Item 1A. Risk Factors,” in the Duke Energy Registrants’ Annual Reports on Form 10-K for additional information).
Restrictive Debt Covenants
The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. The Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio not to exceed 65 percent for all borrowers except Piedmont. The debt-to-total capitalization ratio for Piedmont is not to exceed 70 percent. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of September 30, 2017, each of the Duke Energy Registrants was in compliance with all covenants related to their debt agreements. In addition, some credit agreements may allow for acceleration of payments or termination of the agreements due to nonpayment or acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the debt or credit agreements contain material adverse change clauses.
Credit Ratings
Credit ratings are intended to provide credit lenders a framework for comparingIn March 2021, Moody's Investors Services, Inc. (Moody's) downgraded by one notch the credit quality of securities and are not a recommendation to buy, sell or hold. The Duke Energy Registrants’ credit ratings are dependent on the rating agencies’ assessments of their ability to meet their debt principal and interest obligations when they come due. If, as a result of market conditions or other factors, the Duke Energy Registrants are unable to maintain current balance sheet strength or if earnings and cash flow outlook materially deteriorate, credit ratings could be negatively impacted.
The Duke Energy Registrants each hold credit ratings by Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Rating Services (S&P). In April 2017, Fitch Ratings, Inc. (Fitch) withdrew credit ratings of the Subsidiary Registrants, with the exclusion of Piedmont, which was not previously rated by Fitch due to commercial reasons. Fitch will continue to providelong-term credit ratings for Duke Energy Corporation.
In May 2017, Moody’s changed its rating outlook(Parent) and Duke Energy Carolinas. The downgrade reflects Duke Energy's balance sheet objectives. The downgrade for Duke Energy Corporation to stable from negative(Parent) and affirmed Duke Energy Corporation's credit ratings. In August 2017, Moody's changed its rating outlookCarolinas also considers the impact for Duke Energy Ohio to positive from stableCarolinas and Duke Energy Progress as a result of the 2019 rate case orders and approval of the CCR Settlement Agreement. While these agreements are indicative of a regulatory environment that remains broadly supportive of utility credit quality, their financial terms resulted in current impairment charges and lowered the amount of future cash flow Duke Energy Carolinas and Duke Energy Progress will receive in conjunction with their coal ash remediation spending. As part of the credit rating action, Moody's affirmed Duke Energy's (Parent) short-term and commercial paper credit ratings and confirmed the credit ratings for Duke Energy Ohio'sProgress. Following a January 2021, credit ratings.
rating downgrade of Duke Energy (Parent) and its subsidiaries, Standard & Poor's Rating Services continues to maintain a stable outlook on Duke Energy Corporation and its subsidiaries as of September 30, 2021.
PART I
Cash Flow Information
The following table summarizes Duke Energy’s cash flows. | | | | | Nine Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| (in millions) | | 2017 |
| | 2016 |
| (in millions) | | 2021 | | 2020 |
| Cash flows provided by (used in): | | | | | Cash flows provided by (used in): | |
| Operating activities | | $ | 5,011 |
| | $ | 5,611 |
| Operating activities | | $ | 7,227 | | | $ | 6,766 | |
| Investing activities | | (6,360 | ) | | (5,555 | ) | Investing activities | | (8,200) | | | (7,964) | |
| Financing activities | | 1,239 |
| | 5,266 |
| Financing activities | | 1,160 | | | 1,225 | |
| Changes in cash and cash equivalents included in assets held for sale | | — |
| | 11 |
| |
| Net (decrease) increase in cash and cash equivalents | | (110 | ) | | 5,333 |
| |
| Cash and cash equivalents at beginning of period | | 392 |
| | 383 |
| |
| Cash and cash equivalents at end of period | | $ | 282 |
| | $ | 5,716 |
| |
| | Net increase in cash, cash equivalents and restricted cash | | Net increase in cash, cash equivalents and restricted cash | | 187 | | | 27 | |
| Cash, cash equivalents and restricted cash at beginning of period | | Cash, cash equivalents and restricted cash at beginning of period | | 556 | | | 573 | |
| Cash, cash equivalents and restricted cash at end of period | | Cash, cash equivalents and restricted cash at end of period | | $ | 743 | | | $ | 600 | |
OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows. | | | | | Nine Months Ended | | Nine Months Ended | |
| | | September 30, | | September 30, | |
| (in millions) | | 2017 |
| | 2016 |
| (in millions) | | 2021 | | 2020 | | Variance | |
| Net income | | $ | 2,361 |
| | $ | 2,392 |
| Net income | | $ | 2,915 | | | $ | 1,232 | | | $ | 1,683 | | |
| Non-cash adjustments to net income | | 3,937 |
| | 3,585 |
| Non-cash adjustments to net income | | 4,556 | | | 6,204 | | | (1,648) | | |
| Contributions to qualified pension plans | | (8 | ) | | — |
| |
| | Payments for asset retirement obligations | | (420 | ) | | (443 | ) | Payments for asset retirement obligations | | (389) | | | (463) | | | 74 | | |
| Refund of AMT credit carryforwards | | Refund of AMT credit carryforwards | | — | | | 572 | | | (572) | | |
| Working capital | | (859 | ) | | 77 |
| Working capital | | 145 | | | (779) | | | 924 | | |
| Net cash provided by operating activities | | $ | 5,011 |
| | $ | 5,611 |
| Net cash provided by operating activities | | $ | 7,227 | | | $ | 6,766 | | | $ | 461 | | |
The variance was primarily due to:
a $936 million decreaseto timing of accruals and payments in cash flows from working capital due to the timingaccounts, partially offset by prior year $572 million refund of the payment of accruals, increased taxes accrued resulting from an increased effective tax rate, warmer winter weather and the absence of the International Disposal Group's operating cash flows.AMT credit carryforwards.
| | | | | |
| MD&A | LIQUIDITY AND CAPITAL RESOURCES |
a $321 million increase in net income after non-cash adjustments, primarily due to lower operation, maintenance and other expense and the additional Piedmont earnings contribution in the current year.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows. | | | | | Nine Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| (in millions) | | 2017 |
| | 2016 |
| (in millions) | | 2021 | | 2020 | | Variance |
| Capital, investment and acquisition expenditures | | $ | (6,211 | ) | | $ | (5,450 | ) | Capital, investment and acquisition expenditures | | $ | (7,119) | | | $ | (7,684) | | | $ | 565 | |
| | Other investing items | | (149 | ) | | (105 | ) | Other investing items | | (1,081) | | | (280) | | | (801) | |
| Net cash used in investing activities | | $ | (6,360 | ) | | $ | (5,555 | ) | Net cash used in investing activities | | $ | (8,200) | | | $ | (7,964) | | | $ | (236) | |
The variance wasrelates primarily due to:
a $761 million increaseto payment made to fund ACP's outstanding debt, partially offset by decreases in capital investment and acquisition expenditures due to growthlower overall investments in regulated generation investmentsthe Electric Utilities and natural gas infrastructure, partially offset by a reduction inInfrastructure, Gas Utilities and Infrastructure and Commercial Renewables capital expenditures.
segments.
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows. | | | | | Nine Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| (in millions) | | 2017 |
| | 2016 |
| (in millions) | | 2021 | | 2020 | | Variance |
| Issuances of long-term debt, net | | $ | 3,675 |
| | $ | 7,659 |
| Issuances of long-term debt, net | | $ | 2,683 | | | $ | 2,694 | | | $ | (11) | |
| Notes payable and commercial paper | | (619 | ) | | (647 | ) | |
| Issuances of common stock | | Issuances of common stock | | 5 | | | 75 | | | (70) | |
| | Notes payable, commercial paper and other short-term borrowings | | Notes payable, commercial paper and other short-term borrowings | | (723) | | | 260 | | | (983) | |
| Dividends paid | | (1,825 | ) | | (1,731 | ) | Dividends paid | | (2,340) | | | (2,113) | | | (227) | |
| Contributions from noncontrolling interests | | Contributions from noncontrolling interests | | 1,556 | | | 402 | | | 1,154 | |
| | Other financing items | | 8 |
| | (15 | ) | Other financing items | | (21) | | | (93) | | | 72 | |
| Net cash provided by financing activities | | $ | 1,239 |
| | $ | 5,266 |
| Net cash provided by financing activities | | $ | 1,160 | | | $ | 1,225 | | | $ | (65) | |
The variance was primarily due to:
•a $3,984$983 million net decrease in net proceeds from issuances of long-term debt driven principally by the prior year $3,750 million of senior unsecured notes used to fund payable and commercial paper; and
•a portion of the Piedmont acquisition, and prior year $1,294 million nuclear asset-recovery bonds, offset by a $1,047$227 million increase in current year redemptions; anddividends paid.
Partially offset by:
•a $94 million current year$1.154 billion increase in dividends paid.
Summary of Significant Debt Issuances
Refer to Note 6contributions from noncontrolling interests, primarily due to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant debt issuances.$1 billion receipt from GIC to make an indirect minority interest investment of 11.05% in Duke Energy Indiana.
OTHER MATTERS
Environmental Regulations
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal, coal ash and other environmental matters. These regulations can be changed from time to time and result in new obligations of the Duke Energy Registrants.
The following sections outline various proposed and recently enacted regulations that may impact the Duke Energy Registrants. Refer to Note 43 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.
Coal Combustion Residuals
In April 2015, the EPA published a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring, protection and remedial procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. As a result of the EPA rule, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana recorded additional ARO amounts during 2015. Various industry and environmental parties have appealed the EPA's CCR rule in the U.S. Court of Appeals for the District of Columbia (D.C. Circuit Court). On April 18, 2016, the EPA filed a motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. Duke Energy does not expect a material impact from the settlement or that it will result in additional ARO adjustments. The Utility Solid Waste Activities Group filed a petition with the EPA seeking to have EPA reconsider certain provisions of the final rule, extend remaining compliance deadlines and ask the D.C. Circuit Court to hold the litigation in abeyance. While EPA has confirmed that it will reconsider certain provisions of the final rule, the D.C. Circuit Court denied EPA’s petition to hold the litigation in abeyance. Oral argument is scheduled for November 20, 2017.
In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions and via wholesale contracts, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations. For more information, see Note 9, “Asset Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.
Coal Ash Management Act of 2014
Asset retirement obligations recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at September 30, 2017, and December 31, 2016, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. On July 14, 2016, the Coal Ash Act was amended, requiring Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half- mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The legislation ranked basins at the H.F. Lee, Cape Fear and Weatherspoon stations as intermediate risk, consistent with Duke Energy's previously announced plans to excavate those basins. These specific intermediate-risk basins require closure through excavation including a combination of transferring ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of these specific intermediate-risk basins is required to be completed no later than August 1, 2028. Upon satisfactory completion of the dam improvement projects and installation of alternative drinking water sources by October 15, 2018, the legislation requires the NCDEQ to reclassify all remaining sites, excluding H.F. Lee, Cape Fear and Weatherspoon, as low risk. In January 2017, NCDEQ issued preliminary approval of Duke Energy's plans for the alternative water sources.
Additionally, the July 2016 legislation requires the installation and operation of three large-scale coal ash beneficiation projects, which are expected to produce reprocessed ash for use in the concrete industry. Closure of basins at sites with these beneficiation projects is required to be completed no later than December 31, 2029. On October 5, 2016, Duke Energy announced Buck Steam Station as a first location for one of the beneficiation projects. On December 13, 2016, Duke Energy announced H.F. Lee as the second location. On June 30, 2017, Duke Energy announced the Cape Fear Plant as the third beneficiation location.
Provisions of the Coal Ash Act prohibit cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Act leaves the decision on cost recovery determinations related to closure of ash impoundments to the normal ratemaking processes before utility regulatory commissions. Consistent with the requirements of the Coal Ash Act, Duke Energy has submitted comprehensive site assessments and groundwater corrective plans to NCDEQ and will submit to NCDEQ site-specific coal ash impoundment closure plans in advance of closure. These plans and all associated permits must be approved by NCDEQ before closure work can begin.
For more information, see Note 9, “Asset Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.
Clean Water Act 316(b)
The EPA published the final 316(b) cooling water intake structure rule on August 15, 2014, with an effective date of October 14, 2014. The rule applies to 26 of the electric generating facilities the Duke Energy Registrants own and operate. The rule allows for several options to demonstrate compliance and provides flexibility to the state environmental permitting agencies to make determinations on controls, if any, that will be required for cooling water intake structures. Any required intake structure modifications and/or retrofits are expected to be installed in the 2019 to 2022 time frame. Petitions challenging the rule have been filed by several groups. Oral argument was held on September 14, 2017. It is unknown when the courts will rule on the petitions. The Duke Energy Registrants cannot predict the outcome of these matters.
Steam Electric Effluent Limitations Guidelines
On January 4, 2016, the final Steam Electric Effluent Limitations Guidelines (ELG) rule became effective. The rule establishes new requirements for wastewater streams associated with steam electric power generation and includes more stringent controls for any new coal plants that may be built in the future. As originally written, affected facilities were required to comply between 2018 and 2023, depending on timing of new Clean Water Act (CWA) permits and waste stream. Most of the steam electric generating facilities the Duke Energy Registrants own are affected sources. The Duke Energy Registrants are well-positioned to meet the majority of the requirements of the rule due to current efforts to convert to dry ash handling. Petitions challenging the rule have been filed by several groups. On March 16, 2015, Duke Energy Indiana filed its own legal challenge to the rule with the Seventh Circuit Court of Appeals specific to the ELG rule focused on the limits imposed on IGCC facilities (gasification wastewater). All challenges to the rule were consolidated in the Fifth Circuit Court of Appeals. The Fifth Circuit Court of Appeals granted EPA's request to stay the pending litigation on the ELG rule until August 12, 2017, and on August 22, 2017, the Fifth Circuit Court of Appeals granted EPA’s Motion to Govern Further Proceedings, thereby severing and suspending the claims related to flue gas desulfurization wastewater, bottom ash transport water and gasification wastewater. Claims regarding gasification wastewater were stayed, pending the issuance of the variance to Duke Energy Indiana. The litigation will continue as to claims related to other waste streams.
On August 7, 2017, EPA issued a public notice regarding its proposed decision to grant a variance to Duke Energy Indiana for mercury and total suspended solids for gasification wastewater at its Edwardsport facility. The public comment period has ended, but EPA has not finalized its decision. Separate from the litigation, EPA finalized a rule on September 12, 2017, postponing the initial applicability date for bottom ash transport water and flue gas desulfurization wastewater from 2018 to 2020 and retaining the end applicability date of 2023. Also, as part of the rule, EPA reiterated its intent to conduct a new rulemaking to revise limitation guidelines for bottom ash transport water and flue gas desulfurization wastewater.
The Duke Energy Registrants cannot predict the outcome of these matters.
Estimated Cost and Impacts of Rulemakings
Duke Energy will incur capital expenditures to comply with the environmental regulations and rules discussed above. The following table provides five-year estimated costs, excluding AFUDC, of new control equipment that may need to be installed on existing power plants primarily to comply with the Coal Ash Act requirements for conversion to dry disposal of bottom ash and fly ash, CWA 316(b) and ELGs through December 31, 2021. The table excludes ash basin closure costs recorded in Asset retirement obligations on the Condensed Consolidated Balance Sheets. For more information related to AROs, see Note 9, “Asset Retirement Obligations” in Duke Energy’s Annual Report on Form 10‑K for the year ended December 31, 2016. |
| | | |
| (in millions) | Estimated Cost |
|
| Duke Energy | $ | 1,340 |
|
| Duke Energy Carolinas | 580 |
|
| Progress Energy | 420 |
|
| Duke Energy Progress | 310 |
|
| Duke Energy Florida | 110 |
|
| Duke Energy Ohio | 90 |
|
| Duke Energy Indiana | 250 |
|
The Duke Energy Registrants also expect to incur increased fuel, purchased power, operation and maintenance and other expenses, in addition to costs for replacement generation for potential coal-fired power plant retirements, as a result of these regulations. Actual compliance costs incurred may be materially different from these estimates due to reasons such as the timing and requirements of EPA regulations and the resolution of legal challenges to the rules. The Duke Energy Registrants intend to seek rate recovery of necessary and prudently incurred costs associated with regulated operations to comply with these regulations.
Cross-State Air Pollution Rule
On December 3, 2015, the EPA proposed a rule to lower the Cross-State Air Pollution Rule (CSAPR) Phase 2 state ozone season nitrogen oxide (NOX) emission budgets for 23 eastern states, including North Carolina, Ohio, Kentucky and Indiana. The EPA also proposed to eliminate the CSAPR Phase 2 ozone season state NOX budgets for Florida and South Carolina. On September 7, 2016, the EPA finalized the CSAPR Update Rule that reduces the CSAPR Phase 2 state ozone season NOX emission budgets for 22 eastern states, including Ohio, Kentucky and Indiana. In the final CSAPR Update Rule, the EPA removed Florida, South Carolina and North Carolina from the ozone season NOx program. Beginning in 2017, Duke Energy Registrants in these states will not be subject to any CSAPR ozone season NOx emission limitations. For the states that remain in the program, the reduced state ozone season NOx emission budgets took effect on May 1, 2017. In Kentucky and Indiana, where Duke Energy Registrants own and operate coal-fired electric generating units (EGUs) subject to the final rule requirements, near-term responses include changing unit dispatch to run certain generating units less frequently and/or purchasing NOx allowances from the trading market. Longer term, upgrading the performance of existing NOx controls is an option. The Indiana Utility Group and the Indiana Energy Association jointly filed a petition for reconsideration asking that the EPA correct errors it made in calculating the Indiana budget and increase the budget accordingly. EPA has yet to act on the petition. Numerous parties have filed petitions with the D.C. Circuit Court challenging various aspects of the CSAPR Update Rule. Briefing in the case began on August 21, 2017. The date for oral argument has not been established. The Duke Energy Registrants cannot predict the outcome of these matters.
Carbon Pollution Standards for New, Modified and Reconstructed Power Plants
On October 23, 2015, the EPA published a final rule in the Federal Register establishing carbon dioxide (CO2) emissions limits for new, modified and reconstructed power plants. The requirements for new plants apply to plants that commenced construction after January 8, 2014. The EPA set an emissions standard for coal units of 1,400 pounds of CO2 per gross MWh, which would require the application of partial carbon capture and storage (CCS) technology for a coal unit to be able to meet the limit. Utility-scale CCS is not currently a demonstrated and commercially available technology for coal-fired EGUs, and therefore the final standard effectively prevents the development of new coal-fired generation. The EPA set a final standard of 1,000 pounds of CO2 per gross MWh for new natural gas combined-cycle units.
On March 28, 2017, President Trump signed an executive order directing EPA to review the rule and determine whether to suspend, revise or rescind it. On the same day, the Department of Justice (DOJ) filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. Subsequent to the DOJ motion, the D.C. Circuit Court canceled oral argument in the case, which had been scheduled for April 17, 2017. On August 10, 2017, the court ordered that the litigation be suspended indefinitely. The rule remains in effect pending the outcome of litigation and EPA’s review. EPA has not announced a schedule for completing its review. The Duke Energy Registrants cannot predict the outcome of these matters, but do not expect the impacts of the current final standards will be material to Duke Energy's financial position, results of operations or cash flows.
Clean Power Plan
On October 23, 2015, the EPA published in the Federal Register the final Clean Power Plan (CPP) rule to regulate CO2 emissions from existing fossil fuel-fired EGUs. The CPP established CO2 emission rates and mass cap goals that apply to existing fossil fuel-fired EGUs. Petitions challenging the rule have been filed by several groups and on February 9, 2016, the Supreme Court issued a stay of the final CPP rule, halting implementation of the CPP until legal challenges are resolved. States in which the Duke Energy Registrants operate have suspended work on the CPP in response to the stay. Oral arguments before 10 of the 11 judges on D.C. Circuit Court were heard on September 27, 2016. The court has not issued its opinion in the case.
On March 28, 2017, President Trump signed an executive order directing EPA to review the CPP and determine whether to suspend, revise or rescind the rule. On the same day, the DOJ filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. On April 28, 2017, the court issued an order to suspend the litigation for 60 days. On August 8, 2017, the court, on its own motion, extended the suspension of the litigation for an additional 60 days. On October 10, 2017, EPA issued a Notice of Proposed Rulemaking to repeal the CPP based on a change to EPA’s legal interpretation of the section of the Clean Air Act (CAA) on which the CPP was based. In the proposal EPA indicates that it has not determined whether it will issue a rule to replace the CPP, and if it will do so, when and what form that rule will take. The comment period on EPA's proposal ends December 15, 2017. Litigation of the CPP remains on hold in the D.C. Circuit and the February 2016 U.S. Supreme Court stay of the CPP remains in effect. The Duke Energy Registrants cannot predict the outcome of these matters.
Global Climate Change
For other information on global climate change and the potential impacts on Duke Energy, see “Other Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.
North Carolina Legislation
In July 2017, the North Carolina General Assembly passed House Bill 589 and it was subsequently enacted into law by the governor. The law includes, among other things, overall reform of the application of the Public Utility Regulatory Policies Act of 1978 (PURPA) for new solar projects in the state, a requirement for the utility to procure approximately 2,600 MW of renewable energy through a competitive bidding process and recovery of costs related to the competitive bidding process through the fuel clause and a competitive procurement rider. Duke Energy is evaluating the impact of this law.
Nuclear Matters
For other information on nuclear matters and the potential impacts on Duke Energy, see “Other Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.
New Accounting Standards
See Note 1 to the Condensed Consolidated Financial Statements, “Organization and Basis of Presentation,” for a discussion of the impact of new accounting standards.
Off-Balance Sheet Arrangements
During the three and nine months ended September 30, 2017,2021, there were no material changes to Duke Energy’s off-balance sheet arrangements. See Note 13 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for a discussion of off-balance sheet arrangements regarding Atlantic Coast Pipeline. For additional information on Duke Energy’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Contractual Obligations
Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. During the three and nine months ended September 30, 2017,2021, there were no material changes in Duke Energy's contractual obligations. For an in-depth discussion of Duke Energy’s contractual obligations, see “Contractual Obligations” and “Quantitative and Qualitative Disclosures about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2016.2020.
Subsequent Events
See Note 18 to the Condensed Consolidated Financial Statements, “Subsequent Events,” for a discussion of subsequent events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three and nine months ended September 30, 2017, there were no material changes to the Duke Energy Registrants' disclosures about market risk. For an in-depth discussion of the Duke Energy Registrants' market risks, see “Quantitative and Qualitative Disclosures about Market Risk” in Item 7 of the Annual Report on Form 10-K for the Duke Energy Registrants. During the three and nine months ended September 30, 2021, there were no material changes to the Duke Energy Registrants' disclosures about market risk.
| | | | | |
| ITEM 4. | CONTROLS AND PROCEDURES |
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Securities Exchange Act of 1934 (Exchange Act) areis recorded, processed, summarized and reported, within the time periods specified by the SEC rules and forms.
Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Exchange Act areis accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2017,2021, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.
Changes in Internal Control over Financial Reporting
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f)13a-15 and 15d-15(f)15d-15 under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2017,2021, and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
111
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding material legal proceedings, including regulatory and environmental matters, see Note 4,3, "Regulatory Matters," and Note 5,4, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements. For additional information, see Item 3, "Legal Proceedings," in Duke Energy’sEnergy's Annual Report on Form 10-K for the year ended December 31, 2016.2020.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in the Duke Energy Registrants' Annual Report on Form 10-K for the year ended December 31, 2020, which could materially affect the Duke Energy Registrants’ financial condition or future results. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020.
Our business could be negatively affected as a result of actions of activist shareholders. On May 17, 2021, Elliott who has indicated it holds an economic interest in our outstanding common stock, publicly released a letter it had sent to our Board. On July 19, 2021, Elliott issued a follow-up letter to our Board.
While we strive to maintain constructive communications with our shareholders, activist shareholders may, from time to time, engage in proxy solicitations or advance shareholder proposals, or otherwise attempt to affect changes and assert influence on our Board and management. Perceived uncertainties as to the future direction or governance of the company may cause concern to our current or potential regulators, vendors or strategic partners, or make it more difficult to execute on our strategy or to attract and retain qualified personnel, which may have a material impact on our business and operating results.
In addition, actions such as those described above could cause fluctuations in the trading price of our common stock, based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUERPURCHASES OF EQUITY SECURITIESNone.
There were no issuer purchases of equity securities during the third quarter of 2017.
ITEM 6. EXHIBITS
Exhibits filed herein are designated by an asterisk (*). All exhibits not so designated are incorporated by reference to a prior filing, as indicated. Items constituting management contracts or compensatory plans or arrangements are designated by a double asterisk (**). The Companycompany agrees to furnish upon request to the Commissioncommission a copy of any omitted schedules or exhibits upon request on all items designated by a triple asterisk (***). |
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| | | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Exhibit | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| Number | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
4.1*3.1 | | | | | | | | | | | | | | | X | | |
| 4.1 | | | X | | | | | | X | | | | | | | | |
| 4.2 | | | X | | | | | | | | | | | | | | |
| 10.1 | | | X | | | | | | | | | | | | X | | |
| 10.2 | | | X | | | | | | X | | | | | | | | |
*10.131.1.1 | | X | | | | | | | | | | | | | | |
*12 | | X | | | | | | | | | | | | | | |
*31.1.1 | | X | | | | | | | | | | | | | | |
| *31.1.2 | | | | X | | | | | | | | | | | | |
| *31.1.3 | | | | | | X | | | | | | | | | | |
| *31.1.4 | | | | | | | | X | | | | | | | | |
| *31.1.5 | | | | | | | | | | X | | | | | | |
| *31.1.6 | | | | | | | | | | | | X | | | | |
| *31.1.7 | | | | | | | | | | | | | | X | | |
| *31.1.8 | | | | | | | | | | | | | | | | X |
| *31.2.1 | | X | | | | | | | | | | | | | | |
| *31.2.2 | | | | X | | | | | | | | | | | | |
*31.2.3 | | | | | | X | | | | | | | | | | |
*31.2.4 | | | | | | | | X | | | | | | | | |
*31.2.5 | | | | | | | | | | X | | | | | | |
*31.2.6 | | | | | | | | | | | | X | | | | |
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*31.2.731.2.3 | | | | | | X | | | | | | | | X | | |
*31.2.831.2.4 | | | | | | | | X | | | | | | | | X |
*32.1.131.2.5 | | | | | | | | | | X | | | | | | |
| *31.2.6 | | | | | | | | | | | | X | | | | |
| *31.2.7 | | | | | | | | | | | | | | X | | |
| *31.2.8 | | | | | | | | | | | | | | | | X |
| *32.1.1 | | X | | | | | | | | | | | | | | |
| *32.1.2 | | | | X | | | | | | | | | | | | |
| *32.1.3 | | | | | | X | | | | | | | | | | |
| *32.1.4 | | | | | | | | X | | | | | | | | |
| *32.1.5 | | | | | | | | | | X | | | | | | |
| *32.1.6 | | | | | | | | | | | | X | | | | |
| *32.1.7 | | | | | | | | | | | | | | X | | |
| *32.1.8 | | | | | | | | | | | | | | | | X |
| *32.2.1 | | X | | | | | | | | | | | | | | |
| *32.2.2 | | | | X | | | | | | | | | | | | |
| *32.2.3 | | | | | | X | | | | | | | | | | |
| *32.2.4 | | | | | | | | X | | | | | | | | |
| *32.2.5 | | | | | | | | | | X | | | | | | |
| *32.2.6 | | | | | | | | | | | | X | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| *32.2.7 | | | | | | | | | | | | | | X | | |
| *32.2.8 | | | | | | | | | | | | | | | | X |
*101.INS | XBRL Instance Document. | X | | X | | X | | X | | X | | X | | X | | X |
*101.SCH | XBRL Taxonomy Extension Schema Document. | X | | X | | X | | X | | X | | X | | X | | X |
|
| | | | | | | | | | | | | | | X |
| *101.INS | XBRL Instance Document (this does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | X | | X | | X | | X | | X | | X | | X | | X |
| *101.SCH | XBRL Taxonomy Extension Schema Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.CAL | XBRL Taxonomy Calculation Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.LAB | XBRL Taxonomy Label Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.PRE | XBRL Taxonomy Presentation Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.DEF | XBRL Taxonomy Definition Linkbase Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *104 | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101). | X | | X | | X | | X | | X | | X | | X | | X |
The total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10 percent10% of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees, upon request of the SEC, to furnish copies of any or all of such instruments to it.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. | | | | | | | | |
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DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, LLC DUKE ENERGY FLORIDA, LLC DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, LLC PIEDMONT NATURAL GAS COMPANY, INC.
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| | |
| Date: | November 3, 20174, 2021 | /s/ STEVEN K. YOUNG |
| | Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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| | |
| Date: | November 3, 20174, 2021 | /s/ WILLIAM E. CURRENS JR.CYNTHIA S. LEE |
| | William E. Currens Jr.
Senior Cynthia S. Lee
Vice President, Chief Accounting Officer
and Controller
(Principal Accounting Officer) |
