0001326160duk:MayoUnit1Memberduk:GenerationFacilitiesToBeRetiredMemberduk:DukeEnergyProgressMember2021-01-012021-12-310001326160duk:DukeEnergyCarolinasMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMemberduk:DERFMember2020-12-31
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
|
| | | | |
ý☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal periodyear ended December 31, 20182021 or |
| | | | |
¨☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from________to________
|
| | | | | | | |
Commission file number | | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices and Telephone Number | | IRS Employer Identification No. |
| | | | |
1-32853 | | DUKE ENERGY CORPORATION (a Delaware corporation)
550 South Tryon Street
Charlotte, NC
| 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.
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
56-0556998
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: |
Registrant1-6196 | PIEDMONT NATURAL GAS COMPANY, INC. | Title of each class | | Name of each exchange on
which registered
|
Duke Energy Corporation
(Duke Energy)
| | Common Stock, $0.001 par value | | New York Stock Exchange LLC |
Duke Energy | | 5.125% Junior Subordinated Debentures due January 15, 2073 | | New York Stock Exchange LLC |
Duke Energy | | 5.625% Junior Subordinated Debentures due September 15, 2078 | | New York Stock Exchange LLC56-0556998 |
(a North Carolina corporation)
4720 Piedmont Row Drive
Charlotte, North Carolina 28210
704-364-3120
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange on
RegistrantTitle of each classTrading symbolswhich registered
Duke Energy Corporation Common Stock, $0.001 par value DUK New York Stock Exchange LLC
(Duke Energy)
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
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Duke Energy | Yesx | ☒ | No¨ | ☐ | | Duke Energy Florida, LLC (Duke Energy Florida) | Yesx | ☒ | No¨ | ☐ |
Duke Energy Carolinas, LLC (Duke Energy Carolinas) | Yesx | ☒ | No¨ | ☐ | | Duke Energy Ohio, Inc. (Duke Energy Ohio) | Yesx | ☒ | No¨ | ☐ |
Progress Energy, Inc. (Progress Energy) | Yes¨ | ☐ | Nox | ☒ | | Duke Energy Indiana, LLC (Duke Energy Indiana) | Yes¨ | ☒ | Nox | ☐ |
Duke Energy Progress, LLC (Duke Energy Progress) | Yesx | ☒ | No¨ | ☐ | | Piedmont Natural Gas Company, Inc. (Piedmont) | Yes¨ | ☒ | Nox | ☐ |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes ¨☐ No x☒ (Response applicable to all registrants.)
Indicate by check mark whether the registrants (1) have 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. Yes x☒ No ¨☐
Indicate by check mark whether the registrants have submitted electronically every Interactive Data File required to be submitted 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). Yes x☒ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨ (Only applicable to Duke Energy)
Indicate by check mark whether Duke Energy 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.:
Large accelerated filer xAccelerated filer Filer ☒ Accelerated Filer ¨ Non-accelerated filer ¨Filer ☐ Smaller reporting company ¨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 each of Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont is a large accelerated filer, accelerated filer, non-accelerated filer, smaller reporting company, or 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.:
Large accelerated filer ¨Accelerated filer Filer ¨ Accelerated Filer ¨ Non-accelerated filer xFiler ☒ Smaller reporting company ¨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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7252(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether each of the registrants is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No x |
| | | |
Estimated aggregate market value of the common equity held by nonaffiliates of Duke Energy at June 30, 2018. | $ | 56,283,598,357 |
|
Number of shares of Common Stock, $0.001 par value, outstanding at January 31, 2019. | 727,010,882 |
|
| | | | | |
Estimated aggregate market value of the common equity held by nonaffiliates of Duke Energy at June 30, 2021. | $ | 75,871,309,901 | |
Number of shares of Common Stock, $0.001 par value, outstanding at January 31, 2022. | 769,358,344 | |
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Duke Energy definitive proxy statement for the 20192021 Annual Meeting of the Shareholders or an amendment to this Annual Report are incorporated by reference into PART III, Items 10, 11 and 13 hereof.
This combined Form 10-K 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 I(1)(a) and (b) of Form 10-K and are, therefore, filing this Form 10-K with the reduced disclosure format specified in General Instructions I(2) of Form 10-K.
Auditor Firm ID: 34 Auditor Name: Deloitte & Touche LLP Auditor Location: Charlotte, NC
TABLE OF CONTENTS
FORM 10-K FOR THE YEAR ENDED December 31, 20182021 | | | | | | | | |
Item | | Page |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION | |
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GLOSSARY OF TERMS | |
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PART I. | | |
1. | | |
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| PIEDMONT | |
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1A. | | |
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1B. | | |
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2. | | |
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3. | | |
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4. | | |
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PART II. | | |
5. | | |
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6. | | |
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7. | | |
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7A. | | |
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8. | | |
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9. | | |
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9A. | | |
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PART III. | | |
10. | | |
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11. | | |
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12. | | |
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13. | | |
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14. | | |
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PART IV. | | |
15. | | |
| EXHIBIT INDEX | |
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Item | | Page |
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION | |
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GLOSSARY OF TERMS | |
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PART I. | | |
1. | | |
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| PIEDMONT | |
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1A. | | |
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1B. | | |
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2. | | |
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3. | | |
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4. | | |
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PART II. | | |
5. | | |
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6. | | |
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7. | | |
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7A. | | |
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8. | | |
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9. | | |
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9A. | | |
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PART III. | | |
10. | | |
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11. | | |
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12. | | |
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13. | | |
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14. | | |
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PART IV. | | |
15. | | |
| EXHIBIT INDEX | |
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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:
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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; |
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◦ | 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 obtain the necessary permits and approvals and 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, operational accidents, information technology failures or 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 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, compliance with debt covenants and conditions and general market and 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; |
◦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, asset retirement and construction costs related to carbon emissions reductions, 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, natural gas building and appliance electrification, 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, natural gas electrification, and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in a reduced number of customers, 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 investor, customer and other stakeholder 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 United States 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, an individual utility’s generation mix, 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;
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FORWARD LOOKING STATEMENTS | |
◦The ability to control operation and maintenance costs;
◦The level of creditworthiness of counterparties to transactions;
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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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◦ | The impact of U.S. tax legislation to our financial condition, results of operations or cash flows and our credit ratings; |
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◦ | The impacts from potential impairments of goodwill or equity method investment carrying values; and |
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◦ | The ability to implement our business strategy, including enhancing existing technology systems. |
◦The ability to obtain adequate insurance at acceptable costs;
◦Employee workforce factors, including the potential inability to attract and retain key personnel;
◦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 United States 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 its carbon emission reduction goals.
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 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-K are defined below: | | | | | |
Term or Acronym | Definition |
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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 OPC and other customer advocates |
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the 2015 Plan | Duke Energy Corporation 2015 Long-Term Incentive Plan |
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2017 Settlement | Second Revised and Restated Settlement Agreement in 2017 among Duke Energy Florida, the Florida OPCOffice of Public Counsel and other customer advocates, which replaces and supplants the 2013 Settlement |
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ACE2021 Settlement | Affordable CleanSettlement 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 and Duke Energy and Southern Company Gas |
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ACP pipeline | The approximately 600-mile proposedcanceled interstate natural gas pipeline |
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AFUDCAFS | Available for Sale |
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AFUDC | Allowance for funds used during construction |
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AFSAMI | Available for Sale |
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the Agents | Wells Fargo Securities, LLC, Citigroup Global Market Inc., J.P. Morgan Securities, LLC |
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ALJ | Administrative Law Judge |
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AMI | Advanced Metering Infrastructure |
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AMT | Alternative Minimum Tax |
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AOCI | Accumulated Other Comprehensive Income (Loss) |
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ARO | Asset Retirement Obligation |
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ASR | Accelerated Stock Repurchase Program |
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ATM | At-the-market |
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Audit Committee | Audit Committee of the Board of Directors |
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Barclays | Barclays Capital Inc. |
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BCWF | Benton County Wind Farm, LLC |
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Beckjord | Beckjord Generating Station |
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Belews Creek | Belews Creek Steam Station |
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Bison | Bison Insurance Company Limited |
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Board of Directors | Duke Energy Board of Directors |
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Brunswick | Brunswick Nuclear Plant |
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CAACardinal | Clean Air Act |
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Cardinal | Cardinal Pipeline Company, LLC |
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Catawba | Catawba Nuclear Station |
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CC | Combined Cycle |
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CCR | Coal Combustion Residuals |
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CCSCinergy | Carbon Capture and Storage |
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CECPCN | Certificate of Environmental Compatibility and Public Convenience and Necessity |
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CEO | Chief Executive Officer |
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CertainTeed | CertainTeed Gypsum NC, Inc. |
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Cinergy | Cinergy Corp. (collectively with its subsidiaries) |
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Citrus County CC | Citrus County Combined Cycle Facility |
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CO2 | Carbon Dioxide |
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Coal Ash Act | North Carolina Coal Ash Management Act of 2014 |
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COLthe company | Combined Operating License |
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the Company | Duke Energy Corporation and its subsidiaries |
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GLOSSARY OF TERMSConstitution | |
Constitution Pipeline Company, LLC |
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COVID-19 | Coronavirus Disease 2019 |
Constitution | Constitution Pipeline Company, LLC |
CPCN | |
COSO | Committee of Sponsoring Organizations of the Treadway Commission |
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CPCN | Certificate of Public Convenience and Necessity |
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CPPCRC | Clean Power Plan |
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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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CSACT | Comprehensive Site AssessmentCombustion Turbine |
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CSAPRDATC | Cross-State Air Pollution RuleDuke-American Transmission Company, LLC |
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CTDECON | Combustion TurbineA method of decommissioning in which structures, systems, and components that contain radioactive contamination are removed from a site and safely disposed at a commercially operated low-level waste disposal facility, or decontaminated to a level that permits the site to be released for unrestricted use shortly after it ceases operation |
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CTG | China Three Gorges (Luxembourg) Energy S.à.r.l. |
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CWA | Clean Water Act |
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DATC | Duke-American Transmission Co. |
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D.C. Circuit Court | U.S. Court of Appeals for the District of Columbia |
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DCI | Distribution Capital Investment |
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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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Deloitte | Deloitte & Touche LLP, and the member firms of Deloitte Touche Tohmatsu and their respective affiliates |
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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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DHHSDOE | North Carolina Department of Health and Human Services |
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Directors' Savings Plan | Duke Energy Corporation Directors' Savings Plan |
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DOE | U.S. Department of Energy |
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DOJDominion | Department of JusticeDominion Energy, Inc. |
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DominionGLOSSARY OF TERMS | Dominion Resources |
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Dth | Dekatherms |
DRIP | Dividend Reinvestment Program |
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DSM | Demand Side Management |
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Duke Energy | Duke Energy Corporation (collectively with its subsidiaries) |
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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 Ohio | Duke Energy Ohio, Inc. |
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Duke Energy Progress | Duke Energy Progress, LLC |
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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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East Bend | East Bend Generating Station |
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the EDA | Equity Distribution Agreement |
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EE | Energy efficiency |
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EGU | Electric Generating Units |
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ELG | Effluent Limitations Guidelines |
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EPA | U.S. Environmental Protection Agency |
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EPC | Engineering, Procurement and Construction agreement |
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EPS | Earnings Per Share |
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ESP | Electric Security Plan |
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GLOSSARY OF TERMSEast Bend | |
East Bend Generating Station |
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EDIT | Excess deferred income tax |
ETR | |
EE | Energy efficiency |
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EPA | U.S. Environmental Protection Agency |
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EPC | Engineering, Procurement and Construction agreement |
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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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Executive Savings PlanFASB | Duke Energy Corporation Executive Savings Plan |
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FASB | Financial Accounting Standards Board |
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FERC | Federal Energy Regulatory Commission |
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FES | FirstEnergy Solutions Corp. |
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Fitch | Fitch Ratings, Inc. |
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FirstEnergy | FirstEnergy Corp. |
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Florida OPC | Florida Office of Public Counsel |
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Form S-3 | Registration statement |
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FP&LFPSC | Florida Power & Light Company |
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FPSC | Florida Public Service Commission |
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FTR | Financial transmission rights |
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FluorFV-NI | Fluor Enterprises, Inc. |
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FV-NI | Fair value through net income |
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GAAP | Generally Accepted Accounting Principles in the United States |
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GAAP Reported Earnings | Net Income AttributableAvailable to Duke Energy Corporation common stockholders |
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GAAP Reported EPS | DilutedBasic EPS AttributableAvailable to Duke Energy Corporation common stockholders |
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GHG | Greenhouse Gas |
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GWhGIC | Gigawatt-hoursGIC Private Limited, Singapore's sovereign wealth fund and an experienced investor in U.S. infrastructure |
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GWh | Gigawatt-hour |
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Hardy Storage | Hardy Storage Company, LLC |
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Harris | Shearon Harris Nuclear Plant |
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HinesHLBV | Hines Energy ComplexHypothetical Liquidation at Book Value |
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I SquaredIMPA | ISQ Enerlam Aggregator, L.P. and Enerlam (UK) Holding Ltd.Indiana Municipal Power Agency |
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IBNR | Incurred but not yet reported |
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ICPA | Inter-Company Power Agreement |
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IGCC | Integrated Gasification Combined Cycle |
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IMR | Integrity Management Rider |
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International Disposal GroupIRP | Duke Energy's international business, excluding National Methanol Company |
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IRP | Integrated Resource Plans |
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IRS | Internal Revenue Service |
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ISFSIISO | Independent Spent Fuel Storage Installation |
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ISO | Independent System Operator |
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ITC | Investment Tax Credit |
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IURC | Indiana Utility Regulatory Commission |
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Investment Trusts | Grantor trusts of Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana |
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JDA | Joint Dispatch Agreement |
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KO Transmission | KO Transmission Company |
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KPSC | Kentucky Public Service Commission |
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kV | Kilovolt |
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LDC | Local Distribution Company |
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Lee Nuclear Station | William States Lee III Nuclear Station |
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Levy | Duke Energy Florida’s proposed nuclear plant in Levy County, Florida |
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|
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GLOSSARY OF TERMSKO Transmission | |
KO Transmission Company |
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LIBORKPSC | Kentucky Public Service Commission |
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LIBOR | London Interbank Offered Rate |
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LLC | Limited Liability Company |
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Master TrustGLOSSARY OF TERMS | Duke Energy Corporation Master Retirement Trust |
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McGuire | |
McGuire | McGuire Nuclear Station |
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Merger AgreementMGP | The Agreement and Plan of Merger between Duke Energy and Piedmont |
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MGP | Manufactured gas plant |
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Midwest Generation Disposal GroupMISO | Duke Energy Ohio’s nonregulated Midwest generation business and Duke Energy Retail Sales, LLC |
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MISO | Midcontinent Independent System Operator, Inc. |
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MMBtuMTBE | Million British Thermal Unit |
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MPP | Money Purchase Pension |
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Moody’s | Moody’s Investors Service, Inc. |
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MTBE | Methyl tertiary butyl ether |
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MTEPMW | MISO Transmission Expansion PlanningMegawatt |
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MWMWh | MegawattMegawatt-hour |
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MVP | Multi Value Projects |
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MWh | Megawatt-hour |
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NAAQS | National Ambient Air Quality Standards |
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NAV | Net asset value |
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NAW | North Allegheny Wind, LLC |
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NCDEQ | North Carolina Department of Environmental Quality (formerly the North Carolina Department of Environment and Natural Resources) |
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NCEMCNCUC | North Carolina Electric Membership Corporation |
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NCEMPA | North Carolina Eastern Municipal Power Agency |
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NCRS | Nuclear Power Plant Cost Recovery Statutes |
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NCUC | North Carolina Utilities Commission |
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NDTF | Nuclear decommissioning trust funds |
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NEIL | Nuclear Electric Insurance Limited |
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New Source Review | New Source Review (NSR) is a CAAClean Air Act program that requires industrial facilities to install modern pollution control equipment when they are built or when making a change that increases emissions significantly |
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NYSDEC | New York State Department of Environmental Conservation |
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NMC | National Methanol Company |
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NOL | Net operating loss |
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NOV | Notice of violation |
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NOx
| Nitrogen oxide |
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NPDES | National Pollutant Discharge Elimination System |
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NPNS | Normal purchase/normal sale |
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NPRM | Notice of Proposed Rulemaking |
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NRC | U.S. Nuclear Regulatory Commission |
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NSR | New Source Review |
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NWPA | Nuclear Waste Policy Act of 1982 (as amended) |
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NYSE | New York Stock Exchange |
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Oconee | Oconee Nuclear Station |
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OMB | Office of Management and Budget |
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National Methanol Company |
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OPEBNOL | Net operating loss |
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NPNS | Normal purchase/normal sale |
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NRC | U.S. Nuclear Regulatory Commission |
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NYSE | New York Stock Exchange |
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Oconee | Oconee Nuclear Station |
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OPEB | Other Post-Retirement Benefit Obligations |
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ORSOTTI | Office of Regulatory StaffOther-than-temporary impairment |
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Osprey acquisitionOVEC | Duke Energy Florida's purchase of a Calpine Corporation's 599-MW combined-cycle natural gas plant in Auburndale, Florida |
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OTTI | Other-than-temporary impairment |
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OVEC | Ohio Valley Electric Corporation |
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the Parent | Duke Energy Corporation holding company |
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PCAOBPGA | Public Company Accounting Oversight Board |
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PGA | Purchased Gas Adjustments |
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Philadelphia Utility IndexPHMSA | Philadelphia Sector Index |
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PHMSA | Pipeline and Hazardous Materials Safety Administration |
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Piedmont | Piedmont Natural Gas Company, Inc. |
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Piedmont Pension Assets | Qualified pension plan assets associated with the Retirement Plan of Piedmont |
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Piedmont Term Loan | Term loan facility with commitments totaling $350M entered in June 2017 |
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Pine Needle | Pine Needle LNG Company, LLC |
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Pioneer | Pioneer Transmission, LLC |
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PJM | PJM Interconnection, LLC |
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PMPA | Piedmont Municipal Power Agency |
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PPAPISCC | Post-in-service carrying costs |
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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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PTC | Production Tax Credits |
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PUCO | Public Utilities Commission of Ohio |
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PUCO OrderPURPA | Order issued by PUCO approving a settlement of Duke Energy Ohio’s natural gas base rate case and authorizing the recovery of certain MGP costs |
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PURPA | Public Utility Regulatory Policies Act of 1978 |
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QF | Qualifying Facility |
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RCRAREC | Resource Conservation and Recovery Act |
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REC | Renewable Energy Certificate |
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REC Solar | REC Solar Corp. |
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Relative TSR | TSR of Duke Energy stock relative to a predefined peer group |
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Robinson | Robinson Nuclear Plant |
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RRBAROU | Roanoke River Basin AssociationRight-of-use |
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RSU | Restricted Stock Unit |
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RTO | Regional Transmission Organization |
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SAB | Staff Accounting Bulletin |
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Sabal Trail | Sabal Trail Transmission, LLC |
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Sabal Trail pipelineSAFSTOR | Sabal Trail Natural Gas Pipeline |
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SAFSTOR | A method of decommissioning in which a nuclear facility is placed and maintained in a condition that allows the facility to be safely stored and subsequently decontaminated to levels that permit release for unrestricted use |
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SEC | Securities and Exchange Commission |
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SEIS | Supplemental Environmental Impact Statement |
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SELC | Southern Environmental Law Center |
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Segment Income | Income from continuing operations net of income attributable to noncontrolling interests |
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SEC | Securities and Exchange Commission |
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GLOSSARY OF TERMSS&P | |
Standard & Poor’s Rating Services |
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SO2
| Sulfur dioxide |
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SouthStar | SouthStar Energy Services, LLC |
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Spectra Capital | Spectra Energy Capital, LLC |
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S&P | Standard & Poor’s Rating Services |
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S&P 500 | Standard & Poor's 500 Stock Index |
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SSO | Standard Service Offer |
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State utility commissions | NCUC, PSCSC, FPSC, PUCO, IURC, KPSC and TPUC (Collectively) |
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State electric utility commissions | NCUC, PSCSC, FPSC, PUCO, IURC and KPSC (Collectively) |
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State gas utility commissions | NCUC, PSCSC, PUCO, TPUC and KPSC (Collectively) |
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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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Sutton | L.V. Sutton Combined Cycle Plant |
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the Tax Act | Tax Cuts and Jobs Act |
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TDSICTPUC | Transmission, Distribution and Storage System Improvement Charge |
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Three Year Revolver | Duke Energy (Parent) $1.0 billion revolving credit facility |
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TPUC | Tennessee Public Utility Commission |
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TSCATSR | Toxic Substances Control Act |
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TSR | Total shareholder return |
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U.S. | United States |
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U.S. Court of AppealsVIE | U.S. Court of Appeals for the Second Circuit |
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VEBA | Voluntary Employees' Beneficiary Association |
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VIE | Variable Interest Entity |
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WACC | Weighted Average Cost of Capital |
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Westinghouse | Westinghouse Electric Company |
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WNA | Weather normalization adjustment |
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W.S. Lee CC | William States Lee Combined Cycle Facility |
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WVPA | Wabash Valley Power Association, Inc. |
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BUSINESSWVPA | Wabash Valley Power Association, Inc. |
ITEM 1. BUSINESS
General
Duke Energy was incorporated on May 3, 2005, and is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the FERC and other regulatory agencies listed below. Duke Energy operates in the U.S. primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants,Subsidiary Registrants, including Duke Energy Carolinas, Progress Energy, 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 its separate Subsidiary Registrants, which along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
Piedmont, a North Carolina corporation, is an energy services company whose principal business is the distribution of natural gas to over 1 million residential, commercial, industrial and power generation customers in portions of North Carolina, South Carolina and Tennessee, including customers served by municipalities who are Piedmont's sales for resale customers. In October 2016, Duke Energy completed the acquisition of Piedmont. Piedmont's earnings and cash flows are only included in Duke Energy's consolidated results subsequent to the acquisition date. See Note 2 to the Consolidated Financial Statements, "Acquisitions and Dispositions," 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 NMC, was completed through two transactions including a sale of assets in Brazil to CTG and a sale of Duke Energy's remaining Latin American assets in Peru, Chile, Ecuador, Guatemala, El Salvador and Argentina to I Squared (collectively, the International Disposal Group). See Note 2 to the Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information on the sale of International Energy.
The Duke Energy Registrants electronically file reports with the SEC, including Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to such reports.
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at sec.gov. Additionally, information about the Duke Energy Registrants, including reports filed with the SEC, is available through Duke Energy’s website at duke-energy.com. Such reports are accessible at no charge and are made available as soon as reasonably practicable after such material is filed with or furnished to the SEC.
Business Segments
Duke Energy's segment structure includes three reportable business segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remainder of Duke Energy’s operations is presented as Other. Duke Energy's chief operating decision-maker routinely reviews financial information about each of these business segments in deciding how to allocate resources and evaluate the performance of the business. For additional information on each of these business segments, including financial and geographic information, see Note 32 to the Consolidated Financial Statements, “Business Segments.” The following sections describe the business and operations of each of Duke Energy’s business segments, as well as Other.
ELECTRIC UTILITIES AND INFRASTRUCTURE
Electric Utilities and Infrastructure conducts operations primarily through the regulated public utilities of Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana and Duke Energy Ohio. Electric Utilities and Infrastructure provides retail electric service through the generation, transmission, distribution and sale of electricity to approximately 7.78.2 million customers within the Southeast and Midwest regions of the U.S. The service territory is approximately 95,00091,000 square miles across six states with a total estimated population of 24 million people.26 million. The operations include electricity sold wholesale to municipalities, electric cooperative utilities and other load-serving entities.
During 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 Holdco, LLC, the holding company for Duke Energy Indiana. The transaction will be completed following two closings. The first closing occurred on September 8, 2021, and resulted in Duke Energy Indiana Holdco, LLC issuing 11.05% of its membership interest to the affiliate of GIC. The second closing is expected to occur no later than January 2023. See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies," for additional information. Electric Utilities and Infrastructure is also a joint owner in certain electric transmission projects. Electric Utilities and Infrastructure has a 50 percent50% ownership interest in DATC, a partnership with American Transmission Company, formed to design, build and operate transmission infrastructure. DATC owns 72 percent72% of the transmission service rights to Path 15, an 84-mile transmission line in central California. Electric Utilities and Infrastructure also has a 50 percent50% ownership interest in Pioneer, Transmission, LLC, which builds, owns and operates electric transmission facilities in North America. The following map shows the service territory for Electric Utilities and Infrastructure as of December 31, 2018.2021.
The electric operations and investments in projects are subject to the rules and regulations of the FERC, the NRC, the NCUC, the PSCSC, the FPSC, the IURC, the PUCO and the KPSC.
The following table represents the distribution of GWh billed sales by customer class for the year ended December 31, 2018.2021. | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke | | Duke | | Duke | | Duke | | Duke |
| Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy | | Energy | | Energy | | Energy | | Energy |
| Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Carolinas | | Progress | | Florida | | Ohio | | Indiana |
Residential | 32 | % | | 27 | % | | 50 | % | | 37 | % | | 28 | % | Residential | 33 | % | | 28 | % | | 49 | % | | 38 | % | | 30 | % |
General service | 32 | % | | 23 | % | | 37 | % | | 38 | % | | 25 | % | General service | 32 | % | | 22 | % | | 35 | % | | 37 | % | | 25 | % |
Industrial | 24 | % | | 15 | % | | 7 | % | | 23 | % | | 31 | % | Industrial | 24 | % | | 14 | % | | 8 | % | | 23 | % | | 31 | % |
Total retail sales | 88 | % | | 65 | % | | 94 | % | | 98 | % | | 84 | % | Total retail sales | 89 | % | | 64 | % | | 92 | % | | 98 | % | | 86 | % |
Wholesale and other sales | 12 | % | | 35 | % | | 6 | % | | 2 | % | | 16 | % | Wholesale and other sales | 11 | % | | 36 | % | | 8 | % | | 2 | % | | 14 | % |
Total sales | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % | Total sales | 100 | % | | 100 | % | | 100 | % | | 100 | % | | 100 | % |
The number of residential and general service customers within the Electric Utilities and Infrastructure service territory is expected to increase over time. While economic conditionsSales growth is expected within the service territory remain strong, sales growthbut continues to be influencedimpacted by adoption of energy efficiencies and self-generation. Residential sales for 2018increased in 2021 compared to 2017 saw relatively strong2020 due to customer growth despiteand the impactintroduction of a hybrid work environment in response to multiple waves of COVID-19 during 2021. Meanwhile, sales for general service and industrial customers recovered in 2021 from increasing amounts of energy efficiency. However,temporary closings and ramp backs experienced in 2020 due to the COVID-19 pandemic. Over the longer time frame, it is still expected that the continued adoption of more efficient housing and appliances is expected towill have a negative impact on average usage per residential customer over time.
Seasonality and the Impact of Weather
Revenues and costs are influenced by seasonal weather patterns. Peak sales of electricity occur during the summer and winter months, which results in higher revenue and cash flows during these periods. By contrast, lower sales of electricity occur during the spring and fall, allowing for scheduled plant maintenance. Residential and general service customers are more impacted by weather than industrial customers. Estimated weather impacts are based on actual current period weather compared to normal weather conditions. Normal weather conditions are defined as the long-term average of actual historical weather conditions.
The estimated impact of weather on earnings is based on the temperature variances from a normal condition and customers’ historic usage patterns. The methodology used to estimate the impact of weather does not consider all variables that may impact customer response to weather conditions such as humidity in the summer or wind chill in the winter. The precision of this estimate may also be impacted by applying long-term weather trends to shorter-term periods.
Heating degree days measure the variation in weather based on the extent the average daily temperature falls below a base temperature. Cooling-degreeCooling degree days measure the variation in weather based on the extent the average daily temperature rises above the base temperature. Each degree of temperature below the base temperature counts as one heating-degreeheating degree day and each degree of temperature above the base temperature counts as one cooling-degreecooling degree day.
Competition
Retail
Electric Utilities and Infrastructure’s businesses operate as the sole supplier of electricity within their service territories, with the exception of Ohio, which has a competitive electricity supply market for generation service. Electric Utilities and Infrastructure owns and operates facilities necessary to generate, transmit, distribute and generatesell electricity. Services are priced by state commission approvedcommission-approved rates designed to include the costs of providing these services and a reasonable return on invested capital. This regulatory policy is intended to provide safe and reliable electricity at fair prices.
In Ohio, Electric Utilities and Infrastructure conducts competitive auctions for electricity supply. The cost of energy purchased through these auctions is recovered from retail customers. Electric Utilities and Infrastructure earns retail margin in Ohio on the transmission and distribution of electricity, but not on the cost of the underlying energy.
Competition in the regulated electric distribution business is primarily from the development and deployment of alternative energy sources including on-site generation from industrial customers and distributed generation, such as private solar, at residential, general service and/or industrial customer sites.
Wholesale
Duke Energy competes with other utilities and merchant generators for bulk power sales, sales to municipalities and cooperatives and wholesale transactions under primarily cost-based contracts approved by FERC. The principal factors in competing for these sales are availability of capacity and power, reliability of service and price. Prices are influenced primarily by market conditions and fuel costs.
Increased competition in the wholesale electric utility industry and the availability of transmission access could affect Electric Utilities and Infrastructure’s load forecasts, plans for power supply and wholesale energy sales and related revenues. Wholesale energy sales will be impacted by the extent to which additional generation is available to sell to the wholesale market and the ability of Electric Utilities and Infrastructure to attract new customers and to retain existing customers.
Energy Capacity and Resources
Electric Utilities and Infrastructure owns approximately 50,88050,259 MW of generation capacity. For additional information on owned generation facilities, see Item 2, “Properties.”
Energy and capacity are also supplied through contracts with other generators and purchased on the open market. Factors that could cause Electric Utilities and Infrastructure to purchase power for its customers may include, but are not limited to, generating plant outages, extreme weather conditions, generation reliability, demand growth and price. Electric Utilities and Infrastructure has interconnections and arrangements with its neighboring utilities to facilitate planning, emergency assistance, sale and purchase of capacity and energy and reliability of power supply.
Electric Utilities and Infrastructure’s generation portfolio is a balanced mix of energy resources having different operating characteristics and fuel sources designed to provide energy at the lowest possible cost to meet its obligation to serve retail customers. All options, including owned generation resources and purchased power opportunities, are continually evaluated on a real-time basis to select and dispatch the lowest-cost resources available to meet system load requirements.
Sources of Electricity
Electric Utilities and Infrastructure relies principally on coal,natural gas, nuclear fuel and natural gascoal for its generation of electricity. The following table lists sources of electricity and fuel costs for the three years ended December 31, 2018.2021. | | | | | | | | | | | | | | | | | Cost of Delivered Fuel per Net |
| | | Cost of Delivered Fuel per Net | | Generation by Source | | Kilowatt-hour Generated (Cents) |
| Generation by Source | | Kilowatt-hour Generated (Cents) | | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
| 2018 |
| | 2017 |
| | 2016 |
| | 2018 |
| | 2017 |
| | 2016 |
| |
Natural gas and fuel oil(a) | | Natural gas and fuel oil(a) | 31.8 | % | | 31.3 | % | | 29.2 | % | | 3.89 | | | 2.55 | | | 2.96 | |
Nuclear(a) | | Nuclear(a) | 29.8 | % | | 29.6 | % | | 28.6 | % | | 0.58 | | | 0.58 | | | 0.60 | |
Coal(a) | 24.4 | % | | 27.4 | % | | 27.1 | % | | 2.82 |
| | 2.72 |
| | 3.07 |
| Coal(a) | 18.2 | % | | 18.1 | % | | 21.6 | % | | 2.84 | | | 2.99 | | | 3.08 | |
Nuclear(a) | 26.0 | % | | 27.8 | % | | 27.4 | % | | 0.50 |
| | 0.69 |
| | 0.66 |
| |
Natural gas and oil(a) | 26.2 | % | | 23.6 | % | | 22.9 | % | | 3.57 |
| | 2.85 |
| | 3.07 |
| |
All fuels (cost-based on weighted average)(a) | 76.6 | % | | 78.8 | % | | 77.4 | % | | 2.29 |
| | 2.04 |
| | 2.22 |
| |
All fuels (cost based on weighted average)(a) | | All fuels (cost based on weighted average)(a) | 79.8 | % | | 79.0 | % | | 79.4 | % | | 2.42 | | | 1.91 | | | 2.14 | |
Hydroelectric and solar(b) | 1.3 | % | | 0.7 | % | | 0.7 | % | | | | | | | Hydroelectric and solar(b) | 1.5 | % | | 1.9 | % | | 1.2 | % | |
Total generation | 77.9 | % | | 79.5 | % | | 78.1 | % | | | | | | | Total generation | 81.3 | % | | 80.9 | % | | 80.6 | % | |
Purchased power and net interchange | 22.1 | % | | 20.5 | % | | 21.9 | % | | | | | | | Purchased power and net interchange | 18.7 | % | | 19.1 | % | | 19.4 | % | |
Total sources of energy | 100.0 | % | | 100.0 | % | | 100.0 | % | | | | | | | Total sources of energy | 100.0 | % | | 100.0 | % | | 100.0 | % | |
| |
(a) | (a) Statistics related to all fuels reflect Electric Utilities and Infrastructure's ownership interest in jointly owned generation facilities. |
| |
(b) | Generating figures are net of output required to replenish pumped storage facilities during off-peak periods. |
Coal
Electric Utilities and Infrastructure meets its coal demand through a portfolio of long-term purchase contracts and short-term spot market purchase agreements. Large amounts of coal are purchased under long-term contracts with mining operators who mine both underground and at the surface. Electric Utilities and Infrastructure uses spot market purchases to meet coal requirements not met by long-term contracts. Expiration dates for its long-term contracts, which have various price adjustment provisions and market reopeners, range from 2019 to 2021 for Duke Energy Carolinas, Duke Energy Progress and Duke Energy Ohio, 2019 to 2020 for Duke Energy Florida and 2019 to 2025 for Duke Energy Indiana. Electric Utilities and Infrastructure expects to renew these contracts or enter into similar contracts with other suppliers as existing contracts expire, though prices will fluctuate over time as coal markets change. Electric Utilities and Infrastructure has an adequate supply of coal under contract to meet its hedging guidelines regarding projected future consumption. As a result of volatility in natural gas prices and the associated impacts on coal-fired dispatch within the generation fleet, coal inventories will continue to fluctuate. Electric Utilities and Infrastructure continues to actively manage its portfolio and has worked with suppliers to obtain increased flexibility in its coal contracts.
Coal purchased for the Carolinas is primarily produced from mines in Central Appalachia, Northern Appalachia and the Illinois Basin. Coal purchased for Florida is primarily produced from mines in Colorado and the Illinois Basin. Coal purchased for Kentucky is produced from mines along the Ohio River in Illinois, Ohio, West Virginia and Pennsylvania. Coal purchased for Indiana is primarily produced in Indiana and Illinois. The current average sulfur content of coal purchased by Electric Utilities and Infrastructure is between 1.5 percent and 2 percent for Duke Energy Carolinas and Duke Energy Progress, between 1 percent and 3 percent for Duke Energy Florida, between 3 percent and 3.5 percent for Duke Energy Ohio and between 2.5 percent and 3 percent for Duke Energy Indiana. Electric Utilities and Infrastructure's environmental controls,public utility ownership interest in combination with the usejointly owned generation facilities.
(b) Generating figures are net of SO2 emission allowances, enable Electric Utilities and Infrastructureoutput required to satisfy current SO2 emission limitations for its existing facilities.replenish pumped storage facilities during off-peak periods.
The industrial processes for producing nuclear generating fuel generally involve the mining and milling of uranium ore to produce uranium concentrates and services to convert, enrich and fabricate fuel assemblies.Electric Utilities and Infrastructure has contracted for uranium materials and services to fuel its nuclear reactors. Uranium concentrates, conversion services and enrichment services are primarily met through a diversified portfolio of long-term supply contracts. The contracts are diversified by supplier, country of origin and pricing. Electric Utilities and Infrastructure staggers its contracting so that its portfolio of long-term contracts covers the majority of its fuel requirements in the near term and decreasing portions of its fuel requirements over time thereafter. Near-term requirements not met by long-term supply contracts have been and are expected to be fulfilled with spot market purchases. Due to the technical complexities of changing suppliers of fuel fabrication services, Electric Utilities and Infrastructure generally sources these services to a single domestic supplier on a plant-by-plant basis using multiyear contracts.
Electric Utilities and Infrastructure has entered into fuel contracts that cover 100 percent of its uranium concentrates, conversion services and enrichment services requirements through at least 2019 and cover fabrication services requirements for these plants through at least 2027. For future requirements not already covered under long-term contracts, Electric Utilities and Infrastructure believes it will be able to renew contracts as they expire or enter into similar contractual arrangements with other suppliers of nuclear fuel materials and services.
Natural Gas and Fuel Oil
Natural gas and fuel oil supply, transportation and storage for Electric Utilities and Infrastructure’s generation fleet is purchased under standard industry agreements from various suppliers, including Piedmont. Natural gas supply agreements typically provide for a percentage of forecasted burns being procured over time, with varied expiration dates. Electric Utilities and Infrastructure believes it has access to an adequate supply of natural gas and fuel oil for the reasonably foreseeable future.
Electric Utilities and Infrastructure has certain dual-fuel generating facilities that can operate utilizing both natural gas and fuel oil. The cost of Electric Utilities and Infrastructure’s natural gas and fuel oil is fixed price or determined by published market prices as reported in certain industry publications, plus any transportation and freight costs. Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana use derivative instruments to manage a portion of their exposure to price fluctuations for natural gas. For Duke Energy Florida, there is currently an agreed toagreed-upon moratorium with the FPSC on future hedging with the FPSC.of natural gas prices.
Electric Utilities and Infrastructure has firm interstate and intrastate natural gas transportation agreements and storage agreements in place to support generation needed for load requirements. Electric Utilities and Infrastructure may purchase additional shorter-term natural gas transportation and utilize natural gas interruptible transportation agreements to support generation needed for load requirements. The Electric Utilities and Infrastructure natural gas plants are served by various supply zones and multiple pipelines.
Nuclear
The industrial processes for producing nuclear generating fuel generally involve the mining and milling of uranium ore to produce uranium concentrates and services to convert, enrich and fabricate fuel assemblies.
Electric Utilities and Infrastructure has contracted for uranium materials and services to fuel its nuclear reactors. Uranium concentrates, conversion services and enrichment services are primarily met through a diversified portfolio of long-term supply contracts. The contracts are diversified by supplier, country of origin and pricing. Electric Utilities and Infrastructure staggers its contracting so that its portfolio of long-term contracts covers the majority of its fuel requirements in the near term and decreasing portions of its fuel requirements over time thereafter. Near-term requirements not met by long-term supply contracts have been and are expected to be fulfilled with spot market purchases. Due to the technical complexities of changing suppliers of fuel fabrication services, Electric Utilities and Infrastructure generally source these services to a single domestic supplier on a plant-by-plant basis using multiyear contracts.
Electric Utilities and Infrastructure has entered into fuel contracts that cover 100% of its uranium concentrates and conversion services through at least 2022, 100% of its enrichment services through at least 2023, and 100% of its fabrication services requirements for these plants through at least 2027. For future requirements not already covered under long-term contracts, Electric Utilities and Infrastructure believes it will be able to renew contracts as they expire or enter into similar contractual arrangements with other suppliers of nuclear fuel materials and services.
Coal
Electric Utilities and Infrastructure meets its coal demand through a portfolio of long-term purchase contracts and short-term spot market purchase agreements. Large amounts of coal are purchased under long-term contracts with mining operators who mine both underground and at the surface. Electric Utilities and Infrastructure uses spot market purchases to meet coal requirements not met by long-term contracts. Expiration dates for its long-term contracts, which may have various price adjustment provisions and market reopeners, range from 2022 to 2026 for Duke Energy Carolinas and Duke Energy Progress and 2022 to 2025 for Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana. Electric Utilities and Infrastructure expects to renew these contracts or enter into similar contracts with other suppliers as existing contracts expire, though prices will fluctuate over time as coal markets change. Electric Utilities and Infrastructure has an adequate supply of coal under contract to meet its risk management guidelines regarding projected future consumption. As a result of volatility in natural gas prices and the associated impacts on coal-fired dispatch within the generation fleet, coal inventories will continue to fluctuate. Electric Utilities and Infrastructure continues to actively manage its portfolio and has worked with suppliers to obtain increased flexibility in its coal contracts.
Coal purchased for the Carolinas is primarily produced from mines in Central Appalachia, Northern Appalachia and the Illinois Basin. Coal purchased for Florida is primarily produced from mines in the Illinois Basin. Coal purchased for Kentucky is produced from mines along the Ohio River in Illinois, Ohio, West Virginia and Pennsylvania. Coal purchased for Indiana is primarily produced in Indiana and Illinois. There are adequate domestic coal reserves to serve Electric Utilities and Infrastructure's coal generation needs through end of life. The current average sulfur content of coal purchased by Electric Utilities and Infrastructure is between 1.5% and 2% for Duke Energy Carolinas and Duke Energy Progress, between 2.5% and 3% for Duke Energy Florida and Duke Energy Indiana, and between 3% and 3.5% for Duke Energy Ohio. Electric Utilities and Infrastructure's environmental controls, in combination with the use of sulfur dioxide (SO2) emission allowances, enable Electric Utilities and Infrastructure to satisfy current SO2 emission limitations for its existing facilities.
Purchased Power
Electric Utilities and Infrastructure purchases a portion of its capacity and system requirements through purchase obligations, leases and purchase capacity contracts. Electric Utilities and Infrastructure believes it can obtain adequate purchased power capacity to meet future system load needs. However, during periods of high demand, the price and availability of purchased power may be significantly affected.
The following table summarizes purchased power for the previous three years:
| | | | | | | | | | | | | | | | | |
| 2021 | | 2020 | | 2019 |
Purchase obligations and leases (in millions of MWh)(a) | 36 | | | 32.7 | | | 34.8 | |
Purchase capacity under contract (in MW)(b) | 4,259 | | | 4,716 | | | 4,238 | |
(a) Represents approximately 14% of total system requirements for 2021, 13% for 2020 and 14% for 2019.
(b) For 2021, 2020 and 2019, these agreements include approximately 412 MW of firm capacity under contract by Duke Energy Florida with QFs.
|
| | | | | | | | |
| 2018 |
| | 2017 |
| | 2016 |
|
Purchase obligations and leases (in millions of MWh)(a) | 21.3 |
| | 17.7 |
| | 18.0 |
|
Purchase capacity under contract (in MW)(b) | 4,025 |
| | 4,028 |
| | 4,588 |
|
| | | | | |
(a) | Represents approximately 7 percent of total system requirements for 2018, 2017 and 2016. |
BUSINESS | |
(b) | These agreements include approximately 412 MW of firm capacity under contract by Duke Energy Florida with QFs. |
Inventory
Electric Utilities and Infrastructure must maintain an adequate stock of fuel and materials and supplies in order to ensure continuous operation of generating facilities and reliable delivery to customers. As of December 31, 2018,2021, the inventory balance for Electric Utilities and Infrastructure was approximately $2.9$3 billion. For additional information on inventory, see Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies.”
Ash Basin Management
During 2015, EPA issued regulations were enacted related to the management of CCR from power plants. These regulations classify CCR as nonhazardous waste under the RCRAResource Conservation and Recovery Act (RCRA) and apply to electric generating sites with new and existing landfills and new and existing surface impoundments structural fills and CCR piles, and establishesestablish 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 for the disposal and management of CCR. In addition to the federal regulations, CCR landfills and surface impoundments (ash basins or impoundments) will continue to be independently regulated by existing state laws, regulations and permits, includingsuch as the North Carolina Coal Ash Management Act in North Carolina.of 2014 (Coal Ash Act).
Electric Utilities and Infrastructure has and will periodically submit to applicable authorities required site-specific coal ash impoundment remediation or closure plans. TheseClosure plans must be approved and all associated permits must be approvedissued before any work can begin. Closure activities have begun in all of Duke Energy's jurisdictions. Excavation began in 2015 at the four sites specified as high priority by the Coal Ash Act and at the W.S. Lee Steam Station site in South Carolina in connection with other legal requirements. Excavation at these sites involves movement of CCR materials to off-site locations for use as structural fill, to appropriate engineered off-site or on-site lined landfills or conversionfor reuse in an approved beneficial application. Duke Energy has completed excavation of coal ash at three of the ash for beneficial use.four high-priority North Carolina sites. At other sites preliminarywhere CCR management is required, planning and closure methods have been studied and factored into the estimated retirement and management costs. costs, and closure activities have commenced.
The EPA CCR rule and the Coal Ash Act requires CCR surface impoundments in North Carolina to be closed, with the closure method and timing based on a risk ranking classification determined by legislation or state regulators. Additionally, the RCRA required closure timing depends upon meeting or continuing to meet certain criteria.
The Coal Ash Act leavesleave the decision on cost recovery determinations related to closure of coal ash surface impoundments to the normal ratemaking processes before utility regulatory commissions. Duke Energy Carolinas and Duke Energy ProgressEnergy's electric utilities have included compliance costs associated with the EPA CCR rulefederal and the Coal Ash Actstate requirements in their respective rate case filings.proceedings. During 2017, Duke Energy Carolinas' and Duke Energy Progress’ wholesale contracts were amended to include the recovery of expenditures related to asset retirement obligationsAROs for the closure of coal ash basins. The amended contracts have retail disallowance parity or provisions limiting challenges to CCR cost recovery actions at FERC. FERC approved the amended wholesale rate schedules in 2017. For additional information on the ash basins and recovery, see Item 7, "Other Matters" and Notes 3, 4 5 and 9 to the Consolidated Financial Statements, "Regulatory Matters," "Commitments and Contingencies" and "Asset Retirement Obligations," respectively.
Nuclear Matters
Duke Energy owns, wholly or partially, 11 operating nuclear reactors located at six operating stations. The Crystal River Unit 3 permanently ceased operation in February 2013. Nuclear insurance includes: nuclear liability coverage; property damage coverage; nuclear accident decontamination and premature decommissioning coverage; and accidental outage coverage for losses in the event of a major accidental outage. Joint owners reimburse Duke Energy for certain expenses associated with nuclear insurance in accordance with joint owner agreements. The Price-Anderson Act requires plant owners to provide for public nuclear liability claims resulting from nuclear incidents to the maximum total financial protection liability, which is approximately $14.1$13.5 billion. For additional information on nuclear insurance, see Note 54 to the Consolidated Financial Statements, “Commitments and Contingencies.”
Duke Energy has a significant future financial commitment to dispose of spent nuclear fuel and decommission and decontaminate each plant safely. The NCUC, PSCSC and FPSC require Duke Energy to update their cost estimates for decommissioning their nuclear plants every five years.
The following table summarizes the fair value of NDTF balancesinvestments and the most recent site-specific nuclear decommissioning cost study results for Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida.studies. Decommissioning costs are stated in 2018 or 2019 dollars, for Duke Energy Carolinas, 2017 dollars for Duke Energy Florida and 2014 dollars for Duke Energy Progress,depending on the year of the cost study, and include costs to decommission plant components not subject to radioactive contamination.
| | | | | | | | | | | | | | | | | | | | | | | |
| NDTF(a) | | Decommissioning | | |
(in millions) | December 31, 2021 | | December 31, 2020 | | Costs(a) | | Year of Cost Study |
Duke Energy | $ | 10,401 | | | $ | 9,114 | | | $ | 9,105 | | | 2018 or 2019 |
Duke Energy Carolinas(b)(c) | 5,759 | | | 4,977 | | | 4,365 | | | 2018 |
Duke Energy Progress(d) | 4,089 | | | 3,500 | | | 4,181 | | | 2019 |
Duke Energy Florida(e) | 553 | | | 637 | | | 559 | | | N/A |
(a) Amounts for Progress Energy equal the sum of Duke Energy Progress and Duke Energy Florida.
(b) Decommissioning cost for Duke Energy Carolinas reflects its ownership interest in jointly owned reactors. Other joint owners are responsible for decommissioning costs related to their interest in the reactors.
(c) Duke Energy Carolinas' site-specific nuclear decommissioning cost study completed in 2018 was filed with the NCUC and PSCSC in 2019. A new funding study was also completed and filed with the NCUC and PSCSC in 2019.
(d) Duke Energy Progress' site-specific nuclear decommissioning cost study completed in 2019 was filed with the NCUC and PSCSC in March 2020. Duke Energy Progress also completed a funding study, which was filed with the NCUC and PSCSC in July 2020.
(e) During 2019, Duke Energy Florida reached an agreement to transfer decommissioning work for Crystal River Unit 3 to a third party and decommissioning costs are based on the agreement with this third party rather than a cost study. Regulatory approval was received from the NRC and the FPSC in April 2020 and August 2020, respectively. See Note 3 to the Consolidated Financial Statements, "Regulatory Matters,” for more information.
|
| | | | | | | | | | | | | |
| NDTF(a) | | Decommissioning |
| | |
(in millions) | December 31, 2018 |
| | December 31, 2017 |
| | Costs(a) |
| | Year of Cost Study |
Duke Energy | $ | 6,720 |
| | $ | 7,097 |
| | $ | 8,737 |
| | 2014 and 2018 |
Duke Energy Carolinas(b)(c) | 3,558 |
| �� | 3,772 |
| | 4,291 |
| | 2018 |
Duke Energy Progress | 2,503 |
| | 2,588 |
| | 3,550 |
| | 2014 |
Duke Energy Florida(d) | 659 |
| | 736 |
| | 896 |
| | 2018 |
| | | | | |
(a) | Amounts for Progress Energy equal the sum of Duke Energy Progress and Duke Energy Florida. |
BUSINESS | |
(b) | Decommissioning cost for Duke Energy Carolinas reflects its ownership interest in jointly owned reactors. Other joint owners are responsible for decommissioning costs related to their interest in the reactors. |
| |
(c) | Duke Energy Carolinas' site-specific nuclear decommissioning cost study completed in 2018 is expected to be filed with the NCUC and PSCSC by the second quarter 2019. Duke Energy Carolinas will also complete a new funding study, which will be completed and filed with the NCUC and PSCSC in 2019. |
| |
(d) | Duke Energy Florida's site-specific nuclear decommissioning cost study and a new funding study were completed and filed with the FPSC in 2018. For the years ended December 31, 2017 and December 31, 2018, Duke Energy Florida received reimbursements from the NDTF for costs related to ongoing decommissioning activity of Crystal River Unit 3. |
The NCUC, PSCSC, FPSC and FERC have allowed Electric Utilities and Infrastructure to recover estimated decommissioning costs through retail and wholesale rates over the expected remaining service periods of their nuclear stations. Electric Utilities and Infrastructure believes the decommissioning costs being recovered through rates, when coupled with the existing fund balances and expected fund earnings, will be sufficient to provide for the cost of future decommissioning. For additional information, see Note 9 to the Consolidated Financial Statements, “Asset Retirement Obligations.”
The NWPANuclear Waste Policy Act of 1982 (as amended) provides the framework for development by the federal government of interim storage and permanent disposal facilities for high-level radioactive waste materials. The government has not yet developed a storage facility or disposal capacity, so Electric Utilities and Infrastructure will continue to store spent fuel on its reactor sites.
Under federal law, the DOE is responsible for the selection and construction of a facility for the permanent disposal of spent nuclear fuel and high-level radioactive waste. The DOE terminated the project to license and develop a geologic repository at Yucca Mountain, Nevada in 2010, and is currently taking no action to fulfill its responsibilities to dispose of spent fuel.
Until the DOE begins to accept the spent nuclear fuel, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida will continue to safely manage their spent nuclear fuel. Under current regulatory guidelines, Harris has sufficient storage capacity in its spent fuel pools through the expiration of its renewed operating license. Crystal River Unit 3 ceased operation in 2013 and was placed in a SAFSTOR condition in January 2018. As of January 2018, all spent fuel at Crystal River Unit 3 has been transferred from the spent fuel pool to dry storage at an on-site ISFSI. With certain modifications and approvals by the NRC to expand the on-site dry cask storage facilities, spent nuclear fuel dry storage facilities will be sufficient to provide storage space of spent fuel through the expiration of the operating licenses, including any license renewals, for Brunswick, Catawba, McGuire, Oconee and Robinson. Crystal River Unit 3 ceased operation in 2013 and was placed in a SAFSTOR condition in January 2018. As of January 2018, all spent fuel at Crystal River Unit 3 has been transferred from the spent fuel pool to dry storage at an on-site independent spent fuel storage installation. During 2020, the NRC and the FPSC approved an agreement to transfer ownership of spent fuel for Crystal River Unit 3 to a third party. See Note 3 to the Consolidated Financial Statements, "Regulatory Matters,” for more information.
The nuclear power industry faces uncertainties with respect to the cost and long-term availability of disposal sites for spent nuclear fuel and other radioactive waste, compliance with changing regulatory requirements, capital outlays for modifications and new plant construction.
Electric Utilities and Infrastructure is subject to the jurisdiction of the NRC for the design, construction and operation of its nuclear generating facilities. The following table includes the current year of expiration of nuclear operating licenses for nuclear stations in operation. 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 to renew ONS's operating licenses are potentially subjectlicense for an additional 20 years. Duke Energy has announced its intention to extension.seek 20-year operating license renewals for each of the reactors it operates in Duke Energy Carolinas and Duke Energy Progress. See Note 3 to the Consolidated Financial Statements, "Regulatory Matters,” for additional information. |
| | | | |
Unit | Year of Expiration |
Duke Energy Carolinas | |
Catawba Units 1 and 2 | 2043 |
McGuire Unit 1 | 2041 |
McGuire Unit 2 | 2043 |
Oconee Units 1 and 2 | 2033 |
Oconee Unit 3 | 2034 |
Duke Energy Progress | |
Brunswick Unit 1 | 2036 |
Brunswick Unit 2 | 2034 |
Harris | 2046 |
Robinson | 2030 |
The NRC has acknowledged permanent cessation of operation and permanent removal of fuel from the reactor vessel at Crystal River Unit 3. Therefore, the license no longer authorizes operation of the reactor. For additional information on nuclear decommissioning activity, see Notes 43 and 9 to the Consolidated Financial Statements, "Regulatory Matters" and "Asset Retirement Obligations," respectively.
On October 27, 2016, and December 15, 2016, the NRC issued combined operating licenses for Levy and Lee Nuclear Station, respectively. On August 29, 2017, Duke Energy announced the complete abandonment of the Levy project; the operating license was formally terminated on April 26, 2018. On August 25, 2017, as part of Duke Energy Carolinas rate case filing, Duke Energy Carolinas requested NCUC approval to cancel the development of the Lee Nuclear Station project with the intent to maintain the combined operating licenses. For additional information on the Lee Nuclear Station, see Note 4 to the Consolidated Financial Statements, "Regulatory Matters."
Regulation
State
The NCUC, PSCSC, FPSC, PUCO, IURC and KPSC (collectively, the state electric utility commissions)commissions approve rates for Duke Energy's retail electric service within their respective states. The state electric utility commissions, to varying degrees, have authority over the construction and operation of Electric Utilities and Infrastructure’s generating facilities. CPCNCPCNs issued by the state electric utility commissions, as applicable, authorize Electric Utilities and Infrastructure to construct and operate its electric facilities and to sell electricity to retail and wholesale customers. Prior approval from the relevant state electric utility commission is required for the entities within Electric Utilities and Infrastructure to issue securities. The underlying concept of utility ratemaking is to set rates at a level that allows the utility to collect revenues equal to its cost of providing service plus earn a reasonable rate of return on its invested capital, including equity.
In addition to rates approved in base rate cases, each of the state electric utility commissions allow recovery of certain costs through various cost-recoverycost recovery clauses to the extent the respective commission determines in periodic hearings that such costs, including any past over or under-recovered costs, are prudent.
Fuel, fuel-related costs and certain purchased power costs are eligible for recovery by Electric Utilities and Infrastructure. Electric Utilities and Infrastructure uses coal, hydroelectric, natural gas, oil, renewable generation and nuclear fuel to generate electricity, thereby maintaining a diverse fuel mix that helps mitigate the impact of cost increases in any one fuel. Due to the associated regulatory treatment and the method allowed for recovery, changes in fuel costs from year to year have no material impact on operating results of Electric Utilities and Infrastructure, unless a commission finds a portion of such costs to have been imprudent. However, delays between the expenditure for fuel costs and recovery from customers can adversely impact the timing of cash flows of Electric Utilities and Infrastructure.
The table below reflects significant electric rate case applications approved and effective in the past three years or applications currently pending approval. | | | Regulatory Body | Annual Increase (Decrease) (in millions) | Return on Equity | Equity Component of Capital Structure | Effective Date | | Regulatory Body | Annual Increase (Decrease) (in millions) | Return on Equity | Equity Component of Capital Structure | Effective Date | |
Approved Rate Cases: | | | | | Approved Rate Cases: | | | | |
Duke Energy Carolinas 2017 North Carolina Rate Case | NCUC | $ | (73 | ) | 9.9 | % | 52 | % | 8/1/2018 | |
Duke Energy Progress 2017 North Carolina Rate Case | NCUC | 151 |
| 9.9 | % | 52 | % | 3/16/2018 | |
Duke Energy Progress 2019 North Carolina Rate Case | | Duke Energy Progress 2019 North Carolina Rate Case | NCUC | $ | 178 | | 9.6 | % | 52 | % | 6/1/2021 | |
Duke Energy Carolinas 2019 North Carolina Rate Case | | Duke Energy Carolinas 2019 North Carolina Rate Case | NCUC | 33 | | 9.6 | % | 52 | % | 6/1/2021 | |
Duke Energy Indiana 2019 Indiana Rate Case(a) | | Duke Energy Indiana 2019 Indiana Rate Case(a) | IURC | 146 | | 9.7 | % | 54 | % | 7/30/2020 | |
Duke Energy Kentucky 2019 Kentucky Electric Rate Case | | Duke Energy Kentucky 2019 Kentucky Electric Rate Case | KPSC | 24 | | 9.25 | % | 48.23 | % | 5/1/2020 | |
Duke Energy Carolinas 2018 South Carolina Rate Case | | Duke Energy Carolinas 2018 South Carolina Rate Case | PSCSC | 45 | | 9.5 | % | 53 | % | 6/1/2019 | |
Duke Energy Progress 2018 South Carolina Rate Case | | Duke Energy Progress 2018 South Carolina Rate Case | PSCSC | 29 | | 9.5 | % | 53 | % | 6/1/2019 | |
Duke Energy Ohio 2017 Ohio Electric Rate Case | PUCO | (19 | ) | 9.84 | % | 50.75 | % | 1/2/2019 | Duke Energy Ohio 2017 Ohio Electric Rate Case | PUCO | (19) | | 9.84 | % | 50.75 | % | 1/2/2019 | |
Duke Energy Kentucky 2017 Kentucky Electric Rate Case | KPSC | 8 |
| 9.725 | % | 49 | % | 5/1/2018 | |
Duke Energy Progress 2016 South Carolina Rate Case | PSCSC | (a) |
| 10.1 | % | 53 | % | 1/1/2017 | |
| | | | | | |
Pending Rate Cases: | | | | | Pending Rate Cases: | | |
Duke Energy Carolinas 2018 South Carolina Rate Case | PSCSC | $ | 168 |
| 10.5 | % | 53 | % | 6/1/2019 | |
Duke Energy Progress 2018 South Carolina Rate Case | PSCSC | 59 |
| 10.5 | % | 53 | % | 6/1/2019 | |
Duke Energy Ohio 2021 Ohio Electric Rate Case | | Duke Energy Ohio 2021 Ohio Electric Rate Case | PUCO | $ | 55 | | 10.3 | % | 50.5 | % | 7/1/2022 | |
| |
(a) | An increase of approximately $38 million in revenues was effective January 1, 2017, and an additional increase of approximately $19 million in revenues was effective January 1, 2018. |
(a) Step 1 rates are approximately 75% of the total and became effective July 30, 2020. Step 2 rates are approximately 25% of the total rate case increase. They were approved on July 28, 2021, and implemented in August 2021.
Additionally, in January 2021, Duke Energy Florida filed a settlement agreement with the FPSC that will allow annual increases to its base rates, an agreed upon return on equity (“ROE”) and includes a base rate stay-out provision through 2024, among other provisions. The FPSC approved the 2021 Settlement on May 4, 2021, issuing an order on June 4, 2021. Revised customer rates became effective January 1, 2022, with subsequent base rate increases effective January 1, 2023, and January 1, 2024. For more information on rate matters and other regulatory proceedings, see Note 43 to the Consolidated Financial Statements, “Regulatory Matters.”
Federal
The FERC approves Electric Utilities and Infrastructure’s cost-based rates for electric sales to certain power and transmission wholesale customers. Regulations of FERC and the state electric utility commissions govern access to regulated electric and other data by nonregulated entities and services provided between regulated and nonregulated energy affiliates. These regulations affect the activities of nonregulated affiliates with Electric Utilities and Infrastructure.
Regional Transmission Organizations (RTO).RTOs
PJM and MISO are the ISOs and FERC-approved RTOs for the regions in which Duke Energy Ohio and Duke Energy Indiana operate. PJM and MISO operate energy, capacity and other markets, and control the day-to-day operations of bulk power systems through central dispatch.
Duke Energy Ohio is a member of PJM and Duke Energy Indiana is a member of MISO. Transmission owners in these RTOs have turned over control of their transmission facilities and their transmission systems are currently under the dispatch control of the RTOs. Transmission service is provided on a regionwide, open-access basis using the transmission facilities of the RTO members at rates based on the costs of transmission service.
Environmental.Environmental
Electric Utilities and Infrastructure is subject to the jurisdiction of the EPA and state and local environmental agencies. For a discussion of environmental regulation, see “Environmental Matters” in this section. See the “Other Matters” section of Item 7 Management's Discussion and Analysis for a discussion about potential Global Climate Change legislation and other EPA regulations under development and the potential impacts such legislation and regulation could have on Duke Energy’s operations.
GAS UTILITIES AND INFRASTRUCTURE
Gas Utilities and Infrastructure conducts natural gas operations primarily through the regulated public utilities of Piedmont, Duke Energy Ohio and Duke Energy Ohio.Kentucky. The natural gas operations are subject to the rules and regulations of the NCUC, PSCSC, PUCO, KPSC, TPUC, PHMSA and the FERC. Gas Utilities and Infrastructure serves residential, commercial, industrial and power generation natural gas customers, including customers served by municipalities who are wholesale customers. Gas Utilities and Infrastructure has over 1.6 million total customers, including more than 1.1 million customers located in North Carolina, South Carolina and Tennessee, and an additional 531,000550,000 customers located within southwestern Ohio and northern Kentucky. In the Carolinas, Ohio and Kentucky, the service areas are comprised of numerous cities, towns and communities. In Tennessee, the service area is the metropolitan area of Nashville. The following map shows the service territory and investments in operating and proposed midstream propertiespipelines for Gas Utilities and Infrastructure as of December 31, 2018.2021.
The number of residential, commercial and industrial customers within the Gas Utilities and Infrastructure service territory is expected to increase over time. Average usage per residential customer is expected to remain flat or decline for the foreseeable future,future; however, decoupled rates in North Carolina and various rate design mechanisms in other jurisdictions partially mitigate the impact of the declining usage per customer on overall profitability. While total industrial and general service sales increased in 2018 when compared to 2017, the growth rate was modest when compared to historical periods.
Gas Utilities and Infrastructure also owns, operates and has investments in various pipeline transmission and natural gas storage facilities.
Natural Gas for Retail Distribution
Gas Utilities and Infrastructure is responsible for the distribution of natural gas to retail customers in its North Carolina, South Carolina, Tennessee, Ohio and Kentucky service territories. Gas Utilities and Infrastructure’s natural gas procurement strategy is to contract primarily with major and independent producers and marketers for natural gas supply. It also purchases a diverse portfolio of transportation and storage service from interstate pipelines. This strategy allows Gas Utilities and Infrastructure to assure reliable natural gas supply and transportation for its firm customers during peak winter conditions. When firm pipeline services or contracted natural gas supplies are temporarily not needed due to market demand fluctuations, Gas Utilities and Infrastructure may release these services and supplies in the secondary market under FERC-approved capacity release provisions or make wholesale secondary market sales. In 2018,2021, firm supply purchase commitment agreements provided 100 percent100% of the natural gas supply for both Piedmont and Duke Energy Ohio.
Impact of Weather
Gas Utilities and Infrastructure revenues are generally protected from the impact of weather fluctuations due to the regulatory mechanisms that are available in most service territories. In North Carolina, margin decoupling provides protection from both weather and other usage variations like conservation for residential and commercial customer classes.small and medium general service customers. Margin decoupling provides a set revenuemargin per customer independent of actual usage. In South Carolina, Tennessee and Tennessee,Kentucky, weather normalization adjusts revenues either up or down depending on how much warmer or colder than normal a given month has been. Weather normalization adjustments occur from November through March in South Carolina, and from October through April in Tennessee.Tennessee and from November through April in Kentucky. Duke Energy Ohio collects most of its non-fuel revenue through a fixed monthly charge that is not impacted by usage fluctuations that result from weather changes or conservation. Kentucky, however, bills based on volumetric rates without weather protection.
Competition
Gas Utilities and Infrastructure’s businesses operate as the sole provider of natural gas service within their retail service territories. Gas Utilities and Infrastructure owns and operates facilities necessary to transport and distribute natural gas. Gas Utilities and Infrastructure earns retail margin on the transmission and distribution of natural gas and not on the cost of the underlying commodity. Services are priced by state commission approvedcommission-approved rates designed to include the costs of providing these services and a reasonable return on invested capital. This regulatory policy is intended to provide safe and reliable natural gas service at fair prices.
In residential, commercial and industrial customer markets, natural gas distribution operations compete with other companies that supply energy, primarily electric companies, propane and fuel oil dealers, renewable energy providers and coal companies in relation to sources of energy for electric power plants, as well as nuclear energy. A significant competitive factor is price. Gas Utilities and Infrastructure's primary product competition is with electricity for heating, water heating and cooking. Increases in the price of natural gas or decreases in the price of other energy sources could negatively impact competitive position by decreasing the price benefits of natural gas to the consumer. In the case of industrial customers, such as manufacturing plants, adverse economic or market conditions, including higher natural gas costs, could cause these customers to suspend business operations or to use alternative sources of energy in favor of energy sources with lower per-unit costs.
Higher natural gas costs or decreases in the price of other energy sources may allow competition from alternative energy sources for applications that have traditionally used natural gas, encouraging some customers to move away from natural gas-fired equipment to equipment fueled by other energy sources. Competition between natural gas and other forms of energy is also based on efficiency, performance, reliability, safety and other non-price factors. Technological improvements in other energy sources and events that impair the public perception of the non-price attributes of natural gas could erode our competitive advantage. These factors in turn could decrease the demand for natural gas, impair our ability to attract new customers and cause existing customers to switch to other forms of energy or to bypass our systems in favor of alternative competitive sources. This could result in slow or no customer growth and could cause customers to reduce or cease using our product, thereby reducing our ability to make capital expenditures and otherwise grow our business, adversely affecting our earnings.
Pipeline and Storage Investments
Duke Energy, through its Gas Utilities and Infrastructure segment, is a 47 percent equity member of ACP, which plans to build and own the proposed ACP pipeline, an approximately 600-mile interstate natural gas pipeline, regulated by FERC. The ACP pipeline is intended to transport diverse natural gas supplies into southeastern markets. Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customers of the ACP pipeline. ACP expects to achieve a late 2020 in-service date for key segments of the project, while it expects a remainder to extend into 2021. Abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions may result in cost or schedule modifications in the future. ACP and Duke Energy will continue to consider their options with respect to the foregoing in light of their existing contractual and legal obligations.
Gas Utilities and Infrastructure also has a 7.5 percent7.5% equity ownership interest in Sabal Trail. Sabal Trail is a joint venture that owns the Sabal Trail pipelineNatural Gas Pipeline (Sabal Trail pipeline) to transport natural gas to Florida, regulated by FERC. The Sabal Trail phase onePhase I mainline was placed into service in July 2017 and traverses Alabama, Georgia and Florida. The remaining lateral line to the Duke Energy Florida's Citrus County CC was placed into service in March 2018. Phase II of Sabal Trail went into service in May 2020, adding approximately 200,000 Dth of capacity to the Sabal Trail pipeline.
Gas Utilities and Infrastructure has a 24 percent47% equity ownership interest in ACP, which planned to build the ACP pipeline, an approximately 600-mile interstate natural gas pipeline. The ACP pipeline was intended to transport diverse natural gas supplies into southeastern markets and would be regulated by FERC. Dominion Energy owns 53% of ACP and was contracted to construct and operate the ACP pipeline upon completion. On July 5, 2020, Dominion announced a sale of substantially all of its gas transmission and storage segment assets, which were critical to the ACP pipeline. Further, permitting delays and legal challenges had materially affected the timing and cost of the pipeline. As a result, Duke Energy determined that they would no longer invest in the construction of the ACP pipeline.
Gas Utilities and Infrastructure has a 24% equity ownership interest in Constitution, an interstate pipeline development company formed to develop, construct, own and operate a 124-mile natural gas pipeline and related facilities, regulated by FERC. Constitution iswas slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. As a result of permitting delaysFebruary 5, 2020, the Constitution partners formally resolved to initiate the dissolution of Constitution, and project uncertainty,to terminate the Constitution is unable to approximate an in-service date.Pipeline project.
Duke Energy, through its Gas Utilities and Infrastructure segment, has a 21.49 percent21.49% equity ownership interest in Cardinal, an intrastate pipeline located in North Carolina regulated by the NCUC, a 45 percent45% equity ownership in Pine Needle, an interstate liquefied natural gas storage facility located in North Carolina and a 50 percent50% equity ownership interest in Hardy Storage, an underground interstate natural gas storage facility located in Hardy and Hampshire counties in West Virginia. Pine Needle and Hardy Storage are regulated by FERC.
KO Transmission Company (KO Transmission), a wholly owned subsidiary of Duke Energy Ohio, is an interstate pipeline company engaged in the business of transporting natural gas and is subject to the rules and regulations of FERC. KO Transmission's 90-mile pipeline supplies natural gas to Duke Energy Ohio and interconnects with the Columbia Gulf Transmission pipeline and Tennessee Gas Pipeline. An approximately 70-mile portion of KO Transmission's pipeline facilities is co-owned by Columbia Gas Transmission Corporation.
See Notes 4,3, 12 and 17 to the Consolidated Financial Statements, "Regulatory Matters," "Investments in Unconsolidated Affiliates" and "Variable Interest Entities," respectively, for further information on Duke Energy's pipeline investments.
Inventory
Gas Utilities and Infrastructure must maintain adequate natural gas inventory in order to provide reliable delivery to customers. As of December 31, 2018,2021, the inventory balance for Gas Utilities and Infrastructure was $105$125 million. For more information on inventory, see Note 1 to the Consolidated Financial Statements, "Summary of Significant Accounting Policies."
Regulation
State
The NCUC, PSCSC, PUCO, TPUC and KPSC (collectively, the state gas utility commissions)commissions approve rates for Duke Energy's retail natural gas service within their respective states. The state gas utility commissions, to varying degrees, have authority over the construction and operation of Gas Utilities and Infrastructure’s natural gas distribution facilities. CPCN or Certificates of Environmental Compatibility and Public NecessityCPCNs issued by the state gas utility commissions or other government agencies, as applicable, authorize Gas Utilities and Infrastructure to construct and operate its natural gas distribution facilities and to sell natural gas to retail and wholesale customers. Prior approval from the relevant state gas utility commission is required for Gas Utilities and Infrastructure to issue securities. The underlying concept of utility ratemaking is to set rates at a level that allows the utility to collect revenues equal to its cost of providing service plus a reasonable rate of return on its invested capital, including equity.
In addition to amounts collected from customers through approved base rates, each of the state gas utility commissions allow recovery of certain costs through various cost-recoverycost recovery clauses to the extent the respective commission determines in periodic hearings that such costs, including any past over- or under-recovered costs, are prudent.
Natural gas costs are eligible for recovery by Gas Utilities and Infrastructure. Due to the associated regulatory treatment and the method allowed for recovery, changes in natural gas costs from year to year have no material impact on operating results of Gas Utilities and Infrastructure, unless a commission finds a portion of such costs to have not been prudent.imprudent. However, delays between the expenditure for natural gas and recovery from customers can adversely impact the timing of cash flows of Gas Utilities and Infrastructure.
The following table summarizes certain components underlying recently approved and effective base rates or rate stabilization filings in the last three years. |
| | | | | | | | | | | |
| Annual Increase (Decrease) (in millions) | | Return on Equity | | Equity Component of Capital Structure | | Effective Date |
Approved Rate Cases: | | | | | | | |
Piedmont 2016 South Carolina Rate Stabilization Adjustment Filing | $ | 8 |
| | 10.2 | % | | 53.0 | % | | November 2016 |
Piedmont 2017 South Carolina Rate Stabilization Adjustment Filing | 6 |
| | 10.2 | % | | 53.0 | % | | November 2017 |
Piedmont 2018 South Carolina Rate Stabilization Adjustment Filing | (14 | ) | | 10.2 | % | | 53.0 | % | | November 2018 |
Pending Rate Cases: | | | | | | | |
Duke Energy Kentucky 2018 Kentucky Gas Rate Case | $ | 11 |
| | 9.9 | % | | 50.755 | % | | April 2019 |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Annual Increase (Decrease) (in millions) | | Return on Equity | | Equity Component of Capital Structure | | Effective Date | | |
Approved Rate Cases: | | | | | | | | | |
Duke Energy Kentucky 2018 Natural Gas Base Rate Case | $ | 7 | | | 9.7 | % | | 50.8 | % | | April 2019 | | |
Piedmont 2019 North Carolina Natural Gas Base Rate Case | 109 | | | 9.7 | % | | 52.0 | % | | November 2019 | | |
Piedmont 2019 South Carolina Rate Stabilization Adjustment Filing | 6 | | | 9.9 | % | | 55.4 | % | | November 2019 | | |
Piedmont 2020 South Carolina Rate Stabilization Adjustment Filing | 7 | | | 9.8 | % | | 52.3 | % | | November 2020 | | |
Piedmont 2020 Tennessee Natural Gas Base Rate Case | 16 | | | 9.8 | % | | 50.5 | % | | January 2021 | | |
Piedmont 2021 North Carolina Natural Gas Base Rate Case | 67 | | | 9.6 | % | | 51.6 | % | | November 2021 | | |
Piedmont 2021 South Carolina Rate Stabilization Adjustment Filing | 7 | | | 9.8 | % | | 52.2 | % | | November 2021 | | |
Duke Energy Kentucky 2021 Natural Gas Base Rate Case(a) | 9 | | | 9.38 | % | | 51.3 | % | | January 2022 | | |
| | | | | | | | | |
| | | | | | | | | |
(a) An ROE of 9.375% for natural gas base rates and 9.3% for natural gas riders was approved.
Gas Utilities and Infrastructure has IMR mechanisms in North Carolina and Tennessee designed to separately track and recover certain costs associated with capital investments incurred to comply with federal pipeline safety and integrity
programs, as well as additional state safety and integrity requirements in Tennessee.programs. The following table summarizes information related to
the recently approved
or pending IMR
filings.filing. |
| | | | | | | | | |
| Cumulative |
| | Annual Margin |
| | Effective |
(in millions) | Investment |
| | Revenues |
| | Date |
Piedmont 2018 IMR Filing – North Carolina | $ | 924 |
| | $ | 81 |
| | December 2018 |
Pending Filing: | | | | | Proposed Effective Date |
Piedmont 2018 IMR Filing – Tennessee | $ | 259 |
| | $ | 26 |
| | January 2019 |
| | | | | | | | | | | | | | | | | |
| Cumulative | | Annual | | Effective |
(in millions) | Investment | | Revenues | | Date |
Piedmont 2021 IMR Filing – North Carolina | $ | 61 | | | $ | 4 | | | December 2021 |
| | | | | |
| | | | | |
| | | | | |
In Piedmont's Tennessee rate case settled in February 2021, the company included projected IMR investment through December 31, 2021, in its rate base. The recovery of integrity investment was requested in the rate case and not through the Tennessee IMR mechanism.
For more information on rate matters and other regulatory proceedings, see Note 43 to the Consolidated Financial Statements, “Regulatory Matters.”
Federal
Gas Utilities and Infrastructure is subject to various federal regulations, including regulations that are particular to the natural gas industry. These federal regulations include but are not limited to the following:
•Regulations of the FERC affect the certification and siting of new interstate natural gas pipeline projects, the purchase and sale of, the prices paid for, and the terms and conditions of service for the interstate transportation and storage of natural gas.
•Regulations of the PHMSA affect the design, construction, operation, maintenance, integrity, safety and security of natural gas distribution and transmission systems.
•Regulations of the EPA relate to the environment including proposed air emissions regulations that would expand to include emissions of methane. For a discussion of environmental regulation, see “Environmental Matters” in this section. Refer to the “Other Matters” section of Management's Discussion and Analysis for a discussion about potential Global Climate Change legislation and other EPA regulations under development and the potential impacts such legislation and regulation could have on Duke Energy’s operations.
Regulations of the FERC and the state gas utility commissions govern access to regulated natural gas and other data by nonregulated entities and services provided between regulated and nonregulated energy affiliates. These regulations affect the activities of nonregulated affiliates with Gas Utilities and Infrastructure.
Environmental
Gas Utilities and Infrastructure is subject to the jurisdiction of the EPA and state and local environmental agencies. For a discussion of environmental regulation, see “Environmental Matters” in this section. See “Other Matters” section of Item 7 Management's Discussion and Analysis for a discussion about potential Global Climate Change legislation and other EPA regulations under development and the potential impacts such legislation and regulation could have on Duke Energy’s operations.
COMMERCIAL RENEWABLES
Commercial Renewables primarily acquires, develops, builds, operates and owns wind and solar renewable generation throughout the continental U.S. Commercial Renewables also enters into strategic transactions including minority ownership and tax equity structures in wind and solar generation. The portfolio includes nonregulated renewable energy and energy storage businesses.
Commercial Renewables' renewable energy includes utility-scale wind and solar generation assets, distributed solar generation assets, distributed fuel cell assets and a battery storage project,projects, which total 2,9913,554 MW across 1922 states from 2123 wind facilities, 100178 solar facilitiesprojects, 71 fuel cell locations and onetwo battery storage facility.facilities. Revenues are primarily generated by selling the power produced from renewable generation through long-term contracts to utilities, electric cooperatives, municipalities and commercial and industrialcorporate customers. In most instances, these customers have obligations under state-mandated renewable energy portfolio standards or similar state or local renewable energy goals. Energy and renewable energy credits generated by wind and solar projects are generally sold at contractual prices. The following map shows the service territory forlocations of renewable generation facilities of which Commercial Renewables has an ownership interest as of December 31, 2018.2021.
As eligible wind and solar projects are placed in service, Commercial Renewables generally recognizes either PTCs as power is generated by wind projects over 10 years or ITCs when the renewable solar or wind project achieves commercial availability. ITCs are recognized over the useful life of the asset as a reduction to depreciation expense with the benefitsolar or fuel cell projects. Benefits of the tax basis adjustment due to the ITC beingare recognized inas a reduction to income tax expense in the year of commercial availability. Thein which the project is placed in service. Under the current law, the ITC for solar and fuel cells is being phased down from the current 30 percenta rate of 30% for projects that began construction before 2020 to a permanent 10 percent10% rate for solar, and no ITC is available for fuel cells if construction begins in 2019 through 2022.after 2023. The PTC for onshore wind is beingcurrently phased out and wind turbines will earn 10 years of PTCs at phased-out rates iffor projects beginning construction beginsafter 2021, but remains available for projects that began construction in 2017 through 2019.
As part of its growth strategy, Commercial Renewables has expanded its investment portfolio through the addition of distributed solar companies and projects, energy storage systems and energy management solutions specifically tailored to commercial businesses. These investments include REC Solar Corp., a California-based provider of solar installations for retail, manufacturing, agriculture, technology, government and nonprofit customers across the U.S. and Phoenix Energy Technologies Inc., a California-based provider of enterprise energy management and information software to commercial businesses.2021 or earlier.
Commercial Renewables has entered into agreements for certain of its solar generating assets that are held by LLCs whose members include a noncontrolling tax equity investor. The allocation of earnings, tax attributes and cash distributionsflows to the tax equity investor are based on certaingoverned by the provisions of the liquidation provisions pursuant to the LLC agreements. The GAAP earnings allocations to the tax equity investors can result in variability in earnings to Duke Energy.Energy as a result of the application of the HLBV method in allocating income or loss to the owners. As part of its growth strategy, Commercial Renewables expects to enter into these arrangements for future wind and solar generating assets.
For additional information on Commercial Renewables' generation facilities, see Item 2, “Properties.”
Market Environment and Competition
Commercial Renewables primarily competes for wholesale contracts for the generation and sale of electricity from wind and solar generation assets it either develops or acquires and owns. The market price of commodities and services, along with the quality and reliability of services provided, drive competition in the wholesale energy business. The number and type of competitors may vary based on location, generation type and project size. Commercial Renewables' main competitors include other nonregulated generators and wholesale power providers.
Sources of Electricity
Commercial Renewables relies on wind, solar, fuel cells and battery resources for its generation of electric energy.
Regulation
Commercial Renewables is subject to regulation at the federal level, primarily from the FERC. Regulations of the FERC govern access to regulated market information by nonregulated entities and services provided between regulated and nonregulated utilities.
OTHER
The remainder of Duke Energy’s operations is presented as Other. While it is not a business segment, Other primarily includes interest expense on holding company debt, unallocated corporate costs including costs to achieve strategic acquisitions, amounts related to certain companywide initiatives and contributions made to the Duke Energy Foundation. Other also includes Bison and an investment in NMC.
The Duke Energy Foundation is a nonprofit organization funded by Duke Energy shareholders that makes charitable contributions to selected nonprofits and government subdivisions.
Bison, a wholly owned subsidiary of Duke Energy, is a captive insurance company with the principal activity of providing Duke Energy subsidiaries with indemnification for financial losses primarily related to property, workers’ compensation and general liability.
Duke Energy owns a 17.5 percent17.5% equity interest in NMC. The joint venture company has production facilities in Jubail, Saudi Arabia, where it manufactures certain petrochemicals and plastics. The company annually produces approximately 1 million metric tons each of MTBE and methanol and has the capacity to produce 50,000 metric tons of polyacetal. The main feedstocks to produce these products are natural gas and butane. Duke Energy records the investment activity of NMC using the equity method of accounting and retains 25 percent25% of NMC's board of directorsdirectors' representation and voting rights.
Human Capital Management
Governance
Our employees are critical to the success of our company. Our Human Resources organization is responsible for our human capital management strategy, which includes recruiting and hiring, onboarding and training, diversity and inclusion, workforce planning, talent and succession planning, performance management and employee development. Key areas of focus include fostering a high-performance and inclusive culture built on strong leadership and highly engaged and diverse employees, building a pipeline of skilled workers and ensuring knowledge transfer as employees retire.
Our Board of Directors provides oversight on certain human capital management matters, primarily through the Compensation and People Development Committee, which is responsible for reviewing strategies and policies related to human capital management, including with respect to matters such as diversity and inclusion, employee engagement and talent development. The Compensation and People Development Committee also receives updates on employee engagement surveys and action plans.
Employees
On December 31, 2018,2021, Duke Energy had a total of 30,08327,605 full-time, part-time and temporary employees, on its payroll.the overwhelming majority of which were full-time employees. The total includes 5,4465,064 employees who are represented by labor unions under various collective bargaining agreements that generally cover wages, benefits, working practices, and other terms and conditions of employment.
Compensation
The company seeks to attract and retain an appropriately qualified workforce and leverages Duke Energy’s leadership imperatives to foster a culture focused on customers, innovation, and highly engaged employees. Our compensation program is market driven and designed to link pay to performance with the goal of attracting and retaining talented employees, rewarding individual performance, and encouraging long-term commitment to our business. Our market competitive pay program includes short-term and long-term variable pay components that help to align the interests of Duke Energy to our customers and shareholders. In addition to competitive base pay, we provide eligible employees with compensation and benefits under a variety of plans and programs, including with respect to health care benefits, retirement savings, pension, health savings and flexible spending accounts, wellness, family leaves, employee assistance, as well as other benefits including a charitable matching program. The company is committed to providing market competitive, fair, and equitable compensation and regularly conducts internal pay equity reviews, and benchmarking against peer companies to ensure our pay is competitive.
Diversity and Inclusion
Duke Energy is committed to continuing to build a diverse workforce that reflects the communities we serve while strengthening a culture of inclusion where employees and customers feel respected and valued. Our Enterprise Diversity and Inclusion Council, chaired by our Chief Operating Officer, monitors the effectiveness and execution of our diversity and inclusion strategy and programs. Employee-led councils are also embedded across the company in our business units and focus on the specific diversity and inclusion needs of the business and help drive inclusion deeper into the employee experience. Leaders and individual contributors also have the opportunity to participate in diversity and inclusion training programs and facilitated conversations on thought provoking topics offered to further our commitment to building and enabling an inclusive work environment.
Our aspirational goals include achieving workforce representation of at least 25% female and 20% racial and ethnic diversity. We continue to make strides toward reaching these aspirational goals and as of December 31, 2021, our workforce consisted of approximately 23.9% female and 19.6% racial and ethnic diversity.
The company also has a number of Employee Resource Groups (ERGs), which are networks of employees formed around a common dimension of diversity whose goals and objectives align with the company's goals and objectives. These groups focus on employee professional development and networking, community outreach, cultural awareness, recruiting and retention. They also serve as a resource to the company for advocacy and community outreach and improving customer service through innovation. ERG-sponsored forums include networking events, mentoring, scholarship banquets for aspiring college students, and workshops on topics such as time management, stress reduction, career planning and work-life balance. Our ERGs are open to all employees.
Among other efforts, the company has developed partnerships with community organizations, community colleges and historically Black colleges and universities to support our strategy of building a diverse and highly skilled talent pipeline.
Operational Excellence
The foundation for our growth and success is our continued focus on operational excellence, the leading indicator of which is safety. As such, the safety of our workforce remains our top priority. The company closely monitors the total incident case rate (TICR), which is a metric based on strict OSHA definitions that measures the number of occupational injuries and illnesses per 100 employees. This objective emphasizes our focus on achieving an event-free and injury-free workplace. As an indication of our commitment to safety, we include safety metrics in both the short-term and long-term incentive plans based on the TICR for employees. Our employees delivered strong safety results in 2021, consistent with our industry-leading performance levels from 2016 through 2020.
Information about Our Executive Officers of the Registrants
The following table sets forth the individuals who currently serve as executive officers. Executive officers serve until their successors are duly elected or appointed. |
| | | | | | | | | | | | | |
Name | | Age(a) | | Current and Recent Positions Held |
Lynn J. Good | | 5962 |
| | Chair, President and Chief Executive Officer. Ms. Good has served as Chair, President and Chief Executive Officer of Duke Energy since January 1, 2016, and was Vice Chairman, President and Chief Executive Officer. Ms. Good was elected as ChairmanOfficer of the Board, effective January 1, 2016, and assumed her position as President and Chief Executive Officer inDuke Energy from July 2013.2013 through December 2015. Prior to that, she served as Executive Vice President and Chief Financial Officer since 2009. |
Steven K. Young | | 6063 |
| | Executive Vice President and Chief Financial Officer. Mr. Young assumed his current position in August 2013. Prior to that he served as Vice President, Chief Accounting Officer and Controller, assuming the role of Chief Accounting Officer in July 2012 and the role of Controller in December 2006. |
Douglas F EsamannMelody Birmingham | | 6150 |
| | Senior Vice President and Chief Administrative Officer. Ms. Birmingham assumed her current position in May 2021, Prior to that, Ms. Birmingham served as Senior Vice President, Supply Chain and Chief Procurement Officer since 2018; State President of Duke Energy Indiana’s operations from 2015 to 2018, and Senior Vice President, Midwest Delivery from 2012 to 2015. |
Kodwo Ghartey-Tagoe | | 58 | | Executive Vice President, Energy SolutionsChief Legal Officer and President, Midwest and Florida Regions. Corporate Secretary. Mr. EsamannGhartey-Tagoe assumed his current position in September 2016 and was Executive Vice President and President, Midwest and Florida Regions since June 2015. Prior to that, he served as President, Duke Energy Indiana since November 2010. |
Lloyd M. Yates | | 58 |
| | Executive Vice President, Customer and Delivery Operations and President, Carolinas Region. Mr. Yates assumed his current position in September 2016 and was Executive Vice President, Market Solutions and President, Carolinas Region since August 2014. He held the position of Executive Vice President, Regulated Utilities from November 2012 to August 2014,Chief Legal Officer and prior to that, served asCorporate Secretary in May 2020. He was appointed Executive Vice President Customer Operationsand Chief Legal Officer in October 2019 after serving as President, South Carolina since July 2012, upon the merger2017. Mr. Ghartey-Tagoe joined Duke Energy in 2002, and has held numerous management positions in Duke Energy’s Legal Department, including Duke Energy's Senior Vice President of State and Federal Regulatory Legal Support.
|
R. Alexander Glenn | | 56 | | Senior Vice President and Chief Executive Officer, Duke Energy Florida and Midwest. Mr. Glenn assumed his current position in May 2021. Prior to that, Mr. Glenn served as Senior Vice President, State and Federal Regulatory Legal Support since 2017 and as State President of Duke Energy and Progress Energy.Florida's operations from 2012 to 2017. |
Dhiaa M. Jamil | | 6265 |
| | Executive Vice President and Chief Operating Officer. Mr. Jamil assumed the role of Chief Operating Officer in May 2016. Prior to his current position, he held the title Executive Vice President and President, Regulated Generation and Transmission since June 2015. Prior to that, he served as Executive Vice President and President, Regulated Generation since August 2014. He served as Executive Vice President and President of Duke Energy Nuclear from March 2013 to August 2014, and was Chief Nuclear Officer from February 2008 to February 2013. |
Franklin H. YohoJulia S. Janson | | 5957 |
| | Executive Vice President and President, Natural Gas Business. Mr. YohoChief Executive Officer, Duke Energy Carolinas. Ms. Janson assumed hisher current position in October 2016 upon the acquisition of Piedmont by Duke Energy.May 2021. Prior to this appointment, he served as Senior Vice President and Chief Commercial Officerthat she held the position of Piedmont since August 2011. |
Julia S. Janson | | 54 |
| | Executive Vice President, External Affairs and Chief Legal Officer. Ms. Janson has heldPresident, Carolinas Region since October 2019 and the position of Executive Vice President, External Affairs and Chief Legal Officer since November 2018. She originally assumed the position of Executive Vice President, Chief Legal Officer and Corporate Secretary in December 2012, and then assumed the responsibilities for External Affairs in February 2016. |
Melissa H. AndersonCynthia S. Lee | | 5455 |
| | Executive Vice President, AdministrationChief Accounting Officer and Chief Human Resources Officer.Controller. Ms. AndersonLee assumed her positionrole as Vice President, Chief Accounting Officer and Controller in May 20162021. Prior to that, she served as Director, Investor Relations since June 2019 and had been Executivein various roles within the Corporate Controller's organization after joining the Corporation and its affiliates in 2002.
|
Ronald R. Reising | | 61 | | Senior Vice President and Chief Human Resources Officer since January 2015.Officer. Mr. Reising assumed his current position in July 2020. Prior to joining Duke Energy, shethat, he served as Senior Vice President of Human Resources at Domtar Inc.Operations Support since 2010.2014. Prior to that he served as Chief Procurement Officer since 2006. |
Dwight L. JacobsLouis E. Renjel | | 5348 |
| | Senior Vice President, Chief Accounting Officer, TaxExternal Affairs and Controller.Communications. Mr. Jacobs hasRenjel his current position in May 2021. Prior to that he served as Senior Vice President of Federal Government and Corporate Affairs since 2019, and as Vice President, Federal Government Affairs and Strategic Policy since he joined Duke Energy in March 2017 until 2019. Prior to joining Duke Energy, Mr. Renjel served as Vice President of Strategic Infrastructure since 2009 for CSX Corp and as their Director of Environmental and Government Affairs from 2006 to 2008. |
Brian D. Savoy | | 46 | | Executive Vice President, Chief Strategy and Commercial Officer. Mr. Savoy assumed the position of Executive Vice President, Chief Strategy and Commercial Officer in May 2021. Prior to that he held the position of Senior Vice President, Chief Transformation and Administrative Officer from October 2019 through April 2021; Senior Vice President, Business Transformation and Technology from May 2016 through September 2019; Senior Vice President, Controller and Chief Accounting Officer Taxfrom September 2013 to May 2016; Director, Forecasting and Analysis from 2009 to September 2013; and Vice President and Controller since January 1,of the Commercial Power segment from 2006 to 2009. |
Harry K. Sideris | | 51 | | Executive Vice President, Customer Experience, Solutions and Services. Mr. Sideris assumed his current position in October 2019. Prior to that, he served as Senior Vice President and Chief AccountingDistribution Officer and Controller since June 1, 2018. Prior2018; State President, Florida from January 2017 to that, he served asJune 2018; Senior Vice President Financial Planning & Analysis since February 2016of Environmental Health and as Chief Risk Officer since July 2014. PriorSafety from August 2014 to his role as Chief Risk Officer, Mr. Jacobs served asJanuary 2017; and Vice President Rates & Regulatory Strategy since May 2010.of Power Generations for the company's Fossil/Hydro Operations in the western portions of North Carolina and South Carolina from July 2012 to August 2014. |
(a) The ages of the officers provided are as of DecemberJanuary 31, 2018.2022.
There are no family relationships between any of the executive officers, nor any arrangement or understanding between any executive officer and any other person involved in officer selection.
Environmental Matters
The Duke Energy Registrants are subject to federal, state and local laws and regulations with regard to air and water quality, hazardous and solid waste disposal and other environmental matters. Environmental laws and regulations affecting the Duke Energy Registrants include, but are not limited to:
•The CAA,Clean Air Act, as well as state laws and regulations impacting air emissions, including State Implementation Plans related to existing and new national ambient air quality standards for ozone and particulate matter. Owners and/or operators of air emission sources are responsible for obtaining permits and for annual compliance and reporting.
•The CWA,Clean Water Act, which requires permits for facilities that discharge wastewaters into navigable waters.
•The Comprehensive Environmental Response, Compensation and Liability Act, which can require any individual or entity that currently owns or in the past owned or operated a disposal site, as well as transporters or generators of hazardous substances sent to a disposal site, to share in remediation costs.
•The National Environmental Policy Act, which requires federal agencies to consider potential environmental impacts in their permitting and licensing decisions, including siting approvals.
•Coal Ash Act, as amended, which establishes requirements regarding the use and closure of existing ash basins, the disposal of ash at active coal plants and the handling of surface water and groundwater impacts from ash basins in North Carolina.
•The Solid Waste Disposal Act, as amended by the RCRA, which creates a framework for the proper management of hazardous and nonhazardous solid waste; classifies CCR as nonhazardous waste; and establishes standards for landfill and surface impoundment placement, design, operation and closure, groundwater monitoring, corrective action, and post-closure care.
•The TSCA,Toxic Substances Control Act, which gives EPA the authority to require reporting, recordkeeping and testing requirements, and to place restrictions relating to chemical substances and/or mixtures, including polychlorinated biphenyls.
| |
• | The proposed ACE rule, which will require states to develop CO2 reduction plans based on efficiency (heat rate) improvements at coal-fired power plants.
|
For more information on environmental matters, see Notes 54 and 9 to the Consolidated Financial Statements, “Commitments and Contingencies – Environmental” and "Asset Retirement Obligations," respectively, and the “Other Matters” section of Item 7 Management's Discussion and Analysis. Except as otherwise described in these sections, costs to comply with current federal, state and local provisions regulating the discharge of materials into the environment or other potential costs related to protecting the environment are incorporated into the routine cost structure of our various business segments and are not expected to have a material adverse effect on the competitive position, consolidated results of operations, cash flows or financial position of the Duke Energy Registrants.
The "Other Matters" section of Item 7 Management's Discussion and Analysis includes an estimate of future capital expenditures required to comply withmore information on certain environmental regulations and a discussion of Global Climate Change including the potential impact of current and future legislation related to GHG emissions on the Duke Energy Registrants' operations. Recently passed and potential future environmental statutes and regulations could have a significant impact on the Duke Energy Registrants’ results of operations, cash flows or financial position. However, if and when such statutes and regulations become effective, the Duke Energy Registrants will seek appropriate regulatory recovery of costs to comply within its regulated operations.
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’ service area covers approximately 24,000 square miles and supplies electric service to 2.62.8 million residential, commercial and industrial customers. For information about Duke Energy Carolinas’ generating facilities, see Item 2, “Properties.” Duke Energy Carolinas is subject to the regulatory provisions of the NCUC, PSCSC, NRC and FERC.
Substantially all of Duke Energy Carolinas' operations are regulated and qualify for regulatory accounting. Duke Energy Carolinas operates one reportable business segment, Electric Utilities and Infrastructure. For additional information regarding this business segment, including financial information, see Note 32 to the Consolidated Financial Statements, “Business Segments.”
Progress Energy is a public utility holding company primarily engaged in the regulated electric utility business and is subject to regulation by the FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. When discussing Progress Energy’s financial information, it necessarily includes the results of Duke Energy Progress and Duke Energy Florida.
Substantially all of Progress Energy’s operations are regulated and qualify for regulatory accounting. Progress Energy operates one reportable business segment, Electric Utilities and Infrastructure. For additional information regarding this business segment, including financial information, see Note 32 to the Consolidated Financial Statements, “Business Segments.”
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’ service area covers approximately 32,00029,000 square miles and supplies electric service to approximately 1.61.7 million residential, commercial and industrial customers. For information about Duke Energy Progress’ generating facilities, see Item 2, “Properties.” Duke Energy Progress is subject to the regulatory provisions of the NCUC, PSCSC, NRC and FERC.
Substantially all of Duke Energy Progress’ operations are regulated and qualify for regulatory accounting. Duke Energy Progress operates one reportable business segment, Electric Utilities and Infrastructure. For additional information regarding this business segment, including financial information, see Note 32 to the Consolidated Financial Statements, “Business Segments.”
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’s service area covers approximately 13,000 square miles and supplies electric service to approximately 1.81.9 million residential, commercial and industrial customers. For information about Duke Energy Florida’s generating facilities, see Item 2, “Properties.” Duke Energy Florida is subject to the regulatory provisions of the FPSC, NRC and FERC.
Substantially all of Duke Energy Florida’s operations are regulated and qualify for regulatory accounting. Duke Energy Florida operates one reportable business segment, Electric Utilities and Infrastructure. For additional information regarding this business segment, including financial information, see Note 32 to the Consolidated Financial Statements, “Business Segments.”
Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, in 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 also conducts competitive auctions for retail electricity supply in Ohio whereby recovery of the energy price is from retail customers. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky. References herein to Duke Energy Ohio include Duke Energy Ohio and its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject to the regulatory provisions of the PUCO, KPSC, PHMSA and FERC.
Duke Energy Ohio’s service area covers approximately 3,000 square miles and supplies electric service to approximately 860,000880,000 residential, commercial and industrial customers and provides transmission and distribution services for natural gas to approximately 538,000550,000 customers. For information about Duke Energy Ohio's generating facilities, see Item 2, “Properties.”
KO Transmission, a wholly owned subsidiary of Duke Energy Ohio, is an interstate pipeline company engaged in the business of transporting natural gas and is subject to the rules and regulations of FERC. KO Transmission's 90-mile pipeline supplies natural gas to Duke Energy Ohio and interconnects with the Columbia Gulf Transmission pipeline and Tennessee Gas Pipeline. An approximately 70-mile portion of KO Transmission's pipeline facilities is co-owned by Columbia Gas Transmission Corporation.
Substantially all of Duke Energy Ohio's operations are regulated and qualify for regulatory accounting. Duke Energy Ohio has two reportable segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure. For additional information on these business segments, including financial information, see Note 32 to the Consolidated Financial Statements, “Business Segments.”
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’s service area covers 23,000 square miles and supplies electric service to 840,000870,000 residential, commercial and industrial customers. For information about Duke Energy Indiana's generating facilities, see Item 2, “Properties.” Duke Energy Indiana is subject to the regulatory provisions of the IURC and FERC.
In 2021, Duke Energy completed the first phase of the investment in Duke Energy Indiana by GIC. For additional information, see Note 1 to the Consolidated Financial Statements, "Summary of Significant Accounting Policies."
Substantially all of Duke Energy Indiana’s operations are regulated and qualify for regulatory accounting. Duke Energy Indiana operates one reportable business segment, Electric Utilities and Infrastructure. For additional information regarding this business segment, including financial information, see Note 32 to the Consolidated Financial Statements, “Business Segments.”
Piedmont is a regulated public utility primarily engaged in the distribution of natural gas to over 11.1 million residential, commercial, industrial and power generation customers in portions of North Carolina, South Carolina and Tennessee, including customers served by municipalities who are wholesale customers. For information about Piedmont's natural gas distribution facilities, see Item 2, "Properties." Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, TPUC, PHMSA and FERC.
Substantially all of Piedmont’s operations are regulated and qualify for regulatory accounting. Piedmont operates one reportable business segment, Gas Utilities and Infrastructure. For additional information regarding this business segment, including financial information, see Note 32 to the Consolidated Financial Statements, “Business Segments.”
In addition to other disclosures within this Form 10-K, including "Management's Discussion and Analysis of Financial Condition and Results of Operations – Matters Impacting Future Results" for each registrant in Item 7, and other documents filed with the SEC from time to time, the following factors should be considered in evaluating Duke Energy and its subsidiaries. Such factors could affect actual results of operations and cause results to differ substantially from those currently expected or sought. Unless otherwise indicated, risk factors discussed below generally relate to risks associated with all of the Duke Energy Registrants. Risks identified at the Subsidiary Registrant level are generally applicable to Duke Energy.
BUSINESS STRATEGY RISKS
Duke Energy’s future results could be adversely affected if it is unable to implement its business strategy.strategy including achieving its carbon emissions reduction goals.
Duke Energy’s results of operations depend, in significant part, on the extent to which it can implement its business strategy successfully. Duke Energy's clean energy strategy, includingwhich includes achieving net-zero carbon emissions from electricity generation by 2050, modernizing the regulatory construct, transforming the customer experience, modernizing the energy grid, generating cleaner energy, expansion of natural gas infrastructure, modernizing the regulatory construct,and digital transformation, and engaging employees and stakeholders to accomplish these priorities, is subject to business, policy, regulatory, technology, economic and competitive uncertainties and contingencies, many of which are beyond its control. control and may make those goals difficult to achieve.
Federal or state policies could be enacted that restrict the availability of fuels or generation technologies, such as natural gas or nuclear power, that enable Duke Energy to reduce its carbon emissions. Supportive policies may be needed to facilitate the siting and cost recovery of transmission and distribution upgrades needed to accommodate the build out of large volumes of renewables and energy storage. Further, the approval of our state regulators will be necessary for the company to continue to retire existing carbon emitting assets or make investments in new generating capacity. The company may be constrained by the ability to procure resources or labor needed to build new generation at a reasonable price as well as to construct projects on time. In addition, new technologies that are not yet commercially available or are unproven at utility scale will be needed. If these technologies are not developed or are not available at reasonable prices, or if we invest in early-stage technologies that are then supplanted by technological breakthroughs, Duke Energy’s ability to achieve a net-zero target by 2050 at a cost-effective price could be at risk.
Achieving our carbon reduction goals will require continued operation of our existing carbon-free technologies including nuclear and renewables. The rapid transition to and expansion of certain low-carbon resources, such as renewables without cost-effective storage, may challenge our ability to meet customer expectations of reliability in a carbon constrained environment, Our nuclear fleet is central to our ability to meet these objectives and customer expectations. We are continuing to seek to renew the operating licenses of the 11 reactors we operate at six nuclear stations for an additional 20 years, extending their operating lives to and beyond midcentury. Failure to receive approval from the NRC for the relicensing of any of these reactors could affect our ability to achieve a net-zero target by 2050.
As a consequence, Duke Energy may not be able to fully implement or realize the anticipated results of its strategy.strategy, which may have an adverse effect on its financial condition.
Regulatory, Legislative and Legal RisksREGULATORY, LEGISLATIVE AND LEGAL RISKS
The Duke Energy Registrants’ regulated utility revenues, earnings and results are dependent on state legislation and regulation that affect electric generation, electric and natural gas transmission, distribution and related activities, which may limit their ability to recover costs.
The Duke Energy Registrants’ regulated electric and natural gas utility businesses are regulated on a cost-of-service/rate-of-return basis subject to statutes and regulatory commission rules and procedures of North Carolina, South Carolina, Florida, Ohio, Tennessee, Indiana and Kentucky. If the Duke Energy Registrants’ regulated utility earnings exceed the returns established by the state utility commissions, retail electric and natural gas rates may be subject to review and possible reduction by the commissions, which may decrease the Duke Energy Registrants’ earnings. Additionally, if regulatory bodies do not allow recovery of costs incurred in providing service, or do not do so on a timely basis, the Duke Energy Registrants’ earnings could be negatively impacted. Differences in regulation between jurisdictions with concurrent operations, such as North Carolina and South Carolina in Duke Energy Carolinas' and Duke Energy Progress' service territory, may also result in failure to recover costs.
If legislative and regulatory structures were to evolve in such a way that the Duke Energy Registrants’ exclusive rights to serve their regulated customers were eroded, their earnings could be negatively impacted. Federal and state regulations, laws, commercialization and reduction of costs and other efforts designed to promote and expand the use of energy efficiencyEE measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could reduce recovery of fixed costs in Duke Energy service territories or result in customers leaving the electric distribution system and an increase in customer net energy metering, which allows customers with private solar to receive bill credits for surplus power at the full retail amount. Over time, customer adoption of these technologies and increased energy efficiency could result in excess generation resources as well as stranded costs if Duke Energy is not being able to fully recover the costs and investment in generation.
State regulators have approved various mechanisms to stabilize natural gas utility margins, including margin decoupling in North Carolina and rate stabilization in South Carolina. State regulators have approved other margin stabilizing mechanisms that, for example, allow for recovery of margin losses associated with negotiated transactions designed to retain large volume customers that could use alternative fuels or that may otherwise directly access natural gas supply through their own connection to an interstate pipeline. If regulators decided to discontinue the Duke Energy Registrants' use of tariff mechanisms, it would negatively impact results of operations, financial conditionposition and cash flows. In addition, regulatory authorities also review whether natural gas costs are prudentprudently incurred and can disallow the recovery of a portion of natural gas costs that the Duke Energy Registrants seek to recover from customers, which would adversely impact earnings.
The rates that the Duke Energy Registrants’ regulated utility businesses are allowed to charge are established by state utility commissions in rate case proceedings, which may limit their ability to recover costs and earn an appropriate return on investment.
The rates that the Duke Energy Registrants’ regulated utility business are allowed to charge significantly influences the results of operations, financial position and cash flows of the Duke Energy Registrants. The regulation of the rates that the regulated utility businesses charge customers is determined, in large part, by state utility commissions in rate case proceedings. Negative decisions made by these regulators, or by any court on appeal of a rate case proceeding, could have a material adverse effect on the Duke Energy Registrants’ results of operations, financial position or cash flows and affect the ability of the Duke Energy Registrants to recover costs and an appropriate return on the significant infrastructure investments being made.
Deregulation or restructuring in the electric industry may result in increased competition and unrecovered costs that could adversely affect the Duke Energy Registrants’ financial position, results of operations, financial position or cash flows and their utility businesses.
Increased competition resulting from deregulation or restructuring legislation could have a significant adverse impact on the Duke Energy Registrants’ results of operations, financial position or cash flows. If the retail jurisdictions served by the Duke Energy Registrants become subject to deregulation, the impairment of assets, loss of retail customers, lower profit margins or increased costs of capital, and recovery of stranded costs could have a significant adverse financial impact on the Duke Energy Registrants. Stranded costs primarily include the generation assets of the Duke Energy Registrants whose value in a competitive marketplace may be less than their current book value, as well as above-market purchased power commitments from QFs from whom the Duke Energy Registrants are legally obligated to purchase energy at an avoided cost rate under PURPA. The Duke Energy Registrants cannot predict the extent and timing of entry by additional competitors into the electric markets. The Duke Energy Registrants cannot predict if or when they will be subject to changes in legislation or regulation, nor can they predict the impact of these changes on their results of operations, financial position or cash flows.
The Duke Energy Registrants’ businesses are subject to extensive federal regulation and a wide variety of laws and governmental policies, including taxes and environmental regulations, that may change over time in ways that affect operations and costs.
The Duke Energy Registrants are subject to regulations under a wide variety of U.S. federal and state regulations and policies, including by FERC, NRC, EPA and various other federal agencies as well as the North American Electric Reliability Corporation. Regulation affects almost every aspect of the Duke Energy Registrants’ businesses, including, among other things, their ability to: take fundamental business management actions; determine the terms and rates of transmission and distribution services; make acquisitions; issue equity or debt securities; engage in transactions with other subsidiaries and affiliates; and pay dividends upstream to the Duke Energy Registrants. Changes to federal regulations are continuous and ongoing. There can be no assurance that laws, regulations and policies will not be changed in ways that result in material modifications of business models and objectives or affect returns on investment by restricting activities and products, subjecting them to escalating costs, causing delays, or prohibiting them outright.
The Duke Energy Registrants are subject to numerous environmental laws and regulations requiring significant capital expenditures that can increase the cost of operations, and which may impact or limit business plans, or cause exposure to environmental liabilities.
The Duke Energy Registrants are subject to numerous environmental laws and regulations affecting many aspects of their present and future operations, including CCRs, air emissions, water quality, wastewater discharges, solid waste and hazardous waste. These laws and regulations can result in increased capital, operating and other costs. These laws and regulations generally require the Duke Energy Registrants to obtain and comply with a wide variety of environmental licenses, permits, inspections and other approvals. Compliance with environmental laws and regulations can require significant expenditures, including expenditures for cleanup costs and damages arising from contaminated properties. Failure to comply with environmental regulations may result in the imposition of fines, penalties and injunctive measures affecting operating assets. The steps the Duke Energy Registrants could be required to take to ensure their facilities are in compliance could be prohibitively expensive. As a result, the Duke Energy Registrants may be required to shut down or alter the operation of their facilities, which may cause the Duke Energy Registrants to incur losses. Further, the Duke Energy Registrants may not be successful in recovering capital and operating costs incurred to comply with new environmental regulations through existing regulatory rate structures and their contracts with customers. Also, the Duke Energy Registrants may not be able to obtain or maintain from time to time all required environmental regulatory approvals for their operating assets or development projects. Delays in obtaining any required environmental regulatory approvals, failure to obtain and comply with them or changes in environmental laws or regulations to more stringent compliance levels could result in additional costs of operation for existing facilities or development of new facilities being prevented, delayed or subject to additional costs. Although it is not expected that the costs to comply with current environmental regulations will have a material adverse effect on the Duke Energy Registrants’ results of operations, financial position and cash flows due to regulatory cost recovery, the Duke Energy Registrants are at risk that the costs of complying with environmental regulations in the future will have such an effect.
The EPA has enacted or proposed federal regulations governing the management of cooling water intake structures, wastewater and CO2 emissions. New state legislation could impose carbon reduction goals that are more aggressive than the company's plans. These regulations may require the Duke Energy Registrants to make additional capital expenditures and increase operating and maintenance costs.
Duke Energy Carolinas and Duke Energy Progress are subject to the terms of probation set out in judgments of the United States District Court for the Eastern District of North Carolina on May 14, 2015. The judgments are based on events and activities that took place prior to 2015. The terms of probation require the companies to comply with certain environmental regulatory obligations related to coal ash and subject the two companies to oversight by a Court Appointed Monitor. If Duke Energy Carolinas or Duke Energy Progress failed to comply with certain coal ash-related environmental laws and regulations or otherwise violated the terms of probation, it could result in the imposition of additional penalties, including the revocation of probation and re-prosecution of the underlying violations. Although it is not expected that the companies will violate the terms of probation or that additional material penalties would occur, a significant violation of probation could have a material adverse effect on the Duke Energy Registrants’ reputation, results of operations, financial position and cash flows.
The Duke Energy Registrants' operations, capital expenditures and financial results may be affected by regulatory changes related to the impacts of global climate change.
There is continued concern, and increasing activism, both nationally and internationally, about climate change. The EPA and state regulators may adopt and implement regulations to restrict emissions of GHGs to address global climate change. Certain local and state jurisdictions have also enacted laws to restrict or prevent new gas infrastructure. Increased regulation of GHG emissions could impose significant additional costs on the Duke Energy Registrants' electric and natural gas operations, their suppliers and customers.customers and affect demand for energy conservation and renewable products, which could impact both our electric and natural gas businesses. Regulatory changes could also result in generation facilities to be retired early andearlier than planned to meet our net-zero 2050 goal. Though we would plan to seek cost recovery for investments related to GHG emissions reductions through regulatory rate structures, changes in the regulatory climate could result in stranded costs if Duke Energy is not ablethe failure to fully recover thesuch costs and investment in generation.
Operational RisksOPERATIONAL RISKS
The Duke Energy Registrants’ operations have been and may be affected by COVID-19 in ways listed below and in ways the registrants cannot predict at this time.
The COVID-19 pandemic has immaterially impacted and could impact the Duke Energy Registrants' business strategy, results of operations, financial position and cash flows in the future as a result of delays in rate cases or other legal proceedings, an inability to obtain labor or equipment necessary for the construction of large capital projects, an inability to procure satisfactory levels of fuels or other necessary equipment for the continued production of electricity and delivery of natural gas, and the health and availability of our critical personnel and their ability to perform business functions.
The Duke Energy Registrants’ results of operations may be negatively affected by overall market, economic and other conditions that are beyond their control.
Sustained downturns or sluggishness in the economy generally affect the markets in which the Duke Energy Registrants operate and negatively influence operations. Declines in demand for electricity or natural gas as a result of economic downturns in the Duke Energy Registrants’ regulated service territories will reduce overall sales and lessen cash flows, especially as industrial customers reduce production and, therefore, consumption of electricity and the use of natural gas. Although the Duke Energy Registrants’ regulated electric and natural gas businesses are subject to regulated allowable rates of return and recovery of certain costs, such as fuel and purchased natural gas costs, under periodic adjustment clauses, overall declines in electricity or natural gas sold as a result of economic downturn or recession could reduce revenues and cash flows, thereby diminishing results of operations. The Duke Energy Registrants also monitor the impacts of inflation on the procurement of goods and services and seek to minimize its effects in future periods through pricing strategies, productivity improvements, and cost reductions. Rapidly rising prices as a result of inflation or other factors may impact the ability of the company to recover costs timely or execute on its business strategy including the achievement of growth objectives. Additionally, prolonged economic downturns that negatively impact the Duke Energy Registrants’ results of operations and cash flows could result in future material impairment charges to write-down the carrying value of certain assets, including goodwill, to their respective fair values.
The Duke Energy Registrants also sell electricity into the spot market or other competitive power markets on a contractual basis. With respect to such transactions, the Duke Energy Registrants are not guaranteed any rate of return on their capital investments through mandated rates, and revenues and results of operations are likely to depend, in large part, upon prevailing market prices. These market prices may fluctuate substantially over relatively short periods of time and could reduce the Duke Energy Registrants’ revenues and margins, thereby diminishing results of operations.
Factors that could impact sales volumes, generation of electricity and market prices at which the Duke Energy Registrants are able to sell electricity and natural gas are as follows:
•weather conditions, including abnormally mild winter or summer weather that cause lower energy or natural gas usage for heating or cooling purposes, as applicable, and periods of low rainfall that decrease the ability to operate facilities in an economical manner;
•supply of and demand for energy commodities;
•transmission or transportation constraints or inefficiencies that impact nonregulated energy operations;
•availability of competitively priced alternative energy sources, which are preferred by some customers over electricity produced from coal, nuclear or natural gas plants, and customer usage of energy-efficient equipment that reduces energy demand;
•natural gas, crude oil and refined products production levels and prices;
•ability to procure satisfactory levels of inventory, including materials, supplies, and fuel such as coal, natural gas and uranium; and
•capacity and transmission service into, or out of, the Duke Energy Registrants’ markets.
Natural disasters or operational accidents may adversely affect the Duke Energy Registrants’ operating results.
Natural disasters or other operational accidents within the company or industry (such as forest fires, earthquakes, hurricanes or natural gas transmission pipeline explosions) could have direct or indirect impacts to the Duke Energy Registrants or to key contractors and suppliers. Further, the generation of electricity and the transportation and storage of natural gas involve inherent operating risks that may result in accidents involving serious injury or loss of life, environmental damage or property damage. Such events could impact the Duke Energy Registrants through changes to policies, laws and regulations whose compliance costs have a significant impact on the Duke Energy Registrants’ results of operations, financial position and cash flows. In addition, if a serious operational accident were to occur, itexisting insurance policies may not cover all of the potential exposures or the actual amount of loss incurred, including potential litigation awards. Any losses not covered by insurance, or any increases in the cost of applicable insurance as a result of such accident, could have a material adverse effect on the results of operations, financial position, cash flows and reputation of the Duke Energy Registrants.
The reputation and financial condition of the Duke Energy Registrants could be negatively impacted due to their obligations to comply with federal and state regulations, laws, and other legal requirements that govern the operations, assessments, storage, closure, remediation, disposal and monitoring relating to CCR, the high costs and new rate impacts associated with implementing these new CCR-related requirements and the strategies and methods necessary to implement these requirements in compliance with these legal obligations.
As a result of electricity produced for decades at coal-fired power plants, the Duke Energy Registrants manage large amounts of CCR that are primarily stored in dry storage within landfills or combined with water in other surface impoundments, all in compliance with applicable regulatory requirements. However, the potential exists for anotherA CCR-related incident, such as the one that occurred during the 2014 Dan River Steam Station ash basin release, that could raise environmental or public health concerns. Such a CCR-relatedoperational incident could have a material adverse impact on the reputation and results of operations, financial position and cash flows of the Duke Energy Registrants.
During 2015, EPA regulations were enacted related to the management of CCR from power plants. These regulations classify CCR as nonhazardous waste under the RCRA and apply to electric generating sites with new and existing landfills and, new and existing surface impoundments, structural fills and CCR piles, and establishesestablish 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 for the disposal and management of CCR. In addition to the federal regulations, CCR landfills and surface impoundments will continue to be independently regulated by existing state laws, regulations and permits, as well as additional legal requirements that may be imposed in the future.future, such as the settlement reached with the NCDEQ to excavate seven of the nine remaining coal ash basins in North Carolina, and partially excavate the remaining two, and EPA's January 11, 2022, issuance of a letter interpreting the CCR Rule, including its applicability and closure provisions. These federal and state laws, regulations and other legal requirements may require or result in additional expenditures, including increased operating and maintenance costs, and/or result in closure of certain power generating facilities, which could affect the results of operations, financial position and cash flows of the Duke Energy Registrants. The Duke Energy Registrants will continue to seek full cost recovery for expenditures through the normal ratemaking process with state and federal utility commissions, who permit recovery in rates of necessary and prudently incurred costs associated with the Duke Energy Registrants’ regulated operations, and through other wholesale contracts with terms that contemplate recovery of such costs, although there is no guarantee of full cost recovery. In addition, the timing for and amount of recovery of such costs could have a material adverse impact on Duke Energy's cash flows.
The Duke Energy Registrants have recognized significant asset retirement obligationsAROs related to these CCR-related requirements. Closure activities began in 2015 at the four sites specified as high priority by the Coal Ash Act and at the W.S. Lee Steam Station site in South Carolina in connection with other legal requirements. Excavation at these sites involves movement of large amounts of CCR materials to off-site locations for use as structural fill, to appropriate engineered off-site or on-site lined landfills or conversion of the ash for beneficial use. Duke Energy has completed excavation of coal ash at three of the four high priority sites. At other sites, preliminary planning and closure methods have been studied and factored into the estimated retirement and management costs. The Coal Ash Act requires CCR surface impoundments in North Carolina to be closed, with thecosts, and closure method and timing based on a risk ranking classification determined by legislation or state regulators. Additionally, the RCRA required closure timing depends upon meeting or continuing to meet certain criteria.activities have commenced. As the closure and CCR management work progresses and final closure plans and corrective action measures are developed and approved at each site, the scope and complexity of work and the amount of CCR material could be greater than estimates and could, therefore, materially increase compliance expenditures and rate impacts.
The Duke Energy Registrants’ financial position, results of operations, financial position and cash flows may be negatively affected by a lack of growth or slower growth in the number of customers, or decline in customer demand or number of customers.
Growth in customer accounts and growth of customer usage each directly influence demand for electricity and natural gas and the need for additional power generation and delivery facilities. Customer growth and customer usage are affected by a number ofseveral factors outside the control of the Duke Energy Registrants, such as mandated energy efficiencyEE measures, demand-side management goals, distributed generation resources and economic and demographic conditions, such as population changes, job and income growth, housing starts, new business formation and the overall level of economic activity.
Certain regulatory and legislative bodies have introduced or are considering requirements and/or incentives to reduce energy consumption by certain dates.dates in response to concerns related to climate change. Additionally, technological advances driven by federal laws mandating new levels of energy efficiencyEE in end-use electric and natural gas devices or other improvements in or applications of technology could lead to declines in per capita energy consumption.
Advances in distributed generation technologies that produce power, including fuel cells, microturbines, wind turbines and solar cells, may reduce the cost of alternative methods of producing power to a level competitive with central power station electric production utilized by the Duke Energy Registrants.
In addition, the electrification of buildings and appliances currently relying on natural gas could reduce the number of customers in our natural gas distribution business.
Some or all of these factors could result in a lack of growth or decline in customer demand for electricity or number of customers and may cause the failure of the Duke Energy Registrants to fully realize anticipated benefits from significant capital investments and expenditures, which could have a material adverse effect on their results of operations, financial position and cash flows.
Furthermore, the Duke Energy Registrants currently have energy efficiencyEE riders in place to recover the cost of energy efficiencyEE programs in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. Should the Duke Energy Registrants be required to invest in conservation measures that result in reduced sales from effective conservation, regulatory lag in adjusting rates for the impact of these measures could have a negative financial impact.
The Duke Energy Registrants future results may be impacted by changing expectations and demands including heightened emphasis on environmental, social and governance concerns.
Duke Energy’s ability to execute its strategy and achieve anticipated financial outcomes are influenced by the expectations of our customers, regulators, investors, and stakeholders. Those expectations are based in part on the core fundamentals of reliability and affordability but are also increasingly focused on our ability to meet rapidly changing demands for new and varied products, services and offerings. Additionally, the risks of global climate change continues to shape our customers’ sustainability goals and energy needs as well as the investment and financing criteria of investors. Failure to meet these increasing expectations or to adequately address the risks and external pressures from regulators, customers, investors and other stakeholders may impact Duke Energy’s reputation and affect its ability to achieve favorable outcomes in future rate cases and the results of operations for the Duke Energy Registrants. Furthermore, the increasing use of social media may accelerate and increase the potential scope of negative publicity we might receive and could increase the negative impact on our reputation, business, results of operations, and financial condition.
As it relates to electric generation, a diversified fleet with increasingly clean generation resources may facilitate more efficient financing and lower costs. Conversely, jurisdictions utilizing more carbon-intensive generation such as coal may experience difficulty attracting certain investors and obtaining the most economical financing terms available. Furthermore, with this heightened emphasis on environmental, social, and governance concerns, and climate change in particular, there is an increased risk of litigation by activists.
The Duke Energy Registrants’ operating results may fluctuate on a seasonal and quarterly basis and can be negatively affected by changes in weather conditions and severe weather, including extreme weather conditions associated withand changes in weather patterns from climate change.
Electric power generation and natural gas distribution are generally seasonal businesses. In most parts of the U.S., the demand for power peaks during the warmer summer months, with market prices also typically peaking at that time. In other areas, demand for power peaks during the winter. Demand for natural gas peaks during the winter months. Further, changing frequency or magnitude of extreme weather conditions such as hurricanes, droughts, heat waves, winter storms and severe weather, associated withincluding from climate change, could cause these seasonal fluctuations to be more pronounced. As a result, the overall operating results of the Duke Energy Registrants’ businesses may fluctuate substantially on a seasonal and quarterly basis and thus make period-to-period comparison less relevant.
Sustained severe drought conditions could impact generation by hydroelectric plants, as well as fossil and nuclear plant operations, as these facilities use water for cooling purposes and for the operation of environmental compliance equipment. Furthermore, destruction caused by severe weather events, such as hurricanes, flooding, tornadoes, severe thunderstorms, snow and ice storms, including from climate change, can result in lost operating revenues due to outages, property damage, including downed transmission and distribution lines, and additional and unexpected expenses to mitigate storm damage. The cost of storm restoration efforts may not be fully recoverable through the regulatory process.
The Duke Energy Registrants’ sales may decrease if they are unable to gain adequate, reliable and affordable access to transmission assets.
The Duke Energy Registrants depend on transmission and distribution facilities owned and operated by utilities and other energy companies to deliver electricity sold to the wholesale market. In addition, the growth of renewables and energy storage will put strains on existing transmission assets and require transmission and distribution upgrades. The FERC’s power transmission regulations require wholesale electric transmission services to be offered on an open-access, non-discriminatory basis. If transmission is disrupted, or if transmission capacity is inadequate, the Duke Energy Registrants’ ability to sell and deliver products may be hindered.
The different regional power markets have changing regulatory structures, which could affect growth and performance in these regions. In addition, the ISOs who oversee the transmission systems in regional power markets have imposed in the past, and may impose in the future, price limitations and other mechanisms to address volatility in the power markets. These types of price limitations and other mechanisms may adversely impact the profitability of the Duke Energy Registrants’ wholesale power marketing business.
Duke Energy may be unable to complete necessary or desirable pipeline expansion or infrastructure development or maintenance projects, which may prevent the Duke Energy Registrants from expanding the natural gas business.
In order to serve current or new natural gas customers or expand the service to existing customers, the Duke Energy Registrants need to maintain, expand or upgrade distribution, transmission and/or storage infrastructure, including laying new pipeline and building compressor stations. Duke Energy Registrants have made significant investments in a number of pipeline development projects, which are being operated and constructed by third-party joint venture partners. The Duke Energy Registrants must rely on their third-party joint venture partners for proper construction management of the projects and are dependent upon contractors for the successful and timely completion of the projects. In addition, various factors, such as the inability to obtain required approval from local, state and/or federal regulatory and governmental bodies, public opposition to projects, adverse litigation rulings, inability to obtain adequate financing, competition for labor and materials, construction delays, cost overruns and the inability to negotiate acceptable agreements relating to rights of way, construction or other material development components, may prevent or delay the completion of projects or materially increase the cost of such projects, which could have a material adverse effect on the results of operations and financial position of Duke Energy.
The availability of adequate interstate pipeline transportation capacity and natural gas supply may decrease.
The Duke Energy Registrants purchase almost all of their natural gas supply from interstate sources that must be transported to the applicable service territories. Interstate pipeline companies transport the natural gas to the Duke Energy Registrants' systems under firm service agreements that are designed to meet the requirements of their core markets. A significant disruption to interstate pipelines capacity or reduction in natural gas supply due to events including, but not limited to, operational failures or disruptions, hurricanes, tornadoes, floods, freeze off of natural gas wells, terrorist or cyberattacks or other acts of war or legislative or regulatory actions or requirements, including remediation related to integrity inspections or regulations and laws enacted to address climate change, could reduce the normal interstate supply of natural gas and thereby reduce earnings. Moreover, if additional natural gas infrastructure, including, but not limited to, exploration and drilling rigs and platforms, processing and gathering systems, off-shoreoffshore pipelines, interstate pipelines and storage, cannot be built at a pace that meets demand, then growth opportunities could be limited and earnings negatively impacted.limited.
Fluctuations in commodity prices or availability may adversely affect various aspects of the Duke Energy Registrants’ operations as well as their financial position, results of operations, financial position and cash flows.
The Duke Energy Registrants are exposed to the effects of market fluctuations in the price of natural gas, coal, fuel oil, nuclear fuel, electricity and other energy-related commodities as a result of their ownership of energy-related assets. Fuel costs are recovered primarily through cost-recoverycost recovery clauses, subject to the approval of state utility commissions.
Additionally, the Duke Energy Registrants are exposed to risk that counterparties will not be able to fulfill their obligations. Disruption in the delivery of fuel, including disruptions as a result of, among other things, bankruptcies, transportation delays, weather, labor relations, force majeure events or environmental regulations affecting any of these fuel suppliers, could limit the Duke Energy Registrants' ability to operate their facilities. Should counterparties fail to perform, the Duke Energy Registrants might be forced to replace the underlying commitment at prevailing market prices possibly resulting in losses in addition to the amounts, if any, already paid to the counterparties.
Certain of the Duke Energy Registrants’ hedge agreements may result in the receipt of, or posting of, collateral with counterparties, depending on the daily market-based calculation of financial exposure of the derivative positions. Fluctuations in commodity prices that lead to the return of collateral received and/or the posting of collateral with counterparties could negatively impact liquidity. Downgrades in the Duke Energy Registrants’ credit ratings could lead to additional collateral posting requirements. The Duke Energy Registrants continually monitor derivative positions in relation to market price activity.
Potential terrorist activities, or military or other actions, could adversely affect the Duke Energy Registrants’ businesses.
The continued threat of terrorism and the impact of retaliatory military and other action by the U.S. and its allies may lead to increased political, economic and financial market instability and volatility in prices for natural gas and oil, which may have material adverse effects in ways the Duke Energy Registrants cannot predict at this time. In addition, future acts of terrorism and possible reprisals as a consequence of action by the U.S. and its allies could be directed against companies operating in the U.S. Information technology systems, transmission and distribution and generation facilities such as nuclear plants could be potential targets of terrorist activities or harmful activities by individuals or groups that could have a material adverse effect on Duke Energy Registrants' businesses. In particular, the Duke Energy Registrants may experience increased capital and operating costs to implement increased security for their information technology systems, transmission and distribution and generation facilities, including nuclear power plants under the NRC’s design basis threat requirements. These increased costs could include additional physical plant security and security personnel or additional capability following a terrorist incident.
The failure of Duke Energy information technology systems, or the failure to enhance existing information technology systems and implement new technology, could adversely affect the Duke Energy Registrants’ businesses.
Duke Energy’s operations are dependent upon the proper functioning of its internal systems, including the information technology systems that support our underlying business processes. Any significant failure or malfunction of such information technology systems may result in disruptions of our operations. In the ordinary course of business, we rely on information technology systems, including the internet and third-party hosted services, to support a variety of business processes and activities and to store sensitive data, including (i) intellectual property, (ii) proprietary business information, (iii) personally identifiable information of our customers and employees, and (iv) data with respect to invoicing and the collection of payments, accounting, procurement, and supply chain activities. Our information technology systems are dependent upon global communications and cloud service providers, as well as their respective vendors, many of whom have at some point experienced significant system failures and outages in the past and may experience such failures and outages in the future. These providers’ systems are susceptible to cybersecurity and data breaches, outages from fire, floods, power loss, telecommunications failures, break-ins and similar events. Failure to prevent or mitigate data loss from system failures or outages could materially affect the results of operations, financial position and cash flows of the Duke Energy Registrants.
In addition to maintaining our current information technology systems, Duke Energy believes the digital transformation of its business is key to driving internal efficiencies as well as providing additional capabilities to customers. Duke Energy’s information technology systems are critical to cost-effective, reliable daily operations and our ability to effectively serve our customers. We expect our customers to continue to demand more sophisticated technology-driven solutions and we must enhance or replace our information technology systems in response. This involves significant development and implementation costs to keep pace with changing technologies and customer demand. If we fail to successfully implement critical technology, or if it does not provide the anticipated benefits or meet customer demands, such failure could materially adversely affect our business strategy as well as impact the results of operations, financial position and cash flows of the Duke Energy Registrants.
Cyberattacks and data security breaches could adversely affect the Duke Energy Registrants' businesses.
Cybersecurity risks have increased in recent years as a result of the proliferation of new technologies and the increased sophistication, magnitude and frequency of cyberattacks and data security breaches. Duke Energy relies on the continued operation of sophisticated digital information technology systems and network infrastructure, which are part of an interconnected regional grid. Additionally, connectivity to the internet continues to increase through grid modernization and other operational excellence initiatives. Because of the critical nature of the infrastructure, increased connectivity to the internet and technology systems’ inherent vulnerability to disability or failures due to hacking, viruses, acts of war or terrorism or other types of data security breaches, the Duke Energy Registrants face a heightened risk of cyberattack from foreign or domestic sources and have been subject, and will likely continue to be subject, to attempts to gain unauthorized access to information and/or information systems or to disrupt utility operations through computer viruses and phishing attempts either directly or indirectly through its material vendors or related third parties. In the event of a significant cybersecurity breach on either the Duke Energy Registrants or with one of our material vendors or related third parties, the Duke Energy Registrants could (i) have business operations disrupted, including the disruption of the operation of our natural gas and electric assets and the power grid, theft of confidential company, employee, retiree, shareholder, vendor or customer information, and general business systems and process interruption or compromise, including preventing the Duke Energy Registrants from servicing customers, collecting revenues or the recording, processing and/or reporting financial information correctly, (ii) experience substantial loss of revenues, repair and restoration costs, penalties and costs for lack of compliance with relevant regulations, implementation costs for additional security measures to avert future cyberattacks and other financial loss and (iii) be subject to increased regulation, litigation and reputational damage. While Duke Energy maintains insurance relating to cybersecurity events, such insurance is subject to a number of exclusions and may be insufficient to offset any losses, costs or damage experienced. Also, the market for cybersecurity insurance is relatively new and coverage available for cybersecurity events may evolveis evolving as the industry matures.
The Duke Energy Registrants are subject to standards enacted by the North American Electric Reliability Corporation and enforced by FERC regarding protection of the physical and cyber security of critical infrastructure assets required for operating North America's bulk electric system. The Duke Energy Registrants are also subject to regulations set by the Nuclear Regulatory Commission regarding the protection of digital computer and communication systems and networks required for the operation of nuclear power plants. The Duke Energy Registrants that operate designated critical pipelines that transport natural gas are also subject to security directives issued by the Department of Homeland Security's Transportation Security Administration (TSA) requiring such registrants to implement specific cybersecurity mitigation measures. While the Duke Energy Registrants believe they are in compliance with, or, in the case of the recent TSA security directives, are in the process of implementing such standards and regulations, the Duke Energy Registrants have from time to time been, and may in the future be, found to be in violation of such standards and regulations. In addition, compliance with or changes in the applicable standards and regulations may subject the Duke Energy Registrants to higher operating costs and/or increased capital expenditures as well as substantial fines for non-compliance.
Failure to attract and retain an appropriately qualified workforce could unfavorably impact the Duke Energy Registrants’ results of operations.
Certain events, such as an aging workforce, mismatch of skill set or complement to future needs, or unavailability of contract resources may lead to operating challenges and increased costs. The challenges include lack of resources, loss of knowledge base and the lengthy time required for skill development. In this case, costs, including costs for contractors to replace employees, productivity costs and safety costs, may increase. Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to new employees, or future availability and cost of contract labor may adversely affect the ability to manage and operate the business, especially considering the workforce needs associated with nuclear generation facilities and new skills required to operate a modernized, technology-enabled power grid. If the Duke Energy Registrants are unable to successfully attract and retain an appropriately qualified workforce, their results of operations, financial position and cash flows could be negatively affected.
The costs of decommissioning Duke Energy Florida’s Crystal River Unit 3 could prove to be more extensive than is currently identified.
Costs to decommission the plant could exceed estimates and, if not recoverable through the regulatory process, could adversely affect Duke Energy’s, Progress Energy’s and Duke Energy Florida’s results of operations, financial position and cash flows.
Duke Energy Ohio’s and Duke Energy Indiana’s membership in an RTO presents risks that could have a material adverse effect on their results of operations, financial position and cash flows.
The rules governing the various regional power markets may change, which could affect Duke Energy Ohio’s and Duke Energy Indiana’s costs and/or revenues. To the degree Duke Energy Ohio and Duke Energy Indiana incur significant additional fees and increased costs to participate in an RTO, their results of operations may be impacted. Duke Energy Ohio and Duke Energy Indiana may be allocated a portion of the cost of transmission facilities built by others due to changes in RTO transmission rate design. Duke Energy Ohio and Duke Energy Indiana may be required to expand their transmission system according to decisions made by an RTO rather than their own internal planning process. In addition, RTOs have been developing rules associated with the allocation and methodology of assigning costs associated with improved transmission reliability, reduced transmission congestion and firm transmission rights that may have a financial impact on the results of operations, financial position and cash flows of Duke Energy Ohio and Duke Energy Indiana.
As members of an RTO, Duke Energy Ohio and Duke Energy Indiana are subject to certain additional risks, including those associated with the allocation among RTO members, of losses caused by unreimbursed defaults of other participants in the RTO markets and those associated with complaint cases filed against an RTO that may seek refunds of revenues previously earned by RTO members.
The Duke Energy Registrants may not recover costs incurred to begin construction on projects that are canceled.
Duke Energy’s long-term strategy requires the construction of new projects, either wholly owned or partially owned, which involve a number of risks, including construction delays, nonperformance by equipment and other third-party suppliers, and increases in equipment and labor costs. To limit the risks of these construction projects, the Duke Energy Registrants enter into equipment purchase orders and construction contracts and incur engineering and design service costs in advance of receiving necessary regulatory approvals and/or siting or environmental permits. If any of these projects are canceled for any reason, including failure to receive necessary regulatory approvals and/or siting or environmental permits, significant cancellation penalties under the equipment purchase orders and construction contracts could occur. In addition, if any construction work or investments have been recorded as an asset, an impairment may need to be recorded in the event the project is canceled.
Nuclear Generation RisksThe Duke Energy Registrants are subject to risks associated with their ability to obtain adequate insurance at acceptable costs.
The financial condition of some insurance companies, actual or threatened physical or cyberattacks, and natural disasters, among other things, could have disruptive effects on insurance markets. The availability of insurance covering risks that the Duke Energy Registrants and their respective competitors typically insure against may decrease, and the insurance that the Duke Energy Registrants are able to obtain may have higher deductibles, higher premiums, and more restrictive policy terms. Further, the insurance policies may not cover all of the potential exposures or the actual amount of loss incurred. Any losses not covered by insurance, or any increases in the cost of applicable insurance, could adversely affect the results of operations, financial position or cash flows of the affected Duke Energy Registrant.
Our business could be negatively affected as a result of actions of activist shareholders.
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.
NUCLEAR GENERATION RISKS
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida may incur substantial costs and liabilities due to their ownership and operation of nuclear generating facilities.
Ownership interests in and operation of nuclear stations by Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida subject them to various risks. These risks include, among other things: the potential harmful effects on the environment and human health resulting from the current or past operation of nuclear facilities and the storage, handling and disposal of radioactive materials; limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection with nuclear operations; and uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives.
Ownership and operation of nuclear generation facilities requires compliance with licensing and safety-related requirements imposed by the NRC. In the event of non-compliance, the NRC may increase regulatory oversight, impose fines or shut down a unit depending upon its assessment of the severity of the situation. Revised security and safety requirements promulgated by the NRC, which could be prompted by, among other things, events within or outside of the control of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, such as a serious nuclear incident at a facility owned by a third party, could necessitate substantial capital and other expenditures, as well as assessments to cover third-party losses. In addition, if a serious nuclear incident were to occur, it could have a material adverse effect on the results of operations, financial position, cash flows and reputation of the Duke Energy Registrants.
Liquidity, Capital Requirements and Common Stock RisksLIQUIDITY, CAPITAL REQUIREMENTS AND COMMON STOCK RISKS
The Duke Energy Registrants rely on access to short-term borrowings and longer-term debt and equity markets to finance their capital requirements and support their liquidity needs. Access to those markets can be adversely affected by a number of conditions, many of which are beyond the Duke Energy Registrants’ control.
The Duke Energy Registrants’ businesses are significantly financed through issuances of debt and equity. The maturity and repayment profile of debt used to finance investments often does not correlate to cash flows from their assets. Accordingly, as a source of liquidity for capital requirements not satisfied by the cash flows from their operations and to fund investments originally financed through debt instruments with disparate maturities, the Duke Energy Registrants rely on access to short-term money markets as well as longer-term capital markets. The Subsidiary Registrants also rely on access to short-term intercompany borrowings. If the Duke Energy Registrants are not able to access debt or equity at competitive rates or at all, the ability to finance their operations and implement their strategy and business plan as scheduled could be adversely affected. An inability to access debt and equity may limit the Duke Energy Registrants’ ability to pursue improvements or acquisitions that they may otherwise rely on for future growth.
Market disruptions may increase the cost of borrowing or adversely affect the ability to access one or more financial markets. Such disruptions could include: economic downturns, the bankruptcy of an unrelated energy company, unfavorable capital market conditions, market prices for electricity and natural gas, the generation mix of individual utilities, actual or threatened terrorist attacks, or the overall health of the energy industry. The availability of credit under Duke Energy’s Master Credit Facility depends upon the ability of the banks providing commitments under the facility to provide funds when their obligations to do so arise. SystematicSystemic risk of the banking system and the financial markets could prevent a bank from meeting its obligations under the facility agreement.
Duke Energy maintains a revolving credit facility to provide backup for its commercial paper program and letters of credit to support variable rate demand tax-exempt bonds that may be put to the Duke Energy Registrant issuer at the option of the holder. The facility includes borrowing sublimits for the Duke Energy Registrants, each of whom is a party to the credit facility, and financial covenants that limit the amount of debt that can be outstanding as a percentage of the total capital for the specific entity. Failure to maintain these covenants at a particular entity could preclude Duke Energy from issuing commercial paper or the Duke Energy Registrants from issuing letters of credit or borrowing under the Master Credit Facility.
The Duke Energy Registrants must meet credit quality standards and there is no assurance they will maintain investment grade credit ratings. If the Duke Energy Registrants are unable to maintain investment grade credit ratings, they would be required under credit agreements to provide collateral in the form of letters of credit or cash, which may materially adversely affect their liquidity.
Each of the Duke Energy Registrants’ senior long-term debt issuances is currently rated investment grade by various rating agencies. The Duke Energy Registrants cannot ensure their senior long-term debt will be rated investment grade in the future.
If the rating agencies were to rate the Duke Energy Registrants below investment grade, borrowing costs would increase, perhaps significantly. In addition, the potential pool of investors and funding sources would likely decrease. Further, if the short-term debt rating were to fall, access to the commercial paper market could be significantly limited.
A downgrade below investment grade could also require the posting of additional collateral in the form of letters of credit or cash under various credit, commodity and capacity agreements and trigger termination clauses in some interest rate derivative agreements, which would require cash payments. All of these events would likely reduce the Duke Energy Registrants’ liquidity and profitability and could have a material effect on their results of operations, financial position and cash flows.
Non-compliance with debt covenants or conditions could adversely affect the Duke Energy Registrants’ ability to execute future borrowings.
The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements.
Market performance and other changes may decrease the value of the NDTF investments of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, which then could require significant additional funding.
Ownership and operation of nuclear generation facilities also requires the maintenance of funded trusts that are intended to pay for the decommissioning costs of the respective nuclear power plants. The performance of the capital markets affects the values of the assets held in trust to satisfy these future obligations. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida have significant obligations in this area and hold significant assets in these trusts. These assets are subject to market fluctuations and will yield uncertain returns, which may fall below projected rates of return. Although a number of factors impact funding requirements, a decline in the market value of the assets may increase the funding requirements of the obligations for decommissioning nuclear plants. If Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are unable to successfully manage their NDTF assets, their results of operations, financial position and cash flows could be negatively affected.
Poor investment performance of the Duke Energy pension plan holdings and other factors impacting pension plan costs could unfavorably impact the Duke Energy Registrants’ liquidity and results of operations.
The costs of providing non-contributory defined benefit pension plans are dependent upon a number of factors, such as the rates of return on plan assets, discount rates, the level of interest rates used to measure the required minimum funding levels of the plans, future government regulation and required or voluntary contributions made to the plans. The Subsidiary Registrants are allocated their proportionate share of the cost and obligations related to these plans. Without sustained growth in the pension investments over time to increase the value of plan assets and, depending upon the other factors impacting costs as listed above, Duke Energy could be required to fund its plans with significant amounts of cash. Such cash funding obligations, and the Subsidiary Registrants’ proportionate share of such cash funding obligations, could have a material impact on the Duke Energy Registrants’ results of operations, financial position and cash flows.
Duke Energy is a holding company and depends on the cash flows from its subsidiaries to meet its financial obligations.
Because Duke Energy is a holding company with no operations or cash flows of its own, its ability to meet its financial obligations, including making interest and principal payments on outstanding indebtedness and to pay dividends on its common stock, is primarily dependent on the net income and cash flows of its subsidiaries and the ability of those subsidiaries to pay upstream dividends or to repay borrowed funds. Prior to funding Duke Energy, its subsidiaries have regulatory restrictions and financial obligations that must be satisfied. These subsidiaries are separate legal entities and have no obligation to provide Duke Energy with funds. In addition, Duke Energy may provide capital contributions or debt financing to its subsidiaries under certain circumstances, which would reduce the funds available to meet its financial obligations, including making interest and principal payments on outstanding indebtedness and to pay dividends on Duke Energy’s common stock.
The failure of Duke Energy information technology systems, or the failure to enhance existing information technology systems and implement new technology, could adversely affect the Duke Energy Registrants’ businesses.
Duke Energy’s operations are dependent upon the proper functioning of its internal systems, including the information technology systems that support our underlying business processes. Any significant failure or malfunction of such information technology systems may result in disruptions of our operations. In the ordinary course of business, we rely on information technology systems, including the internet and third-party hosted services, to support a variety of business processes and activities and to store sensitive data, including (i) intellectual property, (ii) proprietary business information, (iii) personally identifiable information of our customers, employees, retirees and shareholders and (iv) data with respect to invoicing and the collection of payments, accounting, procurement, and supply chain activities. Our information technology systems are dependent upon global communications and cloud service providers, as well as their respective vendors, many of whom have at some point experienced significant system failures and outages in the past and may experience such failures and outages in the future. These providers’ systems are susceptible to cybersecurity and data breaches, outages from fire, floods, power loss, telecommunications failures, break-ins and similar events. Failure to prevent or mitigate data loss from system failures or outages could materially affect the results of operations, financial position and cash flows of the Duke Energy Registrants.
In addition to maintaining our current information technology systems, Duke Energy believes the digital transformation of its business is key to driving internal efficiencies as well as providing additional capabilities to customers. Duke Energy’s information technology systems are critical to cost-effective, reliable daily operations and our ability to effectively serve our customers. We expect our customers to continue to demand more sophisticated technology-driven solutions and we must enhance or replace our information technology systems in response. This involves significant development and implementation costs to keep pace with changing technologies and customer demand. If we fail to successfully implement critical technology, or if it does not provide the anticipated benefits or meet customer demands, such failure could materially adversely affect our business strategy as well as impact the results of operations, financial position and cash flows of the Duke Energy Registrants.
Potential terrorist activities, or military or other actions, could adversely affect the Duke Energy Registrants’ businesses.
The continued threat of terrorism and the impact of retaliatory military and other action by the U.S. and its allies may lead to increased political, economic and financial market instability and volatility in prices for natural gas and oil, which may have material adverse effects in ways the Duke Energy Registrants cannot predict at this time. In addition, future acts of terrorism and possible reprisals as a consequence of action by the U.S. and its allies could be directed against companies operating in the U.S. Information technology systems, transportation systems for our fuel sources including natural gas pipelines, transmission and distribution and generation facilities such as nuclear plants could be potential targets of terrorist activities or harmful activities by individuals or groups that could have a material adverse effect on Duke Energy Registrants' businesses. In particular, the Duke Energy Registrants may experience increased capital and operating costs to implement increased security for their information technology systems, transmission and distribution and generation facilities, including nuclear power plants under the NRC’s design basis threat requirements. These increased costs could include additional physical plant security and security personnel or additional capability following a terrorist incident.
Failure to attract and retain an appropriately qualified workforce could unfavorably impact the Duke Energy Registrants’ results of operations.
Certain events, such as an aging workforce, mismatch of skill set or complement to future needs, or unavailability of contract resources may lead to operating challenges and increased costs. The challenges include lack of resources, loss of knowledge base and the lengthy time required for skill development. In this case, costs, including costs for contractors to replace employees, productivity costs and safety costs, may increase. Failure to hire and adequately train replacement employees, including the transfer of significant internal historical knowledge and expertise to new employees, or future availability and cost of contract labor may adversely affect the ability to manage and operate the business, especially considering the workforce needs associated with nuclear generation facilities and new skills required to operate a modernized, technology-enabled power grid. If the Duke Energy Registrants are unable to successfully attract and retain an appropriately qualified workforce, their results of operations, financial position and cash flows could be negatively affected.
ITEM 1B. UNRESOLVED STAFF COMMENTS None.
ELECTRIC UTILITIES AND INFRASTRUCTURE
The following table provides information related to the Electric Utilities and Infrastructure's generation stations as of December 31, 2018.2021. The MW displayed in the table below are based on summer capacity. Ownership interest in all facilities is 100 percent100% unless otherwise indicated.
| | | | | | | | | | | | | | | | |
| | | | | Owned MW | |
Facility | Plant Type | Primary Fuel | Location | | Capacity | |
Duke Energy Carolinas | | | | | | |
Oconee | Nuclear | Uranium | SC | | 2,554 | | |
McGuire | Nuclear | Uranium | NC | | 2,316 | | |
Catawba(a) | Nuclear | Uranium | SC | | 445 | | |
Belews Creek | Fossil | Coal/Gas | NC | | 2,220 | | |
Marshall | Fossil | Coal/Gas | NC | | 2,058 | | |
J.E. Rogers | Fossil | Coal/Gas | NC | | 1,388 | | |
Lincoln Combustion Turbine (CT) | Fossil | Gas/Oil | NC | | 1,161 | | |
Allen | Fossil | Coal | NC | | 840 | | |
Rockingham CT | Fossil | Gas/Oil | NC | | 825 | | |
W.S. Lee Combined Cycle (CC)(b) | Fossil | Gas | SC | | 686 | | |
Buck CC | Fossil | Gas | NC | | 668 | | |
Dan River CC | Fossil | Gas | NC | | 662 | | |
Mill Creek CT | Fossil | Gas/Oil | SC | | 563 | | |
W.S. Lee | Fossil | Gas | SC | | 170 | | |
W.S. Lee CT | Fossil | Gas/Oil | SC | | 84 | | |
Clemson CHP | Fossil | Gas | SC | | 13 | | |
Bad Creek | Hydro | Water | SC | | 1,520 | | |
Jocassee | Hydro | Water | SC | | 780 | | |
Cowans Ford | Hydro | Water | NC | | 324 | | |
Keowee | Hydro | Water | SC | | 152 | | |
Other small facilities (19 plants) | Hydro | Water | NC/SC | | 581 | | |
Distributed generation | Renewable | Solar | NC | | 71 | | |
Total Duke Energy Carolinas | | | | | 20,081 | | |
| | | | | | | | | | | | | | | | |
| | | | | Owned MW | |
Facility | Plant Type | Primary Fuel | Location | | Capacity | |
Duke Energy Progress | | | | | | |
Brunswick | Nuclear | Uranium | NC | | 1,870 | | |
Harris | Nuclear | Uranium | NC | | 964 | | |
Robinson | Nuclear | Uranium | SC | | 759 | | |
Roxboro | Fossil | Coal | NC | | 2,439 | | |
Smith CC | Fossil | Gas/Oil | NC | | 1,083 | | |
H.F. Lee CC | Fossil | Gas/Oil | NC | | 888 | | |
Wayne County CT | Fossil | Gas/Oil | NC | | 822 | | |
Smith CT | Fossil | Gas/Oil | NC | | 772 | | |
Mayo | Fossil | Coal | NC | | 704 | | |
L.V. Sutton CC | Fossil | Gas/Oil | NC | | 607 | | |
| | | | | |
| | | | Owned MW |
|
FacilityAsheville CC | Plant TypeFossil | Primary FuelGas/Oil | LocationNC | Capacity |
|
Duke Energy Carolinas476 | | | | |
Oconee | Nuclear | Uranium | SC | 2,554 |
|
McGuire | Nuclear | Uranium | NC | 2,316 |
|
Catawba(a)
| Nuclear | Uranium | SC | 445 |
|
Belews Creek | Fossil | Coal | NC | 2,220 |
|
Marshall | Fossil | Coal | NC | 2,058 |
|
J.E. Rogers | Fossil | Coal | NC | 1,388 |
|
Lincoln CT | Fossil | Gas/Oil | NC | 1,193 |
|
Allen | Fossil | Coal | NC | 1,098 |
|
Rockingham CT | Fossil | Gas/Oil | NC | 825 |
|
Buck CC | Fossil | Gas | NC | 668 |
|
Dan River CC | Fossil | Gas | NC | 662 |
|
Mill Creek CT | Fossil | Gas/Oil | SC | 563 |
|
W.S. Lee CC(b)
| Fossil | Gas | SC | 686 |
|
W.S. Lee | Fossil | Gas | SC | 170 |
|
W.S. Lee CT | Fossil | Gas/Oil | SC | 84 |
|
Bad Creek | Hydro | Water | SC | 1,360 |
|
Jocassee | Hydro | Water | SC | 780 |
|
Cowans Ford | Hydro | Water | NC | 324 |
|
Keowee | Hydro | Water | SC | 152 |
|
Other small facilities (23 plants) | Hydro | Water | NC/SC | 632 |
|
Distributed generation | Renewable | Solar | NC | 31 |
|
Total Duke Energy Carolinas | | | | 20,209 |
|
|
| | | | | |
| | | | Owned MW |
|
FacilityAsheville CT | Plant TypeFossil | Primary FuelGas/Oil | LocationNC | Capacity | 320 | | |
Duke Energy ProgressDarlington CT | Fossil | Gas/Oil | SC | | 234 | | |
BrunswickWeatherspoon CT | NuclearFossil | UraniumGas/Oil | NC | 1,870 | 124 | | |
Harris | Nuclear | Uranium | NC | 932 |
|
Robinson | Nuclear | Uranium | SC | 741 |
|
Roxboro | Fossil | Coal | NC | 2,439 |
|
Smith CC | Fossil | Gas/Oil | NC | 1,073 |
|
H.F. Lee CC | Fossil | Gas/Oil | NC | 888 |
|
Wayne County CT | Fossil | Gas/Oil | NC | 857 |
|
Smith CT | Fossil | Gas/Oil | NC | 772 |
|
Darlington CT | Fossil | Gas/Oil | SC | 613 |
|
Mayo | Fossil | Coal | NC | 727 |
|
L.V. Sutton CC | Fossil | Gas/Oil | NC | 607 |
|
Asheville | Fossil | Coal | NC | 378 |
|
Asheville CT | Fossil | Gas/Oil | NC | 320 |
|
Weatherspoon CT | Fossil | Gas/Oil | NC | 124 |
|
L.V. Sutton CT (Black Start) | Fossil | Gas/Oil | NC | 78 | 84 | | |
Blewett CT | Fossil | Oil | NC | 52 | 52 | | |
Walters | Hydro | Water | NC | 112 | 112 | | |
Other small facilities (3 plants)(3) | Hydro | Water | NC | 115 | 116 | | |
Distributed generation | Renewable | Solar | NC | 49 | 35 | | |
Asheville – Rock Hill Battery | Renewable | Storage | NC | | 7 | | |
Total Duke Energy Progress | | | | 12,747 | 12,468 | | |
| | | | | | | | | | | | | | | | |
| | | | | Owned MW | |
Facility | Plant Type | Primary Fuel | Location | | Capacity | |
Duke Energy Florida | | | | | | |
Hines CC | Fossil | Gas/Oil | FL | | 2,061 | | |
Citrus County CC | Fossil | Gas | FL | | 1,610 | | |
Crystal River | Fossil | Coal | FL | | 1,410 | | |
Bartow CC | Fossil | Gas/Oil | FL | | 1,112 | | |
Anclote | Fossil | Gas | FL | | 1,013 | | |
Intercession City CT | Fossil | Gas/Oil | FL | | 931 | | |
Osprey CC | Fossil | Gas/Oil | FL | | 583 | | |
DeBary CT | Fossil | Gas/Oil | FL | | 524 | | |
Tiger Bay CC | Fossil | Gas/Oil | FL | | 193 | | |
Bayboro CT | Fossil | Oil | FL | | 171 | | |
Bartow CT | Fossil | Gas/Oil | FL | | 168 | | |
Suwannee River CT | Fossil | Gas | FL | | 145 | | |
| | | | | |
| | | | Owned MW |
|
Facility | Plant Type | Primary Fuel | Location | Capacity |
|
Duke Energy Florida | | | | |
Citrus County CC | Fossil | Gas | FL | 1,632 |
|
Crystal River | Fossil | Coal | FL | 1,422 |
|
Hines CC | Fossil | Gas/Oil | FL | 2,045 |
|
Bartow CC | Fossil | Gas/Oil | FL | 1,104 |
|
Anclote | Fossil | Gas | FL | 1,003 |
|
Intercession City CT | Fossil | Gas/Oil | FL | 951 |
|
Osprey CC | Fossil | Gas/Oil | FL | 582 |
|
DeBary CT | Fossil | Gas/Oil | FL | 561 |
|
Tiger Bay CC | Fossil | Gas/Oil | FL | 200 |
|
Bartow CT | Fossil | Gas/Oil | FL | 168 |
|
Bayboro CT | Fossil | Oil | FL | 171 |
|
Suwannee River CT | Fossil | Gas | FL | 149 |
|
Higgins CT | Fossil | Gas/Oil | FL | 107 |
|
Avon Park CT | Fossil | Gas/Oil | FL | 48 |
|
University of Florida CoGen CT | Fossil | Gas | FL | 44 |
|
Hamilton | Renewable | Solar | FL | 43 |
|
Distributed generation | Renewable | Solar | FL | 8 |
|
Total Duke Energy Florida | | | | 10,238 |
|
|
| | | | | |
| | | | Owned MW |
|
FacilityUniversity of Florida CoGen CT | Plant TypeFossil | Primary FuelGas | LocationFL | Capacity | 44 | | |
Duke Energy OhioDistributed generation | Renewable | Solar | FL | |
East Bend | Fossil323 | Coal | KY | 600 |
|
Woodsdale CT | Fossil | Gas/Propane | OH | 476 |
|
Beckjord Battery Storage | Renewable | Storage | OH | 4 |
|
Total Duke Energy Ohio | | | | 1,080 |
|
|
| | | | | |
| | | | Owned MW |
|
Facility | Plant Type | Primary Fuel | Location | Capacity |
|
Duke Energy Indiana | | | | |
Gibson(c)
| Fossil | Coal | IN | 2,822 |
|
Cayuga(d)
| Fossil | Coal/Oil | IN | 1,005 |
|
Edwardsport | Fossil | Coal | IN | 595 |
|
Madison CT | Fossil | Gas | OH | 566 |
|
Vermillion CT(e)
| Fossil | Gas | IN | 360 |
|
Wheatland CT | Fossil | Gas | IN | 450 |
|
Noblesville CC | Fossil | Gas/Oil | IN | 264 |
|
Gallagher | Fossil | Coal | IN | 280 |
|
Henry County CT | Fossil | Gas/Oil | IN | 129 |
|
Cayuga CT | Fossil | Gas/Oil | IN | 80 |
|
Markland | Hydro | Water | IN | 45 |
|
Distributed generation | Renewable | Solar | IN | 10 |
|
Total Duke Energy IndianaFlorida | | | | 6,606 | 10,288 | | |
| | | | | | | | | | | |
| | | | | Owned MW | |
Facility | Plant Type | Primary Fuel | Location | | Capacity | |
Duke Energy Ohio | | | | | | |
East Bend | Fossil | Coal | KY | | 600 | | |
Woodsdale CT | Fossil | Gas/Propane | OH | | 476 | | |
| | | | | | |
Total Duke Energy Ohio | | | | | 1,076 | | |
| | | | | | | | | | | | | | | | |
| | | | | Owned MW |
|
Totals byFacility | Plant Type | Primary Fuel | Location | | Capacity |
|
Total Electric UtilitiesDuke Energy Indiana | | | 50,880 |
|
Totals By Plant Type | | | |
Nuclear | | | 8,858 |
|
Fossil | | | 38,357 |
|
Hydro | | | 3,520 |
|
Renewable | | | 145 |
|
Total Electric Utilities | | | 50,880 |
|
| |
(a)Gibson(c) | Jointly owned with North Carolina Municipal Power Agency Number 1, NCEMC and PMPA. Duke Energy Carolinas' ownership is 19.25 percent of the facility.Fossil |
Coal | IN | | 2,822 | | |
(b)Cayuga(d) | Jointly owned with NCEMC. Duke Energy Carolinas' ownership is 86.67 percent of the facility.Fossil |
Coal/Oil | IN | | 1,005 | | |
(c)Edwardsport | Duke Energy Indiana owns and operates Gibson Station Units 1 through 4 and is a joint owner of unit 5 with WVPA and Indiana Municipal Power Agency. Duke Energy Indiana operates unit 5 and owns 50.05 percent.Fossil |
Coal | IN | | 595 | | |
(d)Madison CT | Includes Cayuga Internal Combustion.Fossil |
Gas | OH | | 566 | | |
(e)Wheatland CT | Jointly owned with WVPA.Fossil | Gas | IN | | 444 | | |
Vermillion CT(e) | Fossil | Gas | IN | | 360 | | |
| | | | | | |
Noblesville CC | Fossil | Gas/Oil | IN | | 264 | | |
Henry County CT | Fossil | Gas/Oil | IN | | 129 | | |
Cayuga CT | Fossil | Gas/Oil | IN | | 84 | | |
| | | | | | |
| | | | | | |
Markland | Hydro | Water | IN | | 54 | | |
Distributed generation | Renewable | Solar | IN | | 11 | | |
Camp Atterbury Battery | Renewable | Storage | IN | | 4 | | |
Nabb Battery | Renewable | Storage | IN | | 4 | | |
| | | | | | |
Crane Battery | Renewable | Storage | IN | | 4 | | |
| | | | | | |
Total Duke Energy Indiana's ownership is 62.50 percent of the facility.Indiana | | | | | 6,346 | | |
| | | | | | | | | | | | | | |
| | | | | Owned MW | |
Totals by Type | | | | | Capacity | |
Total Electric Utilities | | | | | 50,259 | | |
Totals by Plant Type | | | | | | |
Nuclear | | | | | 8,908 | | |
Fossil | | | | | 37,252 | | |
Hydro | | | | | 3,639 | | |
Renewable | | | | | 460 | | |
Total Electric Utilities | | | | | 50,259 | | |
(a)Jointly owned with North Carolina Municipal Power Agency Number 1, NCEMC and PMPA. Duke Energy Carolinas' ownership is 19.25% of the facility.
(b)Jointly owned with NCEMC. Duke Energy Carolinas' ownership is 87.27% of the facility.
(c)Duke Energy Indiana owns and operates Gibson Station Units 1 through 4 and is a joint owner of unit 5 with WVPA and IMPA. Duke Energy Indiana operates unit 5 and owns 50.05%.
(d)Includes Cayuga Internal Combustion.
(e)Jointly owned with WVPA. Duke Energy Indiana's ownership is 62.5% of the facility.
The following table provides information related to Electric Utilities and Infrastructure's electric transmission and distribution properties as of December 31,
2018.2021. | | | | Duke |
| Duke |
| Duke |
| Duke |
| Duke |
| | Duke |
| Duke |
| Energy |
| Energy |
| Energy |
| Energy |
| Energy |
| | Duke | Energy |
| Energy |
| Carolinas |
| Progress |
| Florida |
| Ohio |
| Indiana |
| | Energy | Carolinas | Progress | Florida | Ohio | Indiana |
Electric Transmission Lines | | Electric Transmission Lines | |
Miles of 500 to 525 kV | 1,036 |
| 576 |
| 292 |
| 168 |
| — |
| — |
| |
Miles of 500 to 525 kilovolt (kV) | | Miles of 500 to 525 kilovolt (kV) | 1,100 | | 600 | | 300 | | 200 | | — | | — | |
Miles of 345 kV | 1,145 |
| — |
| — |
| — |
| 421 |
| 724 |
| Miles of 345 kV | 1,100 | | — | | — | | — | | 400 | | 700 | |
Miles of 230 kV | 8,344 |
| 2,657 |
| 3,396 |
| 1,638 |
| — |
| 653 |
| Miles of 230 kV | 8,500 | | 2,700 | | 3,400 | | 1,700 | | — | | 700 | |
Miles of 100 to 161 kV | 12,509 |
| 6,830 |
| 2,565 |
| 891 |
| 821 |
| 1,402 |
| Miles of 100 to 161 kV | 12,400 | | 6,800 | | 2,600 | | 900 | | 700 | | 1,400 | |
Miles of 13 to 69 kV | 8,345 |
| 3,014 |
| 12 |
| 2,200 |
| 612 |
| 2,507 |
| Miles of 13 to 69 kV | 8,200 | | 2,900 | | — | | 2,200 | | 600 | | 2,500 | |
Total conductor miles of electric transmission lines | 31,379 |
| 13,077 |
| 6,265 |
| 4,897 |
| 1,854 |
| 5,286 |
| Total conductor miles of electric transmission lines | 31,300 | | 13,000 | | 6,300 | | 5,000 | | 1,700 | | 5,300 | |
Electric Distribution Lines | | Electric Distribution Lines | |
Miles of overhead lines | 174,200 |
| 66,600 |
| 46,500 |
| 25,600 |
| 13,300 |
| 22,200 |
| Miles of overhead lines | 173,400 | | 66,600 | | 46,400 | | 25,200 | | 13,300 | | 21,900 | |
Miles of underground line | 106,000 |
| 38,500 |
| 30,000 |
| 22,500 |
| 6,000 |
| 9,000 |
| Miles of underground line | 109,800 | | 40,000 | | 32,600 | | 21,500 | | 6,300 | | 9,400 | |
Total conductor miles of electric distribution lines | 280,200 |
| 105,100 |
| 76,500 |
| 48,100 |
| 19,300 |
| 31,200 |
| Total conductor miles of electric distribution lines | 283,200 | | 106,600 | | 79,000 | | 46,700 | | 19,600 | | 31,300 | |
Number of electric transmission and distribution substations | 3,291 |
| 1,476 |
| 512 |
| 493 |
| 310 |
| 500 |
| Number of electric transmission and distribution substations | 3,000 | | 1,200 | | 500 | | 500 | | 500 | | 300 | |
Substantially all of Electric Utilities and Infrastructure's electric plant in service is mortgaged under indentures relating to Duke Energy Carolinas’, Duke Energy Progress', Duke Energy Florida's, Duke Energy Ohio’s and Duke Energy Indiana’s various series of First Mortgage Bonds.
GAS UTILITIES AND INFRASTRUCTURE
Gas Utilities and Infrastructure owns transmission pipelines and distribution mains that are generally underground, located near public streets and highways, or on property owned by others for which Duke Energy Ohio and Piedmont have obtained the necessary legal rights to place and operate facilities on such property located within the Gas Utilities and Infrastructure service territories. The following table provides information related to Gas Utilities and Infrastructure's natural gas distribution.
| | | | | | | | | | | |
| | Duke | |
| Duke | Energy | |
| Energy | Ohio | Piedmont |
Miles of natural gas distribution and transmission pipelines | 34,800 | | 7,500 | | 27,300 | |
Miles of natural gas service lines | 27,700 | | 6,500 | | 21,200 | |
|
| | | | | | |
| | Duke |
| |
| Duke |
| Energy |
| |
| Energy |
| Ohio |
| Piedmont |
|
Miles of natural gas distribution and transmission pipelines | 33,300 |
| 7,200 |
| 26,100 |
|
Miles of natural gas service lines | 27,700 |
| 7,000 |
| 20,700 |
|
COMMERCIAL RENEWABLES
The following table provides information related to Commercial Renewables' electric generation facilities as of December 31, 2018.2021. The MW displayed in the table below are based on nameplate capacity. Ownership interest in all facilities is 100 percent unless otherwise indicated.
| | | | | | | | | | | | | | | | | | |
| | | | | Owned MW | Ownership |
Facility | Plant Type | Primary Fuel | Location | | Capacity | Interest (%) |
Commercial Renewables – Wind | | | | | | |
Los Vientos (five sites) | Renewable | Wind | TX | | 465 | | 51 | % |
Frontier Windpower II(a) | Renewable | Wind | OK | | 352 | | 100 | % |
Mesteno(a) | Renewable | Wind | TX | | 202 | | 100 | % |
Maryneal(a) | Renewable | Wind | TX | | 182 | | 100 | % |
Sweetwater IV | Renewable | Wind | TX | | 113 | | 47 | % |
Frontier Windpower | Renewable | Wind | OK | | 103 | | 51 | % |
Top of the World | Renewable | Wind | WY | | 102 | | 51 | % |
Notrees | Renewable | Wind | TX | | 78 | | 51 | % |
Mesquite Creek | Renewable | Wind | TX | | 54 | | 26 | % |
Campbell Hill | Renewable | Wind | WY | | 50 | | 51 | % |
Ironwood | Renewable | Wind | KS | | 43 | | 26 | % |
Sweetwater V | Renewable | Wind | TX | | 38 | | 47 | % |
North Allegheny | Renewable | Wind | PA | | 36 | | 51 | % |
Laurel Hill | Renewable | Wind | PA | | 35 | | 51 | % |
Cimarron II | Renewable | Wind | KS | | 34 | | 26 | % |
| | | | | | |
Kit Carson | Renewable | Wind | CO | | 26 | | 51 | % |
Silver Sage | Renewable | Wind | WY | | 21 | | 51 | % |
Happy Jack | Renewable | Wind | WY | | 15 | | 51 | % |
Shirley | Renewable | Wind | WI | | 10 | | 51 | % |
Total Renewables – Wind | | | | | 1,959 | | |
| | | | | | | | | | | | | | | | | | |
| | | | | Owned MW | Ownership |
Facility | Plant Type | Primary Fuel | Location | | Capacity | Interest (%) |
Commercial Renewables – Solar | | | | | | |
Holstein(a) | Renewable | Solar | TX | | 200 | | 100 | % |
Rambler(a) | Renewable | Solar | TX | | 200 | | 100 | % |
North Rosamond(a) | Renewable | Solar | CA | | 150 | | 100 | % |
Pflugerville(a) | Renewable | Solar | TX | | 144 | | 100 | % |
Lapetus(a) | Renewable | Solar | TX | | 100 | | 100 | % |
Conetoe II | Renewable | Solar | NC | | 80 | | 100 | % |
Palmer(a) | Renewable | Solar | CO | | 60 | | 100 | % |
Broad River(a) | Renewable | Solar | NC | | 50 | | 100 | % |
Seville I & II | Renewable | Solar | CA | | 34 | | 67 | % |
Rio Bravo I & II | Renewable | Solar | CA | | 27 | | 67 | % |
Wildwood I & II | Renewable | Solar | CA | | 23 | | 67 | % |
Speedway(a) | Renewable | Solar | NC | | 23 | | 100 | % |
Kelford | Renewable | Solar | NC | | 22 | | 100 | % |
Dogwood | Renewable | Solar | NC | | 20 | | 100 | % |
Halifax Airport | Renewable | Solar | NC | | 20 | | 100 | % |
Pasquotank | Renewable | Solar | NC | | 20 | | 100 | % |
Shawboro | Renewable | Solar | NC | | 20 | | 100 | % |
Caprock | Renewable | Solar | NM | | 17 | | 67 | % |
Creswell Alligood | Renewable | Solar | NC | | 14 | | 100 | % |
Pumpjack | Renewable | Solar | CA | | 13 | | 67 | % |
Longboat | Renewable | Solar | CA | | 13 | | 67 | % |
Shoreham(a) | Renewable | Solar | NY | | 13 | | 51 | % |
Washington White Post | Renewable | Solar | NC | | 12 | | 100 | % |
Whitakers | Renewable | Solar | NC | | 12 | | 100 | % |
Highlander I & II | Renewable | Solar | CA | | 11 | | 51 | % |
Other small solar(a) | Renewable | Solar | Various | | 233 | | Various |
Total Renewables – Solar | | | | | 1,531 | | |
| | | | | | | | | | | | | | | | | | |
| | | | | Owned MW | Ownership |
Facility | Plant Type | Primary Fuel | Location | | Capacity | Interest (%) |
Commercial Renewables – Fuel Cells(a) | Renewable | Fuel Cell | Various | | 44 | | 100 | % |
Total Renewables – Fuel Cells | | | | | 44 | | |
| | | | | | | | | | | | | | | | | | |
| | | | | Owned MW | Ownership |
Facility | Plant Type | Primary Fuel | Location | | Capacity | Interest (%) |
Commercial Renewables – Energy Storage | | | | | | |
Notrees Battery Storage | Renewable | Storage | TX | | 18 | | 51 | % |
Beckjord Battery Storage | Renewable | Storage | OH | | 2 | | 100 | % |
Total Renewables – Energy Storage | | | | | 20 | | |
| | | | | | | | | | | | | | |
| | | | |
| | | Owned MW |
|
FacilityTotals by Type | Plant Type | Location | Capacity |
| Capacity | |
Commercial Renewables – Wind | | | |
Los Vientos (five sites) | Renewable | TX1,959 | 912 |
|
Top of the World | Renewable | WY | 200 |
|
Frontier | Renewable | OK | 201 |
|
Notrees | Renewable | TX | 153 |
|
Campbell Hill | Renewable | WY | 99 |
|
North Allegheny | Renewable | PA | 70 |
|
Laurel Hill | Renewable | PA | 69 |
|
Ocotillo | Renewable | TX | 59 |
|
Kit Carson | Renewable | CO | 51 |
|
Silver Sage | Renewable | WY | 42 |
|
Happy Jack | Renewable | WY | 29 |
|
Shirley | Renewable | WI | 20 |
|
Sweetwater IV(a)
| Renewable | TX | 113 |
|
Sweetwater V(a)
| Renewable | TX | 38 |
|
Ironwood(a)
| Renewable | KS | 84 |
|
Cimarron II(a)
| Renewable | KS | 66 |
|
Mesquite Creek(a)
| Renewable | TX | 106 |
|
Total Renewables – Wind | | | 2,312 |
|
Commercial Renewables – Solar | | | |
Conetoe II | Renewable | NC | 80 |
|
Seville I & II | Renewable | CA | 50 |
|
Rio Bravo I & II | Renewable | CA | 40 |
|
Wildwood I & II | Renewable | CA | 35 |
|
Caprock | Renewable | NM | 25 |
|
Shoreham(b)
| Renewable | NY | 25 |
|
Kelford | Renewable | NC | 22 |
|
Highlander | Renewable | CA | 21 |
|
Dogwood | Renewable | NC | 20 |
|
Halifax Airport | Renewable | NC | 20 |
|
Pasquotank | Renewable | NC | 20 |
|
Pumpjack | Renewable | CA | 20 |
|
Shawboro | Renewable | NC | 20 |
|
Longboat | Renewable | CA | 20 |
|
Bagdad | Renewable | AZ | 15 |
|
TX Solar | Renewable | TX | 14 |
|
Creswell Alligood | Renewable | NC | 14 |
|
Victory | Renewable | CO | 13 |
|
Washington White Post | Renewable | NC | 12 |
|
Whitakers | Renewable | NC | 12 |
|
Other small solar(b)
| Renewable | Various | 145 |
|
Total Renewables – Solar | | | 643 |
|
Commercial Renewables – Energy Storage | | | |
Notrees Battery Storage | Renewable | TX | 36 |
|
Total Renewables – Energy Storage | | | 36 |
|
Total Commercial Renewables | | | 2,991 |
|
| |
(a)Solar | Commercial Renewables owns 47 percent of Sweetwater IV and V and 50 percent of Ironwood, Cimarron II and Mesquite Creek. |
| | | 1,531 | | |
(b)Fuel Cells | Shoreham and certain projects included in Other small solar are in tax-equity structures where investors have differing interests in the project's economic attributes. 100 percent of the tax-equity project's capacity is included in the table above. |
|
| | 44 | | |
PROPERTIESEnergy Storage | | | | | 20 | | |
Total Commercial Renewables(b) | | | | | 3,554 | | |
(a) Certain projects, including projects within Other small solar, are in tax-equity structures where investors have differing interests in the project's economic attributes. 100% of the tax-equity project's capacity is included in the table above.
(b) Net proportion of MW capacity in operation is 4,729, which represents the amount managed or owned by Duke Energy.
OTHER
Duke Energy owns approximately 8 million square feet and, after exiting the Duke Energy Center in 2021, leases approximately 21.5 million square feet of corporate, regional and district office space spread throughout its service territories. See Note 10, "Property, Plant and Equipment," for further information.
ITEM 3. LEGAL PROCEEDINGS For information regarding legal proceedings, including regulatory and environmental matters, see Note 4,3, “Regulatory Matters,” and Note 5,4, “Commitments and Contingencies,” to the Consolidated Financial Statements.
MTBE Litigation
On June 19, 2014, the Commonwealth of Pennsylvania filed suit against, among others, Duke Energy Merchants, alleging contamination of waters of the state by MTBE from leaking gasoline storage tanks. MTBE is a gasoline additive intended to increase the oxygen level in gasoline and make it burn cleaner. The lawsuit was moved to federal court and consolidated into an existing multidistrict litigation docket of pending MTBE cases. This suit was settled for an immaterial amount in December 2017 and dismissed in January 2018.
In December15, 2017, the state of Maryland filed a lawsuitsuit in Baltimore City Circuit Court against Duke Energy Merchants and other defendants alleging contamination of its water suppliesstate waters by MTBE leaking from MTBE.gasoline storage tanks. MTBE is a gasoline additive intended to increase the oxygen levels in gasoline and make it burn cleaner. The case was removed from Baltimore City Circuit Court to federal District Court. Initial motions to dismiss filed by the U.S. District Courtdefendants were denied by the court on September 4, 2019, and the matter is now in Baltimore.discovery. On December 18, 2020, the plaintiff and defendants selected 50 focus sites, none of which have any ties to Duke Energy Merchants. Discovery will be specific to those sites. At this time, Duke Energy Merchants has not engaged in settlement negotiations with the plaintiff and the plaintiff has not reached a settlement agreement with any defendant. Duke Energy cannot predict the outcome of this matter.
ITEM 4. MINE SAFETY DISCLOSURES This is not applicable for any of the Duke Energy Registrants.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The common stock of Duke Energy is listed and traded on the NYSE (ticker symbol DUK). As of January 31, 2019,2022, there were 149,275were 131,590 Duke Energy common stockholders of record. For information on dividends, see the "Dividend Payments" section of Management's DiscussionDiscussion and Analysis.
There is no market for the common equity securities of the Subsidiary Registrants, all of which are directly or indirectly owned by Duke Energy. See Note 1, "Summary of Significant Accounting Policies," to the Consolidated Financial Statements for information on the 2021 investment of a minority interest in Duke Energy Indiana.
Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III within this Annual Report for information regarding Securities Authorized for Issuance Under Equity Compensation Plans.
Issuer Purchases of Equity Securities for Fourth Quarter 2018 ThereThere were no repurchases of equityequity securities during the fourth quarter of 2018.2021.
The following performance graph compares the cumulative total shareholder returnTSR from Duke Energy Corporation common stock, as compared with the SStandard & Poor's 500 Stock Index (S&P 500500) and the Philadelphia Utility Index for the past five years. The graph assumes an initial investment of $100 on December 31, 2013,2016, in Duke Energy common stock, in the S&P 500 and in the Philadelphia Utility Index and that all dividends were reinvested. The stockholder return shown below for the five-year historical period may not be indicative of future performance.
Duke Energy has filed the certification of its Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to this Annual Report on Form 10-K for the year ended December 31, 2018.2021.
ITEM 6. SELECTED FINANCIAL DATA
This is not applicable for any of the Duke Energy Registrants.
|
| | | | |
SELECTED FINANCIAL DATAMD&A | DUKE ENERGY |
ITEM 6. SELECTED FINANCIAL DATAThe following table provides selected financial data for the years of 2014 through 2018. See also Item 7.
|
| | | | | | | | | | | | | | | | | | | |
(in millions, except per share amounts) | 2018 |
| | 2017 |
| | 2016 |
| | 2015 |
| | 2014 |
|
Statements of Operations(a) | | | | | | | | | |
Total operating revenues | $ | 24,521 |
| | $ | 23,565 |
| | $ | 22,743 |
| | $ | 22,371 |
| | $ | 22,509 |
|
Operating income | 4,685 |
| | 5,625 |
| | 5,202 |
| | 4,974 |
| | 4,795 |
|
Income from continuing operations | 2,625 |
| | 3,070 |
| | 2,578 |
| | 2,654 |
| | 2,538 |
|
Income (Loss) from discontinued operations, net of tax | 19 |
| | (6 | ) | | (408 | ) | | 177 |
| | (649 | ) |
Net income | 2,644 |
| | 3,064 |
| | 2,170 |
| | 2,831 |
| | 1,889 |
|
Net income attributable to Duke Energy Corporation | 2,666 |
| | 3,059 |
| | 2,152 |
| | 2,816 |
| | 1,883 |
|
Common Stock Data | | | | | | | | | |
Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | 3.73 |
| | $ | 4.37 |
| | $ | 3.71 |
| | $ | 3.80 |
| | $ | 3.58 |
|
Diluted | 3.73 |
| | 4.37 |
| | 3.71 |
| | 3.80 |
| | 3.58 |
|
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | 0.03 |
| | $ | (0.01 | ) | | $ | (0.60 | ) | | $ | 0.25 |
| | $ | (0.92 | ) |
Diluted | 0.03 |
| | (0.01 | ) | | (0.60 | ) | | 0.25 |
| | (0.92 | ) |
Net income attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | 3.76 |
| | $ | 4.36 |
| | $ | 3.11 |
| | $ | 4.05 |
| | $ | 2.66 |
|
Diluted | 3.76 |
| | 4.36 |
| | 3.11 |
| | 4.05 |
| | 2.66 |
|
Dividends declared per share of common stock | 3.64 |
| | 3.49 |
| | 3.36 |
| | 3.24 |
| | 3.15 |
|
Balance Sheet | | | | | | | | | |
Total assets | $ | 145,392 |
| | $ | 137,914 |
| | $ | 132,761 |
| | $ | 121,156 |
| | $ | 120,557 |
|
Long-term debt including capital leases, less current maturities | 51,123 |
| | 49,035 |
| | 45,576 |
| | 36,842 |
| | 36,075 |
|
| |
(a) | Significant transactions reflected in the results above include: (i) regulatory and legislative charges related to Duke Energy Progress and Duke Energy Carolinas North Carolina rate case orders and impairment charges in 2018 (see Notes 4, 11 and 12 to the Consolidated Financial Statements, "Regulatory Matters," "Goodwill and Intangible Assets" and "Investments in Unconsolidated Affiliates"); (ii) the sale of the International Disposal Group in 2016, including a loss on sale recorded within discontinued operations (see Note 2 to the Consolidated Financial Statements, “Acquisitions and Dispositions”); (iii) the acquisition of Piedmont in 2016, including losses on interest rate swaps related to the acquisition financing (see Note 2); (iv) 2014 impairment related to the disposal of the Midwest Generation Disposal Group; (v) 2014 incremental tax expense resulting from the decision to repatriate all cumulative historical undistributed foreign earnings; (vi) 2014 increase in the litigation reserve related to a criminal investigation of the Dan River release. |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 earnings per shareEPS 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. The 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 as presented herein may not be comparable to similarly titled measures used by other companies.
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 its subsidiariessubsidiaries. 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). 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. Subsequent to Duke Energy's acquisition of Piedmont on October 3, 2016, Piedmont is a wholly owned subsidiary of Duke Energy. The financial information for Duke Energy includes results of Piedmont subsequent to October 3, 2016. See Note 2 to
Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements "Acquisitions and Dispositions,Notes for the years ended December 31, 2021, 2020 and 2019.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," in Duke Energy's Annual Report on Form 10-K for additional information regarding the acquisition.year ended December 31, 2020, filed with the SEC on February 25, 2021, for a discussion of variance drivers for the year ended December 31, 2020, as compared to December 31, 2019.
DUKE ENERGY
Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the U.S. primarily through its wholly owneddirect and indirect 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.
Management’s Discussion and Analysis should be read in conjunction with the Consolidated Financial Statements and Notes for the years ended December 31, 2018, 2017 and 2016.
Executive Overview
At Duke Energy the fundamentals of our business are strong.strong and allow us to deliver growth in earnings and dividends in a low-risk, predictable and transparent way. In 2018,2021, we metcontinued to make progress, meeting our near-term financial commitments, executing on strategic priorities, and positionedcontinuing to provide safe and reliable service while managing the ongoing impacts of the COVID-19 pandemic.
In 2021, we continued to position the company for sustainable long-term growth.growth, working with stakeholders to achieve comprehensive bipartisan energy legislation in North Carolina, executing an important North Carolina coal ash settlement agreement, and closing the first phase of the $2 billion investment of a minority interest in Duke Energy Indiana. We areremain focused on executing on our clean energy transformation and a stable, predictable and regulated businessesbusiness portfolio tothat will deliver a reliable and growing dividend with 4 to 6 percent EPS growth through 2023. We have made progress advancing our long-term growth strategy that delivers value to our customers through investments in cleaner energy, grid modernization, natural gas infrastructure, and digital transformation, while also achieving constructive regulatory outcomes. The strength of our balance sheet is of vital importance to2021 representing the cost-effective financing of our growth strategy, and in 2018 we took proactive steps to strengthen it by issuing $2 billion of equity.
95th consecutive year Duke Energy paid a cash dividend on its common stock.
Financial Results
(a)See Results of Operations below for Duke Energy’s definition of adjusted earnings and adjusted EPS as well as a reconciliation of this non-GAAP financial measure to net income available to Duke Energy and net income available to Duke Energy per basic share.
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(a)MD&A | See Results of Operations below for Duke Energy’s definition of adjusted earnings and adjusted diluted earnings per share as well as a reconciliation of this non-GAAP financial measure to net income attributable to Duke Energy and net income attributable to Duke Energy per diluted share.DUKE ENERGY |
Duke Energy's 2018 GAAP reported earnings2021 Net Income Available to Duke Energy Corporation (GAAP Reported Earnings) were impacted by favorable weather,rate case outcomes and improved residential volumes and ongoing cost management efforts, offset by charges which management believes are not indicative of ongoing performance, including impairments related to workplace and workforce realignment and regulatory and legislative items, impairments, a loss on the sale of a retired plant, and severance.settlements. See “Results of Operations” below for a detailed discussion of the consolidated results of operations and a detailed discussion of financial results for each of Duke Energy’s reportable business segments, as well as Other.
20182021 Areas of Focus and Accomplishments
Operational ExcellenceClean Energy Transformation. Our industry has been undergoing an incredible transformation and Reliability. The safety of2021 was a watershed year for our workforce is a core value. Our employeescompany where we executed on strategic priorities and delivered strong safety results in 2018,on our vision.
Coal Ash Settlement
In January 2021, we reached an agreement with the North Carolina Attorney General, the North Carolina Public Staff, and we maintained our industry-leading performance levels from 2016 and 2017. The reliablethe Sierra Club on costs related to coal ash management and safe operation of our power plants, electric distribution system and natural gas infrastructurebasin closure, resolving the last remaining major issues on coal ash management in North Carolina. This settlement is foundational to our customers, our financial results and our credibility with stakeholders. Our nuclear and fossil/hydro generation fleets demonstrated strong performance, exceeding their respective reliability targets. Five of our six nuclear sites have achieved INPO 1 status,significant as it resolves pending issues in the industry’s highest distinction. Our electric distribution system performed well throughout the year, though we see opportunities to reduce outage durations.
Storm Response and System Restoration. 2018 was a year of intense storm activity, with Hurricane Florence and Hurricane Michael delivering a significant impact to our jurisdictions. Employees and utility partners worked tirelessly to restore 3 million outages during the hurricane season. Our team restored 93 percent of outages within five days during Hurricane Florence and 90 percent of outages within three days during Hurricane Michael. Our ability to effectively handle all facets of the 2018 storm response efforts is a testament to our team’s extensive preparation and coordination in advance of the storm, applying lessons learned from previous storms, and on-the-ground management throughout the restoration efforts.
Customer Satisfaction. Duke Energy continues to transform the customer experience through our use of customer data to better inform operational priorities and performance levels. This data-driven approach allows us to identify the investments that are the most important to the customer experience. In 2018, we instituted more proactive communications, such as text alerts during outages, in response to customer expectations. Over time our work with data analytics will result in customer satisfaction improvement as measured through J.D. Power and other surveys.
Constructive Regulatory and Legislative Outcomes. One of our long-term strategic goals is to achieve modernized regulatory constructs in our jurisdictions. Modernized constructs provide benefits, which include improved earnings and cash flows through more timely recovery of investments, as well as stable pricing for customers. We achieved constructive regulatory outcomes in 2018multiyear coal ash basin closure debate in North Carolina, which is critical for bothpaving the way toward our clean energy future. The agreement brought financial clarity to approximately $9 billion of mitigation costs, supporting coal ash cost recovery in North Carolina for Duke Energy Carolinas and Duke Energy Progress with a rate of return for the company. We agreed to reduce North Carolina customers’ costs by approximately $1 billion, while maintaining our ability to achieve our long-term financial goals and our transition to cleaner energy. The settlement agreement resolved all coal ash prudence and cost recovery issues in connection with the 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.
Minority Interest Investment in Duke Energy Indiana
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% ownership interest in exchange for approximately $1.025 billion. The proceeds from the two-phase $2.05 billion investment are expected to partially fund the company’s $63 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.
North Carolina Energy Legislation
In October 2021, North Carolina House Bill 951 was signed into law after legislative leaders announced bipartisan support for and the General Assembly passed this new legislation. House Bill 951 reflects 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 in the state from 2005 levels by 2030 and carbon neutrality by 2050 while continuing to prioritize affordability and reliability for our customers, who are located in North Carolina 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 multiyear rate plans, that promote more efficient recovery of investments and align incentives between the company and the state’s energy policy objectives.
Generating Cleaner Energy
We’re targeting energy generated from coal ash basin closure costs. The Ohio Comprehensive Settlement Agreementto represent less than 5% by 2030 and a full exit by 2035, subject to regulatory approvals. We’ve made strong progress to date in 2018, approvedreducing carbon emissions from electricity generation (a 44% reduction from 2005) and have committed to do more (at least 50% reduction by PUCO, was a favorable outcome that will enable2030 and net-zero by 2050). We’ve filed and refined comprehensive IRPs consistent with this strategy in multiple jurisdictions and updated the creationenterprise capital plan through 2026 to increase planned investments to $63 billion with over 80% of a new PowerForward rider to recover costs associated with projects to modernizethis capital plan funding investments in the grid and transformclean energy transition. The increased capital plan will allow us to accelerate coal plant retirements, make needed grid investments to enable renewables and energy storage, increase resiliency, and allow for dynamic power flows.
Our commitment for 2030 includes retiring higher-emitting plants, operating our existing carbon-free resources and investing in renewables, our energy delivery system, and natural gas infrastructure. In 2021, we passed the customer experience.milestone of 10,000 MW of solar and wind resources and plan to own or purchase 16,000 MW of renewables by 2025 and 24,000 MW by 2030. In June, we filed an application with the NRC to renew Oconee Nuclear Station's operating licenses for an additional 20 years and we intend to seek 20-year extensions and renewal of operating licenses for all 11 reactors. As we look beyond 2030, we will need additional tools to continue our progress. We are making progress in addressing tax reform across our jurisdictions, targeting solutions that provide benefitswill work actively to customersadvocate for research and support the long-term credit qualitydevelopment and deployment of our utilities.carbon-free, dispatchable resources. That includes longer-duration energy storage, advanced nuclear technologies, carbon capture and zero-carbon fuels.
Cost Management and Efficiencies. Duke Energy has a demonstrated track record of driving efficiencies and productivity into the business, including merger integration and continuous improvement efforts. We continue to leverage new technology and data analytics to drive additional efficiencies across the business in response to a transforming landscape. In 2018, we established a digital transformation initiative that is tasked with identifying the best ways to use digital capabilities throughout our business.
Modernizing the Power Grid.Grid and Natural Gas Infrastructure
Our grid improvement programs continue to be a key component of our growth strategy. Modernization of the electric grid, including smart meters, storm hardening, self-healing and targeted undergrounding, helps to ensure the system is better prepared for severe weather, improves the system's reliability and flexibility, and provides better information and services for customers. Grid improvements enable successful storm response; for example, in the Carolinas, self-healing grid technologies rerouted power from damaged lines and systems to minimize outages. In 2018, we deployed 1.6 million smart meters resulting in 4.3 million customers having access to this technology across our regulated footprint.
Generating Cleaner Energy. We advanced efforts to generate cleaner energy, including progress on several strategic investments during 2018. Overall, we have lowered our carbon emissions by over 30 percent since 2005, consistent with our goal to reduce carbon emissions by 40 percent by 2030. Two natural gas plants came online in 2018 and construction continues on a third one. In our Commercial Renewable business, our Shoreham solar facility came online in 2018.
Expanding the Natural Gas Platform.We continue to pursue natural gas infrastructure investments.expand our self-optimizing grid capabilities, and in 2021, smart, self-healing technologies helped to avoid more than 700,000 extended customer outages across our six-state electric service area, saving customers more than 1.2 million hours of lost outage time. We are working diligentlyadded 60 new self-healing networks in 2021 across our six-state service area and upgraded many existing systems to construct the ACP pipeline to bring low-cost gas supplyimprove their smart capabilities and economic development opportunities to the Mid-Atlantic. Whileself-healing efficiency. Additionally, we navigate the impacts of permitting delays and court rulings, we remain steadfast in our commitment to this backbone infrastructure for the southeast U.S. In 2018, Piedmont announced plans to construct a new liquefied natural gas facility in Robeson County North Carolina on property Piedmont already owns. This investment will help Piedmont provide a reliable gas supply to customers during peak usage periods. We expect to begin constructioninvest $100 million in electric vehicle charging over the summer of 2019.
Dividend Growth. In 2018,next three years. Duke Energy continuedhas a demonstrated track record of driving efficiencies and productivity into the business and we continue to growleverage new technology, digital tools and data analytics across the dividend paymentbusiness in response to shareholders by approximately 4 percent. 2018 represented the 92nd consecutive year Duke Energy paid a cash dividend on its common stock.transforming landscape.
Recognizing the continued importance of natural gas to our plans, we continue to work toward a net-zero methane emission goal by 2030 related to our natural gas distribution business. 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 identify and repair methane leaks along distribution lines and systems.
Constructive Regulatory and Legislative Outcomes. One of our long-term strategic goals is to achieve modernized regulatory constructs in our jurisdictions. Modernized constructs provide benefits, which include improved earnings and cash flows through more timely recovery of investments, as well as stable pricing for customers. As highlighted above, House Bill 951 provides the framework for many of these benefits in North Carolina under the direction of the NCUC. 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 2021, we received constructive rate case orders related to our 2019 North Carolina rate cases for both Duke Energy Carolinas and Duke Energy Progress and also reached constructive settlement agreements in our natural gas businesses in Kentucky, North Carolina, and Tennessee. In October 2021, Duke Energy Ohio filed a request to review the company’s electric distribution rates. We have a multiyear rate plan in Florida and in January 2021, we reached a constructive settlement agreement with key consumer groups to bring additional certainty to rates through 2024. In addition, grid investment riders in the Midwest and Florida enable more timely cost recovery and earnings growth.
Customer Satisfaction. Duke Energy continues to transform the customer experience through our use of customer data to better inform operational priorities and performance levels. This data-driven approach allows us to identify the investments that are the most important to the customer experience. We successfully implemented the first three jurisdictional releases of Customer Connect, a new system that consolidates four legacy billing systems into one customer-service platform, allowing us to deliver the universal experience customers expect. Our work has been recognized by our customers and we have maintained our above-target performance throughout the year, despite the resumption of standard billing and payment practices in most jurisdictions.
Operational Excellence, Safety and Reliability. The reliable and safe operation of our power plants, electric distribution system and natural gas infrastructure in our communities is foundational to our customers, our financial results and our credibility with stakeholders. Our regulated generation fleet and nuclear sites had strong performance throughout the year and our electric distribution system performed well. The safety of our workforce is a core value. Our employees delivered strong safety results in 2021, and we are at or near the top of our industry.
Storm activity was limited in our regulated service territories in 2021, but we supported Entergy Louisiana, sending approximately 500 workers to aid in restoring power after Hurricane Ida. The February winter storm in Texas adversely impacted Duke Energy Renewables’ operations. In addition to operating at reduced capacity, we were required to purchase power at scarcity pricing levels to meet fixed volume commitments. Enterprisewide lessons learned were formed immediately following the Texas weather event to identify opportunities to ensure readiness for extreme weather. Our ability to effectively handle all facets of the 2021 storm response efforts, including navigating ongoing COVID-19 protocols, is a testament to our team’s extensive preparation and coordination, applying lessons learned from previous storms, and to on-the-ground management throughout the restoration efforts. Duke Energy has received over 20 Emergency Response Awards since EEI began recognizing storm response in 1998 (including eight for assisting other utilities, and eight in our service territories over the last decade).
Leading Through COVID-19. COVID-19 continued to impact all that we accomplished in 2021 and demonstrated our resiliency and agility:
•In addition to achieving financial results in the upper half of our original guidance, we have continued our cost-management journey – focused on driving productivity, increasing flexibility and prioritizing spend based on risk and strategic value to our customers and investors. In 2021, we maintained approximately $200 million of O&M savings identified during the earliest days of the pandemic. We also have successfully navigated supply chain challenges and the impacts of inflation. Our procurement teams have created action plans to enhance planning, augment supply, amend operations and leverage our scale to mitigate these risks to the extent possible.
•Duke Energy kept electricity and natural gas flowing while continuing to voluntarily make significant accommodations for our customers. To continue to support our customers, we extended the COVID-19 payment flexibility policies we developed in 2020 without compromising our financial performance. We extended payment arrangements for new arrearages, modified reconnection policies and increased the time customers had to restructure agreements. We analyzed each state’s regulatory environment to identify additional state-specific solutions. To better connect customers to federal and state assistance dollars: a dedicated Agency team was created to help local customer assistance agencies in making pledges for Duke Energy customers; a small team was established to work directly with state and federal agencies; and a team of “payment navigators” was piloted to work directly with customers to connect them with available assistance dollars in their local communities.
•We implemented safety procedures designed to provide physical safety for our workers and provided support for our employees. Throughout the year, we aligned with local, state, and federal policies on COVID-19 protocols.
•In May, we announced that the Duke Energy Plaza, a 40-floor office tower currently under construction in Uptown Charlotte, will become the company’s new corporate headquarters, allowing us to reduce occupied space in the Charlotte area by approximately 60% to optimize our real estate footprint. We've rolled out our new hybrid workplace model (WorkSmart) with about 85% of our office-based workforce working in the WorkSmart model. The WorkSmart team has prepared our buildings to ensure employees return to work safely and have put in place the tools and technologies needed to ensure the most effective transition.
Duke Energy Objectives – 20192022 and Beyond
Duke Energy will continue to deliver exceptional value to customers, be an integral part of the communities in which we do business and provide attractive returns to investors. We have an achievable, long-term strategy in place, and it is producing tangible results, yet the industry in which we operate is becoming more and more dynamic. We are adjusting, where necessary, and accelerating our focus in key areas to ensure the company is well positioned to be successful for many decades into the future. As we look ahead to 2019,2022, our plans include:
•Continuing to place the customer at the center of all that we do.do, which includes providing customized products and solutions
Advancing•Strengthening our relationships with our stakeholders in the achievement of modernized regulatory constructs across all jurisdictions, including consideration of cost recovery models that break the link between load growthcommunities in which we operate and earnings.invest
Improving•Generating cleaner energy and working to achieve net-zero carbon emissions by 2050 and net-zero methane emissions by 2030
•Modernizing and strengthening thea green-enabled energy grid to provide customers with more control, convenience and communications, and make the grid more resilient to severe weather and ever-evolving cyber threats.
Investing in bothour natural gas generationinfrastructure
•Maintaining the safety of our communities and infrastructureemployees
•Deploying digital tools across our business
•Working to supportencourage greenhouse gas emission reductions in our growing gas system,supply chain as we replaceimplement the update to our goals to include Scope 2 and certain Scope 3 emissions in our 2050 net-zero goal. The Scope 3 emissions included in our goal include emissions from upstream fossil fuel procurement, production of power purchased for resale, and from downstream use of sold products in our natural gas distribution business.
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.
Regulatory Matters
Coal Ash Costs
Duke Energy Carolinas and Duke Energy Progress have approximately $1.2 billion and $1.4 billion, respectively, in regulatory assets related to coal unitsash retirement obligations as of December 31, 2021. Future spending, including amounts recorded for depreciation and liability accretion, is expected to continue to expand our LDC customer basebe deferred. The majority of spend is expected to occur over the next 15-20 years.
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 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. Duke Energy Indiana has approximately $749 million in regulatory assets related to coal ash asset retirement obligations as of December 31, 2021. In January 2022, Duke Energy Indiana received a letter from the EPA regarding interpretation of the CCR rule. See Note 4 to the Consolidated Financial Statements, "Commitments and Contingencies" for more information.
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. Duke Energy Ohio has approximately $104 million in regulatory assets related to MGP as of December 31, 2021. 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 Note 3 to the Consolidated Financial Statements, “Regulatory Matters."
Commercial Renewables
Duke Energy continues to monitor recoverability of renewable merchant plants located in the CarolinasElectric Reliability Council of Texas West market and Midwest.
Increasing renewables,in the PJM West market, due to fluctuating market pricing and long-term forecasted energy storage and next-generation demand-side management into our supply/demand resource plans,prices. Based on the most recent recoverability test, the carrying value approximated the aggregate estimated future undiscounted cash flows for the assets under review. A continued decline in pursuit of a growth strategy that leverages these resources to provide choices that our customers value.
Modernizingenergy market pricing or other factors unfavorably impacting the way we plan and build our generation, transmission, distribution and customer systemseconomics would likely result in a fully integrated way through Integrated Systemfuture impairment. Duke Energy has approximately $200 million in property, plant and Operations Planningequipment related to accommodate increased distributed energy resources.these assets as of December 31, 2021. Impairment of these assets could result in adverse impacts. For additional information, see Note 10 to the Consolidated Financial Statements, "Property, Plant and Equipment."
TransformingIn February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the business usingability 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 negatively impacted the operating results of these generating units. In addition, Duke Energy has been named in multiple levers,lawsuits arising out of this winter storm. For more information, see Notes 2 and 4 to the Consolidated Financial Statements, "Business Segments" and "Commitments and Contingencies," respectively.
Duke Energy is also monitoring supply chain disruptions, including digital tools, to increase productivitythe cost and reinvestavailability of key components of planned generating facilities, which could impact the proceeds into new growth opportunities, improved customer service,timing of in-service or economics of commercial renewables projects and lower bills for customers.may result in adverse impacts on operating results.
Results of Operations
Non-GAAP Measures
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted EPS. These items represent income from continuing operations attributableavailable to Duke Energy common stockholders in dollar and per share amounts, adjusted for the dollar and per share impact of special items. As discussed below, special items include 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 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 GAAP Reported Earnings and GAAPEPS Available to Duke Energy Corporation common stockholders (GAAP Reported EPS,EPS), respectively.
Special items included in the periods presented include the following, which management believes do not reflect ongoing costs:
Costs•Workplace and Workforce Realignment represents costs attributable to Achieve Mergersbusiness transformation, including long-term real estate strategy changes and workforce realignment.
•Regulatory Settlements represents charges that result from strategic acquisitions.
Regulatory and Legislative Impacts in 2018 represents chargesan impairment charge related to the South Carolina Supreme Court decision on coal ash, insurance proceeds, the Duke Energy Carolinas and Duke Energy Progress coal ash settlement and the partial settlements in the 2019 North Carolina rate cases.
•Gas Pipeline Investments represents costs related to the cancellation of the ACP investment and additional exit obligations.
•Severance represents the reversal of 2018 Severance charges, which were deferred as a result of a partial settlement in the Duke Energy Carolinas and Duke Energy CarolinasProgress 2019 North Carolina rate case orders and the repeal of the South Carolina Base Load Review Act. For 2017, it represents charges related to the Levy nuclear project in Florida and the Mayo Zero Liquid Discharge and Sutton combustion turbine projects in North Carolina.
Impairment Charges in 2018 represents an impairment at Citrus County CC, a goodwill impairment at Commercial Renewables and an other-than-temporary impairment of an investment in Constitution Pipeline Company, LLC. For 2017 and 2016, the charges represent goodwill and other-than-temporary asset impairments at Commercial Renewables.
Sale of Retired Plant represents the loss associated with selling Beckjord, a nonregulated generating facility in Ohio.
Impacts of the Tax Act represents amounts recognized related to the Tax Act.
Severance Charges relate to companywide initiatives, excluding merger integration, to standardize processes and systems, leverage technology and workforce optimization.
Adjusted earnings also include the operating results of the International Disposal Group, which has been classified as discontinued operations. Management believes inclusion of the operating results of the International Disposal Group within adjusted earnings and adjusted diluted EPS results in a better reflection of Duke Energy's financial performance during the period.cases.
Duke Energy’s adjusted earnings and adjusted diluted EPS may not be comparable to similarly titled measures of another company because other companies may not calculate the measures in the same manner.
Reconciliation of GAAP Reported Amounts to Adjusted Amounts
The following table presents a reconciliation of adjusted earnings and adjusted diluted EPS to the most directly comparable GAAP measures. |
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| Years Ended December 31, |
| 2018 | | 2017 | | 2016 |
(in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS | | Earnings | | EPS |
GAAP Reported Earnings/EPS | $ | 2,666 |
| | $ | 3.76 |
| | $ | 3,059 |
| | $ | 4.36 |
| | $ | 2,152 |
| | $ | 3.11 |
|
Adjustments to Reported: | | | | | | | | | | | |
Costs to Achieve Mergers(a) | 65 |
| | 0.09 |
| | 64 |
| | 0.09 |
| | 329 |
| | 0.48 |
|
Regulatory and Legislative Impacts(b) | 202 |
| | 0.29 |
| | 98 |
| | 0.14 |
| | — |
| | — |
|
Impairment Charges(c) | 179 |
| | 0.25 |
| | 74 |
| | 0.11 |
| | 45 |
| | 0.07 |
|
Sale of Retired Plant(d) | 82 |
| | 0.12 |
| | — |
| | — |
| | — |
| | — |
|
Impacts of the Tax Act(e) | 20 |
| | 0.03 |
| | (102 | ) | | (0.14 | ) | | — |
| | — |
|
Severance Charges(f) | 144 |
| | 0.21 |
| | — |
| | — |
| | 57 |
| | 0.08 |
|
Discontinued Operations(g) | (19 | ) | | (0.03 | ) | | 6 |
| | 0.01 |
| | 661 |
| | 0.95 |
|
Adjusted Earnings/Adjusted Diluted EPS | $ | 3,339 |
| | $ | 4.72 |
| | $ | 3,199 |
| | $ | 4.57 |
| | $ | 3,244 |
| | $ | 4.69 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | |
(in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS | | | | |
GAAP Reported Earnings/EPS | $ | 3,802 | | | $ | 4.94 | | | $ | 1,270 | | | $ | 1.72 | | | | | |
Adjustments to Reported: | | | | | | | | | | | |
Workplace and Workforce Realignment(a) | 148 | | | 0.20 | | | — | | | — | | | | | |
Regulatory Settlements(b) | 69 | | | 0.09 | | | 872 | | | 1.19 | | | | | |
Gas Pipeline Investments(c) | 15 | | | 0.02 | | | 1,711 | | | 2.32 | | | | | |
Severance(d) | — | | | — | | | (75) | | | (0.10) | | | | | |
Discontinued Operations | (7) | | | (0.01) | | | (7) | | | (0.01) | | | | | |
Adjusted Earnings/Adjusted EPS | $ | 4,027 | | | $ | 5.24 | | | $ | 3,771 | | | $ | 5.12 | | | | | |
| |
(a) | Net of tax benefit of $19 million in 2018, $39 million in 2017, and $194 million in 2016. |
| |
(b) | Net of tax benefit of $63 million in 2018 and $60 million in 2017. |
| |
(c) | Net of $27 million tax benefit and $2 million Noncontrolling Interests in 2018. Net of $28 million tax benefit in 2017 and $26 million in 2016. |
| |
(d) | Net of $25 million tax benefit. |
| |
(e) | The Tax Act reduced the corporate income tax rate from 35 to 21 percent, effective January 1, 2018. As the tax change was enacted in 2017, Duke Energy was required to remeasure its existing deferred tax assets and liabilities at the lower rate at December 31, 2017. For Duke Energy's regulated operations, where the reduction in the net accumulated deferred income tax liability is expected to be returned to customers in future rates, the remeasurement has been deferred as a regulatory liability. For 2018, the amount represents a true up of existing regulatory liabilities related to the Tax Act. See Note 23 to the Consolidated Financial Statements, "Income Taxes" for more information. |
| |
(f) | Net of tax benefit of $43 million in 2018 and $35 million in 2016. |
| |
(g) | For 2016, includes a loss on sale of the International Disposal Group. Represents the GAAP reported Loss from Discontinued Operations, less the International Disposal Group operating results, which are included in adjusted earnings. For 2017 and 2018, amounts reflect adjustments related to the sale of the International Disposal Group, primarily related to estimated tax expense. |
(a) Net of tax benefit of $44 million.
(b) Net of tax benefit of $21 million and tax benefit of $263 million for the years ended December 31, 2021, and 2020, respectively.
(c) Net of tax benefit of $5 million and tax benefit of $399 million for the years ended December 31, 2021, and 2020, respectively.
(d) Net of tax expense of $23 million.
Year Ended December 31, 2018,2021, as compared to 20172020
Duke Energy’s full-year 2018 GAAP Reported EPS was $3.76$4.94 for the year ended December 31, 2021, compared to $4.36$1.72 for full-year 2017. In addition to the adjusted diluted EPS drivers discussed below,year ended December 31, 2020. The increase in GAAP Reported Earnings/EPS in 2018 was lower primarily due to regulatoryprior year charges related to the cancellation of the ACP pipeline and legislative impacts, impairment charges, severance chargesthe CCR Settlement Agreement filed with the NCUC, partially offset by workplace and a loss on sale of a retired plant.workforce realignment costs in the current year.
As discussed and shown in the table above, management also evaluates financial performance based on adjusted earnings.EPS. Duke Energy’s full-year 2018 adjusted diluted EPS was $4.72$5.24 for the year ended December 31, 2021, compared to $4.57$5.12 for full-year 2017.the year ended December 31, 2020. The increase in adjusted dilutedAdjusted Earnings/Adjusted EPS was primarily due to:
Higher regulated electric revenues due to favorable weatherpositive rate case contributions and higher retail sales volumes, in the current year;
Positive impacts from the North Carolina rate case orders; and
Rider growth.
Partially offset by:
Higher interest expense due to higher debt outstanding and higher interest rates;
Higher depreciation and amortization expense at Electric Utilities and Infrastructure primarily due to rate base growth; and
A reduced tax benefit on holding company interest as a result of the Tax Act.
Year Ended December 31, 2017, as compared to 2016
Duke Energy’s full-year 2017 GAAP Reported EPS was $4.36 compared to $3.11 for full-year 2016. In addition to the adjusted diluted EPS drivers discussed below, GAAP Reported EPS in 2017 was higher primarily due to a $0.14 benefit per share related to the Tax Act in 2017, lower costs to achieve the Piedmont merger and a loss on sale and impairments associated with the sale of the International Disposal Group in 2016, partially offset by charges of $0.14 related to regulatory settlements in Electric Utilitieshigher operation and Infrastructure.
As discussed, management also evaluates financial performance based on adjusted earnings. Duke Energy’s full-year 2017 adjusted diluted EPS was $4.57 compared to $4.69 for full-year 2016. The decrease in adjusted diluted EPS was primarily due to:
Lower regulated electric revenues due to less favorable weather in the current year, including lost revenues related to Hurricane Irma;
maintenance expenses, lower Commercial Renewables earnings and share dilution from equity issuances.
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MD&A | DUKE ENERGYSEGMENT RESULTS |
The prior year operating results from the International Disposal Group, which was sold in December 2016. The 2016 operating results included a benefit from the valuation of deferred income taxes. See Note 23 to the Consolidated Financial Statements, "Income Taxes," for additional information;
Higher financing costs, primarily due to the Piedmont acquisition; and
Higher depreciation and amortization expense at Electric Utilities and Infrastructure primarily due to higher depreciable base.
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 expenses, 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; and
Additional earnings from incremental investments in ACP and Sabal Trail natural gas pipelines.
SEGMENT RESULTSMatters Impacting Future Results
The remaining information presented in this discussion ofmatters discussed herein could materially impact the future operating 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. Segment income includes intercompany revenuesfinancial condition and expenses that are eliminated in the 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 3 to the Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
The Tax Act
On December 22, 2017, President Trump signed the Tax Act into law. Among other provisions, the Tax Act lowered the corporate federal income tax rate from 35 to 21 percent, limits interest deductions outside of regulated utility operations, requires the normalization of excess deferred taxes associated with property under the average rate assumption method as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate AMT and stipulates a refund of 50 percent of remaining AMT credit carryforwards (to the extent the credits exceed regular tax for the year) for tax years 2018, 2019 and 2020 with all remaining AMT credits to be refunded in tax year 2021.
As a resultcash flows of the Tax Act, Duke Energy revalued its existing deferred taxRegistrants and Business Segments.
Regulatory Matters
Coal Ash Costs
Duke Energy Carolinas and Duke Energy Progress have approximately $1.2 billion and $1.4 billion, respectively, in regulatory assets and deferred tax liabilitiesrelated to coal ash retirement obligations as of December 31, 2017,2021. Future spending, including amounts recorded for depreciation and liability accretion, is expected to account forcontinue to be deferred. The majority of spend is expected to occur over the estimated future impact of lower corporate tax rates on these deferred tax amounts. During the year ended December 31, 2018, next 15-20 years.
Duke Energy recorded measurement period adjustmentsIndiana has interpreted the CCR rule to identify the coal ash basin sites impacted and has assessed the amounts of coal ash subject to the provisional estimate recordedrule 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 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. Duke Energy Indiana has approximately $749 million in regulatory assets related to coal ash asset retirement obligations as of December 31, 2017, in accordance with SAB 118. For2021. In January 2022, Duke Energy's regulated operations, whereEnergy Indiana received a letter from the net reduction inEPA regarding interpretation of the net accumulated deferred income tax liability is expected to be returned to customers in future rates, the remeasurement has been deferred as a regulatory liability.CCR rule. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters,""Commitments and Contingencies" for more information.
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. Duke Energy Ohio has approximately $104 million in regulatory assets related to MGP as of December 31, 2021. 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 Note 3 to the Consolidated Financial Statements, “Regulatory Matters."
Commercial Renewables
Duke Energy continues to monitor recoverability of 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. Based on the Tax Act's impactmost 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. Duke Energy has approximately $200 million in property, plant and equipment related to these assets as of December 31, 2021. Impairment of these assets could result in adverse impacts. For additional information, see Note 10 to the regulatory assetConsolidated Financial Statements, "Property, Plant and liability accounts. The following table showsEquipment."
In February 2021, a severe winter storm impacted certain Commercial Renewables assets in Texas. Extreme weather conditions limited the
expense (benefit) recorded onability 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 negatively impacted the operating results of these generating units. In addition, Duke
Energy'sEnergy has been named in multiple lawsuits arising out of this winter storm. For more information, see Notes 2 and 4 to the Consolidated
Financial Statements,
of Operations. |
| | | | | | |
| Years Ended December 31, |
(in millions) | 2018 | 2017 |
Electric Utilities and Infrastructure(c) | $ | 24 |
| $ | (231 | ) |
Gas Utilities and Infrastructure(d)(e) | 1 |
| (26 | ) |
Commercial Renewables | (3 | ) | (442 | ) |
Other(f) | (2 | ) | 597 |
|
Total impact of the Tax Act(a)(b)(d) | $ | 20 |
| $ | (102 | ) |
| |
(a) | Except where noted below, amounts are included within Income Tax Expense From Continuing Operations on the Consolidated Statements of Operations. |
| |
(b) | See Notes 4 and 23 to the Consolidated Financial Statements, "Regulatory Matters" and "Income Taxes," respectively, for information about the Tax Act's impact on Duke Energy's Consolidated Balance Sheets. |
| |
(c) | Amount primarily relates to the 2017 remeasurement, and true up of that remeasurement in 2018, of net deferred tax liabilities that are excluded for ratemaking purposes related to abandoned or impaired assets and certain wholesale fixed rate contracts. |
| |
(d) | 2017 amount includes a $16 million expense recorded within Equity in earnings (losses) of unconsolidated affiliates on the Consolidated Statement of Operations. |
| |
(e) | 2017 amount primarily relates to the remeasurement of net deferred tax liabilities related to equity method investments. |
| |
(f) | 2017 amount primarily relates to the remeasurement of Foreign Tax Credits, federal NOLs and nonregulated deferred tax assets. |
"Business Segments" and "Commitments and Contingencies," respectively.
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MD&A | SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTUREDUKE ENERGY |
Duke Energy is also monitoring supply chain disruptions, including the cost and availability of key components of planned generating facilities, which could impact the timing of in-service or economics of commercial renewables projects and may result in adverse impacts on operating results.
Electric UtilitiesResults of Operations
Non-GAAP Measures
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and
Infrastructureadjusted EPS. These items represent income from continuing operations available to Duke Energy common stockholders in dollar and per share amounts, adjusted for the dollar and per share impact of special items. As discussed below, special items include 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 EPS provides useful information to investors, as it provides them with an additional relevant comparison of Duke Energy’s performance across periods. |
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | Variance |
| | | | Variance |
|
|
|
|
|
|
|
| 2018 vs. |
|
|
|
|
| 2017 vs. |
|
(in millions) | 2018 |
|
| 2017 |
|
| 2017 |
|
| 2016 |
|
| 2016 |
|
Operating Revenues | $ | 22,273 |
| | $ | 21,331 |
| | $ | 942 |
| | $ | 21,366 |
| | $ | (35 | ) |
Operating Expenses | | | | |
|
| | | |
|
|
Fuel used in electric generation and purchased power | 6,917 |
| | 6,379 |
| | 538 |
| | 6,595 |
| | (216 | ) |
Operations, maintenance and other | 5,631 |
| | 5,360 |
| | 271 |
| | 5,433 |
| | (73 | ) |
Depreciation and amortization | 3,523 |
| | 3,010 |
| | 513 |
| | 2,897 |
| | 113 |
|
Property and other taxes | 1,134 |
| | 1,079 |
| | 55 |
| | 1,021 |
| | 58 |
|
Impairment charges | 309 |
| | 176 |
| | 133 |
| | 16 |
| | 160 |
|
Total operating expenses | 17,514 |
| | 16,004 |
| | 1,510 |
| | 15,962 |
| | 42 |
|
Gains on Sales of Other Assets and Other, net | 8 |
| | 6 |
| | 2 |
| | — |
| | 6 |
|
Operating Income | 4,767 |
| | 5,333 |
| | (566 | ) | | 5,404 |
| | (71 | ) |
Other Income and Expenses, net | 378 |
| | 472 |
| | (94 | ) | | 444 |
| | 28 |
|
Interest Expense | 1,288 |
| | 1,240 |
| | 48 |
| | 1,136 |
| | 104 |
|
Income Before Income Taxes | 3,857 |
| | 4,565 |
| | (708 | ) | | 4,712 |
| | (147 | ) |
Income Tax Expense | 799 |
| | 1,355 |
| | (556 | ) | | 1,672 |
| | (317 | ) |
Segment Income | $ | 3,058 |
| | $ | 3,210 |
| | $ | (152 | ) | | $ | 3,040 |
| | $ | 170 |
|
| | | | | | | | | |
Duke Energy Carolinas Gigawatt-hours (GWh) sales | 92,280 |
| | 87,305 |
| | 4,975 |
| | 88,545 |
| | (1,240 | ) |
Duke Energy Progress GWh sales | 69,331 |
| | 66,822 |
| | 2,509 |
| | 69,049 |
| | (2,227 | ) |
Duke Energy Florida GWh sales | 41,559 |
| | 40,591 |
| | 968 |
| | 40,404 |
| | 187 |
|
Duke Energy Ohio GWh sales | 25,329 |
| | 24,639 |
| | 690 |
| | 25,163 |
| | (524 | ) |
Duke Energy Indiana GWh sales | 34,229 |
| | 33,145 |
| | 1,084 |
| | 34,368 |
| | (1,223 | ) |
Total Electric Utilities and Infrastructure GWh sales | 262,728 |
| | 252,502 |
| | 10,226 |
| | 257,529 |
| | (5,027 | ) |
Net proportional MW capacity in operation | 49,684 |
| | 48,828 |
| | 856 |
| | 49,295 |
| | (467 | ) |
Year Ended December 31, 2018, as compared to 2017
Electric UtilitiesManagement uses these non-GAAP financial measures for planning and Infrastructure'sforecasting, and for reporting financial results were impacted by higher legislative and regulatory charges compared to the prior yearBoard of Directors, employees, stockholders, analysts and higher depreciation frominvestors. Adjusted EPS is also used as a growing asset base, partially offset by favorable weatherbasis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted EPS are GAAP Reported Earnings and EPS Available to Duke Energy Corporation common stockholders (GAAP Reported EPS), respectively.
Special items included in the current year, improved retail volumes, lower income tax expenseperiods presented include the following, which management believes do not reflect ongoing costs:
•Workplace and a positive net contribution from the Duke Energy ProgressWorkforce Realignment represents costs attributable to business transformation, including long-term real estate strategy changes and Duke Energy Carolinas North Carolina rate cases. The following is a detailed discussion of the variance drivers by line item.workforce realignment.
Operating Revenues. The variance was driven primarily by:
a $577 million increase in fuel related revenues due to higher sales volumes driven primarily by favorable weather in the current year, and increases in fuel rates billed to customers, which reflects higher average fuel prices;
a $331 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year;
a $236 million increase in retail pricing primarily due to the Duke Energy Progress and Duke Energy Carolinas North Carolina rate cases and Duke Energy Florida base rate adjustments related to generation assets being placed into service;
a $109 million increase in wholesale power revenues, net of fuel, primarily due to higher recovery of coal ash costs at Duke Energy Progress and Duke Energy Carolinas, partially offset by contracts that expired in the prior year at Duke Energy Indiana and customer refunds in the current year at Duke Energy Carolinas related to a FERC order on a complaint filed by PMPA;
•Regulatory Settlements represents an $82 million increase in weather-normal retail sales volumes driven by residential growth;
a $73 million net increase in retail rider revenues, primarily related to capital investment riders at Duke Energy Indiana and Duke Energy Ohio, partially offset by a net decrease in rider revenuesimpairment charge related to the implementation of new base rates at Duke Energy Carolinas and Duke Energy Progress; and
a $49 million increase in other revenues at Duke Energy Carolinas primarily due to the recognition of previously deferred revenues associated with storm restoration costs in South Carolina and favorable transmission revenues.
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MD&A | SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE |
Partially offset by:
a $578 million decrease in retail and wholesale sales due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act.
Operating Expenses. The variance was driven primarily by:
a $538 million increase in fuel used in electric generation and purchased power due to higher sales and higher amortization of deferred fuel expenses;
a $513 million increase in depreciation and amortization expense primarily due to higher amortization of deferredSupreme Court decision on coal ash, costs, additional plant in service and new depreciation rates associated with the Duke Energy Progress and Duke Energy Carolinas North Carolina rate cases;
a $271 million increase in operation, maintenance and other expense primarily due to impacts associated with the Duke Energy Progress North Carolina rate case and higher storm costs, partially offset by a FERC approved settlement refund of certain transmission costs previously billed by PJM; and
a $133 million increase in impairment charges primarily due to the impacts associated withinsurance proceeds, the Duke Energy Carolinas and Duke Energy Progress coal ash settlement and the partial settlements in the 2019 North Carolina rates cases and the Duke Energy Florida Citrus County CC impairments in the current year, offset by the write-off of remaining unrecovered Levy Nuclear projectrate cases.
•Gas Pipeline Investments represents costs at Duke Energy Florida in the prior year.
Other Income and Expenses, net. The decrease was primarily due to lower post in-service equity returns for projects that had been completed prior to being reflected in customer rates at Duke Energy Carolinas and lower income from non-service components of employee benefit costs in the current year at Duke Energy Progress and Duke Energy Florida. For additional information on employee benefit costs, see Note 22 to the Consolidated Financial Statements, "Employee Benefit Plans."
Interest Expense. The variance was due to higher debt outstanding in the current year, partially offset by lower deferred debt costs on major projects.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act, a decrease in pretax income and the impact of the Tax Act in the prior year. The ETRs for the years ended December 31, 2018, and 2017 were 20.7 percent and 29.7 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of excess deferred taxes partially offset by the impact of the Tax Act in the prior year. See the Tax Act section above for additional information.
Year Ended December 31, 2017, as compared to 2016
Electric Utilities and Infrastructure's results were impacted by the Tax Act, growth from investments, lower operations and maintenance expense and higher weather-normal retail sales volumes, partially offset by less favorable weather, impairment charges due to regulatory settlements, increased depreciation and amortization, higher interest expense and higher property and other taxes. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $292 million decrease in retail sales, net of fuel revenue, due to less favorable weather in the current year; and
a $235 million decrease in fuel revenues driven by lower retail sales volumes, lower fuel prices included in rates and changes in the generation mix.
Partially offset by:
a $364 million increase in rider revenues including increased 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 IGCC plant, as well as an increase in retail pricing due to base rate adjustments for Duke Energy Florida’s Osprey acquisition and Hines Chillers and the Duke Energy Progress South Carolina rate case;
an $86 million increase in weather-normal sales volumes to customers; and
a $26 million increase in other revenues primarily due to favorable transmission revenues.
Operating Expenses. The variance was driven primarily by:
a $160 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 the disallowance from rate base of certain projects at the Mayo and Sutton plants in the current year at Duke Energy Progress related to the partial settlement in the North Carolina rate case;
a $113 million increase in depreciation and amortization expense primarily due to additional plant in service; and
a $58 million increase in property and other taxes primarily due to higher property taxes.
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MD&A | SEGMENT RESULTS - ELECTRIC UTILITIES AND INFRASTRUCTURE |
Partially offset by:
a $216 million decrease in fuel expense (including purchased power) primarily due to lower retail sales and changes in the generation mix; and
a $73 million decrease in operation, maintenance and other expense primarily due to lower plant outage, storm restoration and labor and benefits costs partially offset by higher operational costs that are recoverable in rates.
Interest Expense. The variance was due to higher debt outstanding in the current year and Duke Energy Florida's Crystal River Unit 3 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 the impactcancellation of the Tax Act. The effective tax rates forACP investment and additional exit obligations.
•Severance represents the years ended December 31, 2017, and 2016reversal of 2018 Severance charges, which were 29.7 percent and 35.5 percent, respectively. The decrease in the effective tax rate was primarily due to the impactdeferred as a result of the Tax Act. See the Tax Act section above for additional information.
Matters Impacting Future Electric Utilities and Infrastructure Results
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, were eligible for reassessment as low risk pursuant to legislation enacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low-risk classifications for these impoundments, indicating that Duke Energy Carolinas and Duke Energy Progress have satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. As the 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 Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 9 to the Consolidated Financial Statements, "Asset Retirement Obligations," for additional information.
Duke Energy is a party to multiple lawsuits and could be subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. In addition, the orders issuedpartial settlement in the Duke Energy Carolinas and Duke Energy Progress 2019 North CarolinasCarolina rate cases supporting recoverycases.
Duke Energy’s adjusted earnings and adjusted EPS may not be comparable to similarly titled measures of past coal ash remediation costs have been appealed by various parties. another company because other companies may not calculate the measures in the same manner.
Reconciliation of GAAP Reported Amounts to Adjusted Amounts
The outcomefollowing table presents a reconciliation of these appeals, lawsuitsadjusted earnings and potential fines and penalties could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position, and cash flows. See Notes 4 and 5adjusted EPS to the Consolidated Financial Statements, "Regulatory Matters"most directly comparable GAAP measures.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | |
(in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS | | | | |
GAAP Reported Earnings/EPS | $ | 3,802 | | | $ | 4.94 | | | $ | 1,270 | | | $ | 1.72 | | | | | |
Adjustments to Reported: | | | | | | | | | | | |
Workplace and Workforce Realignment(a) | 148 | | | 0.20 | | | — | | | — | | | | | |
Regulatory Settlements(b) | 69 | | | 0.09 | | | 872 | | | 1.19 | | | | | |
Gas Pipeline Investments(c) | 15 | | | 0.02 | | | 1,711 | | | 2.32 | | | | | |
Severance(d) | — | | | — | | | (75) | | | (0.10) | | | | | |
Discontinued Operations | (7) | | | (0.01) | | | (7) | | | (0.01) | | | | | |
Adjusted Earnings/Adjusted EPS | $ | 4,027 | | | $ | 5.24 | | | $ | 3,771 | | | $ | 5.12 | | | | | |
(a) Net of tax benefit of $44 million.
(b) Net of tax benefit of $21 million and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatmenttax benefit of grid improvement costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. Electric Utilities and Infrastructure's results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
During the last half of 2018, Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territories of Duke Energy Carolinas and Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 4 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Carolinas and Duke Energy Progress filed with the NCUC petitions for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate case. Duke Energy Progress filed a similar request with the PSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for other storms, and on January 30, 2019, the PSCSC issued a directive approving the deferral request. Duke Energy Florida anticipates filing a petition in the first half of 2019 with the FPSC to recover incremental storm costs consistent with the provisions in its 2017 Settlement. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters," for additional information.
Appeals of recently approved rate cases for Duke Energy Carolinas and Duke Energy Progress are pending at the North Carolina Supreme Court. The North Carolina Attorney General and various intervenors primarily dispute the allowance of recovery of coal ash costs from customers, which was approved by the NCUC. The outcome of these appeals could have an adverse impact to Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed for recovery of the storm costs. Storm costs are currently expected to be fully recovered by approximately mid-2021. The commission has scheduled the hearing to begin on May 21, 2019. An order disallowing recovery of these costs could have an adverse impact on Electric Utilities and Infrastructure's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
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MD&A | SEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE |
Gas Utilities and Infrastructure
|
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | Variance |
| | | | Variance |
|
| | | | | 2018 vs. |
| | | | 2017 vs. |
|
(in millions) | 2018 |
| | 2017 |
| | 2017 |
| | 2016 |
| | 2016 |
|
Operating Revenues | $ | 1,881 |
| | $ | 1,836 |
| | $ | 45 |
| | $ | 901 |
| | $ | 935 |
|
Operating Expenses | | | | |
|
| | | |
|
|
Cost of natural gas | 697 |
| | 632 |
| | 65 |
| | 265 |
| | 367 |
|
Operation, maintenance and other | 421 |
| | 383 |
| | 38 |
| | 184 |
| | 199 |
|
Depreciation and amortization | 245 |
| | 231 |
| | 14 |
| | 115 |
| | 116 |
|
Property and other taxes | 107 |
| | 106 |
| | 1 |
| | 70 |
| | 36 |
|
Total operating expenses | 1,470 |
|
| 1,352 |
| | 118 |
| | 634 |
| | 718 |
|
(Loss) Gains on Sales of Other Assets and Other, net | — |
| | — |
| | — |
| | (1 | ) | | 1 |
|
Operating Income | 411 |
| | 484 |
| | (73 | ) | | 266 |
| | 218 |
|
Other Income and Expenses, net | 47 |
| | 56 |
| | (9 | ) | | 22 |
| | 34 |
|
Interest Expense | 106 |
| | 105 |
| | 1 |
| | 46 |
| | 59 |
|
Income Before Income Taxes | 352 |
| | 435 |
| | (83 | ) | | 242 |
| | 193 |
|
Income Tax Expense | 78 |
| | 116 |
| | (38 | ) | | 90 |
| | 26 |
|
Segment Income | $ | 274 |
| | $ | 319 |
| | $ | (45 | ) | | $ | 152 |
| | $ | 167 |
|
| | | | | | | | | |
Piedmont LDC throughput (dekatherms)(a) | 557,145,128 |
| | 468,259,777 |
| | 88,885,351 |
| | 120,908,508 |
| | 347,351,269 |
|
Duke Energy Midwest LDC throughput (MCF) | 90,604,833 |
| | 80,934,836 |
| | 9,669,997 |
| | 81,870,489 |
| | (935,653 | ) |
| |
(a) | Includes throughput subsequent to Duke Energy's acquisition of Piedmont on October 3, 2016. |
Year Ended December 31, 2018, as compared to 2017
Gas Utilities and Infrastructure's results were primarily impacted by the OTTI recorded on the Constitution investment and higher operation, maintenance and other expenses, partially offset by favorable price adjustments, customer growth and other income. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $76$263 million increase primarily due to higher natural gas costs passed through to customers as a result of higher volumes sold driven primarily by weather and higher natural gas prices; and
a $37 million increase primarily due to residential and commercial customer revenue, net of natural gas costs passed through to customers, due to customer growth and IMR rate adjustments and new power generation customers.
Partially offset by:
a $69 million decrease primarily due to revenues subject to refund to customers associated with the lower statutory corporate tax rate under the Tax Act.
Operating Expenses. The variance was driven primarily by:
a $65 million increase in natural gas costs primarily due to higher costs passed through to customers, as a result of a higher natural gas prices;
a $38 million increase in operations, maintenance, and other expense primarily due to increased shared services, costs to achieve merger expenses and a pension settlement charge at Piedmont in 2017; and
a $14 million increase in depreciation and amortization expense due to additional plant in service and higher amortization of software costs.
Other Income and Expenses, net. The variance was driven primarily by:
a $55 million impairment recorded for the investment in Constitution in 2018.
Partially offset by:
a $25 million increase in non-service components of employee benefit costs in 2018. For additional information on employee benefit costs, see Note 22 to the Consolidated Financial Statements, "Employee Benefit Plans"; and
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MD&A | SEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE |
a $20 million increase in equity earnings from pipeline investments.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act, a decrease in pretax income and the impact of the Tax Act in the prior year. The ETRs for the years ended December 31, 2018,2021, and 2017 were 22.2 percent2020, respectively.
(c) Net of tax benefit of $5 million and 26.7 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act partially offset by the impactbenefit of the Tax Act in the prior year. See the Tax Act section above for additional information.
Year Ended December 31, 2017, as compared to 2016
Gas Utilities and Infrastructure's higher results were primarily 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 additional equity earnings from investments in the ACP and Sabal Trail pipelines.
Operating Revenues. The variance was driven primarily by:
an $884$399 million increase in operating revenues due to the inclusion of Piedmont's operating revenues beginning in October 2016; and
a $47 million increase in Piedmont's fourth quarter results due to colder weather, higher natural gas prices, IMR rate adjustments, customer growth and new power generation customers.
Operating Expenses. The variance was driven primarily by:
a $686 million increase in operating expenses due to the inclusion of Piedmont's operating expenses beginning in October 2016; and
a $34 million increase in Piedmont's fourth quarter results primarily due to higher natural gas costs passed through to customers due to the higher price per dekatherm of natural gas.
Other Income and Expenses, net. The increase was driven primarily by higher equity earnings from pipeline investments.
Interest Expense. The variance was primarily due to the inclusion of Piedmont's interest expense beginning in October 2016.
Income Tax Expense. The variance was primarily due to an increase in pretax income due to the inclusion of Piedmont's earnings beginning in October 2016, partially offset by prior period true ups. The effective tax rates for the years ended December 31, 2017,2021, and 2016 were 26.7 percent and 37.2 percent,2020, respectively. The decrease in the effective
(d) Net of tax rate was primarily due to the prior period true ups and the impactexpense of the Tax Act. See the Tax Act section above for additional information.$23 million.
Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 47 percent ownership interest in ACP, which is building an approximately 600-mile interstate natural gas pipeline intended to transport diverse natural gas supplies into southeastern markets. Affected states (West Virginia, Virginia and North Carolina) have issued certain necessary permits; the project remains subject to other pending federal and state approvals, which will allow full construction activities to begin. In 2018, FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route. Project cost estimates are a range of $7.0 billion to $7.8 billion, excluding financing costs. ACP expects to achieve a late 2020 in-service date for key segments of the project, while it expects a remainder to extend into 2021. Project construction activities, schedule and final costs are subject to uncertainty due to abnormal weather, work delays (including delays due to judicial or regulatory action) and other conditions and risks that could result in potential higher project costs, a potential delay in the targeted in-service dates and potential impairment charges. ACP and Duke Energy will continue to consider their options with respect to the foregoing in light of their existing contractual and legal obligations. See Notes 4 and 12 to the Consolidated Financial Statements, "Regulatory Matters" and "Investments in Unconsolidated Affiliates," respectively, for additional information.
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
|
| |
MD&A | SEGMENT RESULTS - COMMERCIAL RENEWABLES |
|
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | Variance |
| | | | Variance |
|
| | | | | 2018 vs. |
| | | | 2017 vs. |
|
(in millions) | 2018 |
| | 2017 |
| | 2017 |
| | 2016 |
| | 2016 |
|
Operating Revenues | $ | 477 |
| | $ | 460 |
| | $ | 17 |
| | $ | 484 |
| | $ | (24 | ) |
Operating Expenses | | | | |
|
| | | |
|
|
Operation, maintenance and other | 304 |
| | 267 |
| | 37 |
| | 337 |
| | (70 | ) |
Depreciation and amortization | 155 |
| | 155 |
| | — |
| | 130 |
| | 25 |
|
Property and other taxes | 25 |
| | 33 |
| | (8 | ) | | 25 |
| | 8 |
|
Impairment charges | 93 |
| | 99 |
| | (6 | ) | | — |
| | 99 |
|
Total operating expenses | 577 |
| | 554 |
| | 23 |
| | 492 |
| | 62 |
|
(Loss) Gains on Sales of Other Assets and Other, net | (1 | ) | | 1 |
| | (2 | ) | | 5 |
| | (4 | ) |
Operating Loss | (101 | ) | | (93 | ) | | (8 | ) | | (3 | ) | | (90 | ) |
Other Income and Expenses, net | 23 |
| | (12 | ) | | 35 |
| | (83 | ) | | 71 |
|
Interest Expense | 88 |
| | 87 |
| | 1 |
| | 53 |
| | 34 |
|
Loss Before Income Taxes | (166 | ) | | (192 | ) | | 26 |
| | (139 | ) | | (53 | ) |
Income Tax Benefit | (147 | ) | | (628 | ) | | 481 |
| | (160 | ) | | (468 | ) |
Less: Loss Attributable to Noncontrolling Interests | (28 | ) | | (5 | ) | | (23 | ) | | (2 | ) | | (3 | ) |
Segment Income | $ | 9 |
| | $ | 441 |
| | $ | (432 | ) | | $ | 23 |
| | $ | 418 |
|
| | | | | | | | | |
Renewable plant production, GWh | 8,522 |
| | 8,260 |
| | 262 |
| | 7,446 |
| | 814 |
|
Net proportional MW capacity in operation(a) | 2,991 |
| | 2,907 |
| | 84 |
| | 2,892 |
| | 15 |
|
| |
(a) | Certain projects are included in tax-equity structures where investors have differing interests in the project's economic attributes. In 2018, 100 percent of the tax-equity project's capacity is included in the table above. |
Year Ended December 31, 2018,2021, as compared to 20172020
Commercial Renewables' results were unfavorably impacted byGAAP Reported EPS was $4.94 for the higher tax benefit in 2017 fromyear ended December 31, 2021, compared to $1.72 for the Tax Act. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. year ended December 31, 2020. The increase in revenues was primarily due to an increase in the number of EPC agreements at REC Solar, partially offset by unfavorable wind portfolio revenue.
Operating Expenses. The increase in operating expenses was primarily due to an increase in the number of EPC agreements at REC Solar, higher wind portfolio expenses and higher solar development costs, partially offset by lower property taxes due to non-recurring property tax payments made in the prior year and lower impairment charges.
Other Income and Expenses, net. The favorable variance in other income and expenses was primarily due to the bankruptcy court approved NAW and FES settlement agreement, which allowed retention of previously collected cash collateral under the PPAs, sale of the FES unsecured claim, impairment of certain cost investments in the prior year and lower equity losses in the current year.
Income Tax Benefit.The decrease in tax benefit in 2018 was primarily due to the one-time impact of the Tax Act in 2017 and lower statutory federal corporate tax rate under the Tax Act. See the Tax Act section above for additional information.
Loss Attributable to Noncontrolling Interests. The increase is primarily driven by the new tax-equity structures entered into during 2018.
Year Ended December 31, 2017, as compared to 2016
Commercial Renewables' higher earnings were primarily due to the Tax Act, partially offset by pretax impairment charges. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decrease was primarily due to lower EPC revenues from REC Solar.
Operating Expenses. The increase was primarily due to a $99 million in pretax impairment charges in 2017 related to a wholly owned non-contracted wind project and other investments and higher expenses associated with new wind and solar projects, partially offset by lower operations and maintenance expense at REC Solar due to fewer projects under construction. See Notes 10 and 11 to the Consolidated Financial Statements, “Property, Plant and Equipment” and “Goodwill and Intangible Assets,” respectively, for additional information.
Other Income and Expenses, net. The variance was primarily due to a $71 million pretax impairment charge in 2016 related to certain equity method investments. For additional information, see Note 12 to the Consolidated Financial Statements, “Investments in Unconsolidated Affiliates.”
|
| |
MD&A | SEGMENT RESULTS - COMMERCIAL RENEWABLES |
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 the impact of the Tax Act and higher PTCs, partially offset by lower ITCs. See the Tax Act section above for additional information on the Tax Act and the impact on the effective tax rate.
Matters Impacting Future Commercial Renewables Results
Persistently low market pricing for wind resources, primarily in the Electric Reliability Council of Texas West and PJM West markets and the future expiration of tax incentives including ITCs and PTCs could result in adverse impacts to the future results of operations, financial position and cash flows of Commercial Renewables.
On September 26, 2018, Duke Energy announced it is seeking a minority investor for the commercial renewables business. Duke Energy will continue to develop projects, grow its portfolio and manage its renewables assets. Duke Energy Renewable Services, an operations and maintenance business for third-party customers, and REC Solar are not included in the potential transaction. A sale of a minority interest is dependent on a number of factors and cannot be predicted at this time.
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
|
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | Variance |
| | | | Variance |
|
| | | | | 2018 vs. |
| | | | 2017 vs. |
|
(in millions) | 2018 |
| | 2017 |
| | 2017 |
| | 2016 |
| | 2016 |
|
Operating Revenues | $ | 89 |
| | $ | 138 |
| | $ | (49 | ) | | $ | 117 |
| | $ | 21 |
|
Operating Expenses | | | | |
|
| | | |
|
|
Fuel used in electric generation and purchased power | — |
| | 58 |
| | (58 | ) | | 51 |
| | 7 |
|
Operation, maintenance and other | 214 |
| | 46 |
| | 168 |
| | 371 |
| | (325 | ) |
Depreciation and amortization | 152 |
| | 131 |
| | 21 |
| | 152 |
| | (21 | ) |
Property and other taxes | 14 |
| | 14 |
| | — |
| | 28 |
| | (14 | ) |
Impairment charges | — |
| | 7 |
| | (7 | ) | | 2 |
| | 5 |
|
Total operating expenses | 380 |
| | 256 |
| | 124 |
| | 604 |
| | (348 | ) |
(Losses) Gains on Sales of Other Assets and Other, net | (96 | ) | | 21 |
| | (117 | ) | | 23 |
| | (2 | ) |
Operating Loss | (387 | ) | | (97 | ) | | (290 | ) | | (464 | ) | | 367 |
|
Other Income and Expenses, net | 73 |
| | 129 |
| | (56 | ) | | 75 |
| | 54 |
|
Interest Expense | 657 |
| | 574 |
| | 83 |
| | 693 |
| | (119 | ) |
Loss Before Income Taxes | (971 | ) | | (542 | ) | | (429 | ) | | (1,082 | ) | | 540 |
|
Income Tax (Benefit) Expense | (282 | ) | | 353 |
| | (635 | ) | | (446 | ) | | 799 |
|
Less: Net Income Attributable to Noncontrolling Interests | 5 |
| | 10 |
| | (5 | ) | | 9 |
| | 1 |
|
Net Loss | $ | (694 | ) | | $ | (905 | ) | | $ | 211 |
| | $ | (645 | ) | | $ | (260 | ) |
Year Ended December 31, 2018, as compared to 2017
Other’s lower net loss was driven by prior year impacts from the Tax Act, partially offset by severance charges, loss on the sale of the retired Beckjord station, higher interest expense and prior year proceeds resulting from the settlement of the shareholder litigation related to the Progress Energy merger. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The decreaseGAAP Reported Earnings/EPS was primarily due to prior year revenues related to Duke Energy Ohio’s entitlement of capacity and energy from OVEC’s power plants. For the year ended December 31, 2018, the revenues and related expenses for OVEC are reflected in the Electric Utilities and Infrastructure segment due to the PUCO Order that approved Duke Energy to recover or credit amounts through Rider PSR. These amounts are deemed immaterial. Therefore, no prior period amounts were restated. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters" for additional information.
Operating Expenses. The increase was primarily due to severance charges related to a corporate initiativethe cancellation of the ACP pipeline and the CCR Settlement Agreement filed with the NCUC, partially offset by prior year fuel expense related to OVEC, which is reflectedworkplace and workforce realignment costs in the Electric Utilitiescurrent year.
As discussed and Infrastructure segment for year ended December 31, 2018. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters" for additional information.
(Losses) Gains on Sales of Other Assets and Other, net. The variance was driven by the loss on sale of the retired Beckjord station, a nonregulated facility retired during 2014, including the transfer of coal ash basins and other real property and indemnification from all potential future claims related to the property, whether arising under environmental laws or otherwise.
Other Income and Expenses, net. The variance was primarily due to insurance proceeds receivedshown in the prior year resulting from settlement of the shareholder litigation related to the Progress Energy merger and lower returnstable above, management also evaluates financial performance based on investments that fund certain employee benefit obligations.
|
| |
MD&A | SEGMENT RESULTS - OTHER |
Interest Expense. The increaseadjusted EPS. Duke Energy’s adjusted EPS was primarily due to an increase in long-term debt as well as higher interest rates on short-term debt.
Income Tax (Benefit) Expense. The variance was primarily due to the prior year impact of the Tax Act and an increase in pretax loss. See the Tax Act section above for additional information on the Tax Act and the impact on the effective tax rate.
Year Ended December 31, 2017, as compared to 2016
Other’s higher net loss was driven by the Tax Act, partially offset by prior year losses on forward-starting interest rate swaps and other costs related to the Piedmont acquisition, decreased severance charges, donations to the Duke Energy Foundation in 2016 and insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to higher OVEC revenues and prior year customer credits related to Piedmont merger commitments. See Note 2 to the Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information.
Operating Expenses. The decrease was primarily due to lower transaction and integration costs associated with the Piedmont acquisition, prior year severance charges related to cost savings initiatives, donations to the Duke Energy Foundation in 2016 as well as prior year depreciation expense and other integration costs related to the Progress Energy merger. The Duke Energy Foundation is a nonprofit organization funded by Duke Energy shareholders that makes charitable contributions to selected nonprofits and government subdivisions.
Other Income and Expenses, net. The increase was primarily driven by insurance proceeds resulting from settlement of the shareholder litigation related to the Progress Energy merger, higher earnings from the equity method investment in NMC and increased returns on investments that fund certain employee benefit obligations.
Interest Expense. The decrease was primarily due to 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, 6 and 14 to the Consolidated Financial Statements, "Acquisitions and Dispositions," "Debt and Credit Facilities" and "Derivatives and Hedging," respectively.
Income Tax Benefit. The variance was primarily due to the impact of the Tax Act and a decrease in pretax loss. See the Tax Act section above for additional information on the Tax Act and the impact on the effective tax rate.
Matters Impacting Future Other Results
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX |
| | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | Variance |
| | | | Variance |
|
| | | | | 2018 vs. |
| | | | 2017 vs. |
|
(in millions) | 2018 |
| | 2017 |
| | 2017 |
| | 2016 |
| | 2016 |
|
Income (Loss) From Discontinued Operations, net of tax | $ | 19 |
| | $ | (6 | ) | | $ | 25 |
| | $ | (408 | ) | | $ | 402 |
|
Year Ended December 31, 2018, as compared to 2017
The variance was primarily driven by tax adjustments related to the International Disposal Groups. See Note 2 to the Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information.
Year Ended December 31, 2017, as compared to 2016
The variance was primarily driven by the prior year loss on the disposal of Duke Energy's Latin American generation business and an impairment charge related to certain assets in Central America, partially offset by a tax benefit related to historic unremitted foreign earnings and immaterial out of period tax adjustments unrelated to the International Disposal Group. See Note 2 to the Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information.
|
| |
MD&A | SUBSIDIARY REGISTRANTS |
SUBSIDIARY REGISTRANTS
As a result of the Tax Act, the Subsidiary Registrants revalued their deferred tax assets and deferred tax liabilities, as of December 31, 2017, to account for the estimated future impact of lower corporate tax rates on these deferred tax amounts. During the year ended December 31, 2018, the Subsidiary Registrants recorded measurement period adjustments to the provisional estimate recorded as of December 31, 2017, in accordance with SAB 118. For the Subsidiary Registrants' regulated operations, where the net reduction in the net accumulated deferred income tax liability is expected to be returned to customers in future rates, the remeasurement has been deferred as a regulatory liability. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters" for additional information on the Tax Act's impact to the regulatory asset and liability accounts. The change in each Subsidiary Registrant's effective tax rate$5.24 for the year ended December 31, 2018,2021, compared to $5.12 for the year ended December 31, 2020. The increase in Adjusted Earnings/Adjusted EPS was primarily due to the impact of the Tax Act, unless noted below. The following table shows the expense (benefit) recorded on the Subsidiary Registrant's Consolidated Statements of Operationspositive rate case contributions and Comprehensive Income, and the effective tax rate for each Subsidiary Registrant. |
| | | | | | | | | | | | |
| Impacts of the Tax Act(a)(b) | | | Effective Tax Rate |
| Years Ended December 31, | | | Years Ended December 31, | |
(in millions) | 2018 |
| 2017 |
| | 2018 |
| | 2017 |
|
Duke Energy Carolinas | $ | 1 |
| $ | 15 |
| | 22.1 | % | | 34.9 | % |
Progress Energy | 25 |
| (246 | ) | (c) | 17.4 | % | | 17.2 | % |
Duke Energy Progress | 19 |
| (40 | ) | (d) | 19.3 | % | | 29.0 | % |
Duke Energy Florida | — |
| (226 | ) | (c) | 15.4 | % | | 6.1 | % |
Duke Energy Ohio | 2 |
| (23 | ) | (e) | 19.6 | % | | 23.4 | % |
Duke Energy Indiana | — |
| 55 |
| (f) | 24.6 | % | | 46.0 | % |
Piedmont | — |
| (2 | ) | (d)(g) | 22.3 | % | | 30.8 | % |
| |
(a) | Except where noted below, amounts are included within Income Tax Expense From Continuing Operations or Income Tax Expense on the Consolidated Statements of Operations and Comprehensive Income.
|
| |
(b) | See Notes 4 and 23 to the Consolidated Financial Statements, "Regulatory Matters" and "Income Taxes," respectively, for information about the Tax Act's impact on Duke Energy's Consolidated Balance Sheets. |
| |
(c) | 2017 amount primarily relates to the remeasurement of deferred tax liabilities that are excluded for ratemaking purposes related to abandoned assets and certain wholesale fixed rate contracts. |
| |
(d) | 2017 amount primarily relates to the remeasurement of deferred tax liabilities of certain wholesale fixed rate contracts. |
| |
(e) | 2017 amount primarily relates to the remeasurement of deferred tax assets that are excluded for ratemaking purposes related to a prior transfer of certain electric generating assets. |
| |
(f) | 2017 amount primarily relates to the remeasurement of deferred tax liabilities that are excluded for ratemaking purposes related to impaired assets. |
| |
(g) | 2017 amount includes a $16 million expense recorded within Equity in earnings (losses) of unconsolidated affiliates on the Consolidated Statements of Operations and Comprehensive Income. |
DUKE ENERGY CAROLINAS
Introduction
Management’s Discussion and Analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes for the years ended December 31, 2018, 2017 and 2016.
Basis of Presentation
The results of operations and variance discussion for Duke Energy Carolinas is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.
|
| |
MD&A | DUKE ENERGY CAROLINAS |
|
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | Variance |
|
Operating Revenues | $ | 7,300 |
| | $ | 7,302 |
| | $ | (2 | ) |
Operating Expenses | | | | |
|
|
Fuel used in electric generation and purchased power | 1,821 |
| | 1,822 |
| | (1 | ) |
Operation, maintenance and other | 2,130 |
| | 2,021 |
| | 109 |
|
Depreciation and amortization | 1,201 |
| | 1,090 |
| | 111 |
|
Property and other taxes | 295 |
| | 281 |
| | 14 |
|
Impairment charges | 192 |
| | — |
| | 192 |
|
Total operating expenses | 5,639 |
| | 5,214 |
| | 425 |
|
(Losses) Gains on Sales of Other Assets and Other, net | (1 | ) | | 1 |
| | (2 | ) |
Operating Income | 1,660 |
| | 2,089 |
| | (429 | ) |
Other Income and Expenses, net | 153 |
| | 199 |
| | (46 | ) |
Interest Expense | 439 |
| | 422 |
| | 17 |
|
Income Before Income Taxes | 1,374 |
| | 1,866 |
| | (492 | ) |
Income Tax Expense | 303 |
| | 652 |
| | (349 | ) |
Net Income | $ | 1,071 |
| | $ | 1,214 |
| | $ | (143 | ) |
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Carolinas. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | | |
Increase (Decrease) over prior year | 2018 | | 2017 |
Residential sales | 11.7 | % | | (4.8 | )% |
General service sales | 4.5 | % | | (1.8 | )% |
Industrial sales | (0.3 | )% | | (0.8 | )% |
Wholesale power sales | 12.5 | % | | 6.3 | % |
Joint dispatch sales | 23.1 | % | | 18.2 | % |
Total sales | 5.7 | % | | (1.4 | )% |
Average number of customers | 1.5 | % | | 1.5 | % |
Year Ended December 31, 2018, as compared to 2017
Operating Revenues. The variance was driven primarily by:
a $263 million decrease in retail sales due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act;
a $68 million decrease in retail rider revenues primarily related to the implementation of new base rates; and
an $8 million decrease in wholesale power revenues, net of sharing and fuel, primarily due to wholesale customer refunds in the current year related to a FERC order on a complaint filed by PMPA,higher volumes, partially offset by higher revenues related to recovery of coal ash costs.
Partially offset by:
a $169 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year;
an $83 million increase in retail pricingoperation and maintenance expenses, lower Commercial Renewables earnings and share dilution from impacts of the North Carolina rate case;
a $49 million increase in other revenues primarily due to the recognition of previously deferred revenues associated with storm restoration costs in South Carolina and favorable transmission revenues; and
a $36 million increase in weather-normal retail sales volumes.
Operating Expenses.The variance was driven primarily by:
a $192 million increase in impairment charges primarily due to the impacts of the North Carolina rate order and charges related to coal ash costs in South Carolina;
a $111 million increase in depreciation and amortization expense primarily due to additional plant in service, new depreciation rates associated with the North Carolina rate case and higher amortization of deferred coal ash costs, partially offset by lower amortization of certain regulatory assets; and
equity issuances.
|
| | | | |
MD&A | DUKE ENERGY CAROLINASSEGMENT RESULTS |
a $109 million increase in operations, maintenance and other expense primarily due to severance charges.
Other Income and Expenses, net.The variance was primarily due to lower AFUDC equity related to the Lee Nuclear Project and W.S. Lee CC and a decrease in recognition of post in-service equity returns for projects that had been completed prior to being reflected in customer rates.
Interest Expense. The variance was primarily due to higher debt outstanding in the current year.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The ETRs for the years ended December 31, 2018, and 2017 were 22.1 percent and 34.9 percent, respectively. The decrease in the ETR was primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of state excess deferred taxes.
Matters Impacting Future Results
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, were eligible for reassessment as low-risk pursuant to legislation enacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low risk classifications for these impoundments, indicating that Duke Energy Carolinas had satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. As the 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' results of operations, financial position and cash flows. See Note 9 to the Consolidated Financial Statements, "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. In addition, the order issued in the Duke Energy Carolinas North Carolinas rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ results of operations, financial position and cash flows. See Notes 4 and 5 to the Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
On June 22, 2018, Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. Duke Energy Carolinas' results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
During the last half of 2018, Duke Energy Carolinas’ service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Carolinas filed with the NCUC a petition for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate case. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Carolinas' results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters," for additional information.
Appeals of the recently approved rate case for Duke Energy Carolinas are pending at the North Carolina Supreme Court. The North Carolina Attorney General and various intervenors primarily dispute the allowance of recovery of coal ash costs from customers, which was approved by the NCUC. The outcome of these appeals could have an adverse impact to Duke Energy Carolina's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
PROGRESS ENERGY
Introduction
Management’s Discussion and Analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes for the years ended December 31, 2018, 2017 and 2016.
Basis of Presentation
The results of operations and variance discussion for Progress Energy is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.
|
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | Variance |
|
Operating Revenues | $ | 10,728 |
| | $ | 9,783 |
| | $ | 945 |
|
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 3,976 |
| | 3,417 |
| | 559 |
|
Operation, maintenance and other | 2,613 |
| | 2,301 |
| | 312 |
|
Depreciation and amortization | 1,619 |
| | 1,285 |
| | 334 |
|
Property and other taxes | 529 |
| | 503 |
| | 26 |
|
Impairment charges | 87 |
| | 156 |
| | (69 | ) |
Total operating expenses | 8,824 |
| | 7,662 |
| | 1,162 |
|
Gains on Sales of Other Assets and Other, net | 24 |
| | 26 |
| | (2 | ) |
Operating Income | 1,928 |
| | 2,147 |
| | (219 | ) |
Other Income and Expenses, net | 165 |
| | 209 |
| | (44 | ) |
Interest Expense | 842 |
| | 824 |
| | 18 |
|
Income Before Income Taxes | 1,251 |
| | 1,532 |
| | (281 | ) |
Income Tax Expense | 218 |
| | 264 |
| | (46 | ) |
Net Income | 1,033 |
| | 1,268 |
| | (235 | ) |
Less: Net Income Attributable to Noncontrolling Interests | 6 |
| | 10 |
| | (4 | ) |
Net Income Attributable to Parent | $ | 1,027 |
| | $ | 1,258 |
| | $ | (231 | ) |
Year Ended December 31, 2018, as compared to 2017
Operating Revenues. The variance was driven primarily by:
a $614 million increase in fuel and capacity revenues primarily due to an increase in fuel and capacity rates billed to retail customers and increased demand;
a $149 million increase in retail pricing due to the impacts of the Duke Energy Progress North Carolina and South Carolina rate cases and Duke Energy Florida base rate adjustments related to generation assets being placed into service;
a $108 million increase in retail sales due to favorable weather in the current year, net of lost revenue impacts associated with Hurricane Irma in 2017 and Hurricane Florence in 2018;
a $96 million increase in wholesale power revenues, net of fuel, primarily due to recovery of coal ash costs and higher peak demand at Duke Energy Progress;
a $34 million net increase in retail rider revenues in conjunction with the implementation of new base rates at Duke Energy Progress; and
a $47 million increase in weather-normal retail sales volumes.
Partially offset by:
a $119 million decrease in retail sales due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act at Duke Energy Progress.
Operating Expenses.The variance was driven primarily by:
a $559 million increase in fuel used in electric generation and purchased power primarily due to higher amortization of deferred fuel and capacity expenses, increased demand and changes in generation mix;
a $334 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs and new depreciation rates associated with the North Carolina rate case at Duke Energy Progress, and accelerated depreciation of Crystal River Units 4 and 5 at Duke Energy Florida;
a $312 million increase in operation, maintenance and other expense primarily due to higher costs related to storms, vegetation management costs and severance charges; and
a $26 million increase in property and other taxes primarily due to higher revenue related taxes at Duke Energy Florida.
Partially offset by:
a $69 million decrease in impairment charges primarily due to the write-off of remaining unrecovered Levy Nuclear Project costs in the prior year, offset by the current year impairment of the Citrus County CC at Duke Energy Florida and the impacts associated with the North Carolina rate case at Duke Energy Progress.
Other Income and Expenses, net. The variance was primarily due to lower income from non-service components of employee benefit costs in the current year at Duke Energy Progress and Duke Energy Florida. For additional information on employee benefit costs, see Note 22 to the Consolidated Financial Statements, "Employee Benefit Plans."
Interest Expense. The variance was primarily due to new debt issuances at Duke Energy Progress.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act partially offset by the favorable impact of the Tax Act in the prior year. The effective tax rate for the years ended December 31, 2018, and 2017 were 17.4 percent and 17.2 percent, respectively. The change in the effective tax rate was primarily due to the favorable impact of the Tax Act in the prior year mostly offset by the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal and state excess deferred taxes in the current year.
Matters Impacting Future Results
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, were eligible for reassessment as low-risk pursuant to legislation enacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low risk classifications for these impoundments, indicating that Progress Energy had satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. As the 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 results of operations, financial position and cash flows. See Note 9 to the Consolidated Financial Statements, "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. As noted above, the order issued in the Duke Energy Progress North Carolinas rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Progress Energy’s results of operations, financial position and cash flows. See Notes 4 and 5 to the Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. The NCUC did allow Duke Energy Carolinas to petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly, Progress Energy's results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
During the last half of 2018, Duke Energy Progress and Duke Energy Florida’s service territories were impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages to the service territory of Duke Energy Progress. Duke Energy Florida’s service territory was also impacted by Hurricane Michael, a Category 4 hurricane and the most powerful storm to hit the Florida Panhandle in recorded history. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Progress filed with the NCUC a petition for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate case. Duke Energy Progress filed a similar request with the PSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for other storms, and on January 30, 2019, the PSCSC issued a directive approving the deferral request. Duke Energy Florida anticipates filing a petition in the first half of 2019 with the FPSC to recover incremental storm costs consistent with the provisions in its 2017 Settlement. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Progress Energy's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters," for additional information.
Appeals of the recently approved rate case for Duke Energy Progress are pending at the North Carolina Supreme Court. The North Carolina Attorney General and various intervenors primarily dispute the allowance of recovery of coal ash costs from customers, which was approved by the NCUC. The outcome of these appeals could have an adverse impact to Progress Energy's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed for recovery of the storm costs. Storm costs are currently expected to be fully recovered by approximately mid-2021. The commission has scheduled the hearing to begin on May 21, 2019. An order disallowing recovery of these costs could have an adverse impact on Progress Energy's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
DUKE ENERGY PROGRESS
Introduction
Management’s Discussion and Analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes for the years ended December 31, 2018, 2017 and 2016.
Basis of Presentation
The results of operations and variance discussion for Duke Energy Progress is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.
|
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | Variance |
|
Operating Revenues | $ | 5,699 |
| | $ | 5,129 |
| | $ | 570 |
|
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,892 |
| | 1,609 |
| | 283 |
|
Operation, maintenance and other | 1,578 |
| | 1,439 |
| | 139 |
|
Depreciation and amortization | 991 |
| | 725 |
| | 266 |
|
Property and other taxes | 155 |
| | 156 |
| | (1 | ) |
Impairment charges | 33 |
| | 19 |
| | 14 |
|
Total operating expenses | 4,649 |
| | 3,948 |
| | 701 |
|
Gains on Sales of Other Assets and Other, net | 9 |
| | 4 |
| | 5 |
|
Operating Income | 1,059 |
| | 1,185 |
| | (126 | ) |
Other Income and Expenses, net | 87 |
| | 115 |
| | (28 | ) |
Interest Expense | 319 |
| | 293 |
| | 26 |
|
Income Before Income Taxes | 827 |
| | 1,007 |
| | (180 | ) |
Income Tax Expense | 160 |
| | 292 |
| | (132 | ) |
Net Income | $ | 667 |
| | $ | 715 |
| | $ | (48 | ) |
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Progress. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | | |
Increase (Decrease) over prior year | 2018 |
| | 2017 |
|
Residential sales | 9.9 | % | | (2.6 | )% |
General service sales | 2.3 | % | | (1.3 | )% |
Industrial sales | 0.8 | % | | 1.1 | % |
Wholesale power sales | 4.6 | % | | (2.9 | )% |
Joint dispatch sales | 2.1 | % | | (17.1 | )% |
Total sales | 3.8 | % | | (3.2 | )% |
Average number of customers | 1.5 | % | | 1.4 | % |
Year Ended December 31, 2018, as compared to 2017
Operating Revenues.The variance was driven primarily by:
a $324 million increase in fuel revenues driven by higher retail sales and changes in generation mix;
a $125 million increase in retail pricing due to the impacts from the North Carolina and South Carolina rate cases;
a $96 million increase in wholesale power revenues, net of fuel, primarily due to recovery of coal ash costs and higher peak demand;
a $34 million net increase in retail rider revenues in conjunction with the implementation of new base rates;
a $61 million increase in retail sales due to favorable weather in the current year, net of the impact of lost revenues due to Hurricane Florence; and
a $35 million increase in weather-normal retail sales volumes.
Partially offset by:
a $119 million decrease in retail sales due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act.
Operating Expenses.The variance was driven primarily by:
a $283 million increase in fuel used in electric generation and purchased power primarily due to higher retail sales and changes in generation mix;
a $266 million increase in depreciation and amortization expense primarily due to higher amortization of deferred coal ash costs and new depreciation rates associated with the North Carolina rate case;
a $139 million increase in operation, maintenance and other expense primarily due to higher storm costs, impacts associated with the North Carolina rate case and severance charges; and
a $14 million increase in impairment charges associated with the North Carolina rate case.
Other Income and Expenses, net. The variance was primarily driven by lower income from non-service components of employment benefit costs. For additional information on employee benefit costs, see Note 22 to the Consolidated Financial Statements, "Employee Benefit Plans."
Interest Expense. The variance was primarily driven by new debt issuances.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act partially offset by the favorable impact of the Tax Act in the prior year. The effective tax rates for the years ended December 31, 2018, and 2017 were 19.3 percent and 29.0 percent, respectively. The decrease in the effective tax rate was primarily due to the lower statutory federal corporate tax rate under the Tax Act and the amortization of state excess deferred taxes partially offset by the impact of the Tax Act in the prior year.
Matters Impacting Future Results
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, were eligible for reassessment as low-risk pursuant to legislation enacted on July 14, 2016. On November 14, 2018, NCDEQ issued final low risk classifications for these impoundments, indicating that Duke Energy Progress had satisfied the permanent replacement water supply and certain dam improvement requirements set out in the Coal Ash Management Act. As the 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' results of operations, financial position and cash flows. See Note 9 to the Consolidated Financial Statements, "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. As noted above, the order issued in the Duke Energy Progress North Carolinas rate case supporting recovery of past coal ash remediation costs has been appealed by various parties. The outcome of these appeals, lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ results of operations, financial position and cash flows. See Notes 4 and 5 to the Consolidated Financial Statements, "Regulatory Matters" and “Commitments and Contingencies,” respectively, for additional information.
Duke Energy Carolinas received an order from the NCUC, which denied the Grid Rider Stipulation and deferral treatment of grid improvement costs. The NCUC did allow Duke Energy Carolinas to petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization. While Duke Energy Progress did not request recovery of these costs in its most recent case with the NCUC, Duke Energy Progress may request recovery of certain grid modernization costs in future regulatory proceedings. If the NCUC were to rule similarly, Duke Energy Progress' results of operations, financial position and cash flows could be adversely impacted if grid modernization costs are not ultimately approved for recovery and/or deferral treatment. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
During the last half of 2018, Duke Energy Progress' service territory was impacted by several named storms. Hurricane Florence, Hurricane Michael and Winter Storm Diego caused flooding, extensive damage and widespread power outages in the service territory. A significant portion of the incremental operation and maintenance expenses related to these storms have been deferred. On December 21, 2018, Duke Energy Progress filed with the NCUC a petition for approval to defer the incremental storm costs incurred to a regulatory asset for recovery in the next base rate case. Duke Energy Progress filed a similar request with the PSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for other storms, and on January 30, 2019, the PSCSC issued a directive approving the deferral request. An order from regulatory authorities disallowing the deferral and future recovery of storm restoration costs could have an adverse impact on Duke Energy Progress' results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters," for additional information.
Appeals of the recently approved rate case for Duke Energy Progress are pending at the North Carolina Supreme Court. The North Carolina Attorney General and various intervenors primarily dispute the allowance of recovery of coal ash costs from customers, which was approved by the NCUC. The outcome of these appeals could have an adverse impact to Duke Energy Progress' results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
DUKE ENERGY FLORIDA
Introduction
Management’s Discussion and Analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes for the years ended December 31, 2018, 2017 and 2016.
Basis of Presentation
The results of operations and variance discussion for Duke Energy Florida is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.
|
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | Variance |
|
Operating Revenues | $ | 5,021 |
| | $ | 4,646 |
| | $ | 375 |
|
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 2,085 |
| | 1,808 |
| | 277 |
|
Operation, maintenance and other | 1,025 |
| | 853 |
| | 172 |
|
Depreciation and amortization | 628 |
| | 560 |
| | 68 |
|
Property and other taxes | 374 |
| | 347 |
| | 27 |
|
Impairment charges | 54 |
| | 138 |
| | (84 | ) |
Total operating expenses | 4,166 |
| | 3,706 |
| | 460 |
|
Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
| | — |
|
Operating Income | 856 |
| | 941 |
| | (85 | ) |
Other Income and Expenses, net | 86 |
| | 96 |
| | (10 | ) |
Interest Expense | 287 |
| | 279 |
| | 8 |
|
Income Before Income Taxes | 655 |
| | 758 |
| | (103 | ) |
Income Tax Expense | 101 |
| | 46 |
| | 55 |
|
Net Income | $ | 554 |
| | $ | 712 |
| | $ | (158 | ) |
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Florida. The below 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 and to public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | | |
Increase (Decrease) over prior year | 2018 |
| | 2017 |
|
Residential sales | 4.3 | % | | (2.3 | )% |
General service sales | 1.9 | % | | (1.3 | )% |
Industrial sales | (0.4 | )% | | (2.4 | )% |
Wholesale power sales | 5.2 | % | | 20.1 | % |
Total sales | 2.4 | % | | 0.5 | % |
Average number of customers | 1.5 | % | | 1.6 | % |
Year Ended December 31, 2018, as compared to 2017
Operating Revenues. The variance was driven primarily by:
a $290 million increase in fuel and capacity revenues primarily due to an increase in fuel and capacity rates billed to retail customers and increased demand;
a $47 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year and impacts of lost revenue resulting from Hurricane Irma in the prior year:
a $24 million increase in retail pricing due to base rate adjustments related to generation assets being placed into service; and
a $12 million increase in weather-normal retail sales volumes.
Operating Expenses. The variance was driven primarily by:
a $277 million increase in fuel used in electric generation and purchased power primarily due to higher amortization of deferred fuel and capacity expenses and increased purchased power and demand;
a $172 million increase in operation, maintenance and other expense primarily due to higher storm cost amortization, vegetation management costs and severance charges, partially offset by lower storm restoration costs in the current year;
a $68 million increase in depreciation and amortization expense primarily due to accelerated depreciation of Crystal River Units 4 and 5 and additional plant in service; and
a $27 million increase in property and other taxes primarily due to higher revenue related taxes.
Partially offset by:
an $84 million decrease in impairment charges primarily due to the write-off of remaining unrecovered Levy Nuclear Project costs in the prior year, offset by the current year impairment of the Citrus County CC.
Other Income and Expenses, net. The variance was driven primarily by lower income from non-service components of employee benefit costs in the current year. For additional information on employee benefit costs, see Note 22 to the Consolidated Financial Statements, "Employee Benefit Plans."
Income Tax Expense.The variance was primarily due to the favorable impact of the Tax Act in the prior year partially offset by the lower statutory federal corporate tax rate under the Tax Act in the current year. The effective tax rates for the years ended December 31, 2018, and 2017 were 15.4 percent and 6.1 percent, respectively. The increase in the effective tax rate was primarily due to the favorable impact of the Tax Act in the prior year partially offset by the lower statutory federal corporate tax rate under the Tax Act and the amortization of federal excess deferred taxes in the current year.
Matters Impacting Future Results
On October 10, 2018, Hurricane Michael made landfall on Florida's Panhandle as a Category 4 hurricane, the most powerful storm to hit the Florida Panhandle in recorded history. The storm caused significant damage within the service territory of Duke Energy Florida, particularly from Panama City Beach to Mexico Beach. Duke Energy Florida has not completed the final accumulation of total estimated storm restoration costs incurred. Given the magnitude of the storm, Duke Energy Florida anticipates filing a petition in the first half of 2019 with the FPSC to recover incremental storm costs consistent with the provisions in its 2017 Settlement. An order from regulatory authorities disallowing the future recovery of storm restoration costs could have an adverse impact on Duke Energy Florida's financial position, results of operations and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
On February 6, 2018, the FPSC approved a stipulation that would apply tax savings resulting from the Tax Act toward storm costs effective January 2018 in lieu of implementing a storm surcharge. On May 31, 2018, Duke Energy Florida filed for recovery of the storm costs. Storm costs are currently expected to be fully recovered by approximately mid-2021. The commission has scheduled the hearing to begin on May 21, 2019. An order disallowing recovery of these costs could have an adverse impact on Duke Energy Florida's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
DUKE ENERGY OHIO
Introduction
Management’s Discussion and Analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes for the years ended December 31, 2018, 2017 and 2016.
Basis of Presentation
The results of operations and variance discussion for Duke Energy Ohio is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.
|
| | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| 2017 |
| Variance |
|
Operating Revenues | | |
|
|
Regulated electric | $ | 1,450 |
| $ | 1,373 |
| $ | 77 |
|
Regulated natural gas | 506 |
| 508 |
| (2 | ) |
Nonregulated electric and other | 1 |
| 42 |
| (41 | ) |
Total operating revenues | 1,957 |
| 1,923 |
| 34 |
|
Operating Expenses | | | |
Fuel used in electric generation and purchased power – regulated | 412 |
| 369 |
| 43 |
|
Fuel used in electric generation and purchased power – nonregulated | — |
| 58 |
| (58 | ) |
Cost of natural gas | 113 |
| 107 |
| 6 |
|
Operation, maintenance and other | 480 |
| 530 |
| (50 | ) |
Depreciation and amortization | 268 |
| 261 |
| 7 |
|
Property and other taxes | 290 |
| 278 |
| 12 |
|
Impairment charges | — |
| 1 |
| (1 | ) |
Total operating expenses | 1,563 |
| 1,604 |
| (41 | ) |
(Losses) Gains on Sales of Other Assets and Other, net | (106 | ) | 1 |
| (107 | ) |
Operating Income | 288 |
| 320 |
| (32 | ) |
Other Income and Expenses, net | 23 |
| 23 |
| — |
|
Interest Expense | 92 |
| 91 |
| 1 |
|
Income from Continuing Operations Before Income Taxes | 219 |
| 252 |
| (33 | ) |
Income Tax Expense from Continuing Operations | 43 |
| 59 |
| (16 | ) |
Income from Continuing Operations | 176 |
| 193 |
| (17 | ) |
(Loss) Income from Discontinued Operations, net of tax | — |
| (1 | ) | 1 |
|
Net Income | $ | 176 |
| $ | 192 |
| $ | (16 | ) |
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 for Duke Energy Ohio. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | | | | | | | | |
| Electric | | Natural Gas |
Increase (Decrease) over prior year | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
|
Residential sales | 12.2 | % | | (4.0 | )% | | 18.0 | % | | (2.6 | )% |
General service sales | 3.3 | % | | (3.1 | )% | | 15.4 | % | | 0.7 | % |
Industrial sales | 1.0 | % | | (2.7 | )% | | 8.1 | % | | (2.8 | )% |
Wholesale electric power sales | (46.6 | )% | | 65.7 | % | | n/a |
| | n/a |
|
Other natural gas sales | n/a |
| | n/a |
| | 0.7 | % | | (0.3 | )% |
Total sales | 2.8 | % | | (2.1 | )% | | 11.9 | % | | (1.1 | )% |
Average number of customers | 0.8 | % | | 0.8 | % | | 0.9 | % | | 0.7 | % |
Year Ended December 31, 2018, as compared to 2017
Operating Revenues. In 2018, the revenues and related expenses for OVEC are reflected in regulated electric due to the PUCO Order that approved Duke Energy Ohio to recover or credit amounts, through Rider PSR, that result from wholesale market transactions relating to Duke Energy Ohio's entitlement to capacity and energy from OVEC's power plants. In 2017, the revenues and related expenses for OVEC are reflected in nonregulated electric. See Note 4 to the Consolidated Financial Statements, "Regulatory Matters" for additional information.
The variance was driven primarily by:
a $44 million increase in electric and natural gas retail sales, net of fuel revenues, due to favorable weather in the current year;
a $17 million increase in rider revenue primarily related to capital investment riders;
a $16 million increase in financial transmission rights revenues;
a $7 million increase in point-to-point transmission revenues; and
a $6 million increase in fuel revenues due to higher natural gas costs.
Partially offset by:
a $48 million decrease in regulated revenues due to revenues subject to refund to customers associated with the lower statutory corporate tax rate under the Tax Act; and
a $7 million decrease in bulk power marketing sales.
Operating Expenses. The variance was driven by:
a $50 million decrease in operations, maintenance and other expense primarily due to the FERC approved settlement refund of certain transmission costs previously billed by PJM; and
a $15 million decrease in fuel used in electric generation and purchased power related to the deferral of OVEC purchased power, which is reflected in regulated electric in 2018 and nonregulated electric in 2017, as noted above in the Operating Revenues section.
Partially offset by:
a $12 million increase in property and other taxes primarily due to higher property taxes and kilowatt tax;
a $7 million increase in depreciation and amortization expense primarily due to additional plant in service and increased amortization of regulatory assets; and
a $6 million increase in cost of natural gas primarily due to an increase in natural gas sales volumes.
(Losses) Gains on Sales of Other Assets and Other, net. The decrease was driven by the loss on the sale of Beckjord, a nonregulated facility retired during 2014, including the transfer of coal ash basins and other real property and indemnification from any and all potential future claims related to the property, whether arising under environmental laws or otherwise.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act and a decrease in pretax income. The effective tax rates for the years ended December 31, 2018, and 2017 were 19.6 percent and 23.4 percent, respectively. The decrease in the effective tax rate was primarily due to the lower statutory federal corporate tax rate under the Tax Act partially offset by the impact of the Tax Act in the prior year.
Matters Impacting Future Results
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
DUKE ENERGY INDIANA
Introduction
Management’s Discussion and Analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes for the years ended December 31, 2018, 2017 and 2016.
Basis of Presentation
The results of operations and variance discussion for Duke Energy Indiana is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.
|
| | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| 2017 |
| Variance |
|
Operating Revenues | $ | 3,059 |
| $ | 3,047 |
| $ | 12 |
|
Operating Expenses | | | |
Fuel used in electric generation and purchased power | 1,000 |
| 966 |
| 34 |
|
Operation, maintenance and other | 788 |
| 743 |
| 45 |
|
Depreciation and amortization | 520 |
| 458 |
| 62 |
|
Property and other taxes | 78 |
| 76 |
| 2 |
|
Impairment charges | 30 |
| 18 |
| 12 |
|
Total operating expenses | 2,416 |
| 2,261 |
| 155 |
|
Operating Income | 643 |
| 786 |
| (143 | ) |
Other Income and Expenses, net | 45 |
| 47 |
| (2 | ) |
Interest Expense | 167 |
| 178 |
| (11 | ) |
Income Before Income Taxes | 521 |
| 655 |
| (134 | ) |
Income Tax Expense | 128 |
| 301 |
| (173 | ) |
Net Income | $ | 393 |
| $ | 354 |
| $ | 39 |
|
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Indiana. The below percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities and to public and private utilities and power marketers. Amounts are not weather-normalized. |
| | | | | |
Increase (Decrease) over prior year | 2018 |
| | 2017 |
|
Residential sales | 12.5 | % | | (3.8 | )% |
General service sales | 2.8 | % | | (2.4 | )% |
Industrial sales | 0.5 | % | | 0.3 | % |
Wholesale power sales | (0.9 | )% | | (10.5 | )% |
Total sales | 3.3 | % | | (3.6 | )% |
Average number of customers | 1.3 | % | | 0.8 | % |
Year Ended December 31, 2018, as compared to 2017
Operating Revenues.The variance was driven primarily by:
a $65 million increase in rate rider revenues primarily related to the Edwardsport IGCC plant and the TDSIC rider;
a $50 million increase in fuel and other revenues primarily due to higher base fuel, non-native fuel and Midwest Independent System Operator rider revenues;
a $13 million increase in retail sales, net of fuel revenues, due to favorable weather in the current year; and
a $13 million increase in weather-normal retail sales volumes.
Partially offset by:
a $105 million decrease due to revenues subject to refund to customers associated with the lower statutory federal corporate tax rate under the Tax Act; and
a $27 million decrease in wholesale power revenues, net of fuel, primarily due to contracts that expired in the prior year.
Operating Expenses.The variance was driven primarily by:
a $62 million increase in depreciation and amortization expense primarily due to additional plant in service and the deferral of certain asset retirement obligations in the prior year;
a $45 million increase in operation, maintenance and other expense primarily due to amortization of previously deferred expenses, and higher transmission, storm and customer related costs;
a $34 million increase in fuel used in electric generation and purchased power primarily due to higher natural gas costs; and
a $12 million increase in impairment charges primarily due to the reduction of a regulatory asset pertaining to the Edwardsport IGCC settlement agreement in the current year, partially offset by the impairment of certain metering equipment in the prior year.
Interest Expense. The variance was primarily due to lower post in-service carrying costs due to three coal ash projects placed in service in December 2017, partially offset by higher intercompany money pool interest expense, higher AFUDC debt balances and higher floating rate debt interest expense.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The effective tax rates for the years ended December 31, 2018, and 2017 were 24.6 percent and 46.0 percent, respectively. The decrease in the effective tax rate was primarily due to the lower statutory federal corporate tax rate under the Tax Act and by the impact of the Tax Act in the prior year.
Matters Impacting Future Results
On April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. Duke Energy Indiana has interpreted the 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. Duke Energy Indiana's interpretation of the requirements of the CCR rule is subject to potential 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 costs related to closure of ash basins could have an adverse impact on Duke Energy Indiana's results of operations, financial position and cash flows. See Note 4 to the Consolidated Financial Statements, “Regulatory Matters,” for additional information.
Within this Item 7, see the Tax Act section above as well as Liquidity and Capital Resources below for discussion of risks associated with the Tax Act.
PIEDMONT
Introduction
Management’s Discussion and Analysis should be read in conjunction with the accompanying Consolidated Financial Statements and Notes for the years ended December 31, 2018, and 2017, Piedmont's Annual Report on Form 10-K for the year ended October 31, 2016, and the Form 10-QT as of December 31, 2016, for the transition period from November 1, 2016, to December 31, 2016. The unaudited results of operations for the year ended December 31, 2016, were derived from data previously reported in the reports noted above.
Basis of Presentation
The results of operations and variance discussion for Piedmont is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.
|
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | Variance |
|
Operating Revenues | | | | | |
Regulated natural gas | $ | 1,365 |
| | $ | 1,319 |
| | $ | 46 |
|
Nonregulated natural gas and other | 10 |
| | 9 |
| | 1 |
|
Total operating revenues | 1,375 |
| | 1,328 |
| | 47 |
|
Operating Expenses | | | | | |
Cost of natural gas | 584 |
| | 524 |
| | 60 |
|
Operation, maintenance and other | 357 |
| | 304 |
| | 53 |
|
Depreciation and amortization | 159 |
| | 148 |
| | 11 |
|
Property and other taxes | 49 |
| | 48 |
| | 1 |
|
Impairment charges | — |
| | 7 |
| | (7 | ) |
Total operating expenses | 1,149 |
| | 1,031 |
| | 118 |
|
Operating Income | 226 |
| | 297 |
| | (71 | ) |
Equity in earnings (losses) of unconsolidated affiliates | 7 |
| | (6 | ) | | 13 |
|
Other income and expenses, net | 14 |
| | (11 | ) | | 25 |
|
Total other income and expenses | 21 |
| | (17 | ) | | 38 |
|
Interest Expense | 81 |
| | 79 |
| | 2 |
|
Income Before Income Taxes | 166 |
| | 201 |
| | (35 | ) |
Income Tax Expense | 37 |
| | 62 |
| | (25 | ) |
Net Income | $ | 129 |
| | $ | 139 |
| | $ | (10 | ) |
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 | 2018 |
| 2017 |
|
Residential deliveries | 23.6 | % | (8.1 | )% |
Commercial deliveries | 14.9 | % | (4.3 | )% |
Industrial deliveries | 4.2 | % | (2.2 | )% |
Power generation deliveries | 23.6 | % | (5.8 | )% |
For resale | 17.0 | % | (20.9 | )% |
Total throughput deliveries | 19.0 | % | (5.4 | )% |
Secondary market volumes | (8.1 | )% | (4.2 | )% |
Average number of customers | 1.6 | % | 1.7 | % |
Piedmont's throughput was 557,145,128 dekatherms and 468,259,777 dekatherms for the years ended December 31, 2018, and 2017, respectively. Due to the margin decoupling mechanism in North Carolina and 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 WNA 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.
Year Ended December 31, 2018, as compared to 2017
Operating Revenues.The variance was driven primarily by:
a $60 million increase primarily due to higher natural gas costs passed through to customers due to higher volumes sold and higher natural gas prices; and
a $37 million increase primarily due to residential and commercial customer revenue, net of natural gas costs passed through to customers, due to customer growth and IMR rate adjustments and new power generation customers.
Partially offset by:
a $51 million decrease primarily due to revenues subject to refund to customers associated with the lower statutory corporate tax rate under the Tax Act.
Operating Expenses.The variance was driven by:
a $60 million increase in cost of natural gas primarily due to higher volumes sold and higher natural gas costs passed through to customers due to the higher price per dekatherm of natural gas;
a $53 million increase in operations, maintenance and other expense primarily due to increased shared services, cost to achieve merger expenses and pension settlement charge; and
an $11 million increase in depreciation and amortization expense due to additional plant in service.
Partially offset by:
a $7 million decrease in impairment charges due to an impairment of software recorded in the prior year.
Other Income and Expenses. The variance was driven by:
a $25 million increase in other income and expenses, net primarily due to higher income from non-service components of employee benefit costs in the current year. For additional information on employee benefit costs, see Note 22 to the Consolidated Financial Statements, "Employee Benefit Plans"; and
a $13 million increase in equity earnings of unconsolidated affiliates from pipeline investments primarily due to favorable earnings partially offset by unfavorable impacts of the Tax Act in the prior year.
Income Tax Expense. The variance was primarily due to the lower statutory federal corporate tax rate under the Tax Act. The effective tax rates for the years ended December 31, 2018, and 2017 were 22.3 percent and 30.8 percent, respectively. The decrease in the effective tax rate was primarily due to the lower statutory federal corporate tax rate under the Tax Act.
Matters Impacting Future Results
Within this Item 7, seeThe matters discussed herein could materially impact the future operating results, financial condition and cash flows of the Duke Energy Registrants and Business Segments.
Regulatory Matters
Coal Ash Costs
Duke Energy Carolinas and Duke Energy Progress have approximately $1.2 billion and $1.4 billion, respectively, in regulatory assets related to coal ash retirement obligations as of December 31, 2021. Future spending, including amounts recorded for depreciation and liability accretion, is expected to continue to be deferred. The majority of spend is expected to occur over the next 15-20 years.
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 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. Duke Energy Indiana has approximately $749 million in regulatory assets related to coal ash asset retirement obligations as of December 31, 2021. In January 2022, Duke Energy Indiana received a letter from the EPA regarding interpretation of the CCR rule. See Note 4 to the Consolidated Financial Statements, "Commitments and Contingencies" for more information.
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 sectionas 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. Duke Energy Ohio has approximately $104 million in regulatory assets related to MGP as of December 31, 2021. 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 Note 3 to the Consolidated Financial Statements, “Regulatory Matters."
Commercial Renewables
Duke Energy continues to monitor recoverability of 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. Based on the most 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. Duke Energy has approximately $200 million in property, plant and equipment related to these assets as of December 31, 2021. Impairment of these assets could result in adverse impacts. For additional information, see Note 10 to the Consolidated Financial Statements, "Property, Plant and Equipment."
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 negatively impacted the operating results of these generating units. In addition, Duke Energy has been named in multiple lawsuits arising out of this winter storm. For more information, see Notes 2 and 4 to the Consolidated Financial Statements, "Business Segments" and "Commitments and Contingencies," respectively.
Duke Energy is also monitoring supply chain disruptions, including the cost and availability of key components of planned generating facilities, which could impact the timing of in-service or economics of commercial renewables projects and may result in adverse impacts on operating results.
Results of Operations
Non-GAAP Measures
Management evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted EPS. These items represent income from continuing operations available to Duke Energy common stockholders in dollar and per share amounts, adjusted for the dollar and per share impact of special items. As discussed below, special items include 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 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 Board of Directors, employees, stockholders, analysts and investors. Adjusted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted EPS are GAAP Reported Earnings and EPS Available to Duke Energy Corporation common stockholders (GAAP Reported EPS), respectively.
Special items included in the periods presented 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 South Carolina Supreme Court decision on coal ash, insurance proceeds, the Duke Energy Carolinas and Duke Energy Progress coal ash settlement and the partial settlements in the 2019 North Carolina rate cases.
•Gas Pipeline Investments represents costs related to the cancellation of the ACP investment and additional exit obligations.
•Severance represents the reversal of 2018 Severance charges, which were deferred as a result of a partial settlement in the Duke Energy Carolinas and Duke Energy Progress 2019 North Carolina rate cases.
Duke Energy’s adjusted earnings and adjusted EPS may not be comparable to similarly titled measures of another company because other companies may not calculate the measures in the same manner.
Reconciliation of GAAP Reported Amounts to Adjusted Amounts
The following table presents a reconciliation of adjusted earnings and adjusted EPS to the most directly comparable GAAP measures.
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | |
(in millions, except per share amounts) | Earnings | | EPS | | Earnings | | EPS | | | | |
GAAP Reported Earnings/EPS | $ | 3,802 | | | $ | 4.94 | | | $ | 1,270 | | | $ | 1.72 | | | | | |
Adjustments to Reported: | | | | | | | | | | | |
Workplace and Workforce Realignment(a) | 148 | | | 0.20 | | | — | | | — | | | | | |
Regulatory Settlements(b) | 69 | | | 0.09 | | | 872 | | | 1.19 | | | | | |
Gas Pipeline Investments(c) | 15 | | | 0.02 | | | 1,711 | | | 2.32 | | | | | |
Severance(d) | — | | | — | | | (75) | | | (0.10) | | | | | |
Discontinued Operations | (7) | | | (0.01) | | | (7) | | | (0.01) | | | | | |
Adjusted Earnings/Adjusted EPS | $ | 4,027 | | | $ | 5.24 | | | $ | 3,771 | | | $ | 5.12 | | | | | |
(a) Net of tax benefit of $44 million.
(b) Net of tax benefit of $21 million and tax benefit of $263 million for the years ended December 31, 2021, and 2020, respectively.
(c) Net of tax benefit of $5 million and tax benefit of $399 million for the years ended December 31, 2021, and 2020, respectively.
(d) Net of tax expense of $23 million.
Year Ended December 31, 2021, as compared to 2020
GAAP Reported EPS was $4.94 for the year ended December 31, 2021, compared to $1.72 for the year ended December 31, 2020. The increase in GAAP Reported Earnings/EPS was primarily due to prior year charges related to the cancellation of the ACP pipeline and the CCR Settlement Agreement filed with the NCUC, partially offset by workplace and workforce realignment costs in the current year.
As discussed and shown in the table above, management also evaluates financial performance based on adjusted EPS. Duke Energy’s adjusted EPS was $5.24 for the year ended December 31, 2021, compared to $5.12 for the year ended December 31, 2020. The increase in Adjusted Earnings/Adjusted EPS was primarily due to positive rate case contributions and higher volumes, partially offset by higher operation and maintenance expenses, lower Commercial Renewables earnings and share dilution from equity issuances.
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 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 Consolidated Financial Statements, “Business Segments,” for additional information on Duke Energy’s segment structure.
Electric Utilities and Infrastructure
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | | | | | |
| | | | | | | | | |
(in millions) | 2021 | | 2020 | | Variance | | | | |
Operating Revenues | $ | 22,603 | | | $ | 21,720 | | | $ | 883 | | | | | |
Operating Expenses | | | | | | | | | |
Fuel used in electric generation and purchased power | 6,332 | | | 6,128 | | | 204 | | | | | |
Operations, maintenance and other | 5,340 | | | 5,391 | | | (51) | | | | | |
Depreciation and amortization | 4,251 | | | 4,068 | | | 183 | | | | | |
Property and other taxes | 1,233 | | | 1,188 | | | 45 | | | | | |
Impairment of assets and other charges | 204 | | | 971 | | | (767) | | | | | |
Total operating expenses | 17,360 | | | 17,746 | | | (386) | | | | | |
Gains on Sales of Other Assets and Other, net | 13 | | | 11 | | | 2 | | | | | |
Operating Income | 5,256 | | | 3,985 | | | 1,271 | | | | | |
Other Income and Expenses, net | 534 | | | 344 | | | 190 | | | | | |
Interest Expense | 1,432 | | | 1,320 | | | 112 | | | | | |
Income Before Income Taxes | 4,358 | | | 3,009 | | | 1,349 | | | | | |
Income Tax Expense | 494 | | | 340 | | | 154 | | | | | |
Less: Income Attributable to Noncontrolling Interest | 14 | | | — | | | 14 | | | | | |
Segment Income | $ | 3,850 | | | $ | 2,669 | | | $ | 1,181 | | | | | |
| | | | | | | | | |
Duke Energy Carolinas GWh sales | 87,796 | | | 84,574 | | | 3,222 | | | | | |
Duke Energy Progress GWh sales | 66,797 | | | 65,240 | | | 1,557 | | | | | |
Duke Energy Florida GWh sales | 42,422 | | | 42,490 | | | (68) | | | | | |
Duke Energy Ohio GWh sales | 24,129 | | | 23,484 | | | 645 | | | | | |
Duke Energy Indiana GWh sales | 31,388 | | | 30,528 | | | 860 | | | | | |
Total Electric Utilities and Infrastructure GWh sales | 252,532 | | | 246,316 | | | 6,216 | | | | | |
Net proportional MW capacity in operation | 49,871 | | | 50,419 | | | (548) | | | | | |
Year Ended December 31, 2021, as compared to 2020
Electric Utilities and Infrastructure’s variance is due to higher revenues from rate cases in various jurisdictions, higher retail sales volumes and the prior year coal ash settlement agreement filed with the NCUC, partially offset by an impairment charge related to the South Carolina Supreme Court decision on coal ash, 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 $420 million increase in retail base rate pricing due to general rate cases in Indiana and North Carolina net of rider impacts as well as Liquidityannual increases from the multiyear settlement rate adjustments in Florida;
•a $192 million increase in weather-normal retail sales volumes;
•a $172 million increase in fuel revenues primarily driven by higher sales volumes; and Capital Resources below for
•a $145 million increase in wholesale revenues primarily due to a prior year coal ash settlement agreement filed with the NCUC.
Partially offset by:
��a $140 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 $767 million decrease in impairment of assets and other charges primarily due to the prior year CCR Settlement Agreement filed with the NCUC in January 2021, partially offset by the South Carolina Supreme Court decision on coal ash at Duke Energy Carolinas and Duke Energy Progress in the current year; and
•a $51 million decrease in operations, maintenance and other driven by decreased storm amortization at Duke Energy Florida and lower COVID-19 costs, partially offset by higher employee-related expenses.
Partially offset by:
•a $204 million increase in fuel used in electric generation and purchased power primarily due to higher sales volumes;
•a $183 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 at Duke Energy Carolinas and Duke Energy Progress; and
•a $45 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.
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 driven by interest expense on excess deferred tax liabilities removed from rate base as a result of the North Carolina rate cases, debt returns on a lower coal ash regulatory asset balance resulting from the CCR Settlement Agreement as well lower debt returns resulting from the Indiana rate case.
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.
Gas Utilities and Infrastructure
| | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | | | | | |
| | | | | | | | | |
(in millions) | 2021 | | 2020 | | Variance | | | | |
Operating Revenues | $ | 2,112 | | | $ | 1,748 | | | $ | 364 | | | | | |
Operating Expenses | | | | | | | | | |
Cost of natural gas | 705 | | | 460 | | | 245 | | | | | |
Operation, maintenance and other | 442 | | | 430 | | | 12 | | | | | |
Depreciation and amortization | 303 | | | 258 | | | 45 | | | | | |
Property and other taxes | 120 | | | 112 | | | 8 | | | | | |
Impairment of assets and other charges | 19 | | | 7 | | | 12 | | | | | |
Total operating expenses | 1,589 | | | 1,267 | | | 322 | | | | | |
| | | | | | | | | |
Operating Income | 523 | | | 481 | | | 42 | | | | | |
Other Income and Expenses | | | | | | | | | |
Equity in earnings (losses) of unconsolidated affiliates | 8 | | | (2,017) | | | 2,025 | | | | | |
Other Income and Expenses, net | 62 | | | 56 | | | 6 | | | | | |
Total other income and expenses | 70 | | | (1,961) | | | 2,031 | | | | | |
Interest Expense | 142 | | | 135 | | | 7 | | | | | |
Income (Loss) Before Income Taxes | 451 | | | (1,615) | | | 2,066 | | | | | |
Income Tax Expense (Benefit) | 55 | | | (349) | | | 404 | | | | | |
| | | | | | | | | |
Segment Income (Loss) | $ | 396 | | | $ | (1,266) | | | $ | 1,662 | | | | | |
| | | | | | | | | |
Piedmont Local Distribution Company (LDC) throughput (Dth) | 542,759,891 | | | 490,071,039 | | | 52,688,852 | | | | | |
Duke Energy Midwest LDC throughput (MCF) | 85,787,624 | | | 84,160,162 | | | 1,627,462 | | | | | |
Year Ended December 31, 2021, as compared to 2020
Gas Utilities and Infrastructure’s results were impacted primarily by the cancellation of the ACP pipeline in the prior year and margin growth, partially offset by higher depreciation expense. The following is a detailed discussion of risksthe variance drivers by line item.
Operating Revenues.The variance was driven primarily by:
•a $245 million increase due to higher natural gas costs passed through to customers, higher volumes and increased off-system sales natural gas costs;
•a $52 million increase due to base rate increases;
•a $22 million increase due to rider revenues related to the Ohio Capital Expenditure Program (CEP);
| | | | | |
MD&A | SEGMENT RESULTS - GAS UTILITIES AND INFRASTRUCTURE |
•a $12 million increase due to customer growth; and
•an $11 million increase due to North Carolina IMR.
Operating Expenses.The variance was driven primarily by:
•a $245 million increase in cost of natural gas due to higher natural gas prices, higher volumes and increased off-system sales natural gas costs;
•a $45 million increase in depreciation due to additional plant in service and depreciation adjustments; and
•a $12 million increase in impairment of assets and other charges related to the propane caverns in Ohio and Kentucky, partially offset by an impairment of ACP redelivery projects in the prior year.
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.
Commercial Renewables
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | | | | | |
| | | | | | | | | |
(in millions) | 2021 | | 2020 | | Variance | | | | |
Operating Revenues | $ | 476 | | | $ | 502 | | | $ | (26) | | | | | |
Operating Expenses | | | | | | | | | |
Operation, maintenance and other | 342 | | | 285 | | | 57 | | | | | |
Depreciation and amortization | 225 | | | 199 | | | 26 | | | | | |
Property and other taxes | 34 | | | 27 | | | 7 | | | | | |
Impairment of assets and other charges | — | | | 6 | | | (6) | | | | | |
Total operating expenses | 601 | | | 517 | | | 84 | | | | | |
Losses on Sales of Other Assets and Other, net | — | | | (1) | | | 1 | | | | | |
Operating Loss | (125) | | | (16) | | | (109) | | | | | |
Other Income and Expenses, net | (24) | | | 7 | | | (31) | | | | | |
Interest Expense | 72 | | | 66 | | | 6 | | | | | |
Loss Before Income Taxes | (221) | | | (75) | | | (146) | | | | | |
Income Tax Benefit | (78) | | | (65) | | | (13) | | | | | |
Add: Loss Attributable to Noncontrolling Interests | 344 | | | 296 | | | 48 | | | | | |
Segment Income | $ | 201 | | | $ | 286 | | | $ | (85) | | | | | |
| | | | | | | | | |
Renewable plant production, GWh | 10,701 | | | 10,204 | | | 497 | | | | | |
Net proportional MW capacity in operation(a) | 4,729 | | | 3,937 | | | 792 | | | | | |
(a) Certain projects are included in tax-equity structures where investors have differing interests in the project's economic attributes. Amounts shown represent 100% of the tax-equity project's capacity.
Year Ended December 31, 2021, as compared to 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 lower earnings from unfavorable wind resource and fewer projects financed with tax equity being placed in service in the current year.
Operating Revenues. The variance was primarily driven by a $19 million decrease due to lower wind resource and operating downtime, a $15 million decrease for lower market prices in the current year impacting the wind portfolio, and a $4 million decrease due to fewer distributed energy projects placed into service. This was partially offset by an $8 million increase for market sales in excess of market purchases during Texas Storm Uri and a $6 million increase due to growth of new projects.
Operating Expenses. The variance was primarily due to $49 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, $31 million increase for higher operating expenses attributed to maintenance at several wind and solar facilities, an $8 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.
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 PTCs generated.
Loss Attributable to Noncontrolling Interests. The variance was primarily driven by the net increase of losses allocated to tax equity members of $60 million from existing and new projects financed with tax equity, partially offset by a $12 million loss resulting from Texas Storm Uri.
| | | | | |
MD&A | SEGMENT RESULTS - OTHER |
Other
| | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | | | | | |
| | | | | | | | | |
(in millions) | 2021 | | 2020 | | Variance | | | | |
Operating Revenues | $ | 111 | | | $ | 97 | | | $ | 14 | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Operating Expenses | 412 | | | 12 | | | 400 | | | | | |
Losses on Sales of Other Assets and Other, net | (1) | | | — | | | (1) | | | | | |
Operating (Loss) Income | (302) | | | 85 | | | (387) | | | | | |
Other Income and Expenses, net | 121 | | | 92 | | | 29 | | | | | |
Interest Expense | 643 | | | 657 | | | (14) | | | | | |
Loss Before Income Taxes | (824) | | | (480) | | | (344) | | | | | |
Income Tax Benefit | (279) | | | (162) | | | (117) | | | | | |
Less: Net Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | | | | | |
Less: Preferred Dividends | 106 | | | 107 | | (1) | | | | | |
Net Loss | $ | (652) | | | $ | (426) | | | $ | (226) | | | | | |
Year Ended December 31, 2021, as compared to 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 in operations, maintenance and other of $248 million was primarily due to a reversal of severance costs in the prior year and higher obligations to the Duke Energy Foundation in the current year. The increase in impairment of assets and other charges of $132 million was due to asset impairments taken in order 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 equity earnings from the NMC investment.
Income Tax Benefit. The increase in the tax benefit was primarily driven by an increase in pretax losses and a reduction of a valuation allowance relating to a capital loss carryforward, partially offset by lower state tax expense in the prior year.
| | | | | |
MD&A | DUKE ENERGY CAROLINAS |
SUBSIDIARY REGISTRANTS
Basis of Presentation
The results of operations and variance discussion for the Subsidiary Registrants is presented in a reduced disclosure format in accordance with General Instruction (I)(2)(a) of Form 10-K.
DUKE ENERGY CAROLINAS
Results of Operations
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | Variance |
Operating Revenues | $ | 7,102 | | | $ | 7,015 | | | $ | 87 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,601 | | | 1,682 | | | (81) | |
Operation, maintenance and other | 1,833 | | | 1,743 | | | 90 | |
Depreciation and amortization | 1,468 | | | 1,462 | | | 6 | |
Property and other taxes | 320 | | | 299 | | | 21 | |
Impairment of assets and other charges | 227 | | | 476 | | | (249) | |
Total operating expenses | 5,449 | | | 5,662 | | | (213) | |
Gains on Sales of Other Assets and Other, net | 2 | | | 1 | | | 1 | |
Operating Income | 1,655 | | | 1,354 | | | 301 | |
Other Income and Expenses, net | 270 | | | 177 | | | 93 | |
Interest Expense | 538 | | | 487 | | | 51 | |
Income Before Income Taxes | 1,387 | | | 1,044 | | | 343 | |
Income Tax Expense | 51 | | | 88 | | | (37) | |
Net Income | $ | 1,336 | | | $ | 956 | | | $ | 380 | |
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Carolinas. The below 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 | 4.6 | % | | |
General service sales | 2.7 | % | | |
Industrial sales | 5.2 | % | | |
Wholesale power sales | 4.5 | % | | |
Joint dispatch sales | 2.8 | % | | |
Total sales | 3.8 | % | | |
Average number of customers | 2.3 | % | | |
Year Ended December 31, 2021, as compared to 2020
Operating Revenues.The variance was driven primarily by:
•a $98 million increase in weather-normal retail sales volumes;
•a $53 million increase in wholesale revenue primarily driven by the CCR Settlement Agreement filed with the NCUC in January 2021;
•a $51 million increase due to higher pricing from the North Carolina retail rate case, net of a return of EDIT to customer; and
•a $13 million increase in retail sales due to more favorable weather.
Partially offset by:
•an $87 million decrease in fuel revenues due to lower prices, partially offset by higher retail sales volumes; and
•a $26 million decrease in rider revenues primarily due to energy efficiency programs.
Operating Expenses. The variance was driven primarily by:
•a $249 million decrease in impairment of assets and other charges due to the prior year CCR Settlement Agreement filed with the NCUC in January 2021, partially offset by the South Carolina Supreme Court decision on coal ash 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
•an $81 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.
| | | | | |
MD&A | DUKE ENERGY CAROLINAS |
Partially offset by:
•a $90 million increase in operation, maintenance and other expense primarily due to higher employee-related expenses; and
•a $21 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 sales and use tax refunds in the current year and lower payroll tax due to the CARES Act employee retention credits.
Other Income and Expense, net. The variance was primarily due to coal ash insurance litigation proceeds and lower non-service pension costs.
Interest Expense. The variance was driven by interest expense on excess deferred tax liabilities removed from rate base as a result of the North Carolina rate case and debt returns on a lower coal ash regulatory asset balance resulting from the CCR Settlement Agreement.
Income Tax Act.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.
PROGRESS ENERGY
Results of Operations
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | Variance |
Operating Revenues | $ | 11,057 | | | $ | 10,627 | | | $ | 430 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 3,584 | | | 3,479 | | | 105 | |
Operation, maintenance and other | 2,529 | | | 2,479 | | | 50 | |
Depreciation and amortization | 1,929 | | | 1,818 | | | 111 | |
Property and other taxes | 542 | | | 545 | | | (3) | |
Impairment of assets and other charges | 82 | | | 495 | | | (413) | |
Total operating expenses | 8,666 | | | 8,816 | | | (150) | |
Gains on Sales of Other Assets and Other, net | 14 | | | 9 | | | 5 | |
Operating Income | 2,405 | | | 1,820 | | | 585 | |
Other Income and Expenses, net | 215 | | | 129 | | | 86 | |
Interest Expense | 794 | | | 790 | | | 4 | |
Income Before Income Taxes | 1,826 | | | 1,159 | | | 667 | |
Income Tax Expense | 227 | | | 113 | | | 114 | |
| | | | | |
| | | | | |
Net Income | 1,599 | | | 1,046 | | | 553 | |
Less: Net Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | |
Net Income Attributable to Parent | $ | 1,598 | | | $ | 1,045 | | | $ | 553 | |
Year Ended December 31, 2021, as compared to 2020
Operating Revenues. The variance was driven primarily by:
•a $223 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 solar base rate adjustment;
•a $176 million increase in fuel cost recovery driven by higher volumes in the current year and accelerated recovery of retired Crystal River coal units;
•a $70 million increase in weather-normal retail sales volumes;
•a $58 million increase in wholesale revenues, net of fuel, primarily driven by a prior year coal ash settlement and higher capacity volumes at Duke Energy Progress, partially offset by a restructured capacity contract at Duke Energy Florida;
•a $25 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 $20 million increase in rider revenues at Duke Energy Florida primarily due to increased retail sales volumes.
Partially offset by:
•a $140 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 $413 million decrease in impairment of assets and other charges primarily due to the prior year CCR Settlement Agreement filed with the NCUC in January 2021, partially offset by the current year South Carolina Supreme Court decision on coal ash 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.
Partially offset by:
•a $111 million increase in depreciation and amortization primarily due to 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;
•a $105 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; and
•a $50 million increase in operation, maintenance and other expense driven by higher employee-related costs, a prior year severance cost adjustment related to the 2019 North Carolina retail rate case and outage costs, partially offset by reduced storm amortization at Duke Energy Florida.
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 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.
DUKE ENERGY PROGRESS
Results of Operations
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | Variance |
Operating Revenues | $ | 5,780 | | | $ | 5,422 | | | $ | 358 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,778 | | | 1,743 | | | 35 | |
Operation, maintenance and other | 1,467 | | | 1,332 | | | 135 | |
Depreciation and amortization | 1,097 | | | 1,116 | | | (19) | |
Property and other taxes | 159 | | | 167 | | | (8) | |
Impairment of assets and other charges | 63 | | | 499 | | | (436) | |
Total operating expenses | 4,564 | | | 4,857 | | | (293) | |
Gains on Sales of Other Assets and Other, net | 13 | | | 8 | | | 5 | |
Operating Income | 1,229 | | | 573 | | | 656 | |
Other Income and Expenses, net | 143 | | | 75 | | | 68 | |
Interest Expense | 306 | | | 269 | | | 37 | |
Income Before Income Taxes | 1,066 | | | 379 | | | 687 | |
Income Tax Expense (Benefit) | 75 | | | (36) | | | 111 | |
Net Income | $ | 991 | | | $ | 415 | | | $ | 576 | |
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Progress. The below 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 | 6.0 | % | | |
General service sales | (0.4) | % | | |
Industrial sales | (7.7) | % | | |
Wholesale power sales | 4.0 | % | | |
Joint dispatch sales | (2.2) | % | | |
Total sales | 2.4 | % | | |
Average number of customers | 1.5 | % | | |
Year Ended December 31, 2021, as compared to 2020
Operating Revenues. The variance was driven primarily by:
•a $140 million increase due to higher pricing from the North Carolina retail rate case, net of a return of EDIT to customers;
•an $80 million increase in wholesale revenues, net of fuel, primarily due to a coal ash settlement in the prior year, and higher capacity volumes, partially offset by lower recovery of coal ash costs;
•a $58 million increase in weather-normal retail sales volumes in the current year;
•a $44 million increase in retail sales due to more favorable weather; and
•a $14 million increase in fuel cost recovery driven by higher fuel prices and volumes in the current year.
Operating Expenses. The variance was driven primarily by:
• a $436 million decrease in impairment of assets and other charges primarily due to the prior year CCR Settlement Agreement filed with the NCUC in January 2021; and
•a $19 million decrease in depreciation and amortization expense, primarily driven by the extension of the lives of nuclear facilities.
Partially offset by:
•a $135 million increase in operation, maintenance and other expense primarily due to higher employee-related costs and a prior year severance cost adjustment related to the 2019 North Carolina retail rate case, increased outage costs and energy efficiency program costs; and
•a $35 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.
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 by interest expense on excess deferred tax liabilities removed from rate base as a result of the North Carolina rate case and debt returns on a lower coal ash regulatory asset balance resulting from the CCR Settlement Agreement.
Income Tax Expense.The increase in tax expense was primarily due to an increase in in pretax income, partially offset by the amortization of excess deferred taxes.
DUKE ENERGY FLORIDA
Results of Operations
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | Variance |
Operating Revenues | $ | 5,259 | | | $ | 5,188 | | | $ | 71 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,806 | | | 1,737 | | | 69 | |
Operation, maintenance and other | 1,048 | | | 1,131 | | | (83) | |
Depreciation and amortization | 831 | | | 702 | | | 129 | |
Property and other taxes | 383 | | | 381 | | | 2 | |
Impairment of assets and other charges | 19 | | | (4) | | | 23 | |
Total operating expenses | 4,087 | | | 3,947 | | | 140 | |
Gains on Sales of Other Assets and Other, net | 1 | | | 1 | | | — | |
Operating Income | 1,173 | | | 1,242 | | | (69) | |
Other Income and Expenses, net | 71 | | | 53 | | | 18 | |
Interest Expense | 319 | | | 326 | | | (7) | |
Income Before Income Taxes | 925 | | | 969 | | | (44) | |
Income Tax Expense | 187 | | | 198 | | | (11) | |
Net Income | $ | 738 | | | $ | 771 | | | $ | (33) | |
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Florida. The below 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 year | 2021 | | |
Residential sales | (1.2) | % | | |
General service sales | 2.3 | % | | |
Industrial sales | 4.6 | % | | |
Wholesale power sales | 22.6 | % | | |
Total sales | (0.2) | % | | |
Average number of customers | 1.5 | % | | |
Year Ended December 31, 2021, as compared to 2020
Operating Revenues. The variance was driven primarily by:
•a $162 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;
•an $83 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 $25 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 $20 million increase in rider revenues primarily due to increased volumes; and
•a $12 million increase in weather-normal retail sales volumes.
Partially offset by:
•a $140 million decrease in storm revenues due to full recovery of Hurricane Dorian costs in the prior year;
•a $63 million decrease in retail sales, net of fuel revenues, due to unfavorable weather in the current year; and
•a $22 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 $129 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 $69 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:
•an $83 million decrease in operation, maintenance and other expense primarily due to decreased storm amortization costs, partially offset by outage maintenance costs at Hines and the timing of Customer Connect costs including training and labor.
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 a decrease in pretax income.
DUKE ENERGY OHIO
Results of Operations
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | 2020 | Variance |
Operating Revenues | | | |
Regulated electric | $ | 1,493 | | $ | 1,405 | | $ | 88 | |
Regulated natural gas | 544 | | 453 | | 91 | |
| | | |
Total operating revenues | 2,037 | | 1,858 | | 179 | |
Operating Expenses | | | |
Fuel used in electric generation and purchased power | 409 | | 339 | | 70 | |
| | | |
Cost of natural gas | 136 | | 73 | | 63 | |
Operation, maintenance and other | 479 | | 463 | | 16 | |
Depreciation and amortization | 307 | | 278 | | 29 | |
Property and other taxes | 355 | | 324 | | 31 | |
Impairment of assets and other charges | 25 | | — | | 25 | |
Total operating expenses | 1,711 | | 1,477 | | 234 | |
Gains on Sales of Other Assets and Other, net | 1 | | — | | 1 | |
Operating Income | 327 | | 381 | | (54) | |
Other Income and Expenses, net | 18 | | 16 | | 2 | |
Interest Expense | 111 | | 102 | | 9 | |
Income Before Income Taxes | 234 | | 295 | | (61) | |
Income Tax Expense | 30 | | 43 | | (13) | |
| | | |
| | | |
Net Income | $ | 204 | | $ | 252 | | $ | (48) | |
The following table shows the percent changes in GWh sales of electricity, MCF of natural gas delivered and average number of electric and natural gas customers for Duke Energy Ohio. The below 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 | 2.7 | % | | | | — | % | | |
General service sales | 3.0 | % | | | | 4.8 | % | | |
Industrial sales | 4.0 | % | | | | 3.2 | % | | |
Wholesale electric power sales | 45.8 | % | | | | n/a | | |
Other natural gas sales | n/a | | | | 1.6 | % | | |
Total sales | 2.7 | % | | | | 1.9 | % | | |
Average number of customers | 0.6 | % | | | | 0.8 | % | | |
Year Ended December 31, 2021, as compared to 2020
Operating Revenues. The variance was driven primarily by:
•an $88 million increase in fuel-related revenues primarily due to higher natural gas prices and increased volumes;
•a $35 million increase in revenues related to OVEC collections and OVEC sales into PJM;
•a $22 million increase due to revenues related the Ohio CEP;
•an $18 million increase in PJM transmission revenues as a result of increased capital spend;
•a $12 million increase in retail pricing primarily due to the Duke Energy Kentucky electric general rate case; and
•a $5 million increase in revenues due to favorable weather.
Operating Expenses. The variance was driven primarily by:
•a $133 million increase in fuel expense primarily driven by higher retail prices and increased volumes for natural gas and purchased power;
•a $31 million increase in property and other taxes primarily due to increased plant in service, and higher kilowatt and natural gas distribution taxes due to increased usage;
•a $28 million increase in depreciation and amortization primarily driven by an increase in distribution plant in service and decreased Ohio CEP deferrals; and
•a $25 million increase in impairment of assets and other charges related to the propane caverns in Ohio and Kentucky 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.
Income Tax Expense. The decrease in tax expense was primarily due to a decrease in pretax income.
DUKE ENERGY INDIANA
Results of Operations | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | 2020 | Variance |
Operating Revenues | $ | 3,174 | | $ | 2,795 | | $ | 379 | |
Operating Expenses | | | |
Fuel used in electric generation and purchased power | 985 | | 767 | | 218 | |
Operation, maintenance and other | 750 | | 762 | | (12) | |
Depreciation and amortization | 615 | | 569 | | 46 | |
Property and other taxes | 73 | | 81 | | (8) | |
Impairment of assets and other charges | 9 | | — | | 9 | |
Total operating expenses | 2,432 | | 2,179 | | 253 | |
| | | |
Operating Income | 742 | | 616 | | 126 | |
Other Income and Expenses, net | 42 | | 37 | | 5 | |
Interest Expense | 196 | | 161 | | 35 | |
Income Before Income Taxes | 588 | | 492 | | 96 | |
Income Tax Expense | 107 | | 84 | | 23 | |
Net Income | $ | 481 | | $ | 408 | | $ | 73 | |
The following table shows the percent changes in GWh sales and average number of customers for Duke Energy Indiana. The below 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 | 4.3 | % | | |
Industrial sales | 2.9 | % | | |
Wholesale power sales | 5.8 | % | | |
Total sales | 2.8 | % | | |
Average number of customers | 1.1 | % | | |
Year Ended December 31, 2021, as compared to 2020
Operating Revenues.The variance was driven primarily by:
•a $175 million increase in fuel revenues primarily due to higher fuel cost recovery driven by customer demand and fuel prices;
•a $134 million increase primarily due to higher base rate pricing from the Indiana retail rate case, net of lower rider revenues;
•a $34 million increase in wholesale revenues primarily related to higher rates in the current year;
•a $22 million increase in weather-normal retail sales volumes driven by higher nonresidential customer demand; and
•a $14 million increase in retail sales due to favorable weather in the current year.
Operating Expenses.The variance was driven primarily by:
•a $218 million increase in fuel used in electric generation and purchased power expense primarily due to higher natural gas prices and increased purchased power;
•a $46 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
•a $9 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 $12 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; and
•an $8 million decrease in property and other taxes attributable to property tax true ups for prior periods, utility receipts tax refunds and lower payroll tax due to the CARES Act employee retention credits.
Interest Expense. The variance is primarily driven by lower post-in-service carrying costs and higher debt returns in the prior year on ash basin closure costs resulting from the Indiana retail rate case.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income.
PIEDMONT
Results of Operations | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | Variance |
| | | | | |
| | | | | |
| | | | | |
Operating Revenues | $ | 1,569 | | | $ | 1,297 | | | $ | 272 | |
Operating Expenses | | | | | |
Cost of natural gas | 569 | | | 386 | | | 183 | |
Operation, maintenance and other | 327 | | | 322 | | | 5 | |
Depreciation and amortization | 213 | | | 180 | | | 33 | |
Property and other taxes | 55 | | | 53 | | | 2 | |
Impairment of assets and other charges | 10 | | | 7 | | | 3 | |
Total operating expenses | 1,174 | | | 948 | | | 226 | |
| | | | | |
Operating Income | 395 | | | 349 | | | 46 | |
Equity in earnings of unconsolidated affiliates | 9 | | | 9 | | | — | |
| | | | | |
Other income and expenses, net | 55 | | | 51 | | | 4 | |
Total other income and expenses | 64 | | | 60 | | | 4 | |
Interest Expense | 119 | | | 118 | | | 1 | |
Income Before Income Taxes | 340 | | | 291 | | | 49 | |
Income Tax Expense | 30 | | | 18 | | | 12 | |
Net Income | $ | 310 | | | $ | 273 | | | $ | 37 | |
The following table shows the percent changes in Dth 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 | 2021 | |
Residential deliveries | 7.0 | % | |
Commercial deliveries | 6.9 | % | |
Industrial deliveries | 4.1 | % | |
Power generation deliveries | 14.0 | % | |
For resale | 13.2 | % | |
Total throughput deliveries | 10.8 | % | |
Secondary market volumes | 37.2 | % | |
Average number of customers | 1.9 | % | |
The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The weather 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.
Year Ended December 31, 2021, as compared to 2020
Operating Revenues.The variance was driven primarily by:
•a $183 million increase due to higher natural gas costs passed through to customers, higher volumes, and increased off-system sales natural gas costs;
•a $52 million increase due to base rate increases;
•a $12 million increase due to customer growth; and
•an $11 million increase due to North Carolina IMR.
Operating Expenses.The variance was driven primarily by:
•a $183 million increase due to higher natural gas costs passed through to customers, higher volumes, and increased off-system sales natural gas costs; and
•a $33 million increase in depreciation expense due to additional plant in service and depreciation adjustments.
Income Tax Expense. The increase in tax expense was primarily due to an increase in pretax income.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Preparation of financial statements requires the application of accounting policies, judgments, assumptions and estimates that can significantly affect the reported results of operations, cash flows or the amounts of assets and liabilities recognized in the financial statements. Judgments made include the likelihood of success of particular projects, possible legal and regulatory challenges, earnings assumptions on pension and other benefit fund investments and anticipated recovery of costs, especially through regulated operations.
Management discusses these policies, estimates and assumptions with senior members of management on a regular basis and provides periodic updates on management decisions to the Audit Committee. Management believes the areas described below require significant judgment in the application of accounting policy or in making estimates and assumptions that are inherently uncertain and that may change in subsequent periods.
For further information, see Note 1 to the Consolidated Financial Statements, "Summary of Significant Accounting Policies."
Regulated Operations Accounting
Substantially all of Duke Energy’s regulated operations meet the criteria for application of regulated operations accounting treatment. As a result, Duke Energy is required to record assets and liabilities that would not be recorded for nonregulated entities. Regulatory assets generally represent incurred costs that have been deferred because such costs are probable of future recovery in customer rates. Regulatory liabilities are recorded when it is probable that a regulator will require Duke Energy to make refunds to customers or reduce rates to customers for previous collections or deferred revenue for costs that have yet to be incurred.
Management continually assesses whether recorded regulatory assets are probable of future recovery by considering factors such as:
•applicable regulatory environment changes;
•historical regulatory treatment for similar costs in Duke Energy’s jurisdictions;
•litigation of rate orders;
•recent rate orders to other regulated entities;
•levels of actual return on equity compared to approved rates of return on equity; and
•the status of any pending or potential deregulation legislation.
If future recovery of costs ceases to be probable, asset write-offs would be recognized in operating income. Additionally, regulatory agencies can provide flexibility in the manner and timing of the depreciation of property, plant and equipment, recognition of asset retirement costs and amortization of regulatory assets, or may disallow recovery of all or a portion of certain assets.
As required by regulated operations accounting rules, significant judgment can be required to determine if an otherwise recognizable incurred cost qualifies to be deferred for future recovery as a regulatory asset. Significant judgment can also be required to determine if revenues previously recognized are for entity specific costs that are no longer expected to be incurred or have not yet been incurred and are therefore a regulatory liability.
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MD&A | CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
For further information, see Note 3 to the Consolidated Financial Statements, "Regulatory Matters."
Goodwill Impairment Assessments
Duke Energy performed its annual goodwill impairment tests for all reporting units as of August 31, 2018,2021. Additionally, Duke Energy monitors all relevant events and circumstances during the year to determine if an interim impairment test is required. Such events and circumstances include an adverse regulatory outcome, declining financial performance and deterioration of industry or market conditions. As of August 31, 2021, all of the reporting units' estimated fair value of equity substantially exceeded the carrying value of equity, except for the Commercial Renewables reporting units, which recorded impairment charges of $93 million.equity. The fair values of the reporting units were calculated using a weighted combination of the income approach, which estimates fair value based on discounted cash flows, and the market approach, which estimates fair value based on market comparables within the utility and energy industries.
Estimated future cash flows under the income approach are based on Duke Energy’s internal business plan. Significant assumptions used are growth rates, future rates of return expected to result from ongoing rate regulation and discount rates. Management determines the appropriate discount rate for each of its reporting units based on the WACC for each individual reporting unit. The WACC takes into account both the after-tax cost of debt and cost of equity. A major component of the cost of equity is the current risk-free rate on 20-year U.S. Treasury bonds. In the 20182021 impairment tests, Duke Energy considered implied WACCs for certain peer companies in determining the appropriate WACC rates to use in its analysis. As each reporting unit has a different risk profile based on the nature of its operations, including factors such as regulation, the WACC for each reporting unit may differ. Accordingly, the WACCs were adjusted, as appropriate, to account for company specific risk premiums. The discount rates used for calculating the fair values as of August 31, 2018,2021, for each of Duke Energy’s reporting units ranged from 5.5 percent5.4% to 6.9 percent.5.8%. The underlying assumptions and estimates are made as of a point in time. Subsequent changes, particularly changes in the discount rates, authorized regulated rates of return or growth rates inherent in management’s estimates of future cash flows, could result in future impairment charges.
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MD&A | CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
One of the most significant assumptions utilized in determining the fair value of reporting units under the market approach is implied market multiples for certain peer companies. Management selects comparable peers based on each peer’s primary business mix, operations, and market capitalization compared to the applicable reporting unit and calculates implied market multiples based on available projected earnings guidance and peer company market values as of August 31. The implied market multiples used for calculating the fair values as of August 31, 2021, for each of Duke Energy's reporting units ranged from 9.7 to 12.7.
Duke Energy primarily operates in environments that are rate-regulated. In such environments, revenue requirements are adjusted periodically by regulators based on factors including levels of costs, sales volumes and costs of capital. Accordingly, Duke Energy’s regulated utilities operate to some degree with a buffer from the direct effects, positive or negative, of significant swings in market or economic conditions. However, significant changes in discount rates or implied market multiples over a prolonged period may have a material impact on the fair value of equity.
Duke Energy has approximately $19.3 billion in Goodwill at both December 31, 2021, and 2020. For further information, see Note 11 to the Consolidated Financial Statements, "Goodwill and Intangible Assets."
Asset Retirement Obligations
AROs are recognized for legal obligations associated with the retirement of property, plant and equipment at the present value of the projected liability in the period in which it is incurred, if a reasonable estimate of fair value can be made. Duke Energy has approximately $12.8 billion and $13 billion of AROs as of December 31, 2021, and 2020, respectively. See Note 9, "Asset Retirement Obligations," for further details including a rollforward of related liabilities.
The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding the amount and timing of future cash flows, regulatory, legal, and legislative decisions, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change.
Obligations for nuclear decommissioning are based on site-specific cost studies. Duke Energy Carolinas and Duke Energy Progress assume prompt dismantlement of the nuclear facilities after operations are ceased. During 2020, Duke Energy Florida, assumesclosed an agreement for the accelerated decommissioning of the Crystal River Unit 3 will be placed into a safe storage configuration until eventual dismantlement is completed by 2074.nuclear power station after receiving approval from the NRC and FPSC. The retirement obligations for the decommissioning of Crystal River Unit 3 nuclear power station are measured based on accelerated decommissioning from 2020 continuing through 2027. Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida also assume that spent fuel will be stored on-site until such time that it can be transferred to a yet to be built DOE facility.
Obligations for closure of ash basins are based upon discounted cash flows of estimated costs for site-specific plans, if known, orplans. Certain ash basins have had probability weightings of theapplied to them based on different potential closure methods ifand the closure plans are under development and multiple closure options are being considered and evaluated on a site-by-site basis.probabilities surrounding pending legal changes.
For further information, see NoteNotes 3, 4 and 9 to the Consolidated Financial Statements, "Regulatory Matters," "Commitments and Contingencies" and "Asset Retirement Obligations."
Long-Lived Asset Impairment Assessments, Excluding Regulated Operations
Duke Energy evaluates property, plant and equipment for impairment when events or changes in circumstances (such as a significant change in cash flow projections or the determination that it is more likely than not that an asset or asset group will be sold) indicate the carrying value of such assets may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, as compared with their carrying value.
Performing an impairment evaluation involves a significant degree of estimation and judgment in areas such as identifying circumstances that indicate an impairment may exist, identifying and grouping affected assets and developing the undiscounted future cash flows. If an impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value and recording a loss if the carrying value is greater than the fair value. Additionally, determining fair value requires probability weighting future cash flows to reflect expectations about possible variations in their amounts or timing and the selection of an appropriate discount rate. Although cash flow estimates are based on relevant information available at the time the estimates are made, estimates of future cash flows are, by nature, highly uncertain and may vary significantly from actual results.
When determining whether an asset or asset group has been impaired, management groups assets at the lowest level that has discrete cash flows.
During 2021, Duke Energy evaluated recoverability of certain renewable merchant plants due to changing market pricing and declining long-term forecasted energy prices, primarily driven by lower long-term forecasted natural gas prices, capital cost of new renewables and increased renewable penetration. It was determined the assets were all recoverable as the carrying value of the assets approximated or were less than the aggregate estimated future cash flows. Duke Energy has approximately $200 million and $210 million in Property, plant and equipment related to these assets as of December 31, 2021, and 2020, respectively.
Workplace and workforce realignment has been a focus for the company and costs have been incurred attributable to business transformation, including long-term real estate strategy changes and workforce realignment. For further information, see NoteNotes 2 and 10 to the Consolidated Financial Statements, "Business Segments" and "Property, Plant and Equipment."
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Equity Method Investments
Equity method investments are assessed for impairment when conditions exist that indicate that the fair value of the investment is less than book value. If the decline in value is considered to be other-than-temporary, an impairment charge is recorded and the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.
Events or changes in circumstances are monitored that may indicate, in management’s judgment, the carrying value of such investments may have experienced an other-than-temporary decline in value. The fair value of equity method investments is generally estimated using an income approach where significant judgments and assumptions include expected future cash flows, the appropriate discount rate, and probability weighted-scenarios, if applicable. In certain instances, a market approach may also be used to estimate the fair value of the equity method investment.
Events or changes in circumstances that may be indicative of an other-than-temporary decline in value will vary by investment, but may include:
Significant delays in or failure to complete significant growth projects of investees;
Adverse regulatory actions expected to substantially reduce the investee’s product demand or profitability;
Expected financial performance significantly worse than anticipated when initially invested;
Prolonged period the fair value is below carrying value;
A significant or sustained decline in the market value of an investee;
Lower than expected cash distributions from investees;
Significant asset impairments or operating losses recognized by investees; and
Loss of significant customers or suppliers with no immediate prospects for replacement.
ACP
As of December 31, 2018, the carrying value of the equity method investment in ACP is $0.8 billion, and Duke Energy's maximum exposure to loss for its guarantee of the ACP revolving credit facility is $0.7 billion. During the fourth quarter of 2018, ACP received several adverse court rulings as described in Note 4 to the Consolidated Financial Statements, "Regulatory Matters." As a result, Duke Energy evaluated this investment for impairment and determined that fair value approximated carrying value and therefore no impairment was necessary.
Duke Energy estimated the fair value of its investment in ACP using an income approach that primarily considered probability-weighted scenarios of discounted future net cash flows based on the most recent estimate of total construction costs and revenues. These scenarios included assumptions of various court decisions and the impact those decisions may have on the timing and extent of investment, including scenarios assuming the full resolution of permitting issues in addition to a scenario where the project does not proceed. Most of the scenarios reflect phased in-service date assumptions. Certain scenarios within the analysis also included growth expectations from additional compression or other expansion opportunities and reopeners for pricing. A discount rate of 6.1 percent was used in the analysis. Higher probabilities were generally assigned to those scenarios where court approvals were received and the project moves forward under reasonable timelines reflecting interim rates and either current contracted pricing provisions, or prices subject to the reopeners. A very low probability was assigned to the scenario where the project does not proceed.
Judgments and assumptions are inherent in our estimates of future cash flows, discount rates, growth assumptions, and the likelihood of various scenarios. It is reasonably possible that future unfavorable developments, such as a reduced likelihood of success with court approvals, increased estimates of construction costs, material increases in the discount rate, important feedback on customer price increases or further significant delays, could result in a future impairment. The use of alternate judgments and assumptions could result in a different calculation of fair value, which could ultimately result in the recognition of an impairment charge in the consolidated financial statements.
For further information, see Note 12 to the Consolidated Financial Statements, “Investments in Unconsolidated Affiliates.”
Pension and Other Post-Retirement Benefits
The calculation of pension expense, other post-retirement benefit expense and net pension and other post-retirement assets or liabilities require the use of assumptions and election of permissible accounting alternatives. Changes in assumptions can result in different expense and reported asset or liability amounts and future actual experience can differ from the assumptions. Duke Energy believes the most critical assumptions for pension and other post-retirement benefits are:
are the expected long-term rate of return on plan assets;
assets and the assumed discount rate applied to future projected benefit payments; andpayments.
the heath care cost trend rate.
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MD&A | CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
Duke Energy elects to amortize net actuarial gain or loss amounts that are in excess of 10 percent10% of the greater of the market-related value of plan assets or the plan's projected benefit obligation, into net pension or other post-retirement benefit expense over the average remaining service period of active participants expected to benefit under the plan. If all or almost all of a plan's participants are inactive, the average remaining life expectancy of the inactive participants is used instead of average remaining service period. Prior service cost or credit, which represents an increase or decrease in a plan's pension benefit obligation resulting from plan amendment, is amortized on a straight-line basis over the average expected remaining service period of active participants expected to benefit under the plan. If all or almost all of a plan's participants are inactive, the average remaining life expectancy of the inactive participants is used instead of average remaining service period.
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MD&A | CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
As of December 31, 2018,2021, Duke Energy assumes pension and other post-retirement plan assets will generate a long-term rate of return of 6.85 percent.6.50%. The expected long-term rate of return was developed using a weighted average calculation of expected returns based primarily on future expected returns across asset classes considering the use of active asset managers, where applicable. The asset allocation targets were set after considering the investment objective and the risk profile. Equity securities are held for their higher expected returns. Debt securities are primarily held to hedge the qualified pension liability. Real assets, return-seeking fixed income, hedge funds and other global securities are held for diversification. Investments within asset classes are diversified to achieve broad market participation and reduce the impact of individual managers on investments.
Duke Energy discounted its future U.S. pension and other post-retirement obligations using a rate of 4.3 percent2.90% as of December 31, 2018.2021. Discount rates used to measure benefit plan obligations for financial reporting purposes reflect rates at which pension benefits could be effectively settled. As of December 31, 2018,2021, Duke Energy determined its discount rate for U.S. pension and other post-retirement obligations using a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high qualityhigh-quality corporate bonds that generate sufficient cash flow to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of non-callable corporate bonds rated Aa quality or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plan’s projected benefit payments discounted at this rate with the market value of the bonds selected.
Future changes in plan asset returns, assumed discount rates and various other factors related to the participants in Duke Energy’s pension and post-retirement plans will impact future pension expense and liabilities. Duke Energy cannot predict with certainty what these factors will be in the future. The following table presents the approximate effect on Duke Energy’s 20182022 pretax pension expense, pretax other post-retirement expense, pension obligation and other post-retirement benefit obligation if a 0.25 percent0.25% change in rates were to occur. |
| | | | | | | | | | | | | | | |
| Qualified and Non- | | Other Post-Retirement |
| Qualified Pension Plans | | Plans |
(in millions) | 0.25 | % | | (0.25 | )% | | 0.25 | % | | (0.25 | )% |
Effect on 2018 pretax pension and other post-retirement expense | | | | | | | |
Expected long-term rate of return | $ | (22 | ) | | $ | 22 |
| | $ | (1 | ) | | $ | 1 |
|
Discount rate | (12 | ) | | 12 |
| | 1 |
| | (1 | ) |
Effect on pension and other post-retirement benefit obligation at December 31, 2018 | |
| | |
| | |
| | |
|
Discount rate | (183 | ) | | 188 |
| | (13 | ) | | 13 |
|
Duke Energy’s other post-retirement plan uses a health care cost trend rate covering both pre- and post-age 65 retired plan participants, which is comprised of a medical care cost trend rate, which reflects the near- and long-term expectation of increases in medical costs, and a prescription drug cost trend rate, which reflects the near- and long-term expectation of increases in prescription drug costs. As of December 31, 2018, the health care cost trend rate was 6.5 percent, trending down to 4.75 percent by 2024. The following table presents the approximate effect on Duke Energy’s 2018 pretax other post-retirement expense and other post-retirement benefit obligation if a 1 percentage point change in the health care cost trend rate were to occur. These plans are closed to new employees. |
| | | | | | | |
| Other Post-Retirement |
| Plans |
(in millions) | 1 | % | | (1 | )% |
Effect on 2018 other post-retirement expense | $ | 1 |
| | $ | (1 | ) |
Effect on other post-retirement benefit obligation at December 31, 2018 | 22 |
| | (20 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| Qualified and Non- | | Other Post-Retirement |
| Qualified Pension Plans | | Plans |
(in millions) | 0.25 | % | | (0.25) | % | | 0.25 | % | | (0.25) | % |
Effect on 2022 pretax pension and other post-retirement expense: | | | | | | | |
Expected long-term rate of return | $ | (21) | | | $ | 21 | | | $ | — | | | $ | — | |
Discount rate | (6) | | | 6 | | | 1 | | | (1) | |
Effect on pension and other post-retirement benefit obligation at December 31, 2022: | | | | | | | |
Discount rate | (189) | | | 193 | | | (11) | | | 12 | |
For further information, see Note 22 to the Consolidated Financial Statements, “Employee Benefit Plans.”
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.
Among other provisions, the Tax Act lowers the corporate federal income tax rate from 35 to 21 percent and eliminates bonus depreciation for regulated utilities. For Duke Energy’s regulated operations, the reduction in federal income taxes is expected to result in lower regulated customer rates. However, Additionally, due to its existing NOL position and other tax credits,attributes, Duke Energy does not expect to be a significant federal cash tax payer through at least 2022. As a result, any reductiontaxpayer until around 2030.
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
Capital Expenditures
Duke Energy continues to focus on reducing risk and positioning its business for future success and will invest principally in customer rates could cause a material reduction in consolidated cash flows from operationsits strongest business sectors. Duke Energy’s projected capital and investment expenditures, including AFUDC debt and capitalized interest, for the next three fiscal years are included in the short term. Over time, the reduction in deferred tax liabilities resulting from the Tax Act will increase Duke Energy’s regulated rate base investments and customer rates. Impacts of Tax Act to Duke Energy’s cash flows and credit metrics are subject to the regulatory actions of its state commissionstable below.
| | | | | | | | | | | |
(in millions) | 2022 | 2023 | 2024 |
New generation | $ | 14 | | $ | 156 | | $ | 445 | |
Regulated renewables | 742 | | 1,194 | | 1,346 | |
Environmental | 780 | | 580 | | 461 | |
Nuclear fuel | 453 | | 366 | | 385 | |
Major nuclear | 252 | | 186 | | 48 | |
Customer additions | 596 | | 591 | | 605 | |
Grid modernization and other transmission and distribution projects | 4,154 | | 4,377 | | 4,526 | |
Maintenance and other | 2,959 | | 3,050 | | 2,609 | |
Total Electric Utilities and Infrastructure | 9,950 | | 10,500 | | 10,425 | |
Gas Utilities and Infrastructure | 1,350 | | 1,375 | | 1,150 | |
Commercial Renewables and Other | 1,050 | | 1,100 | | 650 | |
| | | |
| | | |
Total projected capital and investment expenditures | $ | 12,350 | | $ | 12,975 | | $ | 12,225 | |
Debt
Long-term debt maturities and the FERC.interest payable on long-term debt each represent a significant cash requirement for the Duke Energy Registrants. See Note 46 to the Consolidated Financial Statements, “Regulatory Matters,“Debt and Credit Facilities,” for information regarding the Duke Energy Registrants' long-term debt at December 31, 2021, the weighted average interest rate applicable to each long-term debt category and a schedule of long-term debt maturities over the next five years.
Fuel and Purchased Power
Fuel and purchased power includes firm capacity payments that provide Duke Energy with uninterrupted firm access to electricity transmission capacity and natural gas transportation contracts, as well as undesignated contracts and contracts that qualify as NPNS. Duke Energy’s contractual cash obligations for fuel and purchased power as of December 31, 2021, are as follows:
| | | | | | | | | | | | | | | | | |
| Payments Due by Period |
(in millions) | Total | Less than 1 year (2022) | 2-3 years (2023 & 2024) | 4-5 years (2025 & 2026) | More than 5 years (2027 & beyond) |
Fuel and purchased power | $ | 19,976 | | $ | 4,594 | | $ | 6,071 | | $ | 3,618 | | $ | 5,693 | |
Other Purchase Obligations
Other purchase obligations includes contracts for software, telephone, data and consulting or advisory services, contractual obligations for EPC costs for new generation plants, wind and solar facilities, plant refurbishments, maintenance and day-to-day contract work and commitments to buy certain products. Amount excludes certain open purchase orders for services that are provided on demand for which the timing of the purchase cannot be determined. Total cash commitments for related other purchase obligation expenditures are $7,941 million, with $7,526 million expected to be paid in the next 12 months.
See Note 5 to the Consolidated Financial Statements, “Leases” for a schedule of both finance lease and operating lease payments over the next five years. See Note 9 to the Consolidated Financial Statements, “Asset Retirement Obligations” for information on nuclear decommissioning trust funding obligations and the closure of ash impoundments.
Duke Energy performs ongoing assessments of its respective guarantee obligations to determine whether any liabilities have been incurred as a result of potential increased nonperformance risk by third parties for which Duke Energy has issued guarantees. See Note 7 to the Consolidated Financial Statements, “Guarantees and Indemnifications,” for further details of the guarantee arrangements. Issuance of these guarantee arrangements is not required for the majority of Duke Energy’s operations. Thus, if Duke Energy discontinued issuing these guarantees, there would not be a material impact to the consolidated results of operations, cash flows or financial position. Other than the guarantee arrangements discussed in Note 7 and off-balance sheet debt related to non-consolidated VIEs, Duke Energy does not have any material off-balance sheet financing entities or structures. For additional information.information, see Note 17 to the Consolidated Financial Statements, "Variable Interest Entities."
Cash and Liquidity
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 with Duke Energy and certain of its other subsidiaries in a money pool arrangement. The companies with short-term funds may provide short-term loans to affiliates participating under this arrangement. See Note 6 to the Consolidated Financial Statements, “Debt and Credit Facilities,” for additional discussion of the money pool arrangement.
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
Duke Energy and the Subsidiary Registrants, excluding Progress Energy, (Parent), may also use short-term debt, including commercial paper and the money pool, as a bridge to long-term debt financings. The levels of borrowing may vary significantly over the course of the year due to the timing of long-term debt financings and the impact of fluctuations in cash flows from operations. From time to time, Duke Energy’s current liabilities exceed current assets resulting from the use of short-term debt as a funding source to meet scheduled maturities of long-term debt, as well as cash needs, which can fluctuate due to the seasonality of its businesses.
Equity Issuance
In order to strengthen its balance sheet and credit metrics and bolster cash flows,As of December 31, 2021, Duke Energy plans to issuehad approximately $343 million of cash on hand, $5.0 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 common stock equity per year throughcash on hand, cash from operations and available credit capacity to support its funding needs. Additionally, by January 2023, throughDuke Energy is expecting another $1,025 million from GIC for the DRIPsecond closing of the investment in Duke Energy Indiana. Proceeds from the minority interest investment are expected to partially fund Duke Energy's $63 billion capital and ATM programs. See Noteinvestment expenditure plan. Refer to Notes 6 and 19 to the Consolidated Financial Statements, "Common Stock,"Debt and Credit Facilities" and "Stockholders' Equity," respectively, for further information regarding Duke Energy's debt and equity issuances, in 2018.debt maturities and available credit facilities including the Master Credit Facility.
Credit Facilities and Registration Statements
See Note 6 to the Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding credit facilities and shelf registration statements available to Duke Energy and the Duke Energy Registrants.
CAPITAL EXPENDITURES
Duke Energy continues to focus on reducing risk and positioning its business for future success and will invest principally in its strongest business sectors. Duke Energy’s projected capital and investment expenditures, including debt AFUDC and capitalized interest, for the next three fiscal years are included in the table below. |
| | | | | | | | | |
(in millions) | 2019 |
| 2020 |
| 2021 |
|
New generation | $ | 375 |
| $ | 125 |
| $ | 220 |
|
Regulated renewables | 415 |
| 410 |
| 710 |
|
Environmental | 240 |
| 125 |
| 35 |
|
Nuclear fuel | 430 |
| 505 |
| 390 |
|
Major nuclear | 305 |
| 315 |
| 250 |
|
Customer additions | 505 |
| 480 |
| 475 |
|
Grid modernization and other transmission and distribution projects | 2,835 |
| 3,160 |
| 2,980 |
|
Maintenance and other | 3,395 |
| 2,605 |
| 2,390 |
|
Total Electric Utilities and Infrastructure | 8,500 |
| 7,725 |
| 7,450 |
|
Gas Utilities and Infrastructure | 1,675 |
| 2,000 |
| 1,600 |
|
Commercial Renewables and Other | 925 |
| 825 |
| 625 |
|
Total projected capital and investment expenditures | $ | 11,100 |
| $ | 10,550 |
| $ | 9,675 |
|
DEBT MATURITIES
See Note 6 to the Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant components of Current Maturities of Long-Term Debt on the Consolidated Balance Sheets.
DIVIDEND PAYMENTSDividend Payments
In 2018,2021, Duke Energy paid quarterly cash dividends for the 92nd95th consecutive year and expects to continue its policy of paying regular cash dividends in the future. There is no assurance as to the amount of future dividends because they depend on future earnings, capital requirements, financial condition and are subject to the discretion of the Board of Directors.
Duke Energy targets a dividend payout ratio of between 65between 65% and 75 percent, 75%, based upon adjusted diluted EPS, and expects this trend to continue through 2023. In 2017 and 2018,EPS. Duke Energy increased the dividend by approximately 4 percent approximately 2% annually in both 2021 and 2020, and the company remains committed to continued growth of the dividend.
Dividend and Other Funding Restrictions of Duke Energy Subsidiaries
As discussed in Note 43 to the Consolidated Financial Statements, “Regulatory Matters,” Duke Energy’s wholly owned public utility operating companies have restrictions on the amount of funds that can be transferred to Duke Energy through dividends, advances or loans as a result of conditions imposed by various regulators in conjunction with merger transactions. Duke Energy Progress and Duke Energy Florida also have restrictions imposed by their first mortgage bond indentures and Articles of Incorporation, which in certain circumstances, limit their ability to make cash dividends or distributions on common stock. Additionally, certain other Duke Energy subsidiaries have other restrictions, such as minimum working capital and tangible net worth requirements pursuant to debt and other agreements that limit the amount of funds that can be transferred to Duke Energy. At December 31, 2018,2021, the amount of restricted net assets of wholly owned subsidiaries of Duke Energy that may not be distributed to Duke Energy in the form of a loan or dividend does not exceed a material amount of Duke Energy’s net assets. Duke Energy does not have any legal or other restrictions on paying common stock dividends to shareholders out of its consolidated equity accounts. Although these restrictions cap the amount of funding the various operating subsidiaries can provide to Duke Energy, management does not believe these restrictions will have a significant impact on Duke Energy’s ability to access cash to meet its payment of dividends on common stock and other future funding obligations.
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
CASH FLOWS FROM OPERATING ACTIVITIESCash 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.
As part of Duke Energy’s continued effort to improve its cash flows from operations and liquidity, Duke Energy works with vendors to improve terms and conditions, including the extension of payment terms. To support this effort, Duke Energy established a supply chain finance program (the “program”) in 2020, under which suppliers, at their sole discretion, may sell their receivables from Duke Energy to the participating financial institution. The financial institution administers the program. Duke Energy does not issue any guarantees with respect to the program and does not participate in negotiations between suppliers and the financial institution. Duke Energy does not have an economic interest in the supplier’s decision to participate in the program and receives no interest, fees or other benefit from the financial institution based on supplier participation in the program. Suppliers’ decisions on which invoices are sold do not impact Duke Energy’s payment terms, which are based on commercial terms negotiated between Duke Energy and the supplier regardless of program participation. A significant deterioration in the credit quality of Duke Energy, economic downturn or changes in the financial markets could limit the financial institutions willingness to participate in the program. Duke Energy does not believe such risk would have a material impact on our cash flows from operations or liquidity, as substantially all our payments are made outside the program.
Duke Energy believes it has sufficient liquidity resources through the commercial paper markets, and ultimately, the Master Credit Facility, to support these operations. 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,” for additional information).
At December 31, 2018, Duke Energy had cash and cash equivalents and short-term investments of $442 million.
DEBT ISSUANCESDebt Issuances
Depending on availability based on the issuing entity, the credit rating of the issuing entity, and market conditions, the Subsidiary Registrants prefer to issue first mortgage bonds and secured debt, followed by unsecured debt. This preference is the result of generally higher credit ratings for first mortgage bonds and secured debt, which typically result in lower interest costs. Duke Energy Corporation primarily issues unsecured debt.
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
In 2019,2022, Duke Energy anticipates issuing additional securities of $9.5 billion through debt of $7.5 billion,capital markets. In certain instances Duke Energy may utilize instruments other than senior notes, including equity-content securities such as subordinated debt or preferred stock. Proceeds will primarily be for the purpose of funding capital expenditures and debt maturities. See to Note 6 to the Consolidated Financial Statements, "Debt and Credit Facilities," for further information regarding significant debt issuances in 2018.2021.
Duke Energy’s capitalization is balanced between debt and equity as shown in the table below. | | | Projected 2019 |
| | Actual 2018 |
| | Actual 2017 |
| | Projected 2022 | | Actual 2021 | | Actual 2020 |
Equity | 44 | % | | 43 | % | | 43 | % | Equity | 42 | % | | 43 | % | | 44 | % |
Debt | 56 | % | | 57 | % | | 57 | % | Debt | 58 | % | | 57 | % | | 56 | % |
Restrictive Debt Covenants
Duke Energy’s debt and credit agreements contain various financial and other covenants. Duke Energy's Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio to not exceed 65 percent65% for each borrower, excluding Piedmont, and 70 percent70% for Piedmont. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements or sublimits thereto. As of December 31, 2018,2021, 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.
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
Credit Ratings
Moody’s Investors Service, Inc. and S&P and Fitch Ratings, Inc. provide credit ratings for various Duke Energy Registrants. The following table includes Duke Energy and certain subsidiaries’ credit ratings and ratings outlook as of February 2019.2022. |
| | | | | | | | | | | | | |
| Moody's | | S&P | | Fitch | |
Duke Energy Corporation | Stable | | Stable | | Stable | |
Issuer Credit Rating | Baa1Baa2 | | A-BBB+ | | BBB+ | |
Senior Unsecured Debt | Baa1Baa2 | | BBB+BBB | | BBB+ | |
Commercial PaperJunior Subordinated Debt/Preferred Stock | P-2Baa3/Ba1 | | A-2BBB- | | F-2 | |
Commercial Paper | P-2 | | A-2 | |
Duke Energy Carolinas | Stable | | Stable | | N/A | |
Senior Secured Debt | Aa2Aa3 | | A | | N/A | |
Senior Unsecured Debt | A1A2 | | A-BBB+ | | N/A | |
Progress Energy | Stable | | Stable | | N/A | |
Senior Unsecured Debt | Baa1 | | BBB+BBB | | N/A | |
Duke Energy Progress | Stable | | Stable | | N/A | |
Senior Secured Debt | Aa3 | | A | | N/A | |
| | | | |
Duke Energy Florida | Stable | | Stable | | N/A | |
Senior Secured Debt | A1 | | A | | N/A | |
Senior Unsecured Debt | A3 | | A-BBB+ | | N/A | |
Duke Energy Ohio | Stable | | Stable | | N/A | |
Senior Secured Debt | A2 | | A | | N/A | |
Senior Unsecured Debt | Baa1 | | A-BBB+ | | N/A | |
Duke Energy Indiana | Stable | | Stable | | N/A | |
Senior Secured Debt | Aa3 | | A | | N/A | |
Senior Unsecured Debt | A2 | | A-BBB+ | | N/A | |
Duke Energy Kentucky | Stable | | Stable | | N/A | |
Senior Unsecured Debt | Baa1 | | A-BBB+ | | N/A | |
Piedmont Natural Gas | Stable | | Stable | | N/A | |
Senior Unsecured | A3 | | A-BBB+ | |
| N/A | | | |
Credit ratings are intended to provide credit lenders a framework for comparing 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 deteriorates, credit ratings could be negatively impacted.
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
Cash Flow Information
The following table summarizes Duke Energy’s cash flows for the threetwo most recently completed fiscal years. |
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
|
Cash flows provided by (used in): | | | | | |
Operating activities | $ | 7,186 |
| | $ | 6,624 |
| | $ | 6,863 |
|
Investing activities | (10,060 | ) | | (8,442 | ) | | (11,528 | ) |
Financing activities | 2,960 |
| | 1,782 |
| | 4,251 |
|
Changes in cash and cash equivalents included in assets held for sale | — |
| | — |
| | 474 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash | 86 |
| | (36 | ) | | 60 |
|
Cash, cash equivalents and restricted cash at beginning of period | 505 |
| | 541 |
| | 481 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 591 |
| | $ | 505 |
| | $ | 541 |
|
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | | | | | |
| | | | | | | | | |
(in millions) | 2021 | | 2020 | | | | | | |
Cash flows provided by (used in): | | | | | | | | | |
Operating activities | $ | 8,290 | | | $ | 8,856 | | | | | | | |
Investing activities | (10,935) | | | (10,604) | | | | | | | |
Financing activities | 2,609 | | | 1,731 | | | | | | | |
| | | | | | | | | |
Net decrease in cash, cash equivalents and restricted cash | (36) | | | (17) | | | | | | | |
Cash, cash equivalents and restricted cash at beginning of period | 556 | | | 573 | | | | | | | |
Cash, cash equivalents and restricted cash at end of period | $ | 520 | | | $ | 556 | | | | | | | |
OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows for the threetwo most recently completed fiscal years. | | | Years Ended December 31, | | Years Ended December 31, |
| | | | | Variance |
| | | | Variance |
| |
| | | | | 2018 vs. |
| | | | 2017 vs. |
| |
(in millions) | 2018 |
|
| 2017 |
| | 2017 |
|
| 2016 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | Variance | | |
Net income | $ | 2,644 |
| | $ | 3,064 |
| | $ | (420 | ) | | $ | 2,170 |
| | $ | 894 |
| Net income | $ | 3,579 | | | $ | 1,082 | | | $ | 2,497 | | | |
Non-cash adjustments to net income | 6,484 |
| | 5,380 |
| | 1,104 |
| | 5,305 |
| | 75 |
| Non-cash adjustments to net income | 5,941 | | | 8,353 | | | (2,412) | | | |
Contributions to qualified pension plans | (141 | ) | | (19 | ) | | (122 | ) | | (155 | ) | | 136 |
| |
Payments for AROs | (533 | ) | | (571 | ) | | 38 |
| | (608 | ) | | 37 |
| Payments for AROs | (540) | | | (610) | | | 70 | | | |
Payment for disposal of other assets | (105 | ) | | — |
| | (105 | ) | | — |
| | — |
| |
| Refund of AMT credit carryforwards | | Refund of AMT credit carryforwards | — | | | 572 | | | (572) | | | |
Working capital | (1,163 | ) | | (1,230 | ) | | 67 |
| | 151 |
| | (1,381 | ) | Working capital | (690) | | | (541) | | | (149) | | | |
Net cash provided by operating activities | $ | 7,186 |
|
| $ | 6,624 |
| | $ | 562 |
|
| $ | 6,863 |
| | $ | (239 | ) | Net cash provided by operating activities | $ | 8,290 | | | $ | 8,856 | | | $ | (566) | | | |
For the year ended December 31, 2018, compared to 2017, theThe variance was driven primarily by:
•a $684$572 million refund of AMT credit carryforwards in the prior year; and
•a $149 million increase in cash outflows from working capital primarily due to an increase in under collected fuel used in generation due to higher pricing, partially offset by coal ash insurance litigation proceeds, fluctuations in accounts payable levels and timing of property tax accruals and payments in the current year.
Partially offset by:
•an $85 million increase in net income after adjustment for non-cash items primarily due to favorable weatherhigher revenues from rate cases in various jurisdictions, higher retail sales volumes and increased pricingthe prior year coal ash settlement agreement filed with the NCUC, partially offset by an impairment charge related to the South Carolina Supreme Court Decision on coal ash, higher depreciation, amortization and volumes in the current period;accretion and interest expense; and
•a $38$70 million decrease in payments tofor AROs.
Offset by:
a $122 million increase in contributions to qualified pension plans; and
a $105 million payment for disposal of Beckjord.
For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:
a $1,381 million decrease in working capital due to weather, payment of merger transaction and integration related costs and increased property tax payments in 2017.
Offset by:
a $969 million increase in net income after non-cash adjustments primarily due to the inclusion of Piedmont's earnings for a full year, favorable pricing and weather-normal retail volumes driven by the residential class in the Electric Utilities and Infrastructure segment combined with continued strong cost control;
a $136 million decrease in contributions to qualified pension plans; and
a $37 million decrease in payments to AROs.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows for the threetwo most recently completed fiscal years. | | | Years Ended December 31, | | Years Ended December 31, | |
| | | | | Variance |
| | | | Variance |
| |
| | | | | 2018 vs. |
| | | | 2017 vs. |
| |
(in millions) | 2018 |
|
| 2017 |
| | 2017 |
|
| 2016 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | Variance | |
Capital, investment and acquisition expenditures | $ | (9,668 | ) | | $ | (8,198 | ) | | $ | (1,470 | ) | | $ | (13,215 | ) | | $ | 5,017 |
| |
Capital, investment and acquisition expenditures, net of return of investment capital | | Capital, investment and acquisition expenditures, net of return of investment capital | $ | (9,752) | | | $ | (10,144) | | | $ | 392 | | |
Debt and equity securities, net | (15 | ) | | 27 |
| | (42 | ) | | 83 |
| | (56 | ) | Debt and equity securities, net | 5 | | | (62) | | | 67 | | |
Net proceeds from the sales of discontinued operations and other assets, net of cash divested | 41 |
| | — |
| | 41 |
| | 1,418 |
| | (1,418 | ) | |
| Disbursements to canceled equity method investments | | Disbursements to canceled equity method investments | (855) | | | — | | | (855) | | |
Other investing items | (418 | ) | | (271 | ) | | (147 | ) | | 186 |
| | (457 | ) | Other investing items | (333) | | | (398) | | | 65 | | |
Net cash used in investing activities | $ | (10,060 | ) |
| $ | (8,442 | ) | | $ | (1,618 | ) |
| $ | (11,528 | ) | | $ | 3,086 |
| Net cash used in investing activities | $ | (10,935) | | | $ | (10,604) | | | $ | (331) | | |
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MD&A | LIQUIDITY AND CAPITAL RESOURCES |
The variance relates primarily to a payment made to fund ACP's outstanding debt, partially offset by a decrease in capital expenditures due to lower overall investments in the Commercial Renewables segment. The primary use of cash related to investing activities is typically capital, investment and acquisition expenditures, net of return of investment capital detailed by reportable business segment in the following table. |
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
|
| 2017 |
|
| 2016 |
|
Electric Utilities and Infrastructure | $ | 8,086 |
| | $ | 7,024 |
| | $ | 6,649 |
|
Gas Utilities and Infrastructure | 1,133 |
| | 907 |
| | 5,519 |
|
Commercial Renewables | 193 |
| | 92 |
| | 857 |
|
Other | 256 |
| | 175 |
| | 190 |
|
Total capital, investment and acquisition expenditures | $ | 9,668 |
|
| $ | 8,198 |
|
| $ | 13,215 |
|
For the year ended December 31, 2018, compared to 2017, the variance was driven primarily by:
a $1,470 million increase in capital, investment and acquisition expenditures in all reportable business segments, including expenditures related to W.S. Lee CC, Asheville and Citrus County CC at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively.
For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:
a $5,017 million decrease in capital, investment and acquisition expenditures mainly due to the Piedmont acquisition in the prior year.
Partially offset by:
a $1,418 million decrease in net proceeds from sales of discontinued operations due to the prior year sale of the International business. | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | | | | | | |
| | | | | | | |
(in millions) | 2021 | | 2020 | | Variance | | |
Electric Utilities and Infrastructure | $ | 7,653 | | | $ | 7,612 | | | $ | 41 | | | |
Gas Utilities and Infrastructure | 1,271 | | | 1,303 | | | (32) | | | |
Commercial Renewables | 543 | | | 965 | | | (422) | | | |
Other | 285 | | | 264 | | | 21 | | | |
Total capital, investment and acquisition expenditures, net of return of investment capital | $ | 9,752 | | | $ | 10,144 | | | $ | (392) | | | |
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows for the threetwo most recently completed fiscal years. | | | Years Ended December 31, | | Years Ended December 31, |
| | | | | Variance |
| | | | Variance |
| |
| | | | | 2018 vs. |
| | | | 2017 vs. |
| |
(in millions) | 2018 |
| | 2017 |
| | 2017 |
| | 2016 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | Variance | |
Issuance of common stock | $ | 1,838 |
| | $ | — |
| | $ | 1,838 |
| | $ | 731 |
| | $ | (731 | ) | Issuance of common stock | $ | 5 | | | $ | 2,745 | | | $ | (2,740) | | |
| Issuances of long-term debt, net | 2,393 |
| | 4,593 |
| | (2,200 | ) | | 7,315 |
| | (2,722 | ) | Issuances of long-term debt, net | 3,758 | | | 1,824 | | | 1,934 | | |
Notes payable and commercial paper | 1,171 |
| | (362 | ) | | 1,533 |
| | (1,447 | ) | | 1,085 |
| Notes payable and commercial paper | 479 | | | (319) | | | 798 | | |
Dividends paid | (2,471 | ) | | (2,450 | ) | | (21 | ) | | (2,332 | ) | | (118 | ) | Dividends paid | (3,114) | | | (2,812) | | | (302) | | |
| Contributions from noncontrolling interests | | Contributions from noncontrolling interests | 1,575 | | | 426 | | | 1,149 | | |
Other financing items | 29 |
| | 1 |
| | 28 |
| | (16 | ) | | 17 |
| Other financing items | (94) | | | (133) | | | 39 | | |
Net cash provided by financing activities | $ | 2,960 |
| | $ | 1,782 |
| | $ | 1,178 |
| | $ | 4,251 |
| | $ | (2,469 | ) | Net cash provided by financing activities | $ | 2,609 | | | $ | 1,731 | | | $ | 878 | | |
For the year ended December 31, 2018, compared to 2017, theThe variance was driven primarily by:
•a $1,838 million increase in proceeds from the issuance of common stock; and
a $1,533 million increase in net borrowings from notes payable and commercial paper primarily due to increased funding requirements for capital expenditures and storm costs.
Partially offset by:
a $2,200$1,934 million net decreaseincrease in proceeds from issuances of long-term debt, primarily due to timing related to refinancing of existing maturities, fund growthissuances and general corporate needs.
For the year ended December 31, 2017, compared to 2016, the variance was driven primarily by:
a $2,722 million net decrease in proceeds from issuancesredemptions of long-term debt driven principally by the prior year $3,750debt;
•a $1,149 million increase in contributions from noncontrolling interests, primarily due to a $1,025 million receipt from GIC to make an indirect minority interest investment of senior unsecured notes used to fund a portion of the Piedmont acquisition, offset primarily by $900 million of first mortgage bonds issued by11.05% in Duke Energy Florida in the current year to fund capital expenditures for ongoing constructionIndiana; and capital maintenance and for general corporate purposes;
•a $731$798 million decrease in proceeds from stock issuances used to fund a portion of the Piedmont acquisition in 2016; and
a $118 million current year increase in dividends paid.
Partially offset by:
a $1,085 million decrease in net borrowings from notes payable and commercial paper primarily due to the use ofpaper.
Partially offset by:
•a $2,740 million decrease in proceeds from $1,294 million nuclear asset-recovery bonds issued at Duke Energy Florida in 2016 to pay down outstanding commercial paper.the issuance of common stock.
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MD&A | OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS |
Off-Balance Sheet Arrangements
Duke Energy and certain of its subsidiaries enter into guarantee arrangements in the normal course of business to facilitate commercial transactions with third parties. These arrangements include performance guarantees, standby letters of credit, debt guarantees, surety bonds and indemnifications.
Most of the guarantee arrangements entered into by Duke Energy enhance the credit standing of certain subsidiaries, non-consolidated entities or less than wholly owned entities, enabling them to conduct business. As such, these guarantee arrangements involve elements of performance and credit risk, which are not always included on the Consolidated Balance Sheets. The possibility of Duke Energy, either on its own or on behalf of Spectra Energy Capital, LLC (Spectra Capital) through indemnification agreements entered into as part of the January 2, 2007, spin-off of Spectra Energy Corp, having to honor its contingencies is largely dependent upon the future operations of the subsidiaries, investees and other third parties, or the occurrence of certain future events.
Duke Energy performs ongoing assessments of its respective guarantee obligations to determine whether any liabilities have been incurred as a result of potential increased non-performance risk by third parties for which Duke Energy has issued guarantees. See Note 7 to the Consolidated Financial Statements, “Guarantees and Indemnifications,” for further details of the guarantee arrangements. Issuance of these guarantee arrangements is not required for the majority of Duke Energy’s operations. Thus, if Duke Energy discontinued issuing these guarantees, there would not be a material impact to the consolidated results of operations, cash flows or financial position.
Other than the guarantee arrangements discussed above, normal operating lease arrangements and off-balance sheet debt related to non-consolidated VIEs, Duke Energy does not have any material off-balance sheet financing entities or structures. For additional information, see Notes 5 and 17 to the Consolidated Financial Statements, “Commitments and Contingencies" and "Variable Interest Entities," respectively.
Contractual Obligations
Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. The following table summarizes Duke Energy’s contractual cash obligations as of December 31, 2018. |
| | | | | | | | | | | | | | | | | | | |
| Payments Due By Period |
| | | | | | | | | More than |
|
| | | Less than |
| | 2-3 years |
| | 4-5 years |
| | 5 years |
|
| | | 1 year |
| | (2020 & |
| | (2022 & |
| | (2024 & |
|
(in millions) | Total |
| | (2019) |
| | 2021) |
| | 2023) |
| | beyond) |
|
Long-term debt(a) | $ | 52,446 |
| | $ | 3,291 |
| | $ | 8,311 |
| | $ | 5,861 |
| | $ | 34,983 |
|
Interest payments on long-term debt(b) | 32,834 |
| | 2,121 |
| | 3,823 |
| | 3,329 |
| | 23,561 |
|
Capital leases(c) | 1,428 |
| | 170 |
| | 351 |
| | 330 |
| | 577 |
|
Operating leases(c) | 1,991 |
| | 239 |
| | 405 |
| | 330 |
| | 1,017 |
|
Purchase obligations:(d) | |
| | |
| | |
| | |
| | |
|
Fuel and purchased power(e)(f) | 20,496 |
| | 4,329 |
| | 5,315 |
| | 3,153 |
| | 7,699 |
|
Other purchase obligations(g) | 12,436 |
| | 4,617 |
| | 1,178 |
| | 775 |
| | 5,866 |
|
Nuclear decommissioning trust annual funding(h) | 482 |
| | 24 |
| | 48 |
| | 48 |
| | 362 |
|
Land easements(i) | 234 |
| | 10 |
| | 20 |
| | 20 |
| | 184 |
|
Total contractual cash obligations(j)(k) | $ | 122,347 |
| | $ | 14,801 |
| | $ | 19,451 |
| | $ | 13,846 |
| | $ | 74,249 |
|
| |
(a) | See Note 6 to the Consolidated Financial Statements, “Debt and Credit Facilities.” |
| |
(b) | Interest payments on variable rate debt instruments were calculated using December 31, 2018, interest rates and holding them constant for the life of the instruments. |
| |
(c) | See Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies.” Amounts in the table above include the interest component of capital leases based on the interest rates stated in the lease agreements and exclude certain related executory costs. Amounts exclude contingent lease obligations. |
| |
(d) | Current liabilities, except for current maturities of long-term debt, and purchase obligations reflected on the Consolidated Balance Sheets have been excluded from the above table. |
| |
(e) | Includes firm capacity payments that provide Duke Energy with uninterrupted firm access to electricity transmission capacity and natural gas transportation contracts, as well as undesignated contracts and contracts that qualify as NPNS. For contracts where the price paid is based on an index, the amount is based on market prices at December 31, 2018, or the best projections of the index. For certain of these amounts, Duke Energy may settle on a net cash basis since Duke Energy has entered into payment netting arrangements with counterparties that permit Duke Energy to offset receivables and payables with such counterparties. |
| |
(f) | Amounts exclude obligations under the OVEC purchase power agreement. See Note 17 to the Consolidated Financial Statements, "Variable Interest Entities," for additional information. |
| |
(g) | Includes contracts for software, telephone, data and consulting or advisory services. Amount also includes contractual obligations for EPC costs for new generation plants, wind and solar facilities, plant refurbishments, maintenance and day-to-day contract work and commitments to buy certain products. Amount excludes certain open purchase orders for services that are provided on demand, for which the timing of the purchase cannot be determined. |
| |
(h) | Related to future annual funding obligations to NDTF through nuclear power stations' relicensing dates. See Note 9 to the Consolidated Financial Statements, "Asset Retirement Obligations." |
| |
(i) | Related to Commercial Renewables wind and solar facilities. |
|
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MD&A | OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS |
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(j) | Unrecognized tax benefits of $24 million are not reflected in this table as Duke Energy cannot predict when open income tax years will close with completed examinations. See Note 23 to the Consolidated Financial Statements, "Income Taxes." |
| |
(k) | The table above excludes reserves for litigation, environmental remediation, asbestos-related injuries and damages claims and self-insurance claims (see Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies”) because Duke Energy is uncertain as to the timing and amount of cash payments that will be required. Additionally, the table above excludes annual insurance premiums that are necessary to operate the business, including nuclear insurance (see Note 5 to the Consolidated Financial Statements, “Commitments and Contingencies”), funding of pension and other post-retirement benefit plans (see Note 22 to the Consolidated Financial Statements, "Employee Benefit Plans"), AROs, including ash management expenditures (see Note 9 to the Consolidated Financial Statements, "Asset Retirement Obligations") and regulatory liabilities (see Note 4 to the Consolidated Financial Statements, “Regulatory Matters”) because the amount and timing of the cash payments are uncertain. Also excluded are Deferred Income Taxes and ITCs recorded on the Consolidated Balance Sheets since cash payments for income taxes are determined based primarily on taxable income for each discrete fiscal year. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Risk Management Policies
The Enterprise Risk Management policy framework at Duke Energy includes strategy, operational, project execution and financial or transaction related risks. Enterprise Risk Management includes market risk as part of the financial and transaction related risks in its framework.
Duke Energy is exposed to market risks associated with commodity prices, interest rates and equity prices. Duke Energy has established comprehensive risk management policies to monitor and manage these market risks. Duke Energy’s Chief Executive Officer and Chief Financial Officer are responsible for the overall approval of market risk management policies and the delegation of approval and authorization levels. The Finance and Risk Management Committee of the Board of Directors receives periodic updates from the Chief Risk Officer and other members of management on market risk positions, corporate exposures and overall risk management activities. The Chief Risk Officer is responsible for the overall governance of managing commodity price risk, including monitoring exposure limits.
The following disclosures about market risk contain forward-looking statements that involve estimates, projections, goals, forecasts, assumptions, risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. See Item 1A, “Risk Factors,” and “Cautionary Statement Regarding Forward-Looking Information” for a discussion of the factors that may impact any such forward-looking statements made herein.
Commodity Price Risk
Price risk represents the potential risk of loss from adverse changes in the market price of electricity or other energy commodities. Duke Energy’s exposure to commodity price risk is influenced by a number of factors, including the effects of regulation, commodity contract size and length, market liquidity, market conditions, location and unique or specific contract terms. Duke Energy is exposed to the impact of market fluctuations in the prices of electricity, coal, natural gas and other energy-related products marketed and purchased as a result of its ownership of energy-related assets.
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MD&A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Duke Energy’s exposure to these fluctuations through its regulated utility operations is limited by thesince these operations are subject to cost-based regulation of its regulated operations as these operationsand are typically allowed to recover substantially all of these costs through various cost-recoverycost recovery clauses, including fuel clauses, formula basedformula-based contracts, or other cost-sharing mechanisms. While there may be a delay in timing between when these costs are incurred and when they are recovered through rates, changes from year to year generally do not have a material impact on operating results of these regulated operations.
Price risk representsWithin Duke Energy’s Commercial Renewables segment, the potential riskcompany has exposure to market price fluctuations in prices of loss from adverse changes inelectricity or other energy-related products as a result of its ownership of renewable assets, although its exposure to the market price of electricity or other energy commodities. Duke Energy’s exposurepower is generally limited by entering into contracts with third parties to commodity price risk is influenced bysell the production of these assets, usually for a numberterm of factors, including contract size, length, market liquidity, location and unique or specific contract terms. 10 to 15 years from commercial operation.
Duke Energy employs established policies and procedures to manage risks associated with these market fluctuations, which may include using various commodity derivatives, such as swaps, futures, forwards and options. For additional information, see Note 14 to the Consolidated Financial Statements, “Derivatives and Hedging.”
Generation Portfolio Risks
For the Electric Utilities and Infrastructure segment, the generation portfolio not utilized to serve retail operations or committed load is subject to commodity price fluctuations. However, the impact on the Consolidated Statements of Operations is limited due to mechanisms in these regulated jurisdictions that result in the sharing of most of the net profits from these activities with retail customers.
The inputs and methodologies used to determinemajority of the fair value of contracts are validated by an internal group separate fromenergy assets in Duke Energy’s deal origination function. While Duke Energy uses common industry practicesCommercial Renewables segment operate in regions managed by RTOs and are therefore governed and dispatched under the rules of the applicable RTO. Depending on the structure of power sale agreements with third parties, these assets may be exposed to develop its valuation techniques, changesbasis risk associated with different locational marginal prices based on the specific delivery locations and requirements specified in its pricing methodologies or the underlying assumptions could result in significantly different fair valuesagreements. Additionally, these assets may be subject to operational constraints under the RTO rules and income recognition.may be exposed to market price risk.
Hedging Strategies
Duke Energy closely monitors risks associated with commodity price changes on its future operations and, where appropriate, uses various commodity instruments such as electricity, coal and natural gas forwardhedging contracts and options to mitigate the effect of such fluctuations on operations. Duke Energy’s primary use of energy commodity derivatives is to hedge against exposure to the prices of power, fuel for generation and natural gas for customers. Additionally, Duke Energy’s Commercial Renewables business may enter into short-term or long-term hedge agreements to manage price risk associated with project output to the extent such output is not under contract to third parties.
Duke Energy also manages its exposure to basis risk through the use of congestion hedge products in RTOs such as financial transmission rights (PJM) and congestion revenue rights (ERCOT), which result in payments based on differentials in locational marginal prices. The majority of instruments used to manage Duke Energy’s commodity price exposure are either not designated as hedges or do not qualify for hedge accounting. These instruments are referred to as undesignated contracts. Mark-to-market changes for undesignated contracts entered into by regulated businesses are reflected as regulatory assets or liabilities on the Consolidated Balance Sheets. Undesignated contracts entered into by unregulatednonregulated businesses are marked-to-market each period, with changes in the fair value of the derivative instruments reflected in earnings.
Duke Energy may also enter into other contracts that qualify for the NPNS exception. When a contract meets the criteria to qualify as NPNS, Duke Energy applies such exception. Income recognition and realization related to NPNS contracts generally coincide with the physical delivery of the commodity. For contracts qualifying for the NPNS exception, no recognition of the contract’s fair value in the Consolidated Financial Statements is required until settlement of the contract as long as the transaction remains probable of occurring.
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Generation Portfolio Risks
The Duke Energy Registrants optimize the value of their generation portfolios, which include generation assets, fuel and emission allowances. Modeled forecasts of future generation output and fuel requirements are based on forward power and fuel markets. The component pieces of the portfolio are bought and sold based on models and forecasts of generation in order to manage the economic value of the portfolio in accordance with the strategies of the business units.
For the Electric Utilities and Infrastructure segment, the generation portfolio not utilized to serve retail operations or committed load is subject to commodity price fluctuations. However, the impact on the Consolidated Statements of Operations is partially offset by mechanisms in these regulated jurisdictions that result in the sharing of net profits from these activities with retail customers.
Interest Rate Risk
Duke Energy is exposed to risk resulting from changes in interest rates as a result of its issuance or anticipated issuance of variable and fixed-rate debt and commercial paper. Duke Energy manages interest rate exposure by limiting variable-rate exposures to a percentage of total debt and by monitoring the effects of market changes in interest rates. Duke Energy also enters into financial derivative instruments, which may include instruments such as, but not limited to, interest rate swaps, swaptions and U.S. Treasury lock agreements to manage and mitigate interest rate risk exposure. See Notes 1, 6, 14 and 16 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” “Debt and Credit Facilities,” “Derivatives and Hedging,” and “Fair Value Measurements.”
At December 31, 2018, Duke Energy had $1.2 billion of U.S. treasury lock agreements, $644 million notional amount of floating-to-fixed swaps outstanding, $500 million notional amount of fixed-to-floating swaps outstanding and $300 million forward-starting swaps outstanding. Duke Energy had $8.0had $7.5 billion of unhedged long- and short-term floating interest rate exposure at December 31, 2018.2021. The impact of a 100 basis100-basis point change in interest rates on pretax income is approximately $80$75 million at December 31, 2018.2021. This amount was estimated by considering the impact of the hypothetical interest rates on variable-rate securities outstanding, adjusted for interest rate hedges as of December 31, 2018.2021.
Certain Duke Energy Registrants have variable-rate debt and manage interest rate risk by entering into financial contracts including interest rate swaps. See NoteNotes 6 and 14 "Derivatives and Hedging," to the Consolidated Financial Statements, "Debt and Credit Facilities" and "Derivatives and Hedging." Such financial arrangements generally are indexed based upon LIBOR, which is expected to be fully phased out in 2023. The Secured Overnight Financing Rate (SOFR) has been identified by regulators and industry participants as the preferred successor rate for additional information aboutU.S. dollar-based LIBOR. Impacted financial arrangements extending beyond the forward-starting interest rate swaps relatedphaseout of LIBOR may require contractual amendment or termination and renegotiation to fully adapt to a post-LIBOR environment, and there may be uncertainty regarding the Piedmont acquisition.effectiveness of any such alternative index methodologies. Alternative index provisions are being assessed and incorporated into new financial arrangements that extend beyond the phaseout of LIBOR. Additionally, the progress of the phaseout is being monitored, including proposed transition relief from the FASB.
Credit Risk
Credit risk represents the loss that the Duke Energy Registrants would incur if a counterparty fails to perform under its contractual obligations. Where exposed to credit risk, the Duke Energy Registrants analyze the counterparty's financial condition prior to entering into an agreement and monitor exposure on an ongoing basis. The Duke Energy Registrants establish credit limits where appropriate in the context of contractual arrangements and monitor such limits.
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To reduce credit exposure, the Duke Energy Registrants seek to include netting provisions with counterparties, which permit the offset of receivables and payables with such counterparties. The Duke Energy Registrants also frequently use master agreements with credit support annexes to further mitigate certain credit exposures. The master agreements provide for a counterparty to post cash or letters of credit to the exposed party for exposure in excess of an established threshold. The threshold amount represents a negotiated unsecured credit limit for each party to the agreement, determined in accordance with the Duke Energy Registrants’ internal corporate credit practices and standards. Collateral agreements generally also provide that the inabilityfailure to post collateral when required is sufficient cause to terminate contractstransactions and liquidate all positions.
The Duke Energy Registrants also obtain cash, or letters of credit, or surety bonds from certain counterparties to provide credit support outside of collateral agreements, where appropriate, based on a financial analysis of the counterparty and the regulatory or contractual terms and conditions applicable to each transaction. See Note 14 to the Consolidated Financial Statements, “Derivatives and Hedging,” for additional information regarding credit risk related to derivative instruments.
The Duke Energy Registrants’ principal counterparties for its electric and natural gas businesses are regional transmission organizations,RTOs, distribution companies, municipalities, electric cooperatives and utilities located throughout the U.S. Exposure to these entities consists primarily of amounts due to Duke Energy Registrants for delivered electricity. Additionally, there may be potential risks associated with remarketing of energy and capacity in the event of default by wholesale power customers. The Duke Energy Registrants have concentrations of receivables from certain of such entities throughout these regions. These concentrations of receivablesthat may affect the Duke Energy Registrants’ overall credit risk in that risk factors can negatively impact the credit quality of the entire sector.risk.
The Duke Energy Registrants are also subject to credit risk from transactions with their suppliers that involve prepayments or milestone payments in conjunction with outsourcing arrangements, major construction projects and certain commodity purchases. The Duke Energy Registrants’ credit exposure to such suppliers may take the form of increased costs or project delays in the event of non-performance.nonperformance. The Duke Energy Registrants' frequently require guarantees or letters of credit from suppliers to mitigate this credit risk.
Credit risk associated with the Duke Energy Registrants’ service to residential, commercial and industrial customers is generally limited to outstanding accounts receivable. The Duke Energy Registrants mitigate this credit risk by requiring tariff customers to provide a cash deposit, letter of credit or surety bond until a satisfactory payment history is established, subject to the rules and regulations in effect in each retail jurisdiction at which time the deposit is typically refunded. Charge-offs for retail customers have historically been insignificant to the operations of the Duke Energy Registrants and are typically recovered through retail rates. Management continually monitors customer charge-offs, and payment patterns and the impact of current economic conditions on customers' ability to pay their outstanding balance to ensure the adequacy of bad debt reserves.
In response to the COVID-19 pandemic, in March 2020, the Duke Energy Registrants announced a suspension of disconnections for nonpayment as a result of the national emergency. While disconnections have resumed, the company continued to offer flexible options to customers struggling with the pandemic and the economic fallout, including extended payment arrangements to satisfy delinquent balances through June 2021. Since then, the company has resumed standard payment arrangement options . The Duke Energy Registrants are still monitoring the effects of the resultant economic slowdown on counterparties’ abilities to perform under their contractual obligations. The Duke Energy Registrants have observed a significant increase in utility account arrears as of December 31, 2021. There is an expectation of an increase in charge-offs in the future and the Duke Energy Registrants have reserved for these losses in the allowance for doubtful account balance. See Notes 3 and 18 to the Consolidated Financial Statements, "Regulatory Matters" and "Revenue," respectively, for more information. Duke Energy Ohio and Duke Energy Indiana sell certain of their accounts receivable and related collections through CRC, a Duke Energy consolidated variable interest entity.VIE. Losses on collection are first absorbed by the equity of CRC and next by the subordinated retained interests held by Duke Energy Ohio, Duke Energy Kentucky and Duke Energy Indiana. See Note 17 to the Consolidated Financial Statements, “Variable Interest Entities.”
The Duke Energy also providesRegistrants provide certain non-tariff services, primarily to large commercial and industrial customers in which incurred costs, including invested capital, are intended to be recovered from the individual customer and therefore are not subject to rate recovery in the event of customer default. Customer credit worthinesscreditworthiness is assessed prior to entering into these transactions.
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MD&A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Credit concentration related to these transactions exists for certain of these customers.
Duke Energy’s Commercial Renewables business segment enters into long-term agreements with certain creditworthy buyers that may not include the right to call for collateral in the event of a credit rating downgrade, anddowngrade. Credit concentration exists to certain counterparties on these agreements, including entities that could be subject to wildfire liability. Additionally, Commercial Renewables may invest in projects for which buyers are below investment grade, although such buyers are required to post negotiated amounts of credit support. Also, power sales agreements and/or hedges of project output are generally for an initial term that does not cover the entire life of the asset. As a result, Commercial Renewables is therefore exposed to market price risk and credit risk related to these agreements. Credit concentration exists to certain counterparties on these agreements.
Duke Energy Carolinas has third-party insurance to cover certain losses related to asbestos-related injuries and damages above an aggregate self-insured retention. See Note 54 to the Consolidated Financial Statements, "Commitments and Contingencies" for information on asbestos-related injuries and damages claims.
The Duke Energy Registrants also have credit risk exposure through issuance of performance and financial guarantees, letters of credit and surety bonds on behalf of less than wholly owned entities and third parties. Where the Duke Energy Registrants have issued these guarantees, it is possible that they could be required to perform under these guarantee obligations in the event the obligor under the guarantee fails to perform. Where the Duke Energy Registrants have issued guarantees related to assets or operations that have been disposed of via sale, they attempt to secure indemnification from the buyer against all future performance obligations under the guarantees. See Note 7 to the Consolidated Financial Statements, “Guarantees and Indemnifications,” for further information on guarantees issued by the Duke Energy Registrants.
Based on the Duke Energy Registrants’ policies for managing credit risk, their exposures and their credit and other reserves, the Duke Energy Registrants do not currently anticipate a materially adverse effect on their consolidated financial position or results of operations as a result of non-performancenonperformance by any counterparty.
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MD&A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Marketable Securities Price Risk
As described further in Note 15 to the Consolidated Financial Statements, “Investments in Debt and Equity Securities,” Duke Energy invests in debt and equity securities as part of various investment portfolios to fund certain obligations. The vast majority of investments in equity securities are within the NDTF and assets of the various pension and other post-retirement benefit plans.
Pension Plan Assets
Duke Energy maintains investments to facilitate funding the costs of providing non-contributory defined benefit retirement and other post-retirement benefit plans. These investments are exposed to price fluctuations in equity markets and changes in interest rates. The equity securities held in these pension plans are diversified to achieve broad market participation and reduce the impact of any single investment, sector or geographic region. Duke Energy has established asset allocation targets for its pension plan holdings, which take into consideration the investment objectives and the risk profile with respect to the trust in which the assets are held. See Note 22 to the Consolidated Financial Statements, “Employee Benefit Plans,” for additional information regarding investment strategy of pension plan assets.
A significant decline in the value of plan asset holdings could require Duke Energy to increase funding of its pension plans in future periods, which could adversely affect cash flows in those periods. Additionally, a decline in the fair value of plan assets, absent additional cash contributions to the plan, could increase the amount of pension cost required to be recorded in future periods, which could adversely affect Duke Energy’s results of operations in those periods.
Nuclear Decommissioning Trust Funds
As required by the NRC, NCUC, PSCSC and FPSC, subsidiaries of Duke Energy maintain trust funds to fund the costs of nuclear decommissioning. As of December 31, 2018,2021, these funds were invested primarily in domestic and international equity securities, debt securities, cash and cash equivalents and short-term investments. Per the NRC, Internal Revenue Code, NCUC, PSCSC and FPSC requirements, these funds may be used only for activities related to nuclear decommissioning. These investments are exposed to price fluctuations in equity markets and changes in interest rates. Duke Energy actively monitors its portfolios by benchmarking the performance of its investments against certain indices and by maintaining, and periodically reviewing, target allocation percentages for various asset classes.
Accounting for nuclear decommissioning recognizes that costs are recovered through retail and wholesale rates; therefore, fluctuations in investment prices do not materially affect the Consolidated Statements of Operations, as changes in the fair value of these investments are primarily deferred as regulatory assets or regulatory liabilities pursuant to Orders by the NCUC, PSCSC, FPSC and FERC. Earnings or losses of the fundfunds will ultimately impact the amount of costs recovered through retail and wholesale rates. See Note 9 to the Consolidated Financial Statements, “Asset Retirement Obligations,” for additional information regarding nuclear decommissioning costs. See Note 15 to the Consolidated Financial Statements, “Investments in Debt and Equity Securities,” for additional information regarding NDTF assets.
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 legislation and regulations that may impact the Duke Energy Registrants. Refer to Note 43 to the 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, 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 arelocated at stations generating electricity (regardless of fuel source), which were no longer receiving CCR but contain liquid located at stations currently generating electricity (regardlesscontained liquids as of fuel source).the effective date of the rule. 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. Various industry and environmental parties have appealed EPA's CCR rule in the D.C. Circuit Court. On April 18, 2016, 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. On September 13, 2017, EPA responded to a petition by the Utility Solid Waste Activities Group that the agency would reconsider certain provisions of the final rule, and asked the D.C. Circuit Court to suspend the litigation. The D.C. Circuit Court denied EPA’s petition to suspend the litigation and oral argument was held on November 20, 2017. On August 21, 2018, the D.C. Circuit issued its decision in the CCR rule litigation denying relief for industry petitioners' remaining claims and ruling in favor of environmental petitioners on a number of their challenges, including the regulation of inactive CCR surface impoundments at retired plants and the continued operation of unlined impoundments.
On March 15, 2018, EPA published proposed amendments to the federal CCR rule, including revisions that were required as part of a CCR litigation settlement, as well as changes that the agency considers warranted due to the passage of the Water Infrastructure Improvements for the Nation Act, which provides statutory authority for state and federal permit programs. On July 17, 2018, EPA issued a final rule (Phase 1, Part 1) finalizing certain, but not all, elements included in the agency's March 15, 2018, proposal. The final rule revisesrevising certain closure deadlines and groundwater protection standards in the CCR rule. ItThe rule does not change the primary requirements for groundwater monitoring, corrective action, inspections and maintenance, and closure, and thus does not materially affect Duke Energy’s coal ash basin closure plans or compliance obligations under the CCR rule. On October 22, 2018, a coalition of environmental groups filed a petition for review in the D.C.U.S. Court of Appeals for the District of Columbia (D.C. Circuit CourtCourt) challenging EPA's final Phase 1, Part 1 revisions to the CCR rule. BriefingOn March 13, 2019, the D.C. Circuit Court issued an order in the case concluded in February 2019.Phase 1, Part 1 litigation granting EPA’s motion to remand the rule without vacatur. To date, EPA has finalized two notice-and-comment rulemakings to implement the court’s decision on remand. The “Part A” rule, which was promulgated on August 28, 2020, establishes an April 11, 2021 deadline to cease placement of CCR and non-CCR waste streams into unlined ash basins and initiate closure, and the “Part B” rule, which was promulgated on November 12, 2020, establishes procedures to allow facilities to request approval to operate an existing CCR surface impoundment with an alternate liner.
In addition to the requirements of the federal CCR regulation,rule, CCR landfills and surface impoundments will continue to be independently regulated by mostthe 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 Notes 43 and 9 to the Consolidated Financial Statements, "Regulatory Matters" and "Asset Retirement Obligations," respectively.
Coal Ash Management Act of 2014
AROs recorded on the Duke Energy Carolinas and Duke Energy Progress Consolidated Balance Sheets at December 31, 2018,2021, and December 31, 2017,2020, 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. The Coal Ash Act includes a variance procedure for compliance deadlines and other issues surrounding the management of CCR and CCR surface impoundments and prohibits 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 haspreviously submitted comprehensive site assessments and groundwater corrective action plans to NCDEQNCDEQ. In addition, on December 31, 2019, Duke Energy submitted updated groundwater corrective action plans and will submit to NCDEQ site-specific coal ash impoundment closure plans in advance of closure. In support of theseto NCDEQ.
On April 1, 2019, NCDEQ issued a closure plans, on November 15, 2018,determination requiring Duke Energy submitted options analyses, groundwater modelingCarolinas and net environmental benefits analyses for six sites potentially eligible for closure by cap in place. Separately, on November 16, 2018, Duke Energy submitted a variance application requesting that NCDEQ grant a six-month extensionProgress to the closure deadline applicable to the CCR surfaceexcavate all remaining coal ash impoundments at the Sutton Plant.Allen, Belews Creek, Rogers, Marshall, Mayo and Roxboro facilities in North Carolina. On April 26, 2019, Duke Energy Carolinas and Duke Energy Progress filed Petitions for Contested Case Hearings in the Office of Administrative Hearings to challenge NCDEQ's April 1 Order. On December 31, 2019, Duke Energy Carolinas and Duke Energy Progress entered into a settlement agreement with NCDEQ held a public meetingand certain community groups under which Duke Energy Carolinas and Duke Energy Progress agreed to excavate seven of the nine remaining coal ash basins at these sites with ash moved to on-site lined landfills, including two at Allen, one at Belews Creek, one at Mayo, one at Roxboro, and two at Rogers. At the two remaining basins at Marshall and Roxboro, uncapped basin ash will be excavated and moved to lined landfills. Those portions of the basins at Marshall and Roxboro, which were previously filled with ash and on January 14, 2019 at which it announced that an extensionpermitted facilities were constructed, will not be disturbed and will be closed pursuant to other state regulations.
Following NCDEQ's April 1 Order, Duke Energy estimated the incremental undiscounted cost to close the nine remaining impoundments by excavation would be appropriate. A final decision onapproximately $4 billion to $5 billion, potentially increasing the variance applicationtotal estimated costs to permanently close all ash basins in North Carolina and South Carolina to $9.5 billion to $10.5 billion. The settlement lowers the estimated total undiscounted cost to close the nine remaining basins by excavation by approximately $1.5 billion as compared to Duke Energy’s original estimate that followed the order. As a result, the estimated total cost to permanently close all ash basins in North Carolina and South Carolina is approximately $8 billion to $9 billion of which approximately $3.1 billion has been spent through 2021. The majority of the remaining spend is expected by Aprilto occur over the next 15 2019.to 20 years.
The current plans for each site are listed inDuke Energy has completed excavation of all coal ash at the table below.Riverbend, Dan River and Sutton plants.
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NCDEQ Risk Classification | Plants/Current Closure Date | Expected Closure Method |
Low | Allen – December 31, 2029(a)
Belews Creek – December 31, 2029(a)
Buck – December 31, 2029(a)(b)
Rogers – December 31, 2029(a)
Marshall – December 31, 2029(a)
Mayo – December 31, 2029(a)
Roxboro – December 31, 2029(a)
| Combination of a cap system and a groundwater monitoring system, or for selected sites, conversion for beneficial use. |
Medium | H.F. Lee – December 31, 2029(b)
Cape Fear – December 31, 2029(b)
Weatherspoon – August 1, 2028
| Excavation, which may include conversion of the basin to a lined industrial landfill, transferring coal ash to an engineered landfill, or for selected sites, conversion for beneficial use. |
High | Sutton – August 1, 2019
Riverbend – August 1, 2019
Dan River – August 1, 2019
Asheville – August 1, 2022
| Excavation, which may include a combination of transferring coal ash to an engineered landfill or for selected sites, conversion for beneficial use. |
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(a) | In November 2018, the closure deadline for these basins was extended to December 31, 2029 as a result of the completion of certain dam improvement projects and alternative drinking water source projects by October 15, 2018. |
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(b) | The Coal Ash Act requires the installation and operation of three large-scale coal ash beneficiation projects to produce reprocessed ash for use in the concrete industry. Duke Energy has selected the Buck, H.F. Lee and Cape Fear plants for these projects. Closure at these sites is required to be completed no later than December 31, 2029. |
For further information on ash basins and recovery, see Notes 43 and 9 to the Consolidated Financial Statements, "Regulatory Matters" and “Asset Retirement Obligations,” respectively.
Estimated CostNorth Carolina House Bill 951
On October 13, 2021, North Carolina Governor Roy Cooper signed into law legislation passed by the North Carolina House of Representatives and ImpactsSenate (the “Legislation”). This Legislation establishes a framework overseen by the NCUC to advance state CO2 emissions reductions through the use of Rulemakingsleast cost planning while providing for continued reliability and affordable rates for customers served by such generation. It also authorizes the use of performance-based regulation in North Carolina. Among other things, the Legislation requires the NCUC to:
Duke Energy will incur capital expenditures•develop an initial carbon plan that would target a 70% reduction in CO2 emissions from public utilities' electric generation in the state by 2030 and carbon neutrality by 2050, considering all resource options and the latest technology;
•adopt rules to comply withimplement the environmental regulations and rules discussed above. The following table, as of December 31, 2018, 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, 2023. The table excludes ash basin closure costs recorded in Asset retirement obligations on the Consolidated Balance Sheets. For more information related to AROs, see Note 9 to the Consolidated Financial Statements. |
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(in millions) | Five-Year Estimated Costs |
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Duke Energy | $ | 420 |
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Duke Energy Carolinas | 185 |
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Progress Energy | 200 |
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Duke Energy Progress | 80 |
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Duke Energy Florida | 120 |
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Duke Energy Ohio | 15 |
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Duke Energy Indiana | 20 |
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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 regulationsthe Legislation authorizing performance-based regulation that includes multiyear rate plans with a maximum three-year term, performance incentive mechanisms to track utility performance, and revenue decoupling for the resolution of legal challengesresidential customer class;
•establish rules to the rules. The Duke Energy Registrants intend to seek rate recovery of necessary and prudently incurredsecuritize costs associated with regulated operationsthe early retirement of subcritical coal-fired electric generating facilities necessary to complyachieve the authorized carbon reduction goals at 50% of remaining net book value, with these regulations.the remaining net book value recovered through normal cost of service basis; and
•initiate a process for updating rates and terms of certain existing solar power purchase agreements executed under PURPA.
Other Environmental Regulations
The Duke Energy Registrants are also subject to various federal, state and local regulationslaws regarding air and water quality, hazardous and solid waste disposal and other environmental matters, including the following:
Clean Water Act
Steam Effluent Limitation Guidelines
Cross-State Air Pollution Rule
Carbon Pollution Standards for New, Modified and Reconstructed Power Plants
Clean Power Plan/ACE Rule
matters. Duke Energy continues to comply with enacted environmental lawsstatutes and regulations even as certain of these regulations are in various stages of clarification, revision or legal challenges.challenge. The Duke Energy Registrants cannot predict the outcome of these matters.
Global Climate Change and Regulation of GHG Emissions
In 2021, President Biden recommitted the United States to the Paris Agreement and announced a new target for the United States of 50% - 52% reduction in economywide net GHG emissions from 2005 levels by 2030. The U.S. submittal to support this Paris target includes a goal for 100% carbon-free electricity by 2035. These actions have been supplemented by a number of executive orders by President Biden and an indication by a number of regulatory agencies, including the EPA, that they would impose additional regulations on CO2 and methane emissions to which Duke Energy will be subject. The Duke Energy Registrants are monitoring these matters and cannot predict the outcome, however, there could be a material impact on our climate strategy.
Section 126 Petitions
On November 16, 2016, the state of Maryland filed a petition with EPA under Section 126 of the Clean Air Act alleging that 19 power plants, including two plants (three units) that Duke Energy Registrants own and operate, contribute to violations of EPA’s NAAQS for ozone in the state of Maryland. On March 12, 2018, the state of New York filed a petition with EPA, also under Section 126 of the Clean Air Act alleging that over 60 power plants, including four that Duke Energy Registrants own and operate, contribute to violations of EPA’s ozone NAAQS in the state of New York. Both Maryland and New York seek EPA orders requiring the states in which the named power plants operate impose more stringent NOx emission limitations on the plants. On October 5, 2018, EPA published a final rule denying the Maryland petition. That same day, Maryland appealed EPA's denial of their Section 126 petition to the D.C. Circuit Court. The impact of these petitions could be more stringent requirements for the operation of NOx emission controls at these plants. The Duke Energy Registrants cannot predict the outcome of these matters.
Global Climate Change
The Duke Energy Registrants’ direct GHG emissions consist primarily of CO2 and result that results primarily from operating a fleet of coal-fired and natural gas-fired power plants. In 2018, theplants to serve its customers reliably and affordably. On September 17, 2019, Duke Energy Registrants’ power plants emitted approximately 105 million tons of CO2. Future levels of CO2 emissions will be influenced by variables that include fuel prices, complianceannounced an updated climate strategy with new or existing regulations, economic conditions that affect electricity demandgoals of at least 50% reduction in carbon emissions from electric generation by 2030 and the technologies deployed to generate the electricity necessary to meet the customer demand.
net-zero carbon emissions from electric generation by 2050. The Duke Energy Registrants have taken actions that have resulted in a reduction of CO2 emissions over time. Actions have included the retirement of 47 coal-fired EGUs with a combined generating capacity of 5,425 MW. Much of that capacity has been replaced with state-of-the-art highly efficient natural gas-fired generation that produces far fewer CO2 emissions per unit of electricity generated. Duke Energy also has made investments to expand its portfolio of wind and solar projects, increase energy efficiency offerings and invest in its zero-CO2 emissions hydropower and nuclear plants. These efforts have diversified its system and significantly reduced CO2 emissions. Between 2005 and 2018,2021, the Duke Energy Registrants have collectively lowered the CO2 emissions from their electricity generation by 31 percent,44%. Timelines and initiatives, as well as implementation of new technologies, for future reductions of GHG emissions will vary in each state in which the company operates and will involve collaboration with regulators, customers and other stakeholders. The goals announced in 2019, as well as the actions taken to reduce CO2 emissions, potentially lowerslower the exposure to any future mandatory CO2 emission reduction requirements, or carbon tax, whether as a result of federal legislation, EPA regulation, state regulation or other as yet unknown emission reduction requirement.
Actions to reduce CO2 emissions have included the retirement of 56 coal-fired electric generating units with a combined generating capacity of 7,500 MW, while investing in renewables and state-of-the-art highly efficient natural gas-fired generation that produces far fewer CO2 emissions per unit of electricity generated than coal. Duke Energy also has made investments to increase EE offerings and ensure continued operations of its zero-CO2 emissions hydropower and nuclear plants. These efforts have diversified its system and significantly reduced CO2 emissions.
Duke Energy will continue to explore the use of currently available and commercially demonstrated technology to reduce CO2 emissions, including energy efficiency,EE, wind, solar and storage, as well as evolving technologies like carbon capture, utilization and storage, the use of hydrogen and other low-carbon fuels, long-duration storage and nuclear.advanced nuclear, in its efforts to achieve its net-zero goal as well as to comply with any future regulations. Duke Energy willplans to adjust to and incorporate evolving and innovative technologies in a way that balances the reliability and affordability that customers expect.while meeting regulatory requirements and customer demands. Under any future scenario involving mandatory CO2 limitations, the Duke Energy Registrants would plan to seek recovery of their compliance costs through appropriate regulatory mechanisms. Future levels of GHG emissions by the Duke Energy Registrants will be influenced by variables that include capacity needs in the jurisdictions in which they operate, public policy, tax incentives, economic conditions that affect electricity demand, fuel prices, market prices, availability of resources and labor, compliance with new or existing regulations, the ability to make enhancements to transmission and distribution systems to support increased renewables, and the existence of new technologies that can be deployed to generate the electricity necessary to meet customer demand.
Currently, the Duke Energy Registrants do not purchase carbon credits or offsets for use in connection with the company's net-zero emissions goals. Though they may purchase carbon credits or offsets for such uses in the future , the amount or cost of which is not expected to be material at this time.
Generation Mix Planning Process
The Duke Energy Registrants annually, biennially or triennially prepare lengthy, forward-looking IRPs. These detailed, highly technical plans are based on the company’s thorough analysis of numerous factors that can impact the cost of producing and delivering electricity that influence long-term generation resource planning decisions. The IRP process helps to evaluate a range of options, taking into account stakeholder input as well as forecasts of future electricity demand, fuel prices, transmission improvements, new generating capacity, integration of renewables, energy storage, EE and demand response initiatives. The IRP process also helps evaluate potential environmental and regulatory scenarios to better mitigate policy and economic risks. The IRPs we file with regulators look out 10 to 20 years depending on the jurisdiction.
For a number of years, the Duke Energy Registrants have included a price on CO2 emissions in their IRP planning process to account for the potential regulation of CO2 emissions. Incorporating a price on CO2 emissions in the IRPs allows for the evaluation of existing and future resource needs against potential climate change policy risk in the absence of policy certainty. One of the challenges with using a CO2 price, especially in the absence of a clear and certain policy, is determining the appropriate price to use. To address this uncertainty and ensure the company remains agile, the Duke Energy Registrants typically use a range of potential CO2 prices to reflect a range of potential policy outcomes.
In September 2020, Duke Energy Carolinas and Duke Energy Progress filed their IRPs in North Carolina and South Carolina, and, in December 2021, Duke Energy Indiana filed its IRP, outlining an accelerated energy transition which aligns with the company's 2030 CO2 emissions goal. In December 2021 the PSCSC rejected Duke Energy Carolinas and Duke Energy Progress’ preferred accelerated coal retirements IRP scenario and instead found that the base case without a price on CO2 emissions was the most reasonable IRP scenario.
In 2021, the State of North Carolina passed HB 951, which among other things, directs the NCUC to develop and approve a carbon reduction plan by the end of 2022 that would target a 70% reduction in CO2 emissions from Duke Energy Progress' and Duke Energy Carolinas' electric generation in the state by 2030 and carbon neutrality by 2050, considering all resource options and the latest technology. In light of this legislation, in November 2021, the NCUC declined to make a determination on the portfolios presented in the 2020 IRP noting that the legislation may impact the schedule for coal plant retirements and new resources and limited its order to short term actions for use on an interim basis pending preparation of the carbon plan. The NCUC's carbon reduction plan will be informed by Duke Energy's initial carbon plan, which will be filed with the NCUC by May 16, 2022, building on the IRPs that were filed in 2020 by Duke Energy Carolinas and Duke Energy Progress and incorporating feedback from extensive stakeholder engagement.
CO2 and Methane Emissions Reductions from the Natural Gas Distribution Business
In addition to CO2 emissions resulting primarily from our operations of coal-fired and natural gas-fired power plants, the Duke Energy Registrants are also responsible for certain methane emissions from the distribution of natural gas to customers. On October 9, 2020, Duke Energy announced a new goal to achieve net-zero methane emissions from its natural gas distribution business by 2030. The Duke Energy Registrants have taken actions that have resulted in methane emission reductions, including the replacement of cast iron and bare steel pipelines and associated services with plastic or coated steel, advanced methane leak detection efforts, reducing time to repair nonhazardous leaks and operational releases of methane, and investment in renewable natural gas.
Timelines and initiatives, as well as implementation of new technologies, for future reductions of upstream methane emissions will vary in each state in which the company’s natural gas distribution business operates and will involve collaboration with regulators, customers and other stakeholders. EPA has also proposed regulations that would require reduction of methane emissions upstream of the Duke Energy Registrants' natural gas distribution business. The impact of these regulations on natural gas fuel prices is not currently quantifiable.
In addition to possible EPA regulation of methane emissions, certain local governments, none within the jurisdictions in which the Duke Energy Registrants operate, have enacted or are considering initiatives to eliminate natural gas use in new buildings and focus on electrification. Enactment of similar regulations in the areas in which the Duke Energy Registrants' natural gas distribution operates could have a significant impact on the natural gas distribution business and its operations. At this time, such impacts are not able to be quantified; however, the net-zero methane goals announced in 2020 for the natural gas distribution business, as well as the actions taken to reduce these GHG emissions, potentially lowers the exposure to any future mandatory GHG emission reduction requirements. The Duke Energy Registrants would plan to seek recovery of their compliance costs with any new regulations through the regulatory process.
Physical Impacts of Climate Change
The Duke Energy Registrants recognize certain groupsthat scientists associate severe weather events with increasing levels of GHGs in the atmosphere and forecast the possibilityatmosphere. It is possible that these weather events could have a material impact on future results of operations should they occur more frequently and with greater severity. However, the uncertain nature of potential changes in extreme weather events (such as increased frequency, duration and severity), the long period of time over which any potential changes might take place and the inability to predict potential changes with any degree of accuracy, make estimating with any certainty any potential future financial risk to the Duke Energy Registrants’ operations impossible.
The Duke Energy Registrants annually, biannually or triennially prepare lengthy, forward-looking IRPs. These detailed, highly technical plans are based on the company’s thorough analysis of numerous factors that can impact the cost of producing and delivering electricity that influence long-term resource planning decisions. The IRP process helps to evaluate a range of options, taking into account forecasts of future electricity demand, fuel prices, transmission improvements, new generating capacity, integration of renewables, energy storage, energy efficiency and demand response initiatives. The IRP process also helps evaluate potential environmental and regulatory scenarios to better mitigate policy and economic risks. The IRPs we file with regulators look out 10 to 20 years depending on the jurisdiction.
For a number of years, difficult. Additionally, the Duke Energy Registrants have included a price on CO2 emissions in their IRP planning processwould plan to account for the potential regulationcontinue to seek recovery of CO2 emissions. Incorporating a price on CO2 emissions in the IRPs allows for the evaluation of existing and future resource needs against potential climate change policy risk in the absence of policy certainty. One of the challenges with using a CO2 price, especially in the absence of a clear and certain policy, is determiningstorm costs through the appropriate priceregulatory mechanisms. For more information on storm securitization in North Carolina and storm cost recovery in Florida, see Note 3 to use. To address this uncertainty and ensure the company remains agile, the Duke Energy Registrants typically use a range of potential CO2 prices to reflect a range of potential policy outcomes.Consolidated Financial Statements, "Regulatory Matters."
The Duke Energy Registrants routinely take steps to reduce the potential impact of severe weather events on their electric transmission and distribution systems byand natural gas facilities. The steps include modernizing the electric grid through smart meters, storm hardening, self-healing systems and targeted undergrounding and applying lessons learned from previous storms to restoration efforts. The Duke Energy Registrants’ electric generating facilities and natural gas facilities are designed to withstand extreme weather events without significant damage. The Duke Energy Registrants maintain an inventoryinventories of coal, oil and oil on-siteliquified natural gas to mitigate the effects of any potential short-term disruption in fuel supply so they can continue to provide customers with an uninterrupted supply of electricity.
State 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 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. The law stipulated certain deadlines for Duke Energy to file for NCUC approval of programs required under the law. Duke Energy has made some regulatory filings since the passage of the law and will continue to implement the requirements of House Bill 589.
In July 2018, Duke Energy issued an RFP for the first tranche of 680 MW. In accordance with the provisions of HB 589, total procurement will be changed based upon how much generation with no economic dispatch electricity and/or curtailment occurs over the procurement period. Most of this type of generation is solar procured under PURPA. Based upon the current forecasted amount of such generation that will occur over procurement period, Duke Energy estimates the total under HB 589 competitive procurement will be approximately 1,500 to 2,000 MW.
In various states, legislation is being considered to allow third-party sales of electricity. Deregulation or restructuring in the electric industry may result in increased competition and unrecovered costs. The Duke Energy Registrants cannot predict the outcome of these initiatives.
Liquefied Natural Gas Facility
Piedmont Natural Gas plans to build a liquefied natural gas facility in Robeson County, North Carolina. The project is expected to be completed in the summer of 2021 at a cost of $250 million. Construction will begin in the summer of 2019.gas.
New Accounting Standards
See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of the impact of new accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See “Management’s Discussion and Analysis of Results of Operations and Financial Condition – Quantitative and Qualitative Disclosures About Market Risk.”
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
| | | | |
Duke Energy | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations | |
Consolidated Statements of Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Carolinas | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Progress Energy | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Progress | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Florida | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Ohio | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Indiana | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Piedmont | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
|
| |
Combined Notes to Consolidated Financial Statements | |
Note 1 – Summary of Significant Accounting Policies | |
| |
Note 2 – Acquisitions and DispositionsBusiness Segments | |
Note 3 – Business SegmentsRegulatory Matters | |
Note 4 – Regulatory Matters | |
Note 5 – Commitments and Contingencies | |
Note 5 – Leases | |
Note 6 – Debt and Credit Facilities | |
Note 7 – Guarantees and Indemnifications | |
Note 8 – Joint Ownership of Generating and Transmission Facilities | |
Note 9 – Asset Retirement Obligations | |
Note 10 – Property, Plant and Equipment | |
Note 11 – Goodwill and Intangible Assets | |
Note 12 – Investments in Unconsolidated Affiliates | |
Note 13 – Related Party Transactions | |
Note 14 – Derivatives and Hedging | |
Note 15 – Investments in Debt and Equity Securities | |
Note 16 – Fair Value Measurements | |
Note 17 – Variable Interest Entities | |
Note 18 – Revenue | |
Note 19 – Common StockStockholders' Equity | |
Note 20 – Severance | |
Note 21 – Stock-Based Compensation | |
Note 22 – Employee Benefit Plans | |
Note 23 – Income Taxes | |
Note 24 – Other Income and Expenses, Net | |
Note 25 – Subsequent Events | |
Note 26 – Quarterly Financial Data (Unaudited) | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Duke Energy Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Corporation and subsidiaries (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2019,24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to regulation by federal and state utility regulatory agencies (the “Commissions”), which have jurisdiction with respect to the rates of the Company’s electric and natural gas distribution companies. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $14.6 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We also evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
Noncontrolling Interests - Minority Interest Investment in Duke Energy Indiana – Refer to Note 1 to the financial statements
Critical Audit Matter Description
On January 28, 2021, the Company executed an agreement providing for an investment by an affiliate of GIC Private Limited 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 transaction will be completed following two closings for an aggregate purchase price of approximately $2 billion. The first closing occurred on September 8, 2021 and resulted in Duke Energy Indiana Holdco, LLC issuing 11.05% of its membership interests in exchange for 50% of the purchase price. The Company retained indirect control of these assets, and, therefore, no gain or loss was recognized on the Consolidated Statements of Operations. The difference between the net cash consideration received and the carrying value of the noncontrolling interest was recorded as an increase to equity. The Company has the discretion to determine the timing of the second closing, but the closing will occur no later than January 2023.
We identified the minority interest investment in Duke Energy Indiana as a critical audit matter because of the extensive audit effort required to audit the transaction, including the need to involve professionals in our firm with the appropriate expertise to assist us in evaluating management’s conclusions that there should be no gain or loss associated with this transaction recognized on the Consolidated Statements of Operations for the year ended December 31, 2021.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the minority interest investment in Duke Energy Indiana included the following, among others:
•We tested the effectiveness of controls over the accounting assessment of significant and non- routine transactions, including the controls over the income tax treatment of such transactions.
•We evaluated management’s conclusions related to accounting for the transaction by:
–Obtaining and reading the agreement providing for the minority investment,
–Involving professionals in our firm with the appropriate expertise to evaluate the work performed by management’s expert related to the tax treatment of the transaction,
–Assessing management’s documentation for accounting for the transaction.
•We evaluated the appropriateness of the Company’s disclosures related to the minority interest investment.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 201924, 2022
We have served as the Company's auditor since 1947.
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS | | | Years Ended December 31, | | Years Ended December 31, |
(in millions, except per share amounts) | 2018 |
| | 2017 |
| | 2016 |
| (in millions, except per share amounts) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | | Operating Revenues | |
Regulated electric | $ | 22,097 |
| | $ | 21,177 |
| | $ | 21,221 |
| Regulated electric | $ | 22,319 | | | $ | 21,461 | | | $ | 22,615 | |
Regulated natural gas | 1,773 |
| | 1,734 |
| | 863 |
| Regulated natural gas | 2,008 | | | 1,642 | | | 1,759 | |
Nonregulated electric and other | 651 |
| | 654 |
| | 659 |
| Nonregulated electric and other | 770 | | | 765 | | | 705 | |
Total operating revenues | 24,521 |
| | 23,565 |
| | 22,743 |
| Total operating revenues | 25,097 | | | 23,868 | | | 25,079 | |
Operating Expenses | | | | | | Operating Expenses | |
Fuel used in electric generation and purchased power | 6,831 |
| | 6,350 |
| | 6,625 |
| Fuel used in electric generation and purchased power | 6,255 | | | 6,051 | | | 6,826 | |
Cost of natural gas | 697 |
| | 632 |
| | 265 |
| Cost of natural gas | 705 | | | 460 | | | 627 | |
Operation, maintenance and other | 6,463 |
| | 5,944 |
| | 6,224 |
| Operation, maintenance and other | 6,042 | | | 5,788 | | | 6,066 | |
Depreciation and amortization | 4,074 |
| | 3,527 |
| | 3,294 |
| Depreciation and amortization | 4,990 | | | 4,705 | | | 4,548 | |
Property and other taxes | 1,280 |
| | 1,233 |
| | 1,142 |
| Property and other taxes | 1,389 | | | 1,337 | | | 1,307 | |
Impairment charges | 402 |
| | 282 |
| | 18 |
| |
Impairment of assets and other charges | | Impairment of assets and other charges | 356 | | | 984 | | | (8) | |
Total operating expenses | 19,747 |
| | 17,968 |
| | 17,568 |
| Total operating expenses | 19,737 | | | 19,325 | | | 19,366 | |
(Losses) Gains on Sales of Other Assets and Other, net | (89 | ) | | 28 |
| | 27 |
| |
Gains (Losses) on Sales of Other Assets and Other, net | | Gains (Losses) on Sales of Other Assets and Other, net | 13 | | | 10 | | | (4) | |
Operating Income | 4,685 |
| | 5,625 |
| | 5,202 |
| Operating Income | 5,373 | | | 4,553 | | | 5,709 | |
Other Income and Expenses | | | | | | Other Income and Expenses | |
Equity in earnings (losses) of unconsolidated affiliates | 83 |
| | 119 |
| | (15 | ) | Equity in earnings (losses) of unconsolidated affiliates | 28 | | | (2,005) | | | 162 | |
| Other income and expenses, net | 399 |
| | 508 |
| | 463 |
| Other income and expenses, net | 643 | | | 453 | | | 430 | |
Total other income and expenses | 482 |
| | 627 |
| | 448 |
| Total other income and expenses | 671 | | | (1,552) | | | 592 | |
Interest Expense | 2,094 |
| | 1,986 |
| | 1,916 |
| Interest Expense | 2,280 | | | 2,162 | | | 2,204 | |
Income From Continuing Operations Before Income Taxes | 3,073 |
| | 4,266 |
| | 3,734 |
| Income From Continuing Operations Before Income Taxes | 3,764 | | | 839 | | | 4,097 | |
Income Tax Expense From Continuing Operations | 448 |
| | 1,196 |
| | 1,156 |
| |
Income Tax Expense (Benefit) From Continuing Operations | | Income Tax Expense (Benefit) From Continuing Operations | 192 | | | (236) | | | 519 | |
Income From Continuing Operations | 2,625 |
| | 3,070 |
| | 2,578 |
| Income From Continuing Operations | 3,572 | | | 1,075 | | | 3,578 | |
Income (Loss) From Discontinued Operations, net of tax | 19 |
| | (6 | ) | | (408 | ) | Income (Loss) From Discontinued Operations, net of tax | 7 | | | 7 | | | (7) | |
Net Income | 2,644 |
| | 3,064 |
| | 2,170 |
| Net Income | 3,579 | | | 1,082 | | | 3,571 | |
Less: Net (Loss) Income Attributable to Noncontrolling Interests | (22 | ) | | 5 |
| | 18 |
| |
Add: Net Loss Attributable to Noncontrolling Interests | | Add: Net Loss Attributable to Noncontrolling Interests | 329 | | | 295 | | | 177 | |
Net Income Attributable to Duke Energy Corporation | $ | 2,666 |
| | $ | 3,059 |
| | $ | 2,152 |
| Net Income Attributable to Duke Energy Corporation | 3,908 | | | 1,377 | | | 3,748 | |
Less: Preferred Dividends | | Less: Preferred Dividends | 106 | | | 107 | | | 41 | |
Net Income Available to Duke Energy Corporation Common Stockholders | | Net Income Available to Duke Energy Corporation Common Stockholders | $ | 3,802 | | | $ | 1,270 | | | $ | 3,707 | |
| | | | | | |
Earnings Per Share – Basic and Diluted | | | | | | Earnings Per Share – Basic and Diluted | |
Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | |
Basic | $ | 3.73 |
| | $ | 4.37 |
| | $ | 3.71 |
| |
Diluted | $ | 3.73 |
| | $ | 4.37 |
| | $ | 3.71 |
| |
Income from continuing operations available to Duke Energy Corporation common stockholders | | Income from continuing operations available to Duke Energy Corporation common stockholders | |
Basic and Diluted | | Basic and Diluted | $ | 4.93 | | | $ | 1.71 | | | $ | 5.07 | |
| Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders |
| | | | | Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders | |
Basic | $ | 0.03 |
| | $ | (0.01 | ) | | $ | (0.60 | ) | |
Diluted | $ | 0.03 |
| | $ | (0.01 | ) | | $ | (0.60 | ) | |
Net income attributable to Duke Energy Corporation common stockholders |
| | | | | |
Basic | $ | 3.76 |
| | $ | 4.36 |
| | $ | 3.11 |
| |
Diluted | $ | 3.76 |
| | $ | 4.36 |
| | $ | 3.11 |
| |
Basic and Diluted | | Basic and Diluted | $ | 0.01 | | | $ | 0.01 | | | $ | (0.01) | |
| Net income available to Duke Energy Corporation common stockholders | | Net income available to Duke Energy Corporation common stockholders | |
Basic and Diluted | | Basic and Diluted | $ | 4.94 | | | $ | 1.72 | | | $ | 5.06 | |
| Weighted average shares outstanding | | | | | | Weighted average shares outstanding | |
Basic | 708 |
| | 700 |
| | 691 |
| Basic | 769 | | | 737 | | | 729 | |
Diluted | 708 |
| | 700 |
| | 691 |
| Diluted | 769 | | | 738 | | | 729 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Net Income | $ | 2,644 |
| | $ | 3,064 |
| | $ | 2,170 |
| Net Income | $ | 3,579 | | | $ | 1,082 | | | $ | 3,571 | |
Other Comprehensive (Loss) Income, net of tax | | | | | | |
Foreign currency translation adjustments | — |
| | — |
| | 694 |
| |
Other Comprehensive Income (Loss), net of tax(a) | | Other Comprehensive Income (Loss), net of tax(a) | |
| Pension and OPEB adjustments | (6 | ) | | 3 |
| | (11 | ) | Pension and OPEB adjustments | 7 | | | 6 | | | 9 | |
Net unrealized (losses) gains on cash flow hedges | (10 | ) | | 2 |
| | 17 |
| |
Net unrealized losses on cash flow hedges | | Net unrealized losses on cash flow hedges | (68) | | | (138) | | | (47) | |
Reclassification into earnings from cash flow hedges | 6 |
| | 8 |
| | 13 |
| Reclassification into earnings from cash flow hedges | 13 | | | 11 | | | 6 | |
Unrealized (losses) gains on available-for-sale securities | (3 | ) | | 13 |
| | 2 |
| Unrealized (losses) gains on available-for-sale securities | (8) | | | 3 | | | 8 | |
Other Comprehensive (Loss) Income, net of tax | (13 | ) | | 26 |
| | 715 |
| |
| Other Comprehensive Loss, net of tax | | Other Comprehensive Loss, net of tax | (56) | | | (118) | | | (24) | |
Comprehensive Income | 2,631 |
| | 3,090 |
| | 2,885 |
| Comprehensive Income | 3,523 | | | 964 | | | 3,547 | |
Less: Comprehensive (Loss) Income Attributable to Noncontrolling Interests | (22 | ) | | 5 |
| | 20 |
| |
Add: Comprehensive Loss Attributable to Noncontrolling Interests | | Add: Comprehensive Loss Attributable to Noncontrolling Interests | 319 | | | 306 | | | 177 | |
Comprehensive Income Attributable to Duke Energy Corporation | $ | 2,653 |
| | $ | 3,085 |
| | $ | 2,865 |
| Comprehensive Income Attributable to Duke Energy Corporation | 3,842 | | | 1,270 | | | 3,724 | |
Less: Preferred Dividends | | Less: Preferred Dividends | 106 | | | 107 | | | 41 | |
Comprehensive Income Available to Duke Energy Corporation Common Stockholders | | Comprehensive Income Available to Duke Energy Corporation Common Stockholders | $ | 3,736 | | | $ | 1,163 | | | $ | 3,683 | |
(a) Net of income tax impacts of approximately $17 million and $35 million for the years ended December 31, 2021, and 2020, respectively. Tax impacts are immaterial for other periods presented.
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS | | | December 31, | | December 31, |
(in millions) | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 |
ASSETS | | | | ASSETS | |
Current Assets | | | | Current Assets | |
Cash and cash equivalents | $ | 442 |
| | $ | 358 |
| Cash and cash equivalents | $ | 343 | | | $ | 259 | |
Receivables (net of allowance for doubtful accounts of $16 at 2018 and $14 at 2017) | 962 |
| | 779 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $55 at 2018 and $54 at 2017) | 2,172 |
| | 1,995 |
| |
| Receivables (net of allowance for doubtful accounts of $46 at 2021 and $29 at 2020) | | Receivables (net of allowance for doubtful accounts of $46 at 2021 and $29 at 2020) | 1,173 | | | 1,009 | |
Receivables of VIEs (net of allowance for doubtful accounts of $76 at 2021 and $117 at 2020) | | Receivables of VIEs (net of allowance for doubtful accounts of $76 at 2021 and $117 at 2020) | 2,437 | | | 2,144 | |
Inventory | 3,084 |
|
| 3,250 |
| Inventory | 3,199 | | | 3,167 | |
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs) | 2,005 |
| | 1,437 |
| |
Other (includes $162 at 2018 and $214 at 2017 related to VIEs) | 1,049 |
| | 634 |
| |
| Regulatory assets (includes $105 at 2021 and $53 at 2020 related to VIEs) | | Regulatory assets (includes $105 at 2021 and $53 at 2020 related to VIEs) | 2,150 | | | 1,641 | |
Other (includes $256 at 2021 and $296 at 2020 related to VIEs) | | Other (includes $256 at 2021 and $296 at 2020 related to VIEs) | 638 | | | 462 | |
Total current assets | 9,714 |
| | 8,453 |
| Total current assets | 9,940 | | | 8,682 | |
Property, Plant and Equipment | | | | Property, Plant and Equipment | |
Cost | 134,458 |
| | 127,507 |
| Cost | 161,819 | | | 155,580 | |
Accumulated depreciation and amortization | (43,126 | ) | | (41,537 | ) | Accumulated depreciation and amortization | (50,555) | | | (48,827) | |
Generation facilities to be retired, net | 362 |
| | 421 |
| |
Facilities to be retired, net | | Facilities to be retired, net | 144 | | | 29 | |
Net property, plant and equipment | 91,694 |
| | 86,391 |
| Net property, plant and equipment | 111,408 | | | 106,782 | |
Other Noncurrent Assets | | | | Other Noncurrent Assets | |
Goodwill | 19,303 |
| | 19,396 |
| Goodwill | 19,303 | | | 19,303 | |
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs) | 13,617 |
| | 12,442 |
| |
Regulatory assets (includes $1,823 at 2021 and $937 at 2020 related to VIEs) | | Regulatory assets (includes $1,823 at 2021 and $937 at 2020 related to VIEs) | 12,487 | | | 12,421 | |
Nuclear decommissioning trust funds | 6,720 |
| | 7,097 |
| Nuclear decommissioning trust funds | 10,401 | | | 9,114 | |
Operating lease right-of-use assets, net | | Operating lease right-of-use assets, net | 1,266 | | | 1,524 | |
Investments in equity method unconsolidated affiliates | 1,409 |
| | 1,175 |
| Investments in equity method unconsolidated affiliates | 970 | | | 961 | |
Other | 2,935 |
| | 2,960 |
| |
| Other (includes $92 at 2021 and $81 at 2020 related to VIEs) | | Other (includes $92 at 2021 and $81 at 2020 related to VIEs) | 3,812 | | | 3,601 | |
Total other noncurrent assets | 43,984 |
| | 43,070 |
| Total other noncurrent assets | 48,239 | | | 46,924 | |
Total Assets | $ | 145,392 |
| | $ | 137,914 |
| Total Assets | $ | 169,587 | | | $ | 162,388 | |
LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | |
Current Liabilities | | | | Current Liabilities | |
Accounts payable | $ | 3,487 |
| | $ | 3,043 |
| Accounts payable | $ | 3,629 | | | $ | 3,144 | |
Notes payable and commercial paper | 3,410 |
| | 2,163 |
| Notes payable and commercial paper | 3,304 | | | 2,873 | |
Taxes accrued | 577 |
| | 551 |
| Taxes accrued | 749 | | | 482 | |
Interest accrued | 559 |
| | 525 |
| Interest accrued | 533 | | | 537 | |
Current maturities of long-term debt (includes $227 at 2018 and $225 at 2017 related to VIEs) | 3,406 |
| | 3,244 |
| |
Current maturities of long-term debt (includes $243 at 2021 and $472 at 2020 related to VIEs) | | Current maturities of long-term debt (includes $243 at 2021 and $472 at 2020 related to VIEs) | 3,387 | | | 4,238 | |
| Asset retirement obligations | 919 |
| | 689 |
| Asset retirement obligations | 647 | | | 718 | |
Regulatory liabilities | 598 |
| | 402 |
| Regulatory liabilities | 1,211 | | | 1,377 | |
Other | 2,085 |
| | 1,865 |
| Other | 2,471 | | | 2,936 | |
Total current liabilities | 15,041 |
| | 12,482 |
| Total current liabilities | 15,931 | | | 16,305 | |
Long-Term Debt (includes $3,998 at 2018 and $4,306 at 2017 related to VIEs) | 51,123 |
| | 49,035 |
| |
Long-Term Debt (includes $4,854 at 2021 and $3,535 at 2020 related to VIEs) | | Long-Term Debt (includes $4,854 at 2021 and $3,535 at 2020 related to VIEs) | 60,448 | | | 55,625 | |
Other Noncurrent Liabilities | | | | Other Noncurrent Liabilities | |
Deferred income taxes | 7,806 |
| | 6,621 |
| Deferred income taxes | 9,379 | | | 9,244 | |
Asset retirement obligations | 9,548 |
| | 9,486 |
| Asset retirement obligations | 12,129 | | | 12,286 | |
Regulatory liabilities | 14,834 |
| | 15,330 |
| Regulatory liabilities | 16,152 | | | 15,029 | |
Operating lease liabilities | | Operating lease liabilities | 1,074 | | | 1,340 | |
Accrued pension and other post-retirement benefit costs | 988 |
| | 1,103 |
| Accrued pension and other post-retirement benefit costs | 855 | | | 969 | |
Investment tax credits | 568 |
| | 539 |
| Investment tax credits | 833 | | | 687 | |
Other (includes $212 at 2018 and $241 at 2017 related to VIEs) | 1,650 |
| | 1,581 |
| |
| Other (includes $319 at 2021 and $316 at 2020 related to VIEs) | | Other (includes $319 at 2021 and $316 at 2020 related to VIEs) | 1,650 | | | 1,719 | |
Total other noncurrent liabilities | 35,394 |
| | 34,660 |
| Total other noncurrent liabilities | 42,072 | | | 41,274 | |
Commitments and Contingencies | | | | Commitments and Contingencies | 0 | | 0 |
| Equity | | | | Equity | |
Common stock, $0.001 par value, 2 billion shares authorized; 727 million shares outstanding at 2018 and 700 million shares outstanding at 2017 | 1 |
| | 1 |
| |
Preferred stock, Series A, $0.001 par value, 40 million depositary shares authorized and outstanding at 2021 and 2020 | | 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 | | 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 | | Common stock, $0.001 par value, 2 billion shares authorized; 769 million shares outstanding at 2021 and 2020 | 1 | | | 1 | |
Additional paid-in capital | 40,795 |
| | 38,792 |
| Additional paid-in capital | 44,371 | | | 43,767 | |
Retained earnings | 3,113 |
| | 3,013 |
| Retained earnings | 3,265 | | | 2,471 | |
Accumulated other comprehensive loss | (92 | ) | | (67 | ) | Accumulated other comprehensive loss | (303) | | | (237) | |
Total Duke Energy Corporation stockholders' equity | 43,817 |
| | 41,739 |
| Total Duke Energy Corporation stockholders' equity | 49,296 | | | 47,964 | |
Noncontrolling interests | 17 |
| | (2 | ) | Noncontrolling interests | 1,840 | | | 1,220 | |
Total equity | 43,834 |
| | 41,737 |
| Total equity | 51,136 | | | 49,184 | |
Total Liabilities and Equity | $ | 145,392 |
| | $ | 137,914 |
| Total Liabilities and Equity | $ | 169,587 | | | $ | 162,388 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES | |
Net income | $ | 2,644 |
| | $ | 3,064 |
| | $ | 2,170 |
| Net income | $ | 3,579 | | | $ | 1,082 | | | $ | 3,571 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation, amortization and accretion (including amortization of nuclear fuel) | 4,696 |
| | 4,046 |
| | 3,880 |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 5,663 | | | 5,486 | | | 5,176 | |
Equity in (earnings) losses of unconsolidated affiliates | | Equity in (earnings) losses of unconsolidated affiliates | (28) | | | 2,005 | | | (162) | |
Equity component of AFUDC | (221 | ) | | (237 | ) | | (200 | ) | Equity component of AFUDC | (171) | | | (154) | | | (139) | |
Losses (Gains) on sales of other assets | 88 |
| | (33 | ) | | 477 |
| |
Impairment charges | 402 |
| | 282 |
| | 212 |
| |
| Impairment of assets and other charges | | Impairment of assets and other charges | 356 | | | 984 | | | (8) | |
Deferred income taxes | 1,079 |
| | 1,433 |
| | 900 |
| Deferred income taxes | 191 | | | 54 | | | 806 | |
Equity in (earnings) losses of unconsolidated affiliates | (83 | ) | | (119 | ) | | 15 |
| |
Accrued pension and other post-retirement benefit costs | 61 |
| | 8 |
| | 21 |
| |
Contributions to qualified pension plans | (141 | ) | | (19 | ) | | (155 | ) | |
Payments for asset retirement obligations | (533 | ) | | (571 | ) | | (608 | ) | Payments for asset retirement obligations | (540) | | | (610) | | | (746) | |
Payment for the disposal of other assets | (105 | ) | | — |
| | — |
| |
Other rate case adjustments | 37 |
| | — |
| | — |
| |
Provision for rate refunds | 425 |
| | — |
| | — |
| Provision for rate refunds | (70) | | | (22) | | | 60 | |
Refund of AMT credit carryforwards | | Refund of AMT credit carryforwards | — | | | 572 | | | 573 | |
(Increase) decrease in | | | | | | (Increase) decrease in | |
Net realized and unrealized mark-to-market and hedging transactions | 22 |
| | 18 |
| | 34 |
| Net realized and unrealized mark-to-market and hedging transactions | 50 | | | 63 | | | (48) | |
Receivables | (345 | ) | | (83 | ) | | (372 | ) | Receivables | (297) | | | (56) | | | 78 | |
Inventory | 156 |
| | 268 |
| | 272 |
| Inventory | (34) | | | 66 | | | (122) | |
Other current assets | (721 | ) | | (400 | ) | | (174 | ) | Other current assets | (1,136) | | | 205 | | | 10 | |
Increase (decrease) in | | | | | | Increase (decrease) in | |
Accounts payable | 479 |
| | (204 | ) | | 296 |
| Accounts payable | 249 | | | (21) | | | (164) | |
Taxes accrued | 23 |
| | 149 |
| | 236 |
| Taxes accrued | 284 | | | 117 | | | (224) | |
Other current liabilities | 270 |
| | (482 | ) | | 182 |
| Other current liabilities | (13) | | | (65) | | | 172 | |
Other assets | (1,008 | ) | | (436 | ) | | (186 | ) | Other assets | 112 | | | (408) | | | (555) | |
Other liabilities | (39 | ) | | (60 | ) | | (137 | ) | Other liabilities | 95 | | | (442) | | | (69) | |
Net cash provided by operating activities | 7,186 |
|
| 6,624 |
|
| 6,863 |
| Net cash provided by operating activities | 8,290 | | | 8,856 | | | 8,209 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | |
Capital expenditures | (9,389 | ) | | (8,052 | ) | | (7,901 | ) | Capital expenditures | (9,715) | | | (9,907) | | | (11,122) | |
Contributions to equity method investments | (416 | ) | | (414 | ) | | (307 | ) | Contributions to equity method investments | (81) | | | (370) | | | (324) | |
Acquisitions, net of cash acquired | — |
| | (13 | ) | | (4,778 | ) | |
| Return of investment capital | 137 |
| | 281 |
| | 1 |
| Return of investment capital | 44 | | | 133 | | | 11 | |
Purchases of debt and equity securities | (3,762 | ) | | (4,071 | ) | | (5,153 | ) | Purchases of debt and equity securities | (6,098) | | | (8,011) | | | (3,348) | |
Proceeds from sales and maturities of debt and equity securities | 3,747 |
| | 4,098 |
| | 5,236 |
| Proceeds from sales and maturities of debt and equity securities | 6,103 | | | 7,949 | | | 3,343 | |
Proceeds from the sales of discontinued operations and other assets, net of cash divested | 41 |
| | — |
| | 1,418 |
| |
| Disbursements to canceled equity method investments | | Disbursements to canceled equity method investments | (855) | | | — | | | — | |
Other | (418 | ) | | (271 | ) | | (44 | ) | Other | (333) | | | (398) | | | (517) | |
Net cash used in investing activities | (10,060 | ) |
| (8,442 | ) |
| (11,528 | ) | Net cash used in investing activities | (10,935) | | | (10,604) | | | (11,957) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | |
Proceeds from the: | | | | | | Proceeds from the: | |
Issuance of long-term debt | 5,299 |
| | 6,909 |
| | 9,238 |
| Issuance of long-term debt | 9,052 | | | 6,330 | | | 7,091 | |
Issuance of preferred stock | | Issuance of preferred stock | — | | | — | | | 1,962 | |
Issuance of common stock | 1,838 |
| | — |
| | 731 |
| Issuance of common stock | 5 | | | 2,745 | | | 384 | |
Payments for the redemption of long-term debt | (2,906 | ) | | (2,316 | ) | | (1,923 | ) | Payments for the redemption of long-term debt | (5,294) | | | (4,506) | | | (3,476) | |
Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 472 |
| | 319 |
| | 2,081 |
| Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 332 | | | 3,009 | | | 397 | |
Payments for the redemption of short-term debt with original maturities greater than 90 days | (282 | ) | | (272 | ) | | (2,166 | ) | Payments for the redemption of short-term debt with original maturities greater than 90 days | (997) | | | (2,147) | | | (479) | |
Notes payable and commercial paper | 981 |
| | (409 | ) | | (1,362 | ) | Notes payable and commercial paper | 1,144 | | | (1,181) | | | (298) | |
| Contributions from noncontrolling interests | | Contributions from noncontrolling interests | 1,575 | | | 426 | | | 843 | |
Dividends paid | (2,471 | ) | | (2,450 | ) | | (2,332 | ) | Dividends paid | (3,114) | | | (2,812) | | | (2,668) | |
| Other | 29 |
| | 1 |
| | (16 | ) | Other | (94) | | | (133) | | | (26) | |
Net cash provided by financing activities | 2,960 |
|
| 1,782 |
|
| 4,251 |
| Net cash provided by financing activities | 2,609 | | | 1,731 | | | 3,730 | |
Changes in cash and cash equivalents included in assets held for sale | — |
| | — |
| | 474 |
| |
Net increase (decrease) in cash, cash equivalents, and restricted cash | 86 |
|
| (36 | ) |
| 60 |
| |
Cash, cash equivalents, and restricted cash at beginning of period | 505 |
| | 541 |
| | 481 |
| |
Cash, cash equivalents, and restricted cash at end of period | $ | 591 |
|
| $ | 505 |
|
| $ | 541 |
| |
| Net decrease in cash, cash equivalents and restricted cash | | Net decrease in cash, cash equivalents and restricted cash | (36) | | | (17) | | | (18) | |
Cash, cash equivalents and restricted cash at beginning of period | | Cash, cash equivalents and restricted cash at beginning of period | 556 | | | 573 | | | 591 | |
Cash, cash equivalents and restricted cash at end of period | | Cash, cash equivalents and restricted cash at end of period | $ | 520 | | | $ | 556 | | | $ | 573 | |
Supplemental Disclosures: | | | | | | Supplemental Disclosures: | |
Cash paid for interest, net of amount capitalized | $ | 2,086 |
| | $ | 1,963 |
| | $ | 1,794 |
| Cash paid for interest, net of amount capitalized | $ | 2,248 | | | $ | 2,186 | | | $ | 2,195 | |
Cash (received from) paid for income taxes | (266 | ) | | 4 |
| | 229 |
| |
Cash received from income taxes | | Cash received from income taxes | (3) | | | (585) | | | (651) | |
Significant non-cash transactions: | | | | | | Significant non-cash transactions: | |
Accrued capital expenditures | 1,112 |
| | 1,032 |
| | 1,000 |
| Accrued capital expenditures | 1,325 | | | 1,116 | | | 1,356 | |
Non-cash dividends | 107 |
| | — |
| | — |
| Non-cash dividends | — | | | 110 | | | 108 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Income (Loss) | | | | | | |
| | | | | | | | | | | | | | 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, 2018 | $ | — | | 727 | | | $ | 1 | | | $ | 40,795 | | | $ | 3,113 | | | | | $ | (14) | | | $ | (3) | | | $ | (75) | | | $ | 43,817 | | | $ | 17 | | | $ | 43,834 | |
Net income (loss) | — | | — | | | — | | | — | | | 3,707 | | | | | — | | | — | | | — | | | 3,707 | | | (177) | | | 3,530 | |
Other comprehensive (loss) income | — | | — | | | — | | | — | | | — | | | | | (41) | | | 8 | | | 9 | | | (24) | | | — | | | (24) | |
Preferred stock, Series A, issuances, net of issuance costs(a) | 973 | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 973 | | | — | | | 973 | |
Preferred stock, Series B, issuances, net of issuance costs(a) | 989 | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 989 | | | — | | | 989 | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | 6 | | | — | | | 552 | | | — | | | | | — | | | — | | | — | | | 552 | | | — | | | 552 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (2,735) | | | | | — | | | — | | | — | | | (2,735) | | | — | | | (2,735) | |
Sale of noncontrolling interest(b) | — | | — | | | — | | | (466) | | | — | | | | | 10 | | | — | | | — | | | (456) | | | 863 | | | 407 | |
Contribution from noncontrolling interest (f) | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | 428 | | | 428 | |
Distributions to noncontrolling interest in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (4) | | | (4) | |
Other(c) | — | | — | | | — | | | — | | | 23 | | | | | (6) | | | (2) | | | (16) | | | (1) | | | 2 | | | 1 | |
Balance at December 31, 2019 | $ | 1,962 | | 733 | | | $ | 1 | | | $ | 40,881 | | | $ | 4,108 | | | | | $ | (51) | | | $ | 3 | | | $ | (82) | | | $ | 46,822 | | | $ | 1,129 | | | $ | 47,951 | |
Net income | — | | — | | | — | | | — | | | 1,270 | | | | | — | | | — | | | — | | | 1,270 | | | (295) | | | 975 | |
Other comprehensive (loss) Income | — | | — | | | — | | | — | | | — | | | | | (116) | | | 3 | | | 6 | | | (107) | | | (11) | | | (118) | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | 36 | | | — | | | 2,902 | | | — | | | | | — | | | — | | | — | | | 2,902 | | | — | | | 2,902 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (2,815) | | | | | — | | | — | | | — | | | (2,815) | | | — | | | (2,815) | |
| | | | | | | | | | | | | | | | | | | | | | |
Contribution from noncontrolling interest(f) | — | | — | | | — | | | (17) | | | — | | | | | — | | | — | | | — | | | (17) | | | 426 | | | 409 | |
Distributions to noncontrolling interest in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (30) | | | (30) | |
Other(d) | — | | — | | | — | | | 1 | | | (92) | | | | | — | | | — | | | — | | | (91) | | | 1 | | | (90) | |
Balance at December 31, 2020 | $ | 1,962 | | 769 | | | $ | 1 | | | $ | 43,767 | | | $ | 2,471 | | | | | $ | (167) | | | $ | 6 | | | $ | (76) | | | $ | 47,964 | | | $ | 1,220 | | | $ | 49,184 | |
Net income | — | | — | | | — | | | — | | | 3,802 | | | | | — | | | — | | | — | | | 3,802 | | | (329) | | | 3,473 | |
Other comprehensive (loss) income | — | | — | | | — | | | — | | | — | | | | | (65) | | | (8) | | | 7 | | | (66) | | | 10 | | | (56) | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | — | | | — | | | 68 | | | — | | | | | — | | | — | | | — | | | 68 | | | — | | | 68 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (3,008) | | | | | — | | | — | | | — | | | (3,008) | | | — | | | (3,008) | |
Sale of noncontrolling interest(e) | — | | — | | | — | | | 545 | | | — | | | | | — | | | — | | | — | | | 545 | | | 454 | | | 999 | |
Contribution from noncontrolling interest, net of transaction costs(f) | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | 550 | | | 550 | |
Distributions to noncontrolling interests in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (66) | | | (66) | |
Other | — | | — | | | — | | | (9) | | | — | | | | | — | | | — | | | — | | | (9) | | | 1 | | | (8) | |
Balance at December 31, 2021 | $ | 1,962 | | 769 | | | $ | 1 | | | $ | 44,371 | | | $ | 3,265 | | | | | $ | (232) | | | $ | (2) | | | $ | (69) | | | $ | 49,296 | | | $ | 1,840 | | | $ | 51,136 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Loss | | | | | | |
| | | | | | | | | | | | | Net Unrealized |
| | | | Total |
| | | | |
| | | | | | | | | Foreign |
| | Net |
| | Gains (Losses) |
| | | | 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 | — |
| | — |
| | — |
| | 2,152 |
| | — |
| | — |
| | — |
| | — |
| | 2,152 |
| | 18 |
| | 2,170 |
|
Other comprehensive income (loss)(a) | — |
| | — |
| | — |
| | — |
| | 692 |
| | 30 |
| | 2 |
| | (11 | ) | | 713 |
| | 2 |
| | 715 |
|
Common stock issuances, including dividend reinvestment and employee benefits | 12 |
| | — |
| | 773 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 773 |
| | — |
| | 773 |
|
Common stock dividends | — |
| | — |
| | — |
| | (2,332 | ) | | — |
| | — |
| | — |
| | — |
| | (2,332 | ) | | — |
| | (2,332 | ) |
Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (6 | ) | | (6 | ) |
Other(b) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (50 | ) | | (50 | ) |
Balance at December 31, 2016 | 700 |
|
| $ | 1 |
|
| $ | 38,741 |
|
| $ | 2,384 |
|
| $ | — |
|
| $ | (20 | ) |
| $ | (1 | ) |
| $ | (72 | ) |
| $ | 41,033 |
|
| $ | 8 |
|
| $ | 41,041 |
|
Net income | — |
| | — |
| | — |
| | 3,059 |
| | — |
| | — |
| | — |
| | — |
| | 3,059 |
| | 5 |
| | 3,064 |
|
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 10 |
| | 13 |
| | 3 |
| | 26 |
| | — |
| | 26 |
|
Common stock issuances, including dividend reinvestment and employee benefits | — |
| | — |
| | 51 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 51 |
| | — |
| | 51 |
|
Common stock dividends | — |
| | — |
| | — |
| | (2,450 | ) | | — |
| | — |
| | — |
| | — |
| | (2,450 | ) | | — |
| | (2,450 | ) |
Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
Other(c) | — |
| | — |
| | — |
| | 20 |
| | — |
| | — |
| | — |
| | — |
| | 20 |
| | (13 | ) | | 7 |
|
Balance at December 31, 2017 | 700 |
|
| $ | 1 |
|
| $ | 38,792 |
|
| $ | 3,013 |
|
| $ | — |
|
| $ | (10 | ) |
| $ | 12 |
|
| $ | (69 | ) |
| $ | 41,739 |
|
| $ | (2 | ) |
| $ | 41,737 |
|
Net income | — |
| | — |
| | — |
| | 2,666 |
| | — |
| | — |
| | — |
| | — |
| | 2,666 |
| | (22 | ) | | 2,644 |
|
Other comprehensive (loss) income | — |
| | — |
| | — |
| | — |
| | — |
| | (4 | ) | | (3 | ) | | (6 | ) | | (13 | ) | | — |
| | (13 | ) |
Common stock issuances, including dividend reinvestment and employee benefits | 27 |
| | — |
| | 2,003 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2,003 |
| | — |
| | 2,003 |
|
Common stock dividends | — |
| | — |
| | — |
| | (2,578 | ) | | — |
| | — |
| | — |
| | — |
| | (2,578 | ) | | — |
| | (2,578 | ) |
Distributions to noncontrolling interests in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Other(d) | — |
| | — |
| | — |
| | 12 |
| | — |
| | — |
| | (12 | ) | | — |
| | — |
| | 42 |
| | 42 |
|
Balance at December 31, 2018 | 727 |
| | $ | 1 |
| | $ | 40,795 |
| | $ | 3,113 |
| | $ | — |
| | $ | (14 | ) | | $ | (3 | ) | | $ | (75 | ) | | $ | 43,817 |
| | $ | 17 |
| | $ | 43,834 |
|
(a) Duke Energy issued 40 million depositary shares of preferred stock, Series A, in the first quarter of 2019 and 1 million shares of preferred stock, Series B, in the third quarter of 2019. | |
(a) | Foreign Currency Translation Adjustments amount includes $620 million of cumulative adjustment realized as a result of the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements. |
| |
(b) | Noncontrolling Interests amount is primarily related to the sale of the Latin American generation business. See Note 2 to the Consolidated Financial Statements. |
| |
(c) | Retained Earnings relates to a cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the associated income taxes. See Note 1 to the Consolidated Financial Statements for additional information. Noncontrolling Interests relates to the purchase of remaining interest in REC Solar. |
| |
(d) | Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. Amount in Noncontrolling Interests primarily relates to tax equity financing activity in the Commercial Renewables segment. |
(b) Relates to the sale of a noncontrolling interest in the Commercial Renewables segment. See Note 1 for additional discussion of the transaction.
(c) Amounts in Retained Earnings and AOCI primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
(d) 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.
(e) Relates to the sale of a noncontrolling interest in Duke Energy Indiana. See Note 1 for additional discussion.
(f) Relates to tax equity financing activity in the Commercial Renewables segment.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Carolinas, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Carolinas, LLC and subsidiaries (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission and by the South Carolina Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $3.5 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 201924, 2022
We have served as the Company's auditor since 1947.
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 7,300 |
| | $ | 7,302 |
| | $ | 7,322 |
| Operating Revenues | $ | 7,102 | | | $ | 7,015 | | | $ | 7,395 | |
Operating Expenses | | | | | | Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,821 |
|
| 1,822 |
| | 1,797 |
| Fuel used in electric generation and purchased power | 1,601 | | | 1,682 | | | 1,804 | |
Operation, maintenance and other | 2,130 |
|
| 2,021 |
| | 2,158 |
| Operation, maintenance and other | 1,833 | | | 1,743 | | | 1,868 | |
Depreciation and amortization | 1,201 |
|
| 1,090 |
| | 1,075 |
| Depreciation and amortization | 1,468 | | | 1,462 | | | 1,388 | |
Property and other taxes | 295 |
|
| 281 |
| | 276 |
| Property and other taxes | 320 | | | 299 | | | 292 | |
Impairment charges | 192 |
|
| — |
| | 1 |
| |
Impairment of assets and other charges | | Impairment of assets and other charges | 227 | | | 476 | | | 17 | |
Total operating expenses | 5,639 |
| | 5,214 |
| | 5,307 |
| Total operating expenses | 5,449 | | | 5,662 | | | 5,369 | |
(Losses) Gains on Sales of Other Assets and Other, net | (1 | ) | | 1 |
| | (5 | ) | |
Gains on Sales of Other Assets and Other, net | | Gains on Sales of Other Assets and Other, net | 2 | | | 1 | | | — | |
Operating Income | 1,660 |
| | 2,089 |
| | 2,010 |
| Operating Income | 1,655 | | | 1,354 | | | 2,026 | |
Other Income and Expenses, net | 153 |
| | 199 |
| | 214 |
| Other Income and Expenses, net | 270 | | | 177 | | | 151 | |
Interest Expense | 439 |
| | 422 |
| | 424 |
| Interest Expense | 538 | | | 487 | | | 463 | |
Income Before Income Taxes | 1,374 |
| | 1,866 |
| | 1,800 |
| Income Before Income Taxes | 1,387 | | | 1,044 | | | 1,714 | |
Income Tax Expense | 303 |
| | 652 |
| | 634 |
| Income Tax Expense | 51 | | | 88 | | | 311 | |
Net Income | $ | 1,071 |
| | $ | 1,214 |
| | $ | 1,166 |
| Net Income | $ | 1,336 | | | $ | 956 | | | $ | 1,403 | |
Other Comprehensive Income, net of tax | | | | | | Other Comprehensive Income, net of tax | | | | | |
Reclassification into earnings from cash flow hedges | 1 |
| | 2 |
| | 2 |
| |
| Net unrealized gain on cash flow hedges | | Net unrealized gain on cash flow hedges | 1 | | | — | | | — | |
Other Comprehensive Income, net of tax | 1 |
| | 2 |
| | 2 |
| Other Comprehensive Income, net of tax | 1 | | | — | | | — | |
Comprehensive Income | $ | 1,072 |
| | $ | 1,216 |
| | $ | 1,168 |
| Comprehensive Income | $ | 1,337 | | | $ | 956 | | | $ | 1,403 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED BALANCE SHEETS | | | | December 31, | | | December 31, |
(in millions) | | 2018 |
| | 2017 |
| (in millions) | | 2021 | | 2020 |
ASSETS | | | | | ASSETS | | | | |
Current Assets | | | | | Current Assets | | | | |
Cash and cash equivalents | | $ | 33 |
| | $ | 16 |
| Cash and cash equivalents | | $ | 7 | | | $ | 21 | |
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017) | | 219 |
| | 200 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2018 and 2017) | | 699 |
| | 640 |
| |
Receivables (net of allowance for doubtful accounts of $1 at 2021 and 2020) | | Receivables (net of allowance for doubtful accounts of $1 at 2021 and 2020) | | 300 | | | 247 | |
Receivables of VIEs (net of allowance for doubtful accounts of $41 at 2021 and $22 at 2020) | | Receivables of VIEs (net of allowance for doubtful accounts of $41 at 2021 and $22 at 2020) | | 844 | | | 696 | |
Receivables from affiliated companies | | 182 |
| | 95 |
| Receivables from affiliated companies | | 190 | | | 124 | |
| Inventory | | 948 |
|
| 971 |
| Inventory | | 1,026 | | | 1,010 | |
Regulatory assets | | 520 |
| | 299 |
| |
Regulatory assets (includes $12 at 2021 related to VIEs) | | Regulatory assets (includes $12 at 2021 related to VIEs) | | 544 | | | 473 | |
Other | | 72 |
| | 19 |
| Other | | 95 | | | 20 | |
Total current assets | | 2,673 |
| | 2,240 |
| Total current assets | | 3,006 | | | 2,591 | |
Property, Plant and Equipment | | | | | Property, Plant and Equipment | | | | |
Cost | | 44,741 |
| | 42,939 |
| Cost | | 51,874 | | | 50,640 | |
Accumulated depreciation and amortization | | (15,496 | ) | | (15,063 | ) | Accumulated depreciation and amortization | | (17,854) | | | (17,453) | |
Facilities to be retired, net | | Facilities to be retired, net | | 102 | | | — | |
Net property, plant and equipment | | 29,245 |
| | 27,876 |
| Net property, plant and equipment | | 34,122 | | | 33,187 | |
Other Noncurrent Assets | | | | | Other Noncurrent Assets | |
Regulatory assets | | 3,457 |
| | 2,853 |
| |
| Regulatory assets (includes $220 at 2021 related to VIEs) | | Regulatory assets (includes $220 at 2021 related to VIEs) | | 2,935 | | | 2,996 | |
Nuclear decommissioning trust funds | | 3,558 |
| | 3,772 |
| Nuclear decommissioning trust funds | | 5,759 | | | 4,977 | |
Operating lease right-of-use assets, net | | Operating lease right-of-use assets, net | | 92 | | | 110 | |
Other | | 1,027 |
| | 979 |
| Other | | 1,248 | | | 1,187 | |
Total other noncurrent assets | | 8,042 |
| | 7,604 |
| Total other noncurrent assets | | 10,034 | | | 9,270 | |
Total Assets | | $ | 39,960 |
| | $ | 37,720 |
| Total Assets | | $ | 47,162 | | | $ | 45,048 | |
LIABILITIES AND EQUITY | | | | | LIABILITIES AND EQUITY | | | | |
Current Liabilities | | | | | Current Liabilities | | | | |
Accounts payable | | $ | 988 |
| | $ | 842 |
| Accounts payable | | $ | 988 | | | $ | 1,000 | |
Accounts payable to affiliated companies | | 230 |
| | 209 |
| Accounts payable to affiliated companies | | 266 | | | 199 | |
Notes payable to affiliated companies | | 439 |
| | 104 |
| Notes payable to affiliated companies | | 226 | | | 506 | |
Taxes accrued | | 171 |
| | 234 |
| Taxes accrued | | 274 | | | 76 | |
Interest accrued | | 102 |
| | 108 |
| Interest accrued | | 125 | | | 117 | |
Current maturities of long-term debt | | 6 |
| | 1,205 |
| |
Current maturities of long-term debt (includes $5 at 2021 related to VIEs) | | Current maturities of long-term debt (includes $5 at 2021 related to VIEs) | | 362 | | | 506 | |
Asset retirement obligations | | 290 |
| | 337 |
| Asset retirement obligations | | 249 | | | 264 | |
Regulatory liabilities | | 199 |
| | 126 |
| Regulatory liabilities | | 487 | | | 473 | |
Other | | 571 |
| | 486 |
| Other | | 546 | | | 546 | |
Total current liabilities | | 2,996 |
| | 3,651 |
| Total current liabilities | | 3,523 | | | 3,687 | |
Long-Term Debt | | 10,633 |
| | 8,598 |
| |
Long-Term Debt (includes $703 at 2021 related to VIEs) | | Long-Term Debt (includes $703 at 2021 related to VIEs) | | 12,595 | | | 11,412 | |
Long-Term Debt Payable to Affiliated Companies | | 300 |
| | 300 |
| Long-Term Debt Payable to Affiliated Companies | | 318 | | | 300 | |
Other Noncurrent Liabilities | | | | | Other Noncurrent Liabilities | | | | |
Deferred income taxes | | 3,689 |
| | 3,413 |
| Deferred income taxes | | 3,634 | | | 3,842 | |
Asset retirement obligations | | 3,659 |
| | 3,273 |
| Asset retirement obligations | | 5,052 | | | 5,086 | |
Regulatory liabilities | | 5,999 |
| | 6,231 |
| Regulatory liabilities | | 7,198 | | | 6,535 | |
Operating lease liabilities | | Operating lease liabilities | | 78 | | | 97 | |
Accrued pension and other post-retirement benefit costs | | 99 |
| | 95 |
| Accrued pension and other post-retirement benefit costs | | 50 | | | 73 | |
Investment tax credits | | 231 |
| | 232 |
| Investment tax credits | | 287 | | | 236 | |
Other | | 671 |
| | 566 |
| Other | | 536 | | | 626 | |
Total other noncurrent liabilities | | 14,348 |
| | 13,810 |
| Total other noncurrent liabilities | | 16,835 | | | 16,495 | |
Commitments and Contingencies | |
| |
| Commitments and Contingencies | | 0 | | 0 |
Equity | | | | | Equity | | | | |
Member's equity | | 11,689 |
| | 11,368 |
| Member's equity | | 13,897 | | | 13,161 | |
Accumulated other comprehensive loss | | (6 | ) | | (7 | ) | Accumulated other comprehensive loss | | (6) | | | (7) | |
Total equity | | 11,683 |
| | 11,361 |
| Total equity | | 13,891 | | | 13,154 | |
Total Liabilities and Equity | | $ | 39,960 |
| | $ | 37,720 |
| Total Liabilities and Equity | | $ | 47,162 | | | $ | 45,048 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 1,071 |
| | $ | 1,214 |
| | $ | 1,166 |
| Net income | $ | 1,336 | | | $ | 956 | | | $ | 1,403 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization (including amortization of nuclear fuel) | 1,487 |
| | 1,409 |
| | 1,382 |
| Depreciation and amortization (including amortization of nuclear fuel) | 1,743 | | | 1,731 | | | 1,671 | |
Equity component of AFUDC | (73 | ) | | (106 | ) | | (102 | ) | Equity component of AFUDC | (65) | | | (62) | | | (42) | |
Losses (Gains) on sales of other assets | 1 |
| | (1 | ) | | 5 |
| |
Impairment charges | 192 |
| | — |
| | 1 |
| |
| Impairment of assets and other charges | | Impairment of assets and other charges | 227 | | | 476 | | | 17 | |
Deferred income taxes | 305 |
| | 410 |
| | 470 |
| Deferred income taxes | (213) | | | (260) | | | 133 | |
Accrued pension and other post-retirement benefit costs | 4 |
| | (4 | ) | | 4 |
| |
Contributions to qualified pension plans | (46 | ) | | — |
| | (43 | ) | |
Payments for asset retirement obligations | (230 | ) | | (271 | ) | | (287 | ) | Payments for asset retirement obligations | (182) | | | (162) | | | (278) | |
Provision for rate refunds | 182 |
| | — |
| | — |
| Provision for rate refunds | (46) | | | (5) | | | 36 | |
(Increase) decrease in |
| | | | | (Increase) decrease in | |
Net realized and unrealized mark-to-market and hedging transactions | 2 |
| | 9 |
| | 5 |
| Net realized and unrealized mark-to-market and hedging transactions | — | | | (4) | | | (8) | |
Receivables | (86 | ) | | (9 | ) | | (76 | ) | Receivables | (99) | | | 52 | | | (21) | |
Receivables from affiliated companies | (87 | ) | | 68 |
| | (56 | ) | Receivables from affiliated companies | (66) | | | (10) | | | 68 | |
Inventory | 25 |
| | 78 |
| | 215 |
| Inventory | (16) | | | (14) | | | (48) | |
Other current assets | (161 | ) | | 7 |
| | 67 |
| Other current assets | (309) | | | 209 | | | (73) | |
Increase (decrease) in |
| | | | | Increase (decrease) in | |
Accounts payable | 168 |
| | 23 |
| | (69 | ) | Accounts payable | 5 | | | 55 | | | (50) | |
Accounts payable to affiliated companies | 21 |
| | (38 | ) | | 18 |
| Accounts payable to affiliated companies | 85 | | | (11) | | | (20) | |
Taxes accrued | (65 | ) | | 86 |
| | 187 |
| Taxes accrued | 206 | | | 30 | | | (127) | |
Other current liabilities | 89 |
| | (161 | ) | | 63 |
| Other current liabilities | (39) | | | (56) | | | 127 | |
Other assets | (179 | ) | | (49 | ) | | 20 |
| Other assets | 21 | | | (102) | | | (42) | |
Other liabilities | (90 | ) | | (31 | ) | | 6 |
| Other liabilities | 116 | | | (47) | | | (37) | |
Net cash provided by operating activities | 2,530 |
| | 2,634 |
| | 2,976 |
| Net cash provided by operating activities | 2,704 | | | 2,776 | | | 2,709 | |
CASH FLOWS FROM INVESTING ACTIVITIES |
| | | | | CASH FLOWS FROM INVESTING ACTIVITIES | |
Capital expenditures | (2,706 | ) | | (2,524 | ) | | (2,220 | ) | Capital expenditures | (2,693) | | | (2,669) | | | (2,714) | |
| Purchases of debt and equity securities | (1,810 | ) | | (2,124 | ) | | (2,832 | ) | Purchases of debt and equity securities | (3,425) | | | (1,602) | | | (1,658) | |
Proceeds from sales and maturities of debt and equity securities | 1,810 |
| | 2,128 |
| | 2,832 |
| Proceeds from sales and maturities of debt and equity securities | 3,425 | | | 1,602 | | | 1,658 | |
Notes receivable from affiliated companies | — |
| | 66 |
| | 97 |
| |
| Other | (147 | ) | | (109 | ) | | (83 | ) | Other | (177) | | | (164) | | | (204) | |
Net cash used in investing activities | (2,853 | ) | | (2,563 | ) | | (2,206 | ) | Net cash used in investing activities | (2,870) | | | (2,833) | | | (2,918) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | 1,983 |
| | 569 |
| | 1,587 |
| Proceeds from the issuance of long-term debt | 1,651 | | | 998 | | | 886 | |
Payments for the redemption of long-term debt | (1,205 | ) | | (116 | ) | | (356 | ) | Payments for the redemption of long-term debt | (617) | | | (813) | | | (6) | |
Notes payable to affiliated companies | 335 |
| | 104 |
| | — |
| Notes payable to affiliated companies | (280) | | | 477 | | | (410) | |
Distributions to parent | (750 | ) | | (625 | ) | | (2,000 | ) | Distributions to parent | (600) | | | (600) | | | (275) | |
Other | (23 | ) | | (1 | ) | | — |
| Other | (1) | | | (2) | | | (1) | |
Net cash provided by (used in) financing activities | 340 |
| | (69 | ) | | (769 | ) | |
Net increase in cash and cash equivalents | 17 |
| | 2 |
| | 1 |
| |
Cash and cash equivalents at beginning of period | 16 |
| | 14 |
| | 13 |
| |
Cash and cash equivalents at end of period | $ | 33 |
| | $ | 16 |
| | $ | 14 |
| |
Net cash provided by financing activities | | Net cash provided by financing activities | 153 | | | 60 | | | 194 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | | Net (decrease) increase in cash, cash equivalents and restricted cash | (13) | | | 3 | | | (15) | |
Cash, cash equivalents and restricted cash at beginning of period | | Cash, cash equivalents and restricted cash at beginning of period | 21 | | | 18 | | | 33 | |
Cash, cash equivalents and restricted cash at end of period | | Cash, cash equivalents and restricted cash at end of period | $ | 8 | | | $ | 21 | | | $ | 18 | |
Supplemental Disclosures: | | | | | | Supplemental Disclosures: | |
Cash paid for interest, net of amount capitalized | $ | 452 |
| | $ | 398 |
| | $ | 393 |
| Cash paid for interest, net of amount capitalized | $ | 508 | | | $ | 481 | | | $ | 433 | |
Cash paid for (received from) income taxes | 89 |
| | 193 |
| | (60 | ) | |
Cash paid for income taxes | | Cash paid for income taxes | 233 | | | 321 | | | 122 | |
Significant non-cash transactions: | | | | | | Significant non-cash transactions: | |
Accrued capital expenditures | 302 |
| | 315 |
| | 347 |
| Accrued capital expenditures | 359 | | | 365 | | | 347 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | | | | Accumulated Other | | | | Accumulated Other | |
| | | Comprehensive | | | | | | Comprehensive | | |
| | | Loss | | | | Income (Loss) | | |
| | | Net Losses |
| | | | Net Gains | | |
| | | on Cash |
| | | | (Losses) on | | |
| Member's |
| | Flow |
| | Total |
| | Member's | | Cash Flow | | | Total |
(in millions) | Equity |
| | Hedges |
| | Equity |
| (in millions) | Equity | | Hedges | | | Equity |
Balance at December 31, 2015 | $ | 11,617 |
| | $ | (11 | ) | | $ | 11,606 |
| |
Balance at December 31, 2018 | | Balance at December 31, 2018 | $ | 11,689 | | | $ | (6) | | | | $ | 11,683 | |
Net income | | Net income | 1,403 | | | — | | | | 1,403 | |
| Distributions to parent | | Distributions to parent | (275) | | | — | | | | (275) | |
Other | | Other | 1 | | | (1) | | | | — | |
Balance at December 31, 2019 | | Balance at December 31, 2019 | $ | 12,818 | | | $ | (7) | | | | $ | 12,811 | |
Net income | | Net income | 956 | | | — | | | | 956 | |
| Distributions to parent | | Distributions to parent | (600) | | | — | | | | (600) | |
Other(a) | | Other(a) | (13) | | | — | | | | (13) | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | $ | 13,161 | | | $ | (7) | | | | $ | 13,154 | |
Net income | 1,166 |
| | — |
| | 1,166 |
| Net income | 1,336 | | | — | | | | 1,336 | |
Other comprehensive income | — |
| | 2 |
| | 2 |
| Other comprehensive income | — | | | 1 | | | | 1 | |
Distributions to parent | (2,000 | ) | | — |
| | (2,000 | ) | Distributions to parent | (600) | | | — | | | | (600) | |
Other | (2 | ) | | — |
| | (2 | ) | |
Balance at December 31, 2016 | $ | 10,781 |
| | $ | (9 | ) | | $ | 10,772 |
| |
Net income | 1,214 |
| | — |
| | 1,214 |
| |
Other comprehensive income | — |
| | 2 |
| | 2 |
| |
Distributions to parent | (625 | ) | | — |
| | (625 | ) | |
Other | (2 | ) | | — |
| | (2 | ) | |
Balance at December 31, 2017 | $ | 11,368 |
| | $ | (7 | ) | | $ | 11,361 |
| |
Net income | 1,071 |
| | — |
| | 1,071 |
| |
Other comprehensive income | — |
| | 1 |
| | 1 |
| |
Distributions to parent | (750 | ) | | — |
| | (750 | ) | |
Balance at December 31, 2018 | $ | 11,689 |
| | $ | (6 | ) | | $ | 11,683 |
| |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | $ | 13,897 | | | $ | (6) | | | | $ | 13,891 | |
(a) Amounts primarily represent impacts due to implementation of a new accounting standard related to Credit Losses. See Note 1 for additional discussion.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Progress Energy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Progress Energy, Inc. and subsidiaries (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission, South Carolina Public Service Commission and Florida Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $6.9 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 201924, 2022
We have served as the Company's auditor since 1930.
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 10,728 |
| | $ | 9,783 |
| | $ | 9,853 |
| Operating Revenues | $ | 11,057 | | | $ | 10,627 | | | $ | 11,202 | |
Operating Expenses | | | | | | Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 3,976 |
| | 3,417 |
| | 3,644 |
| Fuel used in electric generation and purchased power | 3,584 | | | 3,479 | | | 4,024 | |
Operation, maintenance and other | 2,613 |
| | 2,301 |
| | 2,458 |
| Operation, maintenance and other | 2,529 | | | 2,479 | | | 2,495 | |
Depreciation and amortization | 1,619 |
| | 1,285 |
| | 1,213 |
| Depreciation and amortization | 1,929 | | | 1,818 | | | 1,845 | |
Property and other taxes | 529 |
| | 503 |
| | 487 |
| Property and other taxes | 542 | | | 545 | | | 561 | |
Impairment charges | 87 |
| | 156 |
| | 7 |
| |
Impairment of assets and other charges | | Impairment of assets and other charges | 82 | | | 495 | | | (24) | |
Total operating expenses | 8,824 |
|
| 7,662 |
|
| 7,809 |
| Total operating expenses | 8,666 | | | 8,816 | | | 8,901 | |
Gains on Sales of Other Assets and Other, net | 24 |
| | 26 |
| | 25 |
| Gains on Sales of Other Assets and Other, net | 14 | | | 9 | | | — | |
Operating Income | 1,928 |
|
| 2,147 |
|
| 2,069 |
| Operating Income | 2,405 | | | 1,820 | | | 2,301 | |
Other Income and Expenses, net | 165 |
| | 209 |
| | 186 |
| Other Income and Expenses, net | 215 | | | 129 | | | 141 | |
Interest Expense | 842 |
| | 824 |
| | 689 |
| Interest Expense | 794 | | | 790 | | | 862 | |
Income From Continuing Operations Before Income Taxes | 1,251 |
|
| 1,532 |
|
| 1,566 |
| |
Income Tax Expense From Continuing Operations | 218 |
| | 264 |
| | 527 |
| |
Income From Continuing Operations | 1,033 |
|
| 1,268 |
|
| 1,039 |
| |
Income From Discontinued Operations, net of tax | — |
| | — |
| | 2 |
| |
Income Before Income Taxes | | Income Before Income Taxes | 1,826 | | | 1,159 | | | 1,580 | |
Income Tax Expense | | Income Tax Expense | 227 | | | 113 | | | 253 | |
| Net Income | 1,033 |
|
| 1,268 |
|
| 1,041 |
| Net Income | 1,599 | | | 1,046 | | | 1,327 | |
Less: Net Income Attributable to Noncontrolling Interests | 6 |
| | 10 |
| | 10 |
| Less: Net Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | |
Net Income Attributable to Parent | $ | 1,027 |
|
| $ | 1,258 |
|
| $ | 1,031 |
| Net Income Attributable to Parent | $ | 1,598 | | | $ | 1,045 | | | $ | 1,327 | |
| | | | | | |
Net Income | $ | 1,033 |
|
| $ | 1,268 |
|
| $ | 1,041 |
| Net Income | $ | 1,599 | | | $ | 1,046 | | | $ | 1,327 | |
Other Comprehensive Income, net of tax | | | | | | Other Comprehensive Income, net of tax | | | | | |
Pension and OPEB adjustments | 5 |
| | 4 |
| | 1 |
| Pension and OPEB adjustments | 1 | | | (1) | | | 2 | |
Net unrealized gain on cash flow hedges | 6 |
| | 5 |
| | — |
| Net unrealized gain on cash flow hedges | 3 | | | 5 | | | 5 | |
Reclassification into earnings from cash flow hedges | — |
| | — |
| | 8 |
| |
| Unrealized (losses) gains on available-for-sale securities | (1 | ) | | 4 |
| | 1 |
| Unrealized (losses) gains on available-for-sale securities | — | | | (1) | | | 1 | |
| Other Comprehensive Income, net of tax | 10 |
|
| 13 |
|
| 10 |
| Other Comprehensive Income, net of tax | 4 | | | 3 | | | 8 | |
Comprehensive Income | 1,043 |
|
| 1,281 |
|
| 1,051 |
| Comprehensive Income | 1,603 | | | 1,049 | | | 1,335 | |
Less: Comprehensive Income Attributable to Noncontrolling Interests | 6 |
| | 10 |
| | 10 |
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | |
Comprehensive Income Attributable to Parent | $ | 1,037 |
|
| $ | 1,271 |
|
| $ | 1,041 |
| Comprehensive Income Attributable to Parent | $ | 1,602 | | | $ | 1,048 | | | $ | 1,335 | |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS | | | December 31, | | December 31, |
(in millions) | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 |
ASSETS | | | | ASSETS | | | |
Current Assets | | | | Current Assets | | | |
Cash and cash equivalents | $ | 67 |
| | $ | 40 |
| Cash and cash equivalents | $ | 70 | | | $ | 59 | |
Receivables (net of allowance for doubtful accounts of $5 at 2018 and $4 at 2017) | 220 |
| | 123 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2018 and $7 at 2017) | 909 |
| | 780 |
| |
Receivables (net of allowance for doubtful accounts of $11 at 2021 and $8 at 2020) | | Receivables (net of allowance for doubtful accounts of $11 at 2021 and $8 at 2020) | 247 | | | 228 | |
Receivables of VIEs (net of allowance for doubtful accounts of $25 at 2021 and $29 at 2020) | | Receivables of VIEs (net of allowance for doubtful accounts of $25 at 2021 and $29 at 2020) | 1,006 | | | 901 | |
Receivables from affiliated companies | 168 |
| | 31 |
| Receivables from affiliated companies | 121 | | | 157 | |
Notes receivable from affiliated companies | — |
| | 240 |
| |
| Inventory | 1,459 |
|
| 1,592 |
| Inventory | 1,398 | | | 1,375 | |
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs) | 1,137 |
| | 741 |
| |
Other (includes $39 at 2018 and $44 at 2017 related to VIEs) | 125 |
| | 334 |
| |
Regulatory assets (includes $93 at 2021 and $53 at 2020 related to VIEs) | | Regulatory assets (includes $93 at 2021 and $53 at 2020 related to VIEs) | 1,030 | | | 758 | |
Other (includes $39 at 2021 and 2020 related to VIEs) | | Other (includes $39 at 2021 and 2020 related to VIEs) | 125 | | | 109 | |
Total current assets | 4,085 |
| | 3,881 |
| Total current assets | 3,997 | | | 3,587 | |
Property, Plant and Equipment | | | | Property, Plant and Equipment | | | |
Cost | 50,260 |
| | 47,323 |
| Cost | 60,894 | | | 57,892 | |
Accumulated depreciation and amortization | (16,398 | ) | | (15,857 | ) | Accumulated depreciation and amortization | (19,214) | | | (18,368) | |
Generation facilities to be retired, net | 362 |
| | 421 |
| |
Facilities to be retired, net | | Facilities to be retired, net | 26 | | | 29 | |
Net property, plant and equipment | 34,224 |
| | 31,887 |
| Net property, plant and equipment | 41,706 | | | 39,553 | |
Other Noncurrent Assets | | | | Other Noncurrent Assets | | | |
Goodwill | 3,655 |
| | 3,655 |
| Goodwill | 3,655 | | | 3,655 | |
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs) | 6,564 |
| | 6,010 |
| |
Regulatory assets (includes $1,603 at 2021 and $937 at 2020 related to VIEs) | | Regulatory assets (includes $1,603 at 2021 and $937 at 2020 related to VIEs) | 5,909 | | | 5,775 | |
Nuclear decommissioning trust funds | 3,162 |
| | 3,324 |
| Nuclear decommissioning trust funds | 4,642 | | | 4,137 | |
Operating lease right-of-use assets, net | | Operating lease right-of-use assets, net | 691 | | | 690 | |
Other | 974 |
| | 931 |
| Other | 1,242 | | | 1,227 | |
Total other noncurrent assets | 14,355 |
| | 13,920 |
| Total other noncurrent assets | 16,139 | | | 15,484 | |
Total Assets | $ | 52,664 |
| | $ | 49,688 |
| Total Assets | $ | 61,842 | | | $ | 58,624 | |
LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | | | |
Current Liabilities | | | | Current Liabilities | | | |
Accounts payable | $ | 1,172 |
| | $ | 1,006 |
| Accounts payable | $ | 1,099 | | | $ | 919 | |
Accounts payable to affiliated companies | 360 |
| | 251 |
| Accounts payable to affiliated companies | 506 | | | 289 | |
Notes payable to affiliated companies | 1,235 |
| | 805 |
| Notes payable to affiliated companies | 2,809 | | | 2,969 | |
Taxes accrued | 109 |
| | 101 |
| Taxes accrued | 128 | | | 121 | |
Interest accrued | 246 |
| | 212 |
| Interest accrued | 192 | | | 202 | |
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs) | 1,672 |
| | 771 |
| |
Current maturities of long-term debt (includes $71 at 2021 and $305 at 2020 related to VIEs) | | Current maturities of long-term debt (includes $71 at 2021 and $305 at 2020 related to VIEs) | 1,082 | | | 1,426 | |
Asset retirement obligations | 514 |
| | 295 |
| Asset retirement obligations | 275 | | | 283 | |
Regulatory liabilities | 280 |
| | 213 |
| Regulatory liabilities | 478 | | | 640 | |
Other | 821 |
| | 729 |
| Other | 868 | | | 793 | |
Total current liabilities | 6,409 |
| | 4,383 |
| Total current liabilities | 7,437 | | | 7,642 | |
Long-Term Debt (includes $1,636 at 2018 and $1,689 at 2017 related to VIEs) | 17,089 |
| | 16,916 |
| |
Long-Term Debt (includes $2,293 at 2021 and $1,252 at 2020 related to VIEs) | | Long-Term Debt (includes $2,293 at 2021 and $1,252 at 2020 related to VIEs) | 19,591 | | | 17,688 | |
Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | | Other Noncurrent Liabilities | | | |
Deferred income taxes | 3,941 |
| | 3,502 |
| Deferred income taxes | 4,564 | | | 4,396 | |
Asset retirement obligations | 4,897 |
| | 5,119 |
| Asset retirement obligations | 5,837 | | | 5,866 | |
Regulatory liabilities | 5,049 |
| | 5,306 |
| Regulatory liabilities | 5,566 | | | 5,051 | |
Operating lease liabilities | | Operating lease liabilities | 606 | | | 623 | |
Accrued pension and other post-retirement benefit costs | 521 |
| | 545 |
| Accrued pension and other post-retirement benefit costs | 417 | | | 505 | |
Other | 351 |
| | 302 |
| Other | 526 | | | 462 | |
Total other noncurrent liabilities | 14,759 |
| | 14,774 |
| Total other noncurrent liabilities | 17,516 | | | 16,903 | |
Commitments and Contingencies |
| |
| Commitments and Contingencies | 0 | | 0 |
Equity | | | | Equity | | | |
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2018 and 2017 | — |
| | — |
| |
Common stock, $0.01 par value, 100 shares authorized and outstanding at 2021 and 2020 | | Common stock, $0.01 par value, 100 shares authorized and outstanding at 2021 and 2020 | — | | | — | |
Additional paid-in capital | 9,143 |
| | 9,143 |
| Additional paid-in capital | 9,149 | | | 9,143 | |
Retained earnings | 5,131 |
| | 4,350 |
| Retained earnings | 8,007 | | | 7,109 | |
Accumulated other comprehensive loss | (20 | ) | | (25 | ) | Accumulated other comprehensive loss | (11) | | | (15) | |
Total Progress Energy, Inc. stockholder's equity | 14,254 |
| | 13,468 |
| Total Progress Energy, Inc. stockholder's equity | 17,145 | | | 16,237 | |
Noncontrolling interests | 3 |
| | (3 | ) | Noncontrolling interests | 3 | | | 4 | |
Total equity | 14,257 |
| | 13,465 |
| Total equity | 17,148 | | | 16,241 | |
Total Liabilities and Equity | $ | 52,664 |
|
| $ | 49,688 |
| Total Liabilities and Equity | $ | 61,842 | | | $ | 58,624 | |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 1,033 |
| | $ | 1,268 |
| | $ | 1,041 |
| Net income | $ | 1,599 | | | $ | 1,046 | | | $ | 1,327 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion (including amortization of nuclear fuel) | 1,987 |
| | 1,516 |
| | 1,435 |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 2,302 | | | 2,327 | | | 2,207 | |
Equity component of AFUDC | (104 | ) | | (92 | ) | | (76 | ) | Equity component of AFUDC | (51) | | | (42) | | | (66) | |
Gains on sales of other assets | (24 | ) | | (28 | ) | | (34 | ) | |
Impairment charges | 87 |
| | 156 |
| | 7 |
| |
| Impairment of assets and other charges | | Impairment of assets and other charges | 82 | | | 495 | | | (24) | |
Deferred income taxes | 358 |
| | 703 |
| | 532 |
| Deferred income taxes | 247 | | | (197) | | | 433 | |
Accrued pension and other post-retirement benefit costs | 24 |
| | (28 | ) | | (24 | ) | |
Contributions to qualified pension plans | (45 | ) | | — |
| | (43 | ) | |
Payments for asset retirement obligations | (230 | ) | | (248 | ) | | (270 | ) | Payments for asset retirement obligations | (288) | | | (384) | | | (412) | |
Other rate case adjustments | 37 |
| | — |
| | — |
| |
Provision for rate refunds | 122 |
| | — |
| | — |
| Provision for rate refunds | (36) | | | 2 | | | 15 | |
(Increase) decrease in | | | | | | (Increase) decrease in | |
Net realized and unrealized mark-to-market and hedging transactions | 18 |
| | — |
| | 42 |
| Net realized and unrealized mark-to-market and hedging transactions | 51 | | | (9) | | | (34) | |
Receivables | (207 | ) | | (89 | ) | | 7 |
| Receivables | (97) | | | (69) | | | 47 | |
Receivables from affiliated companies | (137 | ) | | 71 |
| | 211 |
| Receivables from affiliated companies | 18 | | | (81) | | | 81 | |
Inventory | 121 |
| | 125 |
| | 35 |
| Inventory | (26) | | | 49 | | | 62 | |
Other current assets | (12 | ) | | (397 | ) | | 50 |
| Other current assets | (551) | | | 223 | | | 184 | |
Increase (decrease) in | | | | | | Increase (decrease) in | |
Accounts payable | 217 |
| | (260 | ) | | 252 |
| Accounts payable | 59 | | | (62) | | | (4) | |
Accounts payable to affiliated companies | 109 |
| | (97 | ) | | 37 |
| Accounts payable to affiliated companies | 217 | | | (21) | | | (50) | |
Taxes accrued | 8 |
| | 17 |
| | 15 |
| Taxes accrued | 13 | | | 75 | | | (74) | |
Other current liabilities | 129 |
| | (166 | ) | | (42 | ) | Other current liabilities | (32) | | | 139 | | | 25 | |
Other assets | (913 | ) | | (300 | ) | | (248 | ) | Other assets | (110) | | | (137) | | | (341) | |
Other liabilities | (34 | ) | | (98 | ) | | (36 | ) | Other liabilities | (99) | | | (177) | | | (167) | |
Net cash provided by operating activities | 2,544 |
|
| 2,053 |
|
| 2,891 |
| Net cash provided by operating activities | 3,298 | | | 3,177 | | | 3,209 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (3,854 | ) | | (3,152 | ) | | (3,306 | ) | Capital expenditures | (3,668) | | | (3,488) | | | (3,952) | |
Asset Acquisitions | — |
| | — |
| | (10 | ) | |
| Purchases of debt and equity securities | (1,753 | ) | | (1,806 | ) | | (2,143 | ) | Purchases of debt and equity securities | (2,233) | | | (5,998) | | | (1,511) | |
Proceeds from sales and maturities of debt and equity securities | 1,769 |
| | 1,824 |
| | 2,187 |
| Proceeds from sales and maturities of debt and equity securities | 2,322 | | | 6,010 | | | 1,504 | |
Net proceeds from sales of other assets | 20 |
| | — |
| | — |
| |
Proceeds from insurance | — |
| | 7 |
| | 58 |
| |
Proceeds from the sale of nuclear fuel | — |
| | 20 |
| | 20 |
| |
| Notes receivable from affiliated companies | 240 |
| | (160 | ) | | (80 | ) | Notes receivable from affiliated companies | — | | | 164 | | | (164) | |
Other | (182 | ) | | (86 | ) | | 47 |
| Other | (156) | | | (160) | | | (190) | |
Net cash used in investing activities | (3,760 | ) | | (3,353 | ) | | (3,227 | ) | Net cash used in investing activities | (3,735) | | | (3,472) | | | (4,313) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 1,833 |
| | 2,118 |
| | 2,375 |
| Proceeds from the issuance of long-term debt | 3,095 | | | 1,791 | | | 2,187 | |
Payments for the redemption of long-term debt | (771 | ) | | (813 | ) | | (327 | ) | Payments for the redemption of long-term debt | (1,883) | | | (2,157) | | | (1,667) | |
Notes payable to affiliated companies | 430 |
| | 100 |
| | 444 |
| Notes payable to affiliated companies | (160) | | | 1,148 | | | 586 | |
Dividends to parent | (250 | ) | | (124 | ) | | (2,098 | ) | Dividends to parent | (700) | | | (400) | | | — | |
Other | (1 | ) | | (4 | ) | | (3 | ) | Other | (2) | | | (13) | | | 12 | |
Net cash provided by financing activities | 1,241 |
|
| 1,277 |
|
| 391 |
| Net cash provided by financing activities | 350 | | | 369 | | | 1,118 | |
Net increase (decrease) in cash, cash equivalents, and restricted cash | 25 |
|
| (23 | ) |
| 55 |
| |
Cash, cash equivalents, and restricted cash at beginning of period | 87 |
| | 110 |
| | 55 |
| |
Cash, cash equivalents, and restricted cash at end of period | $ | 112 |
| | $ | 87 |
| | $ | 110 |
| |
Net (decrease) increase in cash, cash equivalents and restricted cash | | Net (decrease) increase in cash, cash equivalents and restricted cash | (87) | | | 74 | | | 14 | |
Cash, cash equivalents and restricted cash at beginning of period | | Cash, cash equivalents and restricted cash at beginning of period | 200 | | | 126 | | | 112 | |
Cash, cash equivalents and restricted cash at end of period | | Cash, cash equivalents and restricted cash at end of period | $ | 113 | | | $ | 200 | | | $ | 126 | |
Supplemental Disclosures: | | | | | | Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 798 |
| | $ | 773 |
| | $ | 673 |
| Cash paid for interest, net of amount capitalized | $ | 813 | | | $ | 819 | | | $ | 892 | |
Cash received from income taxes | (348 | ) | | (146 | ) | | (187 | ) | |
Cash paid for (received from) income taxes | | Cash paid for (received from) income taxes | 14 | | | 149 | | | (79) | |
Significant non-cash transactions: | | | | | | Significant non-cash transactions: | |
Accrued capital expenditures | 478 |
| | 391 |
| | 317 |
| Accrued capital expenditures | 501 | | | 363 | | | 447 | |
Equitization of certain notes payable to affiliates | — |
| | 1,047 |
| | — |
| |
Dividend to parent related to a legal entity restructuring | — |
| | 547 |
| | — |
| |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | | |
| | |
| | Accumulated Other Comprehensive Loss | | |
| | |
| | |
| | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | |
| | | | | Net |
| | Net Unrealized |
| | | | Total Progress |
| | | | | | | | Net Gains | | Net Unrealized | | | Total Progress | |
| Additional |
| | | | Losses on |
| | Gains (Losses) |
| | Pension and |
| | Energy, Inc. |
| | | | | | | Additional | | (Losses) on | | Gains (Losses) | | Pension and | | Energy, Inc. | |
| Paid-in |
| | Retained |
| | Cash Flow |
| | on Available-for- |
| | OPEB |
| | Stockholder's |
| | Noncontrolling |
| | Total |
| | | Paid-in | | Retained | | Cash Flow | | on Available-for- | | OPEB | | Stockholder's | | Noncontrolling | | Total |
(in millions) | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
| (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 |
| |
Balance at December 31, 2018 | | Balance at December 31, 2018 | | $ | 9,143 | | | $ | 5,131 | | | $ | (12) | | | $ | (1) | | | $ | (7) | | | $ | 14,254 | | | $ | 3 | | | $ | 14,257 | |
Net income | | Net income | | — | | | 1,327 | | | — | | | — | | | — | | | 1,327 | | | — | | | 1,327 | |
Other comprehensive income | | Other comprehensive income | | — | | | — | | | 5 | | | 1 | | | 2 | | | 8 | | | — | | | 8 | |
| Other(a) | | Other(a) | | — | | | 7 | | | (3) | | | (1) | | | (2) | | | 1 | | | — | | | 1 | |
Balance at December 31, 2019 | | Balance at December 31, 2019 | | $ | 9,143 | | | $ | 6,465 | | | $ | (10) | | | $ | (1) | | | $ | (7) | | | $ | 15,590 | | | $ | 3 | | | $ | 15,593 | |
Net income | | Net income | | — | | | 1,045 | | | — | | | — | | | — | | | 1,045 | | | 1 | | | 1,046 | |
Other comprehensive income (loss) | | Other comprehensive income (loss) | | — | | | — | | | 5 | | | (1) | | | (1) | | | 3 | | | — | | | 3 | |
| Dividends to parent | | Dividends to parent | | — | | | (400) | | | — | | | — | | | — | | | (400) | | | — | | | (400) | |
| Other | | Other | | — | | | (1) | | | — | | | — | | | — | | | (1) | | | — | | | (1) | |
Balance at December 31, 2020 | | Balance at December 31, 2020 | | $ | 9,143 | | | $ | 7,109 | | | $ | (5) | | | $ | (2) | | | $ | (8) | | | $ | 16,237 | | | $ | 4 | | | $ | 16,241 | |
Net income | — |
| | 1,031 |
| | — |
| | — |
| | — |
| | 1,031 |
| | 10 |
| | 1,041 |
| Net income | | — | | | 1,598 | | | — | | | — | | | — | | | 1,598 | | | 1 | | | 1,599 | |
Other comprehensive income | — |
| | — |
| | 8 |
| | 1 |
| | 1 |
| | 10 |
| | — |
| | 10 |
| Other comprehensive income | | — | | | — | | | 3 | | | — | | | 1 | | | 4 | | | — | | | 4 | |
Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | Distributions to noncontrolling interests | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Dividends to parent | — |
| | (2,098 | ) | | — |
| | — |
| | — |
| | (2,098 | ) | | — |
| | (2,098 | ) | Dividends to parent | | — | | | (700) | | | — | | | — | | | — | | | (700) | | | — | | | (700) | |
| Other | 2 |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
| Other | | 6 | | | — | | | — | | | — | | | — | | | 6 | | | (1) | | | 5 | |
Balance at December 31, 2016 | $ | 8,094 |
|
| $ | 3,764 |
|
| $ | (23 | ) |
| $ | 1 |
|
| $ | (16 | ) |
| $ | 11,820 |
|
| $ | (13 | ) |
| $ | 11,807 |
| |
Net income | — |
| | 1,258 |
| | — |
| | — |
| | — |
| | 1,258 |
| | 10 |
| | 1,268 |
| |
Other comprehensive income | — |
| | — |
| | 5 |
| | 4 |
| | 4 |
| | 13 |
| | — |
| | 13 |
| |
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 December 31, 2017 | $ | 9,143 |
|
| $ | 4,350 |
|
| $ | (18 | ) |
| $ | 5 |
|
| $ | (12 | ) |
| $ | 13,468 |
|
| $ | (3 | ) |
| $ | 13,465 |
| |
Net income | — |
| | 1,027 |
| | — |
| | — |
| | — |
| | 1,027 |
| | 6 |
| | 1,033 |
| |
Other comprehensive income (loss) | — |
| | — |
| | 6 |
| | (1 | ) | | 5 |
| | 10 |
| | — |
| | 10 |
| |
Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | |
Dividends to parent | — |
| | (250 | ) | | — |
| | — |
| | — |
| | (250 | ) | | — |
| | (250 | ) | |
Other(b) | — |
| | 4 |
| | — |
| | (5 | ) | | — |
| | (1 | ) | | 1 |
| | — |
| |
Balance at December 31, 2018 | $ | 9,143 |
|
| $ | 5,131 |
|
| $ | (12 | ) |
| $ | (1 | ) |
| $ | (7 | ) |
| $ | 14,254 |
|
| $ | 3 |
|
| $ | 14,257 |
| |
Balance at December 31, 2021 | | Balance at December 31, 2021 | | $ | 9,149 | | | $ | 8,007 | | | $ | (2) | | | $ | (2) | | | $ | (7) | | | $ | 17,145 | | | $ | 3 | | | $ | 17,148 | |
| |
(a) | Includes a $547 million non-cash dividend related to a legal entity restructuring. |
| |
(b) | Amounts in Retained Earnings and Accumulated Other Comprehensive Loss represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. |
(a) Amounts in Retained Earnings and AOCI primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Progress, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Progress, LLC and subsidiaries (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission and by the South Carolina Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $4.7 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 201924, 2022
We have served as the Company's auditor since 1930.
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 5,699 |
| | $ | 5,129 |
| | $ | 5,277 |
| Operating Revenues | $ | 5,780 | | | $ | 5,422 | | | $ | 5,957 | |
Operating Expenses | | | | | | Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,892 |
| | 1,609 |
| | 1,830 |
| Fuel used in electric generation and purchased power | 1,778 | | | 1,743 | | | 2,012 | |
Operation, maintenance and other | 1,578 |
| | 1,439 |
| | 1,565 |
| Operation, maintenance and other | 1,467 | | | 1,332 | | | 1,446 | |
Depreciation and amortization | 991 |
| | 725 |
| | 703 |
| Depreciation and amortization | 1,097 | | | 1,116 | | | 1,143 | |
Property and other taxes | 155 |
| | 156 |
| | 156 |
| Property and other taxes | 159 | | | 167 | | | 176 | |
Impairment charges | 33 |
| | 19 |
| | 1 |
| |
Impairment of assets and other charges | | Impairment of assets and other charges | 63 | | | 499 | | | 12 | |
Total operating expenses | 4,649 |
| | 3,948 |
| | 4,255 |
| Total operating expenses | 4,564 | | | 4,857 | | | 4,789 | |
Gains on Sales of Other Assets and Other, net | 9 |
| | 4 |
| | 3 |
| Gains on Sales of Other Assets and Other, net | 13 | | | 8 | | | — | |
Operating Income | 1,059 |
| | 1,185 |
| | 1,025 |
| Operating Income | 1,229 | | | 573 | | | 1,168 | |
Other Income and Expenses, net | 87 |
| | 115 |
| | 132 |
| Other Income and Expenses, net | 143 | | | 75 | | | 100 | |
Interest Expense | 319 |
| | 293 |
| | 257 |
| Interest Expense | 306 | | | 269 | | | 306 | |
Income Before Income Taxes | 827 |
| | 1,007 |
| | 900 |
| Income Before Income Taxes | 1,066 | | | 379 | | | 962 | |
Income Tax Expense | 160 |
| | 292 |
| | 301 |
| |
Income Tax Expense (Benefit) | | Income Tax Expense (Benefit) | 75 | | | (36) | | | 157 | |
Net Income and Comprehensive Income | $ | 667 |
| | $ | 715 |
| | $ | 599 |
| Net Income and Comprehensive Income | $ | 991 | | | $ | 415 | | | $ | 805 | |
|
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED BALANCE SHEETS | | | December 31, | | December 31, |
(in millions) | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 |
ASSETS | | | | ASSETS | | | |
Current Assets | | | | Current Assets | | | |
Cash and cash equivalents | $ | 23 |
| | $ | 20 |
| Cash and cash equivalents | $ | 35 | | | $ | 39 | |
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $1 at 2017) | 75 |
| | 56 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2018 and 2017) | 547 |
| | 459 |
| |
Receivables (net of allowance for doubtful accounts of $4 at 2021 and $4 at 2020) | | Receivables (net of allowance for doubtful accounts of $4 at 2021 and $4 at 2020) | 127 | | | 132 | |
Receivables of VIEs (net of allowance for doubtful accounts of $17 at 2021 and $19 at 2020) | | Receivables of VIEs (net of allowance for doubtful accounts of $17 at 2021 and $19 at 2020) | 574 | | | 500 | |
Receivables from affiliated companies | 23 |
| | 3 |
| Receivables from affiliated companies | 65 | | | 50 | |
| Inventory | 954 |
|
| 1,017 |
| Inventory | 921 | | | 911 | |
Regulatory assets | 703 |
| | 352 |
| |
Regulatory assets (includes $39 at 2021 related to VIEs) | | Regulatory assets (includes $39 at 2021 related to VIEs) | 533 | | | 492 | |
Other | 62 |
| | 97 |
| Other | 83 | | | 60 | |
Total current assets | 2,387 |
| | 2,004 |
| Total current assets | 2,338 | | | 2,184 | |
Property, Plant and Equipment | | | | Property, Plant and Equipment | |
Cost | 31,459 |
| | 29,583 |
| Cost | 37,018 | | | 35,759 | |
Accumulated depreciation and amortization | (11,423 | ) | | (10,903 | ) | Accumulated depreciation and amortization | (13,387) | | | (12,801) | |
Generation facilities to be retired, net | 362 |
| | 421 |
| |
Facilities to be retired, net | | Facilities to be retired, net | 26 | | | 29 | |
Net property, plant and equipment | 20,398 |
| | 19,101 |
| Net property, plant and equipment | 23,657 | | | 22,987 | |
Other Noncurrent Assets | | | | Other Noncurrent Assets | |
Regulatory assets | 4,111 |
| | 3,507 |
| |
Regulatory assets (includes $720 at 2021 related to VIEs) | | Regulatory assets (includes $720 at 2021 related to VIEs) | 4,118 | | | 3,976 | |
Nuclear decommissioning trust funds | 2,503 |
| | 2,588 |
| Nuclear decommissioning trust funds | 4,089 | | | 3,500 | |
Operating lease right-of-use assets, net | | Operating lease right-of-use assets, net | 389 | | | 346 | |
Other | 612 |
| | 599 |
| Other | 792 | | | 740 | |
Total other noncurrent assets | 7,226 |
| | 6,694 |
| Total other noncurrent assets | 9,388 | | | 8,562 | |
Total Assets | $ | 30,011 |
| | $ | 27,799 |
| Total Assets | $ | 35,383 | | | $ | 33,733 | |
LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | |
Current Liabilities | | | | Current Liabilities | |
Accounts payable | $ | 660 |
| | $ | 402 |
| Accounts payable | $ | 476 | | | $ | 454 | |
Accounts payable to affiliated companies | 278 |
| | 179 |
| Accounts payable to affiliated companies | 310 | | | 215 | |
Notes payable to affiliated companies | 294 |
| | 240 |
| Notes payable to affiliated companies | 172 | | | 295 | |
Taxes accrued | 53 |
| | 64 |
| Taxes accrued | 163 | | | 85 | |
Interest accrued | 116 |
| | 102 |
| Interest accrued | 96 | | | 99 | |
Current maturities of long-term debt | 603 |
| | 3 |
| |
Current maturities of long-term debt (includes $15 at 2021 related to VIEs) | | Current maturities of long-term debt (includes $15 at 2021 related to VIEs) | 556 | | | 603 | |
Asset retirement obligations | 509 |
| | 295 |
| Asset retirement obligations | 274 | | | 283 | |
Regulatory liabilities | 178 |
| | 139 |
| Regulatory liabilities | 381 | | | 530 | |
Other | 408 |
| | 376 |
| Other | 448 | | | 411 | |
Total current liabilities | 3,099 |
| | 1,800 |
| Total current liabilities | 2,876 | | | 2,975 | |
Long-Term Debt | 7,451 |
| | 7,204 |
| |
Long-Term Debt (includes $1,097 at 2021 related to VIEs) | | Long-Term Debt (includes $1,097 at 2021 related to VIEs) | 9,543 | | | 8,505 | |
Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | | Other Noncurrent Liabilities | |
Deferred income taxes | 2,119 |
| | 1,883 |
| Deferred income taxes | 2,208 | | | 2,298 | |
Asset retirement obligations | 4,311 |
| | 4,378 |
| Asset retirement obligations | 5,401 | | | 5,352 | |
Regulatory liabilities | 3,955 |
| | 3,999 |
| Regulatory liabilities | 4,868 | | | 4,394 | |
Operating lease liabilities | | Operating lease liabilities | 350 | | | 323 | |
Accrued pension and other post-retirement benefit costs | 237 |
| | 248 |
| Accrued pension and other post-retirement benefit costs | 221 | | | 242 | |
Investment tax credits | 142 |
| | 143 |
| Investment tax credits | 128 | | | 132 | |
Other | 106 |
| | 45 |
| Other | 87 | | | 102 | |
Total other noncurrent liabilities | 10,870 |
| | 10,696 |
| Total other noncurrent liabilities | 13,263 | | | 12,843 | |
Commitments and Contingencies | | | | Commitments and Contingencies | 0 | | 0 |
Equity | | | | Equity | |
Member's Equity | 8,441 |
| | 7,949 |
| Member's Equity | 9,551 | | | 9,260 | |
| Total Liabilities and Equity | $ | 30,011 |
| | $ | 27,799 |
| Total Liabilities and Equity | $ | 35,383 | | | $ | 33,733 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 | | 2017 | | 2016 | (in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 667 |
| | $ | 715 |
| | $ | 599 |
| Net income | $ | 991 | | | $ | 415 | | | $ | 805 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization (including amortization of nuclear fuel) | 1,183 |
| | 936 |
| | 907 |
| Depreciation and amortization (including amortization of nuclear fuel) | 1,286 | | | 1,299 | | | 1,329 | |
Equity component of AFUDC | (57 | ) | | (47 | ) | | (50 | ) | Equity component of AFUDC | (34) | | | (29) | | | (60) | |
Gains on sales of other assets | (9 | ) | | (5 | ) | | (6 | ) | |
Impairment charges | 33 |
| | 19 |
| | 1 |
| |
| Impairment of assets and other charges | | Impairment of assets and other charges | 63 | | | 499 | | | 12 | |
Deferred income taxes | 236 |
| | 384 |
| | 384 |
| Deferred income taxes | (46) | | | (234) | | | 197 | |
Accrued pension and other post-retirement benefit costs | 15 |
| | (20 | ) | | (32 | ) | |
Contributions to qualified pension plans | (25 | ) | | — |
| | (24 | ) | |
Payments for asset retirement obligations | (195 | ) | | (192 | ) | | (212 | ) | Payments for asset retirement obligations | (187) | | | (304) | | | (390) | |
Other rate case adjustments | 37 |
| | — |
| | — |
| |
Provisions for rate refunds | 122 |
| | — |
| | — |
| Provisions for rate refunds | (36) | | | 2 | | | 12 | |
(Increase) decrease in | | | | | | (Increase) decrease in | |
Net realized and unrealized mark-to-market and hedging transactions | 5 |
| | (4 | ) | | 4 |
| Net realized and unrealized mark-to-market and hedging transactions | 48 | | | 1 | | | (6) | |
Receivables | (107 | ) | | (58 | ) | | (17 | ) | Receivables | (52) | | | (4) | | | 21 | |
Receivables from affiliated companies | (20 | ) | | 2 |
| | 11 |
| Receivables from affiliated companies | (33) | | | 2 | | | (29) | |
Inventory | 63 |
| | 59 |
| | 12 |
| Inventory | (11) | | | 23 | | | 20 | |
Other current assets | (201 | ) | | (75 | ) | | 84 |
| Other current assets | (147) | | | 98 | | | 101 | |
Increase (decrease) in | | | | | | Increase (decrease) in | |
Accounts payable | 219 |
| | (230 | ) | | 181 |
| Accounts payable | 12 | | | (127) | | | 32 | |
Accounts payable to affiliated companies | 99 |
| | (48 | ) | | 37 |
| Accounts payable to affiliated companies | 95 | | | 12 | | | (75) | |
Taxes accrued | (11 | ) | | (39 | ) | | 90 |
| Taxes accrued | 83 | | | 68 | | | (46) | |
Other current liabilities | 46 |
| | (131 | ) | | 114 |
| Other current liabilities | (23) | | | 157 | | | 68 | |
Other assets | (484 | ) | | (53 | ) | | (163 | ) | Other assets | (37) | | | (215) | | | (205) | |
Other liabilities | 12 |
| | (18 | ) | | 12 |
| Other liabilities | (16) | | | 3 | | | 37 | |
Net cash provided by operating activities | 1,628 |
| | 1,195 |
| | 1,932 |
| Net cash provided by operating activities | 1,956 | | | 1,666 | | | 1,823 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (2,220 | ) | | (1,715 | ) | | (1,733 | ) | Capital expenditures | (1,746) | | | (1,581) | | | (2,108) | |
| Purchases of debt and equity securities | (1,236 | ) | | (1,249 | ) | | (1,658 | ) | Purchases of debt and equity securities | (1,931) | | | (1,555) | | | (842) | |
Proceeds from sales and maturities of debt and equity securities | 1,206 |
| | 1,207 |
| | 1,615 |
| Proceeds from sales and maturities of debt and equity securities | 1,914 | | | 1,516 | | | 810 | |
Net proceeds from the sales of other assets | 20 |
| | — |
| | — |
| |
Proceeds from insurance | — |
| | 4 |
| | — |
| |
Notes receivable from affiliated companies | — |
| | 165 |
| | (165 | ) | |
| Other | (115 | ) | | (55 | ) | | 26 |
| Other | (20) | | | (57) | | | (119) | |
Net cash used in investing activities | (2,345 | ) | | (1,643 | ) | | (1,915 | ) | Net cash used in investing activities | (1,783) | | | (1,677) | | | (2,259) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | 845 |
| | 812 |
| | 505 |
| Proceeds from the issuance of long-term debt | 1,959 | | | 1,296 | | | 1,269 | |
Payments for the redemption of long-term debt | (3 | ) | | (470 | ) | | (15 | ) | Payments for the redemption of long-term debt | (1,308) | | | (1,085) | | | (605) | |
Notes payable to affiliated companies | 54 |
| | 240 |
| | (209 | ) | Notes payable to affiliated companies | (123) | | | 229 | | | (228) | |
Distributions to parent | (175 | ) | | (124 | ) | | (300 | ) | Distributions to parent | (700) | | | (400) | | | — | |
Other | (1 | ) | | (1 | ) | | (2 | ) | Other | (1) | | | (12) | | | (1) | |
Net cash provided by (used in) financing activities | 720 |
| | 457 |
| | (21 | ) | |
Net increase (decrease) in cash and cash equivalents | 3 |
| | 9 |
| | (4 | ) | |
Cash and cash equivalents at beginning of period | 20 |
| | 11 |
| | 15 |
| |
Cash and cash equivalents at end of period | $ | 23 |
| | $ | 20 |
| | $ | 11 |
| |
Net cash (used in) provided by financing activities | | Net cash (used in) provided by financing activities | (173) | | | 28 | | | 435 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | | Net increase (decrease) in cash, cash equivalents and restricted cash | — | | | 17 | | | (1) | |
Cash, cash equivalents and restricted cash at beginning of period | | Cash, cash equivalents and restricted cash at beginning of period | 39 | | | 22 | | | 23 | |
Cash, cash equivalents and restricted cash at end of period | | Cash, cash equivalents and restricted cash at end of period | $ | 39 | | | $ | 39 | | | $ | 22 | |
Supplemental Disclosures: | | | | | | Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 303 |
| | $ | 291 |
| | $ | 248 |
| Cash paid for interest, net of amount capitalized | $ | 335 | | | $ | 301 | | | $ | 331 | |
Cash (received from) paid for income taxes | (112 | ) | | 59 |
| | (287 | ) | |
Cash paid for (received from) income taxes | | Cash paid for (received from) income taxes | 83 | | | 123 | | | (30) | |
Significant non-cash transactions: | | | | | | Significant non-cash transactions: | |
Accrued capital expenditures | 220 |
| | 191 |
| | 147 |
| Accrued capital expenditures | 163 | | | 149 | | | 175 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| | | |
| Member's |
|
(in millions) | Equity |
|
Balance at December 31, 2015 | $ | 7,059 |
|
Net income | 599 |
|
Distribution to parent | (300 | ) |
Balance at December 31, 2016 | $ | 7,358 |
|
Net income | 715 |
|
Distribution to parent | (124 | ) |
Balance at December 31, 2017 | $ | 7,949 |
|
Net income | 667 |
|
Distribution to parent | (175 | ) |
Balance at December 31, 2018 | $ | 8,441 |
|
| | | | | | | | | | | | | |
| | | | | Member's | | | | |
(in millions) | | | | | Equity | | | | |
Balance at December 31, 2018 | | | | | $ | 8,441 | | | | | |
Net income | | | | | 805 | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2019 | | | | | $ | 9,246 | | | | | |
Net income | | | | | 415 | | | | | |
Distribution to parent | | | | | (400) | | | | | |
| | | | | | | | | |
Other | | | | | (1) | | | | | |
Balance at December 31, 2020 | | | | | $ | 9,260 | | | | | |
Net income | | | | | 991 | | | | | |
Distribution to parent | | | | | (700) | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2021 | | | | | $ | 9,551 | | | | | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Florida, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Florida, LLC and subsidiaries (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Florida Public Service Commission (the “Commission”), which has jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $2.3 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commission, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commission, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 201924, 2022
We have served as the Company's auditor since 2001.
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 5,021 |
| | $ | 4,646 |
| | $ | 4,568 |
| Operating Revenues | $ | 5,259 | | | $ | 5,188 | | | $ | 5,231 | |
Operating Expenses | | | | | | Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 2,085 |
| | 1,808 |
| | 1,814 |
| Fuel used in electric generation and purchased power | 1,806 | | | 1,737 | | | 2,012 | |
Operation, maintenance and other | 1,025 |
| | 853 |
| | 884 |
| Operation, maintenance and other | 1,048 | | | 1,131 | | | 1,034 | |
Depreciation and amortization | 628 |
| | 560 |
| | 509 |
| Depreciation and amortization | 831 | | | 702 | | | 702 | |
Property and other taxes | 374 |
| | 347 |
| | 333 |
| Property and other taxes | 383 | | | 381 | | | 392 | |
Impairment charges | 54 |
| | 138 |
| | 6 |
| |
Impairment of assets and other charges | | Impairment of assets and other charges | 19 | | | (4) | | | (36) | |
Total operating expenses | 4,166 |
| | 3,706 |
| | 3,546 |
| Total operating expenses | 4,087 | | | 3,947 | | | 4,104 | |
Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
| | — |
| Gains on Sales of Other Assets and Other, net | 1 | | | 1 | | | — | |
Operating Income | 856 |
| | 941 |
| | 1,022 |
| Operating Income | 1,173 | | | 1,242 | | | 1,127 | |
Other Income and Expenses, net | 86 |
| | 96 |
| | 63 |
| Other Income and Expenses, net | 71 | | | 53 | | | 48 | |
Interest Expense | 287 |
| | 279 |
| | 212 |
| Interest Expense | 319 | | | 326 | | | 328 | |
Income Before Income Taxes | 655 |
| | 758 |
| | 873 |
| Income Before Income Taxes | 925 | | | 969 | | | 847 | |
Income Tax Expense | 101 |
| | 46 |
| | 322 |
| Income Tax Expense | 187 | | | 198 | | | 155 | |
Net Income | $ | 554 |
| | $ | 712 |
| | $ | 551 |
| Net Income | $ | 738 | | | $ | 771 | | | $ | 692 | |
Other Comprehensive (Loss) Income, net of tax | | | | | | |
| Other Comprehensive Income (Loss), net of tax | | Other Comprehensive Income (Loss), net of tax | | | | | |
Unrealized (losses) gains on available-for-sale securities | (1 | ) | | 3 |
| | 1 |
| Unrealized (losses) gains on available-for-sale securities | (1) | | | (1) | | | 1 | |
| Other Comprehensive (Loss) Income, net of tax | (1 | ) | | 3 |
| | 1 |
| Other Comprehensive (Loss) Income, net of tax | (1) | | | (1) | | | 1 | |
Comprehensive Income | $ | 553 |
| | $ | 715 |
| | $ | 552 |
| Comprehensive Income | $ | 737 | | | $ | 770 | | | $ | 693 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED BALANCE SHEETS | | | December 31, | | December 31, |
(in millions) | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 |
ASSETS | | | | ASSETS | | | |
Current Assets | | | | Current Assets | | | |
Cash and cash equivalents | $ | 36 |
| | $ | 13 |
| Cash and cash equivalents | $ | 23 | | | $ | 11 | |
Receivables (net of allowance for doubtful accounts of $3 at 2018 and 2017) | 143 |
| | 65 |
| |
Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2018 and $2 at 2017) | 362 |
| | 321 |
| |
Receivables (net of allowance for doubtful accounts of $8 at 2021 and $4 at 2020) | | Receivables (net of allowance for doubtful accounts of $8 at 2021 and $4 at 2020) | 117 | | | 94 | |
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2021 and $10 at 2020) | | Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2021 and $10 at 2020) | 432 | | | 401 | |
Receivables from affiliated companies | 28 |
| | 2 |
| Receivables from affiliated companies | 16 | | | 3 | |
Notes receivable from affiliated companies | — |
| | 313 |
| |
| Inventory | 504 |
|
| 574 |
| Inventory | 477 | | | 464 | |
Regulatory assets (includes $52 at 2018 and $51 at 2017 related to VIEs) | 434 |
| | 389 |
| |
Other (includes $39 at 2018 and $40 at 2017 related to VIEs) | 46 |
| | 86 |
| |
Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs) | | Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs) | 497 | | | 265 | |
Other (includes $39 at 2021 and 2020 related to VIEs) | | Other (includes $39 at 2021 and 2020 related to VIEs) | 80 | | | 41 | |
Total current assets | 1,553 |
| | 1,763 |
| Total current assets | 1,642 | | | 1,279 | |
Property, Plant and Equipment | | | | Property, Plant and Equipment | | | |
Cost | 18,792 |
| | 17,730 |
| Cost | 23,865 | | | 22,123 | |
Accumulated depreciation and amortization | (4,968 | ) | | (4,947 | ) | Accumulated depreciation and amortization | (5,819) | | | (5,560) | |
Net property, plant and equipment | 13,824 |
| | 12,783 |
| Net property, plant and equipment | 18,046 | | | 16,563 | |
Other Noncurrent Assets | | | | Other Noncurrent Assets | | | |
Regulatory assets (includes $1,041 at 2018 and $1,091 at 2017 related to VIEs) | 2,454 |
| | 2,503 |
| |
| Regulatory assets (includes $883 at 2021 and $937 at 2020 related to VIEs) | | Regulatory assets (includes $883 at 2021 and $937 at 2020 related to VIEs) | 1,791 | | | 1,799 | |
Nuclear decommissioning trust funds | 659 |
| | 736 |
| Nuclear decommissioning trust funds | 553 | | | 637 | |
Operating lease right-of-use assets, net | | Operating lease right-of-use assets, net | 302 | | | 344 | |
Other | 311 |
| | 284 |
| Other | 399 | | | 335 | |
Total other noncurrent assets | 3,424 |
| | 3,523 |
| Total other noncurrent assets | 3,045 | | | 3,115 | |
Total Assets | $ | 18,801 |
| | $ | 18,069 |
| Total Assets | $ | 22,733 | | | $ | 20,957 | |
LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | | | |
Current Liabilities | | | | Current Liabilities | | | |
Accounts payable | $ | 511 |
| | $ | 602 |
| Accounts payable | $ | 623 | | | $ | 465 | |
Accounts payable to affiliated companies | 91 |
| | 74 |
| Accounts payable to affiliated companies | 209 | | | 85 | |
Notes payable to affiliated companies | 108 |
| | — |
| Notes payable to affiliated companies | 199 | | | 196 | |
Taxes accrued | 74 |
| | 34 |
| Taxes accrued | 51 | | | 82 | |
Interest accrued | 75 |
| | 56 |
| Interest accrued | 68 | | | 69 | |
Current maturities of long-term debt (includes $53 at 2018 and 2017 related to VIEs) | 270 |
| | 768 |
| |
Current maturities of long-term debt (includes $56 at 2021 and $305 at 2020 related to VIEs) | | Current maturities of long-term debt (includes $56 at 2021 and $305 at 2020 related to VIEs) | 76 | | | 823 | |
Asset retirement obligations | 5 |
| | — |
| Asset retirement obligations | 1 | | | — | |
Regulatory liabilities | 102 |
| | 74 |
| Regulatory liabilities | 98 | | | 110 | |
Other | 406 |
| | 334 |
| Other | 408 | | | 374 | |
Total current liabilities | 1,642 |
| | 1,942 |
| Total current liabilities | 1,733 | | | 2,204 | |
Long-Term Debt (includes $1,336 at 2018 and $1,389 at 2017 related to VIEs) | 7,051 |
| | 6,327 |
| |
Long-Term Debt (includes $1,196 at 2021 and $1,002 at 2020 related to VIEs) | | Long-Term Debt (includes $1,196 at 2021 and $1,002 at 2020 related to VIEs) | 8,406 | | | 7,092 | |
Other Noncurrent Liabilities | | | | Other Noncurrent Liabilities | | | |
Deferred income taxes | 1,986 |
| | 1,761 |
| Deferred income taxes | 2,434 | | | 2,191 | |
| Asset retirement obligations | 586 |
| | 742 |
| Asset retirement obligations | 436 | | | 514 | |
Regulatory liabilities | 1,094 |
| | 1,307 |
| Regulatory liabilities | 698 | | | 658 | |
Operating lease liabilities | | Operating lease liabilities | 256 | | | 300 | |
Accrued pension and other post-retirement benefit costs | 254 |
| | 264 |
| Accrued pension and other post-retirement benefit costs | 166 | | | 231 | |
| Other | 93 |
| | 108 |
| Other | 309 | | | 209 | |
Total other noncurrent liabilities | 4,013 |
| | 4,182 |
| Total other noncurrent liabilities | 4,299 | | | 4,103 | |
Commitments and Contingencies | | | | Commitments and Contingencies | 0 | | 0 |
| Equity | | | | Equity | | | |
Member's equity | 6,097 |
| | 5,614 |
| Member's equity | 8,298 | | | 7,560 | |
Accumulated other comprehensive income | (2 | ) | | 4 |
| |
| Accumulated other comprehensive loss | | Accumulated other comprehensive loss | (3) | | | (2) | |
Total equity | 6,095 |
| | 5,618 |
| Total equity | 8,295 | | | 7,558 | |
Total Liabilities and Equity | $ | 18,801 |
| | $ | 18,069 |
| Total Liabilities and Equity | $ | 22,733 | | | $ | 20,957 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 554 |
| | $ | 712 |
| | $ | 551 |
| Net income | $ | 738 | | | $ | 771 | | | $ | 692 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 793 |
| | 570 |
| | 516 |
| Depreciation, amortization and accretion | 1,011 | | | 1,019 | | | 869 | |
Equity component of AFUDC | (47 | ) | | (45 | ) | | (26 | ) | Equity component of AFUDC | (16) | | | (12) | | | (6) | |
Gains on sales of other assets | (1 | ) | | (1 | ) | | — |
| |
Impairment charges | 54 |
| | 138 |
| | 6 |
| |
| Impairment of assets and other charges | | Impairment of assets and other charges | 19 | | | (4) | | | (36) | |
Deferred income taxes | 159 |
| | 245 |
| | 224 |
| Deferred income taxes | 279 | | | 27 | | | 180 | |
Accrued pension and other post-retirement benefit costs | 5 |
| | (13 | ) | | 2 |
| |
Contributions to qualified pension plans | (20 | ) | | — |
| | (20 | ) | |
Payments for asset retirement obligations | (35 | ) | | (56 | ) | | (58 | ) | Payments for asset retirement obligations | (101) | | | (80) | | | (22) | |
| (Increase) decrease in | | | | | | (Increase) decrease in | |
Net realized and unrealized mark-to-market and hedging transactions | 7 |
| | 5 |
| | 38 |
| Net realized and unrealized mark-to-market and hedging transactions | — | | | (14) | | | (33) | |
Receivables | (100 | ) | | (38 | ) | | 23 |
| Receivables | (45) | | | (64) | | | 26 | |
Receivables from affiliated companies | (26 | ) | | — |
| | 21 |
| Receivables from affiliated companies | (13) | | | (3) | | | 17 | |
Inventory | 58 |
| | 66 |
| | 23 |
| Inventory | (15) | | | 26 | | | 42 | |
Other current assets | 59 |
| | (138 | ) | | (86 | ) | Other current assets | (451) | | | 40 | | | 156 | |
Increase (decrease) in | | | | | | Increase (decrease) in | |
Accounts payable | (1 | ) | | (32 | ) | | 71 |
| Accounts payable | 47 | | | 66 | | | (36) | |
Accounts payable to affiliated companies | 17 |
| | (51 | ) | | 9 |
| Accounts payable to affiliated companies | 124 | | | (46) | | | 40 | |
Taxes accrued | 40 |
| | 1 |
| | (117 | ) | Taxes accrued | (30) | | | 39 | | | (31) | |
Other current liabilities | 82 |
| | (37 | ) | | (149 | ) | Other current liabilities | (7) | | | (7) | | | (36) | |
Other assets | (428 | ) | | (229 | ) | | (84 | ) | Other assets | (69) | | | 84 | | | (131) | |
Other liabilities | (61 | ) | | (82 | ) | | (53 | ) | Other liabilities | (69) | | | (181) | | | (213) | |
Net cash provided by operating activities | 1,109 |
| | 1,015 |
| | 891 |
| Net cash provided by operating activities | 1,402 | | | 1,661 | | | 1,478 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | |
Capital expenditures | (1,634 | ) | | (1,437 | ) | | (1,583 | ) | Capital expenditures | (1,923) | | | (1,907) | | | (1,844) | |
| Purchases of debt and equity securities | (517 | ) | | (557 | ) | | (485 | ) | Purchases of debt and equity securities | (302) | | | (4,443) | | | (669) | |
Proceeds from sales and maturities of debt and equity securities | 563 |
| | 617 |
| | 572 |
| Proceeds from sales and maturities of debt and equity securities | 408 | | | 4,495 | | | 695 | |
Proceeds from insurance | — |
| | 4 |
| | 58 |
| |
Proceeds from the sale of nuclear fuel | — |
| | 20 |
| | 20 |
| |
| Notes receivable from affiliated companies | 313 |
| | (313 | ) | | — |
| Notes receivable from affiliated companies | — | | | 173 | | | (173) | |
Other | (65 | ) | | (31 | ) | | 21 |
| Other | (136) | | | (103) | | | (67) | |
Net cash used in investing activities | (1,340 | ) | | (1,697 | ) | | (1,397 | ) | Net cash used in investing activities | (1,953) | | | (1,785) | | | (2,058) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | |
Proceeds from the issuance of long-term debt | 988 |
| | 1,306 |
| | 1,870 |
| Proceeds from the issuance of long-term debt | 1,135 | | | 495 | | | 918 | |
Payments for the redemption of long-term debt | (769 | ) | | (342 | ) | | (12 | ) | Payments for the redemption of long-term debt | (575) | | | (572) | | | (262) | |
Notes payable to affiliated companies | 108 |
| | (297 | ) | | (516 | ) | Notes payable to affiliated companies | 3 | | | 196 | | | (108) | |
Distribution to parent | (75 | ) | | — |
| | (775 | ) | |
| Other | 1 |
| | (1 | ) | | — |
| Other | — | | | (1) | | | 13 | |
Net cash provided by financing activities | 253 |
| | 666 |
| | 567 |
| Net cash provided by financing activities | 563 | | | 118 | | | 561 | |
Net increase (decrease) in cash, cash equivalents, and restricted cash | 22 |
| | (16 | ) | | 61 |
| |
Cash, cash equivalents, and restricted cash at beginning of period | 53 |
| | 69 |
| | 8 |
| |
Cash, cash equivalents, and restricted cash at end of period | $ | 75 |
| | $ | 53 |
| | $ | 69 |
| |
Net increase (decrease) in cash, cash equivalents and restricted cash | | Net increase (decrease) in cash, cash equivalents and restricted cash | 12 | | | (6) | | | (19) | |
Cash, cash equivalents and restricted cash at beginning of period | | Cash, cash equivalents and restricted cash at beginning of period | 50 | | | 56 | | | 75 | |
Cash, cash equivalents and restricted cash at end of period | | Cash, cash equivalents and restricted cash at end of period | $ | 62 | | | $ | 50 | | | $ | 56 | |
Supplemental Disclosures: | | | | | | Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 270 |
| | $ | 274 |
| | $ | 208 |
| Cash paid for interest, net of amount capitalized | $ | 308 | | | $ | 321 | | | $ | 332 | |
Cash (received from) paid for income taxes | (120 | ) | | (197 | ) | | 216 |
| Cash (received from) paid for income taxes | (15) | | | 138 | | | 1 | |
Significant non-cash transactions: | | | | | | Significant non-cash transactions: | |
Accrued capital expenditures | 258 |
| | 199 |
| | 170 |
| Accrued capital expenditures | 337 | | | 214 | | | 272 | |
|
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | | | | | Accumulated | | | | | Accumulated | | |
| | | | Other | | | | | Other | | |
| | | | Comprehensive | | | | | Comprehensive | | |
| | | | Income (Loss) | | | | | Income (Loss) | | |
| | | | Net Unrealized |
| | | | | | Net Unrealized | | | |
| | | | Gains (Losses) on |
| | | | | | Gains (Losses) on | | | |
| | Member's |
| | Available-for- |
| | Total |
| | | | Member's | | Available-for- | | | Total |
(in millions) | | Equity |
| | Sale Securities |
| | Equity |
| (in millions) | | | Equity | | Sale Securities | | | Equity |
Balance at December 31, 2015 | | $ | 5,121 |
| | $ | — |
| | $ | 5,121 |
| |
Balance at December 31, 2018 | | Balance at December 31, 2018 | | | $ | 6,097 | | | $ | (2) | | | | $ | 6,095 | |
Net income | | 551 |
| | — |
| | 551 |
| Net income | | | 692 | | | — | | | | 692 | |
Other comprehensive income | | — |
| | 1 |
| | 1 |
| Other comprehensive income | | | — | | | 1 | | | | 1 | |
Distribution to parent | | (775 | ) | | — |
| | (775 | ) | |
Other | | 2 |
| | — |
| | 2 |
| |
Balance at December 31, 2016 | | $ | 4,899 |
| | $ | 1 |
| | $ | 4,900 |
| |
Net income | | 712 |
| | — |
| | 712 |
| |
Other comprehensive income | | — |
| | 3 |
| | 3 |
| |
Other | | 3 |
| | — |
| | 3 |
| |
Balance at December 31, 2017 | | $ | 5,614 |
| | $ | 4 |
| | $ | 5,618 |
| |
| Balance at December 31, 2019 | | Balance at December 31, 2019 | | | $ | 6,789 | | | $ | (1) | | | | $ | 6,788 | |
Net income | | 554 |
| | — |
| | 554 |
| Net income | | | 771 | | | — | | | | 771 | |
Other comprehensive loss | | — |
| | (1 | ) | | (1 | ) | Other comprehensive loss | | | — | | | (1) | | | | (1) | |
Distribution to parent | | (75 | ) | | — |
| | (75 | ) | |
Other(a) | | 4 |
| | (5 | ) | | (1 | ) | |
Balance at December 31, 2018 | | $ | 6,097 |
| | $ | (2 | ) | | $ | 6,095 |
| |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | | | $ | 7,560 | | | $ | (2) | | | | $ | 7,558 | |
Net income | | Net income | | | 738 | | | — | | | | 738 | |
Other comprehensive loss | | Other comprehensive loss | | | — | | | (1) | | | | (1) | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | | | $ | 8,298 | | | $ | (3) | | | | $ | 8,295 | |
| |
(a) | Amounts represent a cumulative-effect adjustment due to implementation of a new accounting standard related to Financial Instruments Classification and Measurement. See Note 1 for more information. |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Ohio, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Ohio, Inc. and subsidiaries (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Public Utilities Commission of Ohio and by the Kentucky Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric and gas rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $707 million recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 201924, 2022
We have served as the Company's auditor since 2002.
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | | Operating Revenues | | | | | |
Regulated electric | $ | 1,450 |
| | $ | 1,373 |
| | $ | 1,410 |
| Regulated electric | $ | 1,493 | | | $ | 1,405 | | | $ | 1,456 | |
Regulated natural gas | 506 |
| | 508 |
| | 503 |
| Regulated natural gas | 544 | | | 453 | | | 484 | |
Nonregulated electric and other | 1 |
| | 42 |
| | 31 |
| |
| Total operating revenues | 1,957 |
| | 1,923 |
| | 1,944 |
| Total operating revenues | 2,037 | | | 1,858 | | | 1,940 | |
Operating Expenses | | | | | | Operating Expenses | | | | | |
Fuel used in electric generation and purchased power – regulated | 412 |
| | 369 |
| | 442 |
| |
Fuel used in electric generation and purchased power – nonregulated | — |
| | 58 |
| | 51 |
| |
Fuel used in electric generation and purchased power | | Fuel used in electric generation and purchased power | 409 | | | 339 | | | 388 | |
| Cost of natural gas | 113 |
| | 107 |
| | 103 |
| Cost of natural gas | 136 | | | 73 | | | 95 | |
Operation, maintenance and other | 480 |
| | 530 |
| | 514 |
| Operation, maintenance and other | 479 | | | 463 | | | 520 | |
Depreciation and amortization | 268 |
| | 261 |
| | 233 |
| Depreciation and amortization | 307 | | | 278 | | | 265 | |
Property and other taxes | 290 |
| | 278 |
| | 258 |
| Property and other taxes | 355 | | | 324 | | | 308 | |
Impairment charges | — |
| | 1 |
| | — |
| |
Impairment of assets and other charges | | Impairment of assets and other charges | 25 | | | — | | | — | |
Total operating expenses | 1,563 |
| | 1,604 |
| | 1,601 |
| Total operating expenses | 1,711 | | | 1,477 | | | 1,576 | |
(Losses) Gains on Sales of Other Assets and Other, net | (106 | ) | | 1 |
| | 2 |
| |
Gains on Sales of Other Assets and Other, net | | Gains on Sales of Other Assets and Other, net | 1 | | | — | | | — | |
Operating Income | 288 |
| | 320 |
| | 345 |
| Operating Income | 327 | | | 381 | | | 364 | |
Other Income and Expenses, net | 23 |
| | 23 |
| | 11 |
| Other Income and Expenses, net | 18 | | | 16 | | | 24 | |
Interest Expense | 92 |
| | 91 |
| | 86 |
| Interest Expense | 111 | | | 102 | | | 109 | |
Income From Continuing Operations Before Income Taxes | 219 |
| | 252 |
| | 270 |
| Income From Continuing Operations Before Income Taxes | 234 | | | 295 | | | 279 | |
Income Tax Expense From Continuing Operations | 43 |
| | 59 |
| | 78 |
| Income Tax Expense From Continuing Operations | 30 | | | 43 | | | 40 | |
Income From Continuing Operations | 176 |
| | 193 |
| | 192 |
| Income From Continuing Operations | 204 | | | 252 | | | 239 | |
(Loss) Income From Discontinued Operations, net of tax | — |
| | (1 | ) | | 36 |
| |
Loss From Discontinued Operations, net of tax | | Loss From Discontinued Operations, net of tax | — | | | — | | | (1) | |
Net Income and Comprehensive Income | $ | 176 |
| | $ | 192 |
| | $ | 228 |
| Net Income and Comprehensive Income | $ | 204 | | | $ | 252 | | | $ | 238 | |
|
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED BALANCE SHEETS | | | December 31, | | December 31, |
(in millions) | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 |
ASSETS | | | | ASSETS | | | |
Current Assets | | | | Current Assets | | | |
Cash and cash equivalents | $ | 21 |
| | $ | 12 |
| Cash and cash equivalents | $ | 13 | | | $ | 14 | |
Receivables (net of allowance for doubtful accounts of $2 at 2018 and $3 at 2017) | 102 |
| | 68 |
| |
Receivables (net of allowance for doubtful accounts of $4 at 2021 and 2020) | | Receivables (net of allowance for doubtful accounts of $4 at 2021 and 2020) | 96 | | | 98 | |
Receivables from affiliated companies | 114 |
| | 133 |
| Receivables from affiliated companies | 122 | | | 102 | |
Notes receivable from affiliated companies | — |
| | 14 |
| Notes receivable from affiliated companies | 15 | | | — | |
Inventory | 126 |
|
| 133 |
| Inventory | 116 | | | 110 | |
| Regulatory assets | 33 |
| | 49 |
| Regulatory assets | 72 | | | 39 | |
Other | 24 |
| | 39 |
| Other | 57 | | | 31 | |
Total current assets | 420 |
| | 448 |
| Total current assets | 491 | | | 394 | |
Property, Plant and Equipment | | | | Property, Plant and Equipment | | | |
Cost | 9,360 |
| | 8,732 |
| Cost | 11,725 | | | 11,022 | |
Accumulated depreciation and amortization | (2,717 | ) | | (2,691 | ) | Accumulated depreciation and amortization | (3,106) | | | (3,013) | |
Facilities to be retired, net | | Facilities to be retired, net | 6 | | | — | |
Net property, plant and equipment | 6,643 |
| | 6,041 |
| Net property, plant and equipment | 8,625 | | | 8,009 | |
Other Noncurrent Assets | | | | Other Noncurrent Assets | | | |
Goodwill | 920 |
| | 920 |
| Goodwill | 920 | | | 920 | |
Regulatory assets | 531 |
| | 445 |
| Regulatory assets | 635 | | | 610 | |
Operating lease right-of-use assets, net | | Operating lease right-of-use assets, net | 19 | | | 20 | |
| Other | 41 |
| | 21 |
| Other | 84 | | | 72 | |
Total other noncurrent assets | 1,492 |
| | 1,386 |
| Total other noncurrent assets | 1,658 | | | 1,622 | |
Total Assets | $ | 8,555 |
| | $ | 7,875 |
| Total Assets | $ | 10,774 | | | $ | 10,025 | |
LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | | | |
Current Liabilities | | | | Current Liabilities | | | |
Accounts payable | $ | 316 |
| | $ | 313 |
| Accounts payable | $ | 348 | | | $ | 279 | |
Accounts payable to affiliated companies | 78 |
| | 62 |
| Accounts payable to affiliated companies | 64 | | | 68 | |
Notes payable to affiliated companies | 274 |
| | 29 |
| Notes payable to affiliated companies | 103 | | | 169 | |
Taxes accrued | 202 |
| | 190 |
| Taxes accrued | 275 | | | 247 | |
Interest accrued | 22 |
| | 21 |
| Interest accrued | 30 | | | 31 | |
Current maturities of long-term debt | 551 |
| | 3 |
| Current maturities of long-term debt | — | | | 50 | |
| Asset retirement obligations | 6 |
| | 3 |
| Asset retirement obligations | 13 | | | 3 | |
Regulatory liabilities | 57 |
| | 36 |
| Regulatory liabilities | 62 | | | 65 | |
Other | 74 |
| | 71 |
| Other | 82 | | | 70 | |
Total current liabilities | 1,580 |
| | 728 |
| Total current liabilities | 977 | | | 982 | |
Long-Term Debt | 1,589 |
| | 2,039 |
| Long-Term Debt | 3,168 | | | 3,014 | |
Long-Term Debt Payable to Affiliated Companies | 25 |
| | 25 |
| Long-Term Debt Payable to Affiliated Companies | 25 | | | 25 | |
Other Noncurrent Liabilities | | | | Other Noncurrent Liabilities | | | |
Deferred income taxes | 817 |
| | 781 |
| Deferred income taxes | 1,050 | | | 981 | |
Asset retirement obligations | 87 |
| | 81 |
| Asset retirement obligations | 123 | | | 108 | |
Regulatory liabilities | 840 |
| | 891 |
| Regulatory liabilities | 739 | | | 748 | |
Operating lease liabilities | | Operating lease liabilities | 18 | | | 20 | |
Accrued pension and other post-retirement benefit costs | 79 |
| | 59 |
| Accrued pension and other post-retirement benefit costs | 109 | | | 113 | |
| Other | 93 |
| | 108 |
| Other | 101 | | | 99 | |
Total other noncurrent liabilities | 1,916 |
| | 1,920 |
| Total other noncurrent liabilities | 2,140 | | | 2,069 | |
Commitments and Contingencies | | | | Commitments and Contingencies | 0 | | 0 |
Equity | | | | Equity | | | |
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2018 and 2017 | 762 |
| | 762 |
| |
Common stock, $8.50 par value, 120 million shares authorized; 90 million shares outstanding at 2021 and 2020 | | 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 |
| | 2,670 |
| Additional paid-in capital | 3,100 | | | 2,776 | |
Accumulated deficit | (93 | ) | | (269 | ) | |
Retained earnings | | Retained earnings | 602 | | | 397 | |
| Total equity | 3,445 |
| | 3,163 |
| Total equity | 4,464 | | | 3,935 | |
Total Liabilities and Equity | $ | 8,555 |
| | $ | 7,875 |
| Total Liabilities and Equity | $ | 10,774 | | | $ | 10,025 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 176 |
| | $ | 192 |
| | $ | 228 |
| Net income | $ | 204 | | | $ | 252 | | | $ | 238 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 271 |
| | 265 |
| | 237 |
| Depreciation, amortization and accretion | 311 | | | 283 | | | 269 | |
Equity component of AFUDC | (11 | ) | | (11 | ) | | (6 | ) | Equity component of AFUDC | (7) | | | (7) | | | (13) | |
Losses (Gains) on sales of other assets | 106 |
| | (1 | ) | | (2 | ) | |
Impairment charges | — |
| | 1 |
| | — |
| |
| Impairment of assets and other charges | | Impairment of assets and other charges | 25 | | | — | | | — | |
Deferred income taxes | 25 |
| | 90 |
| | 55 |
| Deferred income taxes | 42 | | | 31 | | | 81 | |
Accrued pension and other post-retirement benefit costs | 3 |
| | 2 |
| | 6 |
| |
Contributions to qualified pension plans | — |
| | (4 | ) | | (5 | ) | |
Payments for asset retirement obligations | (3 | ) | | (7 | ) | | (5 | ) | Payments for asset retirement obligations | (2) | | | (2) | | | (8) | |
Provision for rate refunds | 24 |
| | — |
| | — |
| Provision for rate refunds | 16 | | | 14 | | | 7 | |
(Increase) decrease in | | | | | | (Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | — |
| | — |
| | (2 | ) | |
| Receivables | (33 | ) | | 2 |
| | (4 | ) | Receivables | 6 | | | (13) | | | 20 | |
Receivables from affiliated companies | 19 |
| | (4 | ) | | (36 | ) | Receivables from affiliated companies | (25) | | | 9 | | | 22 | |
Inventory | 7 |
| | 6 |
| | (32 | ) | Inventory | (6) | | | 25 | | | (9) | |
Other current assets | 16 |
| | (22 | ) | | 79 |
| Other current assets | (60) | | | (18) | | | (5) | |
Increase (decrease) in | | | | | | Increase (decrease) in | | | | | |
Accounts payable | (19 | ) | | 12 |
| | 19 |
| Accounts payable | 38 | | | 2 | | | (17) | |
Accounts payable to affiliated companies | 16 |
| | (1 | ) | | 10 |
| Accounts payable to affiliated companies | (4) | | | — | | | (10) | |
Taxes accrued | 12 |
| | 11 |
| | 3 |
| Taxes accrued | 26 | | | 30 | | | 17 | |
Other current liabilities | 14 |
| | (19 | ) | | (54 | ) | Other current liabilities | 11 | | | 3 | | | 1 | |
Other assets | (26 | ) | | (28 | ) | | (35 | ) | Other assets | (43) | | | (32) | | | (26) | |
Other liabilities | (27 | ) | | (5 | ) | | (31 | ) | Other liabilities | 27 | | | (2) | | | (41) | |
Net cash provided by operating activities | 570 |
| | 479 |
| | 425 |
| Net cash provided by operating activities | 559 | | | 575 | | | 526 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (827 | ) | | (686 | ) | | (476 | ) | Capital expenditures | (848) | | | (834) | | | (952) | |
| Notes receivable from affiliated companies | 14 |
| | 80 |
| | (94 | ) | Notes receivable from affiliated companies | (10) | | | (19) | | | — | |
Other | (89 | ) | | (41 | ) | | (30 | ) | Other | (60) | | | (48) | | | (68) | |
Net cash used in investing activities | (902 | ) | | (647 | ) | | (600 | ) | Net cash used in investing activities | (918) | | | (901) | | | (1,020) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 99 |
| | 182 |
| | 341 |
| Proceeds from the issuance of long-term debt | 150 | | | 467 | | | 1,003 | |
Payments for the redemption of long-term debt | (3 | ) | | (2 | ) | | (53 | ) | Payments for the redemption of long-term debt | (50) | | | — | | | (551) | |
Notes payable to affiliated companies | 245 |
| | 13 |
| | (87 | ) | Notes payable to affiliated companies | (67) | | | (144) | | | 38 | |
Dividends to parent | — |
| | (25 | ) | | (25 | ) | |
Other | — |
| | (1 | ) | | (2 | ) | |
Capital contribution from parent | | Capital contribution from parent | 325 | | | — | | | — | |
| Net cash provided by financing activities | 341 |
| | 167 |
| | 174 |
| Net cash provided by financing activities | 358 | | | 323 | | | 490 | |
Net increase (decrease) in cash and cash equivalents | 9 |
| | (1 | ) | | (1 | ) | |
Net decrease in cash and cash equivalents | | Net decrease in cash and cash equivalents | (1) | | | (3) | | | (4) | |
Cash and cash equivalents at beginning of period | 12 |
| | 13 |
| | 14 |
| Cash and cash equivalents at beginning of period | 14 | | | 17 | | | 21 | |
Cash and cash equivalents at end of period | $ | 21 |
| | $ | 12 |
| | $ | 13 |
| Cash and cash equivalents at end of period | $ | 13 | | | $ | 14 | | | $ | 17 | |
Supplemental Disclosures: | | | | | | Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 87 |
| | $ | 85 |
| | $ | 81 |
| Cash paid for interest, net of amount capitalized | $ | 107 | | | $ | 97 | | | $ | 97 | |
Cash received from income taxes | (6 | ) | | (8 | ) | | (46 | ) | |
Cash paid for (received from) income taxes | | Cash paid for (received from) income taxes | 9 | | | — | | | (37) | |
Significant non-cash transactions: | | | | | | Significant non-cash transactions: | |
Accrued capital expenditures | 95 |
| | 82 |
| | 83 |
| Accrued capital expenditures | 135 | | | 104 | | | 109 | |
Non-cash equity contribution from parent | 106 |
| | — |
| | — |
| |
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | | | | | | | Additional |
| | | | | | Additional | | Retained | | | |
| Common |
| | Paid-in |
| | Accumulated |
| | Total |
| | Common | | Paid-in | | Earnings | | | Total |
(in millions) | Stock |
| | Capital |
| | Deficit |
| | Equity |
| (in millions) | Stock | | Capital | | (Deficit) | | | Equity |
Balance at December 31, 2015 | $ | 762 |
| | $ | 2,720 |
| | $ | (698 | ) | | $ | 2,784 |
| |
Balance at December 31, 2018 | | Balance at December 31, 2018 | $ | 762 | | | $ | 2,776 | | | $ | (93) | | | | $ | 3,445 | |
Net income | | Net income | — | | | — | | | 238 | | | | 238 | |
| Balance at December 31, 2019 | | Balance at December 31, 2019 | $ | 762 | | | $ | 2,776 | | | $ | 145 | | | | $ | 3,683 | |
Net income | | Net income | — | | | — | | | 252 | | | | 252 | |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | $ | 762 | | | $ | 2,776 | | | $ | 397 | | | | $ | 3,935 | |
Net income | — |
| | — |
| | 228 |
| | 228 |
| Net income | — | | | — | | | 204 | | | | 204 | |
Contribution from parent | — |
| | — |
| | 9 |
| | 9 |
| Contribution from parent | — | | | 325 | | | — | | | | 325 | |
Dividends to parent | — |
| | (25 | ) | | — |
| | (25 | ) | |
Balance at December 31, 2016 | $ | 762 |
| | $ | 2,695 |
| | $ | (461 | ) | | $ | 2,996 |
| |
Net income | — |
| | — |
| | 192 |
| | 192 |
| |
Dividends to parent | — |
| | (25 | ) | | — |
| | (25 | ) | |
Balance at December 31, 2017 | $ | 762 |
|
| $ | 2,670 |
|
| $ | (269 | ) |
| $ | 3,163 |
| |
Net income | — |
| | — |
| | 176 |
| | 176 |
| |
Contribution from parent | — |
| | 106 |
| | — |
| | 106 |
| |
Balance at December 31, 2018 | $ | 762 |
| | $ | 2,776 |
| | $ | (93 | ) | | $ | 3,445 |
| |
| Other | | Other | — | | | (1) | | | 1 | | | | — | |
Balance at December 31, 2021 | | Balance at December 31, 2021 | $ | 762 | | | $ | 3,100 | | | $ | 602 | | | | $ | 4,464 | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Indiana, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Indiana, LLC and subsidiariessubsidiary (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018,2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018,2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Indiana Utility Regulatory Commission (the “Commission”), which has jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $1.6 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commission, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commission, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
Duke Energy Indiana Coal Ash Asset Retirement Obligations – Refer to Notes 1, 4, and 9 to the financial statements.
Critical Audit Matter Description
Duke Energy Indiana has asset retirement obligations associated with coal ash impoundments at operating and retired coal generation facilities. These legal obligations are the result of Indiana state and federal regulations. There is significant judgment in determining the methods to close each site since Duke Energy Indiana does not have approved closure plans for certain sites. Management has applied probability weightings for the cash flows for certain sites based the likelihood of implementing potential closure methods. Probability weightings for the cash flows associated with the different potential closure methods (“probability weightings”) creates estimation uncertainty. The liability for coal ash asset retirement obligations at Duke Energy Indiana was $949 million at December 31, 2021.
We identified the asset retirement obligations associated with coal ash impoundments at Duke Energy Indiana as a critical audit matter because of the significant management estimates and assumptions, including the different potential closure methods and the probability weightings as a result of pending legal challenges. The audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the probability weightings for the cash flows associated with the different potential closure methods required a high degree of auditor judgment and an increased extent of effort, including the need to involve our environmental specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the probability weightings for the cash flows associated with the different potential closure methods for coal ash asset retirement obligations at Duke Energy Indiana included the following, among others:
•We tested the effectiveness of controls over management’s coal ash asset retirement obligation estimate, including those over management’s determination of the probability weightings.
•We tested the mathematical accuracy of management’s coal ash asset retirement obligation calculations, including the application of probability weightings.
•We made inquiries of internal and external legal counsel regarding the status of the legal matters associated with the probability weightings.
•We inspected the opinions from internal and external legal counsel supporting the probability weightings.
•With the assistance of professionals in our firm with the appropriate expertise, we inspected the Company’s filings with and orders from the Indiana Department of Environmental Management, for evidence that might contradict management’s assertions regarding the probability weightings.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 201924, 2022
We have served as the Company's auditor since 2002.
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 3,059 |
| | $ | 3,047 |
| | $ | 2,958 |
| Operating Revenues | $ | 3,174 | | | $ | 2,795 | | | $ | 3,004 | |
Operating Expenses | | | | | | Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,000 |
|
| 966 |
| | 909 |
| Fuel used in electric generation and purchased power | 985 | | | 767 | | | 935 | |
Operation, maintenance and other | 788 |
|
| 743 |
| | 727 |
| Operation, maintenance and other | 750 | | | 762 | | | 790 | |
Depreciation and amortization | 520 |
|
| 458 |
| | 496 |
| Depreciation and amortization | 615 | | | 569 | | | 525 | |
Property and other taxes | 78 |
|
| 76 |
| | 58 |
| Property and other taxes | 73 | | | 81 | | | 69 | |
Impairment charges | 30 |
|
| 18 |
| | 8 |
| |
Impairment of assets and other charges | | Impairment of assets and other charges | 9 | | | — | | | — | |
Total operating expenses | 2,416 |
| | 2,261 |
| | 2,198 |
| Total operating expenses | 2,432 | | | 2,179 | | | 2,319 | |
Gains on Sales of Other Assets and Other, net | — |
| | — |
| | 1 |
| |
| Operating Income | 643 |
| | 786 |
| | 761 |
| Operating Income | 742 | | | 616 | | | 685 | |
Other Income and Expenses, net | 45 |
| | 47 |
| | 26 |
| Other Income and Expenses, net | 42 | | | 37 | | | 41 | |
Interest Expense | 167 |
| | 178 |
| | 181 |
| Interest Expense | 196 | | | 161 | | | 156 | |
Income Before Income Taxes | 521 |
|
| 655 |
|
| 606 |
| Income Before Income Taxes | 588 | | | 492 | | | 570 | |
Income Tax Expense | 128 |
| | 301 |
| | 225 |
| Income Tax Expense | 107 | | | 84 | | | 134 | |
Net Income | $ | 393 |
|
| $ | 354 |
|
| $ | 381 |
| |
Other Comprehensive Loss, net of tax | | | | | | |
Reclassification into earnings from cash flow hedges | — |
| | — |
| | (1 | ) | |
Comprehensive Income | $ | 393 |
|
| $ | 354 |
|
| $ | 380 |
| |
Net Income and Comprehensive Income | | Net Income and Comprehensive Income | $ | 481 | | | $ | 408 | | | $ | 436 | |
|
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED BALANCE SHEETS | | | December 31, | | December 31, |
(in millions) | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 |
ASSETS | | | | ASSETS | | | |
Current Assets | | | | Current Assets | | | |
Cash and cash equivalents | $ | 24 |
| | $ | 9 |
| Cash and cash equivalents | $ | 6 | | | $ | 7 | |
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017) | 52 |
| | 57 |
| |
Receivables (net of allowance for doubtful accounts of $3 at 2021 and 2020) | | Receivables (net of allowance for doubtful accounts of $3 at 2021 and 2020) | 100 | | | 55 | |
Receivables from affiliated companies | 122 |
| | 125 |
| Receivables from affiliated companies | 98 | | | 112 | |
Notes receivable from affiliated companies | | Notes receivable from affiliated companies | 134 | | | — | |
Inventory | 422 |
|
| 450 |
| Inventory | 418 | | | 473 | |
Regulatory assets | 175 |
| | 165 |
| Regulatory assets | 277 | | | 125 | |
Other | 35 |
| | 30 |
| Other | 68 | | | 37 | |
Total current assets | 830 |
| | 836 |
| Total current assets | 1,101 | | | 809 | |
Property, Plant and Equipment | | | | Property, Plant and Equipment | | | |
Cost | 15,443 |
| | 14,948 |
| Cost | 17,343 | | | 17,382 | |
Accumulated depreciation and amortization | (4,914 | ) | | (4,662 | ) | Accumulated depreciation and amortization | (5,583) | | | (5,661) | |
| Net property, plant and equipment | 10,529 |
| | 10,286 |
| Net property, plant and equipment | 11,760 | | | 11,721 | |
Other Noncurrent Assets | | |
| Other Noncurrent Assets | | |
Regulatory assets | 982 |
| | 978 |
| Regulatory assets | 1,278 | | | 1,203 | |
Operating lease right-of-use assets, net | | Operating lease right-of-use assets, net | 53 | | | 55 | |
| Other | 194 |
| | 189 |
| Other | 296 | | | 253 | |
Total other noncurrent assets | 1,176 |
| | 1,167 |
| Total other noncurrent assets | 1,627 | | | 1,511 | |
Total Assets | $ | 12,535 |
| | $ | 12,289 |
| Total Assets | $ | 14,488 | | | $ | 14,041 | |
LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | | | |
Current Liabilities | | | | Current Liabilities | | | |
Accounts payable | $ | 200 |
| | $ | 196 |
| Accounts payable | $ | 282 | | | $ | 188 | |
Accounts payable to affiliated companies | 83 |
| | 78 |
| Accounts payable to affiliated companies | 221 | | | 88 | |
Notes payable to affiliated companies | 167 |
| | 161 |
| Notes payable to affiliated companies | — | | | 131 | |
Taxes accrued | 43 |
| | 95 |
| Taxes accrued | 73 | | | 62 | |
Interest accrued | 58 |
| | 57 |
| Interest accrued | 49 | | | 51 | |
Current maturities of long-term debt | 63 |
| | 3 |
| Current maturities of long-term debt | 84 | | | 70 | |
Asset retirement obligations | 109 |
| | 54 |
| Asset retirement obligations | 110 | | | 168 | |
Regulatory liabilities | 25 |
| | 24 |
| Regulatory liabilities | 127 | | | 111 | |
Other | 107 |
| | 104 |
| Other | 105 | | | 83 | |
Total current liabilities | 855 |
| | 772 |
| Total current liabilities | 1,051 | | | 952 | |
Long-Term Debt | 3,569 |
| | 3,630 |
| Long-Term Debt | 4,089 | | | 3,871 | |
Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | | Other Noncurrent Liabilities | | | |
Deferred income taxes | 1,009 |
| | 925 |
| Deferred income taxes | 1,303 | | | 1,228 | |
Asset retirement obligations | 613 |
| | 727 |
| Asset retirement obligations | 877 | | | 1,008 | |
Regulatory liabilities | 1,722 |
| | 1,723 |
| Regulatory liabilities | 1,565 | | | 1,627 | |
Operating lease liabilities | | Operating lease liabilities | 50 | | | 53 | |
Accrued pension and other post-retirement benefit costs | 115 |
| | 76 |
| Accrued pension and other post-retirement benefit costs | 167 | | | 171 | |
Investment tax credits | 147 |
| | 147 |
| Investment tax credits | 177 | | | 168 | |
Other | 16 |
| | 18 |
| Other | 44 | | | 30 | |
Total other noncurrent liabilities | 3,622 |
| | 3,616 |
| Total other noncurrent liabilities | 4,183 | | | 4,285 | |
Commitments and Contingencies | | | | Commitments and Contingencies | 0 | | 0 |
Equity | | | | Equity | | | |
Member's Equity | 4,339 |
| | 4,121 |
| Member's Equity | 5,015 | | | 4,783 | |
| Total Liabilities and Equity | $ | 12,535 |
| | $ | 12,289 |
| Total Liabilities and Equity | $ | 14,488 | | | $ | 14,041 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 393 |
| | $ | 354 |
| | $ | 381 |
| Net income | $ | 481 | | | $ | 408 | | | $ | 436 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization, and accretion | 524 |
| | 462 |
| | 499 |
| |
Depreciation, amortization and accretion | | Depreciation, amortization and accretion | 619 | | | 572 | | | 531 | |
Equity component of AFUDC | (32 | ) | | (28 | ) | | (16 | ) | Equity component of AFUDC | (27) | | | (23) | | | (18) | |
Impairment charges | 30 |
| | 18 |
| | 8 |
| |
| Impairment of assets and other charges | | Impairment of assets and other charges | 9 | | | — | | | — | |
Deferred income taxes | 95 |
| | 152 |
| | 213 |
| Deferred income taxes | 34 | | | 29 | | | 156 | |
Accrued pension and other post-retirement benefit costs | 7 |
| | 2 |
| | 8 |
| |
Contributions to qualified pension plans | (8 | ) | | — |
| | (9 | ) | |
Payments for asset retirement obligations | (69 | ) | | (45 | ) | | (46 | ) | Payments for asset retirement obligations | (67) | | | (63) | | | (48) | |
Provision for rate refunds | 53 |
| | — |
| | — |
| |
| (Increase) decrease in | | | | | | (Increase) decrease in | | | | | |
| Receivables | 7 |
| | 59 |
| | (2 | ) | Receivables | (33) | | | 8 | | | (8) | |
Receivables from affiliated companies | 3 |
| | (11 | ) | | (43 | ) | Receivables from affiliated companies | — | | | — | | | 41 | |
Inventory | 28 |
| | 54 |
| | 66 |
| Inventory | 55 | | | 44 | | | (95) | |
Other current assets | (25 | ) | | 28 |
| | (67 | ) | Other current assets | (181) | | | (3) | | | 76 | |
Increase (decrease) in | | | | | | Increase (decrease) in | | | | | |
Accounts payable | 37 |
| | (86 | ) | | 8 |
| Accounts payable | 76 | | | (12) | | | (10) | |
Accounts payable to affiliated companies | 5 |
| | 4 |
| | (9 | ) | Accounts payable to affiliated companies | 8 | | | 1 | | | 4 | |
Taxes accrued | (52 | ) | | 64 |
| | (4 | ) | Taxes accrued | 12 | | | 13 | | | (25) | |
Other current liabilities | 14 |
| | (10 | ) | | (81 | ) | Other current liabilities | 13 | | | 6 | | | 15 | |
Other assets | 29 |
| | (28 | ) | | (27 | ) | Other assets | 20 | | | (68) | | | (74) | |
Other liabilities | (33 | ) | | (20 | ) | | (8 | ) | Other liabilities | (15) | | | 26 | | | 16 | |
Net cash provided by operating activities | 1,006 |
| | 969 |
| | 871 |
| Net cash provided by operating activities | 1,004 | | | 938 | | | 997 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (832 | ) | | (840 | ) | | (755 | ) | Capital expenditures | (818) | | | (888) | | | (876) | |
| Purchases of debt and equity securities | (48 | ) | | (20 | ) | | (14 | ) | Purchases of debt and equity securities | (142) | | | (37) | | | (26) | |
Proceeds from sales and maturities of debt and equity securities | 44 |
| | 7 |
| | 11 |
| Proceeds from sales and maturities of debt and equity securities | 65 | | | 22 | | | 20 | |
Proceeds from the sales of other assets | 15 |
| | — |
| | — |
| |
| Notes receivable from affiliated companies | — |
| | 86 |
| | (3 | ) | Notes receivable from affiliated companies | (120) | | | (33) | | | — | |
Other | 3 |
| | (65 | ) | | 32 |
| Other | 36 | | | 48 | | | (49) | |
Net cash used in investing activities | (818 | ) | | (832 | ) | | (729 | ) | Net cash used in investing activities | (979) | | | (888) | | | (931) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | — |
| | — |
| | 494 |
| Proceeds from the issuance of long-term debt | 300 | | | 544 | | | 485 | |
Payments for the redemption of long-term debt | (3 | ) | | (5 | ) | | (478 | ) | Payments for the redemption of long-term debt | (70) | | | (513) | | | (213) | |
Notes payable to affiliated companies | 6 |
| | 161 |
| | — |
| Notes payable to affiliated companies | (131) | | | 101 | | | (137) | |
Distributions to parent | (175 | ) | | (300 | ) | | (149 | ) | Distributions to parent | (125) | | | (200) | | | (200) | |
Other | (1 | ) | | (1 | ) | | (1 | ) | |
| Net cash used in financing activities | (173 | ) | | (145 | ) | | (134 | ) | Net cash used in financing activities | (26) | | | (68) | | | (65) | |
Net increase (decrease) in cash and cash equivalents | 15 |
| | (8 | ) | | 8 |
| |
Net (decrease) increase in cash and cash equivalents | | Net (decrease) increase in cash and cash equivalents | (1) | | | (18) | | | 1 | |
Cash and cash equivalents at beginning of period | 9 |
| | 17 |
| | 9 |
| Cash and cash equivalents at beginning of period | 7 | | | 25 | | | 24 | |
Cash and cash equivalents at end of period | $ | 24 |
| | $ | 9 |
| | $ | 17 |
| Cash and cash equivalents at end of period | $ | 6 | | | $ | 7 | | | $ | 25 | |
Supplemental Disclosures: | | | | | | Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 162 |
| | $ | 179 |
| | $ | 171 |
| Cash paid for interest, net of amount capitalized | $ | 194 | | | $ | 164 | | | $ | 150 | |
Cash paid for (received from) income taxes | 75 |
| | 117 |
| | (7 | ) | Cash paid for (received from) income taxes | 56 | | | 36 | | | (6) | |
Significant non-cash transactions: | | | | | | Significant non-cash transactions: | |
Accrued capital expenditures | 88 |
| | 125 |
| | 99 |
| Accrued capital expenditures | 118 | | | 101 | | | 102 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | 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 | — |
| | — |
| | — |
| | 381 |
| | — |
| | 381 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
Distributions to parent | — |
| | — |
| | — |
| | (149 | ) | | — |
| | (149 | ) |
Transfer to Member's Equity | (1 | ) | | (1,384 | ) | | (2,450 | ) | | 3,835 |
| | — |
| | — |
|
Balance at December 31, 2016 | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 4,067 |
| | $ | — |
|
| $ | 4,067 |
|
Net income | — |
| | — |
| | — |
| | 354 |
| | — |
| | 354 |
|
Distributions to parent | — |
| | — |
| | — |
| | (300 | ) | | — |
| | (300 | ) |
Balance at December 31, 2017 | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 4,121 |
| | $ | — |
|
| $ | 4,121 |
|
Net income | — |
| | — |
| | — |
| | 393 |
| | — |
| | 393 |
|
Distributions to parent | — |
| | — |
| | — |
| | (175 | ) | | — |
| | (175 | ) |
Balance at December 31, 2018 | $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 4,339 |
| | $ | — |
|
| $ | 4,339 |
|
| | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | Member's | | | | |
(in millions) | | | | | | | Equity | | | | |
Balance at December 31, 2018 | | | | | | | $ | 4,339 | | | | | |
Net income | | | | | | | 436 | | | | | |
| | | | | | | | | | | |
Distributions to parent | | | | | | | (200) | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2019 | | | | | | | $ | 4,575 | | | | | |
Net income | | | | | | | 408 | | | | | |
| | | | | | | | | | | |
Distributions to parent | | | | | | | (200) | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2020 | | | | | | | $ | 4,783 | | | | | |
Net income | | | | | | | 481 | | | | | |
Distributions to parent | | | | | | | (250) | | | | | |
Other | | | | | | | 1 | | | | | |
Balance at December 31, 2021 | | | | | | | $ | 5,015 | | | | | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Piedmont Natural Gas Company, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Piedmont Natural Gas Company, Inc. and subsidiaries (the "Company") as of December 31, 20182021 and 2017,2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the periodsperiod ended December 31, 2018, December 31, 2017, October 31 2016, and for the two months ended December 31, 20162021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20182021 and 2017,2020 and the results of its operations and its cash flows for each of the three years in the periodsperiod ended December 31, 2018, December 31, 2017, October 31, 2016, and for the two months ended December 31, 2016,2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
EmphasisCritical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of Matter
As discussed in Note 1the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements effectiveand (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission, the Public Service Commission of South Carolina, and the Tennessee Public Utility Commission (collectively the “Commissions”), which have jurisdiction with respect to the gas rates of the Company. Management has determined it meets the criteria for fiscal year 2016,the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company changedhas approximately $456.8 million recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its fiscal year endassertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from October 31 to December 31. This resultedmanagement asserting that regulatory assets recorded in a two-month transition period beginning November 1, 2016 through December 31, 2016.the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 201924, 2022
We have served as the Company's auditor since 1951.
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | | | Years Ended December 31, | | Two Months Ended December 31, | | Year Ended October 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | | | | Operating Revenues | |
Regulated natural gas | $ | 1,365 |
| | $ | 1,319 |
| | $ | 320 |
| | $ | 1,139 |
| Regulated natural gas | $ | 1,555 | | | $ | 1,286 | | | $ | 1,369 | |
Nonregulated natural gas and other | 10 |
| | 9 |
| | 2 |
| | 10 |
| Nonregulated natural gas and other | 14 | | | 11 | | | 12 | |
| Total operating revenues | 1,375 |
| | 1,328 |
| | 322 |
| | 1,149 |
| Total operating revenues | 1,569 | | | 1,297 | | | 1,381 | |
Operating Expenses | | | | | | | | Operating Expenses | | |
Cost of natural gas | 584 |
| | 524 |
| | 144 |
| | 391 |
| Cost of natural gas | 569 | | | 386 | | | 532 | |
Operation, maintenance and other | 357 |
| | 304 |
| | 50 |
| | 353 |
| Operation, maintenance and other | 327 | | | 322 | | | 328 | |
Depreciation and amortization | 159 |
| | 148 |
| | 23 |
| | 137 |
| Depreciation and amortization | 213 | | | 180 | | | 172 | |
Property and other taxes | 49 |
| | 48 |
| | 7 |
| | 43 |
| Property and other taxes | 55 | | | 53 | | | 45 | |
Impairment charges | — |
| | 7 |
| | — |
| | — |
| |
Impairment of assets and other charges | | Impairment of assets and other charges | 10 | | | 7 | | | — | |
Total operating expenses | 1,149 |
| | 1,031 |
|
| 224 |
| | 924 |
| Total operating expenses | 1,174 | | | 948 | | | 1,077 | |
| Operating Income | 226 |
| | 297 |
|
| 98 |
| | 225 |
| Operating Income | 395 | | | 349 | | | 304 | |
Equity in earnings (losses) of unconsolidated affiliates | 7 |
| | (6 | ) | | 2 |
| | 29 |
| |
Gain on sale of unconsolidated affiliates | — |
| | — |
| | — |
| | 133 |
| |
Equity in earnings of unconsolidated affiliates | | Equity in earnings of unconsolidated affiliates | 9 | | | 9 | | | 8 | |
| Other income and expense, net | 14 |
| | (11 | ) | | (2 | ) | | (1 | ) | Other income and expense, net | 55 | | | 51 | | | 20 | |
Total other income and expenses | 21 |
| | (17 | ) |
| — |
| | 161 |
| Total other income and expenses | 64 | | | 60 | | | 28 | |
Interest Expense | 81 |
| | 79 |
| | 12 |
| | 69 |
| Interest Expense | 119 | | | 118 | | | 87 | |
Income Before Income Taxes | 166 |
| | 201 |
|
| 86 |
| | 317 |
| Income Before Income Taxes | 340 | | | 291 | | | 245 | |
Income Tax Expense | 37 |
| | 62 |
| | 32 |
| | 124 |
| Income Tax Expense | 30 | | | 18 | | | 43 | |
Net Income | $ | 129 |
| | $ | 139 |
|
| $ | 54 |
| | $ | 193 |
| |
Other Comprehensive Income, net of tax | | | | | | | | |
Unrealized loss from hedging activities of equity method investments | — |
| | — |
| | — |
| | (3 | ) | |
Reclassification into earnings from hedging activities of equity method investments | — |
| | — |
| | — |
| | 4 |
| |
Other Comprehensive Income, net of tax | — |
| | — |
| | — |
| | 1 |
| |
Comprehensive Income | $ | 129 |
| | $ | 139 |
| | $ | 54 |
| | $ | 194 |
| |
Net Income and Comprehensive Income | | Net Income and Comprehensive Income | $ | 310 | | | $ | 273 | | | $ | 202 | |
|
See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
| | | December 31, | | December 31, |
(in millions) | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 |
ASSETS | | | | ASSETS | |
Current Assets | | | | Current Assets | |
Cash and cash equivalents | $ | — |
| | $ | 19 |
| |
Receivables (net of allowance for doubtful accounts of $2 at 2018 and 2017) | 266 |
| | 275 |
| |
| Receivables (net of allowance for doubtful accounts of $15 at 2021 and $12 at 2020) | | Receivables (net of allowance for doubtful accounts of $15 at 2021 and $12 at 2020) | $ | 318 | | | $ | 250 | |
Receivables from affiliated companies | 22 |
| | 7 |
| Receivables from affiliated companies | 11 | | | 10 | |
Inventory | 70 |
| | 66 |
| Inventory | 109 | | | 68 | |
Regulatory assets | 54 |
| | 95 |
| Regulatory assets | 141 | | | 153 | |
| Other | 19 |
| | 52 |
| Other | 9 | | | 20 | |
Total current assets | 431 |
| | 514 |
| Total current assets | 588 | | | 501 | |
Property, Plant and Equipment | | | | Property, Plant and Equipment | |
Cost | 7,486 |
| | 6,725 |
| Cost | 9,918 | | | 9,134 | |
Accumulated depreciation and amortization | (1,575 | ) | | (1,479 | ) | Accumulated depreciation and amortization | (1,899) | | | (1,749) | |
Facilities to be retired, net | | Facilities to be retired, net | 11 | | | — | |
Net property, plant and equipment | 5,911 |
| | 5,246 |
| Net property, plant and equipment | 8,030 | | | 7,385 | |
Other Noncurrent Assets | | | | Other Noncurrent Assets | |
Goodwill | 49 |
| | 49 |
| Goodwill | 49 | | | 49 | |
Regulatory assets | 303 |
| | 283 |
| Regulatory assets | 316 | | | 302 | |
Operating lease right-of-use assets, net | | Operating lease right-of-use assets, net | 16 | | | 20 | |
Investments in equity method unconsolidated affiliates | 64 |
| | 61 |
| Investments in equity method unconsolidated affiliates | 95 | | | 88 | |
Other | 52 |
| | 65 |
| Other | 288 | | | 270 | |
Total other noncurrent assets | 468 |
| | 458 |
| Total other noncurrent assets | 764 | | | 729 | |
Total Assets | $ | 6,810 |
| | $ | 6,218 |
| Total Assets | $ | 9,382 | | | $ | 8,615 | |
LIABILITIES AND EQUITY | | | | LIABILITIES AND EQUITY | |
Current Liabilities | | | | Current Liabilities | |
Accounts payable | $ | 203 |
| | $ | 125 |
| Accounts payable | $ | 196 | | | $ | 230 | |
Accounts payable to affiliated companies | 38 |
| | 13 |
| Accounts payable to affiliated companies | 40 | | | 79 | |
| Notes payable to affiliated companies | 198 |
| | 364 |
| Notes payable to affiliated companies | 518 | | | 530 | |
Taxes accrued | 84 |
| | 19 |
| Taxes accrued | 63 | | | 23 | |
Interest accrued | 31 |
| | 31 |
| Interest accrued | 37 | | | 34 | |
Current maturities of long-term debt | 350 |
| | 250 |
| Current maturities of long-term debt | — | | | 160 | |
Regulatory liabilities | 37 |
| | 3 |
| Regulatory liabilities | 56 | | | 88 | |
Other | 58 |
| | 69 |
| Other | 81 | | | 69 | |
Total current liabilities | 999 |
| | 874 |
| Total current liabilities | 991 | | | 1,213 | |
Long-Term Debt | 1,788 |
| | 1,787 |
| Long-Term Debt | 2,968 | | | 2,620 | |
| Other Noncurrent Liabilities | | | | Other Noncurrent Liabilities | |
Deferred income taxes | 551 |
| | 564 |
| Deferred income taxes | 815 | | | 821 | |
Asset retirement obligations | 19 |
| | 15 |
| Asset retirement obligations | 22 | | | 20 | |
Regulatory liabilities | 1,181 |
| | 1,141 |
| Regulatory liabilities | 1,058 | | | 1,044 | |
Operating lease liabilities | | Operating lease liabilities | 14 | | | 19 | |
Accrued pension and other post-retirement benefit costs | 4 |
| | 5 |
| Accrued pension and other post-retirement benefit costs | 7 | | | 8 | |
Other | 177 |
| | 170 |
| Other | 158 | | | 155 | |
Total other noncurrent liabilities | 1,932 |
| | 1,895 |
| Total other noncurrent liabilities | 2,074 | | | 2,067 | |
Commitments and Contingencies | | | | Commitments and Contingencies | 0 | | 0 |
Equity | | | | Equity | |
Common stock, no par value: 100 shares authorized and outstanding at 2018 and 2017 | 1,160 |
| | 860 |
| |
Common stock, no par value: 100 shares authorized and outstanding at 2021 and 2020 | | Common stock, no par value: 100 shares authorized and outstanding at 2021 and 2020 | 1,635 | | | 1,310 | |
| Retained earnings | 931 |
| | 802 |
| Retained earnings | 1,714 | | | 1,405 | |
| Total equity | 2,091 |
| | 1,662 |
| Total equity | 3,349 | | | 2,715 | |
Total Liabilities and Equity | $ | 6,810 |
| | $ | 6,218 |
| Total Liabilities and Equity | $ | 9,382 | | | $ | 8,615 | |
See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | Years Ended December 31, | | Two Months Ended December 31, | | Year Ended October 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | CASH FLOWS FROM OPERATING ACTIVITIES | |
Net income | $ | 129 |
| | $ | 139 |
| | $ | 54 |
| | $ | 193 |
| Net income | $ | 310 | | | $ | 273 | | | $ | 202 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Depreciation and amortization | 161 |
| | 151 |
| | 25 |
| | 148 |
| Depreciation and amortization | 216 | | | 182 | | | 174 | |
Gains on sales of other assets | — |
| | — |
| | — |
| | (133 | ) | |
Impairment charges | — |
| | 7 |
| | — |
| | — |
| |
Equity component of AFUDC | | Equity component of AFUDC | (20) | | | (19) | | | — | |
| Impairment of assets and other charges | | Impairment of assets and other charges | 10 | | | 7 | | | — | |
Deferred income taxes | (31 | ) | | 154 |
| | 26 |
| | 74 |
| Deferred income taxes | 4 | | | 53 | | | 136 | |
Equity in (earnings) losses from unconsolidated affiliates | (7 | ) | | 6 |
| | (2 | ) | | (29 | ) | Equity in (earnings) losses from unconsolidated affiliates | (9) | | | (9) | | | (8) | |
Accrued pension and other post-retirement benefit costs | (4 | ) | | 23 |
| | 5 |
| | 3 |
| |
Contributions to qualified pension plans | — |
| | (11 | ) | | (10 | ) | | (14 | ) | |
Payments for asset retirement obligations | — |
| | — |
| | (1 | ) | | (6 | ) | |
| Provision for rate refunds | 43 |
| | — |
| | — |
| | — |
| Provision for rate refunds | (4) | | | (33) | | | 2 | |
(Increase) decrease in | | | | | | | | (Increase) decrease in | |
| Receivables | 7 |
| | (40 | ) | | (157 | ) | | 12 |
| Receivables | (77) | | | 10 | | | 28 | |
Receivables from affiliated companies | (15 | ) | | — |
| | — |
| | (7 | ) | Receivables from affiliated companies | (1) | | | — | | | 12 | |
Inventory | (4 | ) | | — |
| | (11 | ) | | 14 |
| Inventory | (40) | | | 3 | | | (2) | |
Other current assets | 71 |
| | (20 | ) | | 8 |
| | (98 | ) | Other current assets | 33 | | | (66) | | | (25) | |
Increase (decrease) in | | | | | | | | Increase (decrease) in | |
Accounts payable | 15 |
| | (13 | ) | | 35 |
| | 6 |
| Accounts payable | (25) | | | 16 | | | (7) | |
Accounts payable to affiliated companies | 25 |
| | 5 |
| | 4 |
| | 6 |
| Accounts payable to affiliated companies | (39) | | | 76 | | | (35) | |
Taxes accrued | 65 |
| | (48 | ) | | (2 | ) | | 38 |
| Taxes accrued | 37 | | | 3 | | | (60) | |
Other current liabilities | 21 |
| | (9 | ) | | 2 |
| | 28 |
| Other current liabilities | (26) | | | (11) | | | 1 | |
Other assets | 6 |
| | 7 |
| | (7 | ) | | (91 | ) | Other assets | 26 | | | (11) | | | 1 | |
Other liabilities | (4 | ) | | (2 | ) | | 5 |
| | 180 |
| Other liabilities | (4) | | | 7 | | | (10) | |
Net cash provided by (used in) operating activities | 478 |
| | 349 |
| | (26 | ) | | 324 |
| |
Net cash provided by operating activities | | Net cash provided by operating activities | 391 | | | 481 | | | 409 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | CASH FLOWS FROM INVESTING ACTIVITIES | |
Capital expenditures | (721 | ) | | (585 | ) | | (113 | ) | | (522 | ) | Capital expenditures | (850) | | | (901) | | | (1,053) | |
Contributions to equity method investments | — |
| | (12 | ) | | (12 | ) | | (47 | ) | Contributions to equity method investments | (9) | | | — | | | (16) | |
Proceeds from the sales of other assets | — |
| | — |
| | — |
| | 175 |
| |
| Other | (10 | ) | | (6 | ) | | 1 |
| | 5 |
| Other | (31) | | | (28) | | | (14) | |
Net cash used in investing activities | (731 | ) | | (603 | ) | | (124 | ) | | (389 | ) | Net cash used in investing activities | (890) | | | (929) | | | (1,083) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | CASH FLOWS FROM FINANCING ACTIVITIES | |
Proceeds from the: | | | | | | | | |
Issuance of long-term debt | 100 |
| | 250 |
| | — |
| | 295 |
| |
Issuance of common stock | — |
| | — |
| | — |
| | 122 |
| |
Proceeds from the issuance of long-term debt | | Proceeds from the issuance of long-term debt | 347 | | | 394 | | | 596 | |
Payments for the redemption of long-term debt | — |
| | (35 | ) | | — |
| | (40 | ) | Payments for the redemption of long-term debt | (160) | | | — | | | (350) | |
Notes payable and commercial paper | — |
| | (330 | ) | | 185 |
| | (195 | ) | |
Notes payable to affiliated companies | (166 | ) | | 364 |
| | — |
| | — |
| Notes payable to affiliated companies | (13) | | | 54 | | | 278 | |
| Capital contribution from parent | 300 |
| | — |
| | — |
| | — |
| Capital contribution from parent | 325 | | | — | | | 150 | |
Dividends to parent | — |
| | — |
| | (27 | ) | | — |
| |
Dividends paid | — |
| | — |
| | — |
| | (114 | ) | |
Other | — |
| | (1 | ) | | — |
| | — |
| |
| Net cash provided by financing activities | 234 |
| | 248 |
| | 158 |
| | 68 |
| Net cash provided by financing activities | 499 | | | 448 | | | 674 | |
Net (decrease) increase in cash and cash equivalents | (19 | ) | | (6 | ) | | 8 |
| | 3 |
| |
Net decrease in cash and cash equivalents | | Net decrease in cash and cash equivalents | — | | | — | | | — | |
Cash and cash equivalents at beginning of period | 19 |
| | 25 |
| | 17 |
| | 14 |
| Cash and cash equivalents at beginning of period | — | | | — | | | — | |
Cash and cash equivalents at end of period | $ | — |
| | $ | 19 |
| | $ | 25 |
| | $ | 17 |
| Cash and cash equivalents at end of period | $ | — | | | $ | — | | | $ | — | |
Supplemental Disclosures: | | | | | | | | Supplemental Disclosures: | |
Cash paid for interest, net of amount capitalized | $ | 79 |
| | $ | 78 |
| | $ | 11 |
| | $ | 81 |
| Cash paid for interest, net of amount capitalized | $ | 114 | | | $ | 115 | | | $ | 84 | |
Cash received from income taxes | (16 | ) | | (12 | ) | | — |
| | (25 | ) | Cash received from income taxes | (13) | | | (36) | | | (31) | |
Significant non-cash transactions: | | | | | | | | Significant non-cash transactions: | |
Accrued capital expenditures | 96 |
| | 34 |
| | 48 |
| | 63 |
| Accrued capital expenditures | 97 | | | 106 | | | 109 | |
Transfer of ownership interest of certain equity method investees to parent | — |
| | 149 |
| | — |
| | — |
| |
See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
| | | | | | | | | | | | | | | |
| | | | | Accumulated | | |
| | | | | Other | | |
| | | | | Comprehensive | | |
| | | | | Income (Loss) | | |
| | | | | Net Gain on |
| | |
| | | | | Hedging Activities |
| | |
| Common |
| | Retained |
| | of Unconsolidated |
| | Total |
|
(in millions) | Stock |
| | Earnings |
| | Affiliates |
| | Equity |
|
Balance at October 31, 2015 | $ | 721 |
| | $ | 706 |
| | $ | (1 | ) | | $ | 1,426 |
|
Net income | — |
| | 193 |
| | — |
| | 193 |
|
Other comprehensive income | — |
| | — |
| | 1 |
| | 1 |
|
Common stock issuances, including dividend reinvestment and employee benefits | 139 |
| | — |
| | — |
| | 139 |
|
Common stock dividends | — |
| | (114 | ) | | — |
| | (114 | ) |
Balance at October 31, 2016 | $ | 860 |
| | $ | 785 |
| | $ | — |
| | $ | 1,645 |
|
Net income | — |
| | 54 |
| | — |
| | 54 |
|
Dividends to parent | — |
| | (27 | ) | | — |
| | (27 | ) |
Balance at December 31, 2016 | $ | 860 |
| | $ | 812 |
| | $ | — |
| | $ | 1,672 |
|
Net income | — |
| | 139 |
| | — |
| | 139 |
|
Transfer of ownership interest of certain equity method investees to parent | — |
| | (149 | ) | | — |
| | (149 | ) |
Balance at December 31, 2017 | $ | 860 |
| | $ | 802 |
| | $ | — |
| | $ | 1,662 |
|
Net income | — |
| | 129 |
| | — |
| | 129 |
|
Contribution from parent | 300 |
| | — |
| | — |
| | 300 |
|
Balance at December 31, 2018 | $ | 1,160 |
| | $ | 931 |
| | $ | — |
| | $ | 2,091 |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Common | | Retained | | | | Total |
(in millions) | Stock | | Earnings | | | | Equity |
Balance at December 31, 2018 | $ | 1,160 | | | $ | 931 | | | | | $ | 2,091 | |
Net income | — | | | 202 | | | | | 202 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Contribution from parent | 150 | | | — | | | | | 150 | |
| | | | | | | |
Balance at December 31, 2019 | $ | 1,310 | | | $ | 1,133 | | | | | $ | 2,443 | |
Net income | — | | | 273 | | | | | 273 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other | — | | | (1) | | | | | (1) | |
Balance at December 31, 2020 | $ | 1,310 | | | $ | 1,405 | | | | | $ | 2,715 | |
Net income | — | | | 310 | | | | | 310 | |
| | | | | | | |
| | | | | | | |
Contribution from parent | 325 | | | — | | | | | 325 | |
Other | — | | | (1) | | | | | (1) | |
Balance at December 31, 2021 | $ | 1,635 | | | $ | 1,714 | | | | | $ | 3,349 | |
See Notes to Consolidated Financial Statements
|
| | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Index to Combined Notes To Consolidated Financial Statements
The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply. | | | Applicable Notes | | Applicable Notes |
Registrant | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 | Registrant | 1 | | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | |
Duke Energy | • | | • | Duke Energy | • | | • | | • | |
Duke Energy Carolinas | • | | • | | • | | • | Duke Energy Carolinas | • | | • | | • | | • | | • | |
Progress Energy | • | | • | | • | | • | | • | Progress Energy | • | | • | | • | | • | | • | |
Duke Energy Progress | • | | • | | | • | | • | | • | Duke Energy Progress | • | | • | | | • | | • | | • | |
Duke Energy Florida | • | | • | | • | | • | | • | Duke Energy Florida | • | | • | | • | | • | | • | |
Duke Energy Ohio | • | | • | | • | | • | | • | | • | Duke Energy Ohio | • | | • | | | • | | • | | • | | • | |
Duke Energy Indiana | • | | • | | • | | • | | • | Duke Energy Indiana | • | | • | | • | | • | | • | |
Piedmont | • | | • | | • | | • | | • | 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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Consolidation
Duke Energy is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the FERC and other regulatory agencies listed below. Duke Energy operates in the U.S. primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas; Progress Energy; 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 its separate Subsidiary Registrants, which along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
In October 2016, Duke Energy completed the acquisition of Piedmont. Duke Energy's consolidated financial statements include Piedmont's results of operations and cash flows activity subsequent to the acquisition date. 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) for the transition period from November 1, 2016, to December 31, 2016. 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 NMC, was completed through two transactions including a sale of assets in Brazil to CTG and a sale of Duke Energy's remaining Latin American assets in Peru, Chile, Ecuador, Guatemala, El Salvador and Argentina to I Squared (collectively, the International Disposal Group). See Note 2 for additional information on the sale of International Energy.
The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Consolidated Financial Statements. However, none of the Subsidiary Registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.
These 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 control. See Note 17 for additional information on VIEs. These Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities. See Note 8 for additional information on joint ownership. 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 NCUC, PSCSC, NRC and FERC.
Progress Energy is a public utility holding company, which conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. Progress Energy is subject to regulation by FERC and other regulatory agencies listed below.
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 FPSC, NRC and FERC.
|
| |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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 Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, 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 PUCO, 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 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, TPUC and FERC.
Certain prior year amounts have been reclassified to conform to the current year presentation.
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Other Current Assets and Liabilities
The following table provides a description of amounts included in Other within Current Assets or Current Liabilities that exceed 5 percent5% of total Current Assets or Current Liabilities on the Duke Energy Registrants' Consolidated Balance Sheets at either December 31, 2018,2021, or 2017.2020. | | | | December 31, | | December 31, |
(in millions) | Location | | 2018 |
| | 2017 |
| (in millions) | Location | | 2021 | | 2020 |
Duke Energy | | | | | Duke Energy | |
Income taxes receivable | Current Assets | | $ | 729 |
| | $ | 330 |
| |
Accrued compensation | Current Liabilities | | 793 |
| | 757 |
| Accrued compensation | Current Liabilities | | $ | 915 | | | $ | 662 | |
Other accrued liabilities | | Other accrued liabilities | Current Liabilities | | 649 | | | 1,455 | |
Duke Energy Carolinas | | | | | Duke Energy Carolinas | |
Accrued compensation | Current Liabilities | | $ | 251 |
| | $ | 252 |
| Accrued compensation | Current Liabilities | | $ | 277 | | | $ | 213 | |
Progress Energy | | | |
| | |
| |
Income taxes receivable | Current Assets | | $ | 66 |
| | $ | 278 |
| |
Customer deposits | Current Liabilities | | 345 |
| | 338 |
| |
| Duke Energy Progress | | | |
| | |
| Duke Energy Progress | | |
Customer deposits | Current Liabilities | | $ | 137 |
| | $ | 129 |
| Customer deposits | Current Liabilities | | $ | 144 | | | $ | 144 | |
Accrued compensation | Current Liabilities | | 130 |
| | 132 |
| |
Other accrued liabilities | | Other accrued liabilities | Current Liabilities | | 163 | | | 132 | |
Duke Energy Florida | | | |
| | |
| Duke Energy Florida | | | | | |
Customer deposits | Current Liabilities | | $ | 208 |
| | $ | 208 |
| Customer deposits | Current Liabilities | | $ | 200 | | | $ | 203 | |
Other accrued liabilities | Current Liabilities | | 85 |
| | 16 |
| Other accrued liabilities | Current Liabilities | | 89 | | | 81 | |
Duke Energy Ohio | | | |
| | |
| Duke Energy Ohio | | | | | |
Income taxes receivable | Current Assets | | $ | 13 |
| | $ | 36 |
| |
Customer deposits | Current Liabilities | | 44 |
| | 46 |
| |
Duke Energy Indiana | | | |
| | |
| |
Customer deposits | Current Liabilities | | $ | 47 |
| | $ | 45 |
| |
Piedmont | | | | | |
Income taxes receivable | Current Assets | | $ | 11 |
| | $ | 43 |
| |
Gas Storage | | Gas Storage | Current Assets | | $ | 25 | | | $ | 21 | |
Collateral liabilities | | Collateral liabilities | Current Liabilities | | 57 | | | 41 | |
|
Discontinued Operations
The results of operations of the International Disposal Group have been classified as Discontinued Operations on Duke Energy's 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 consolidated financial statements exclude amounts related to discontinued operations for all periods presented. See Note 2 for additional information.
Amounts Attributable to Controlling Interests
For the years ended December 31, 2018,2021, 2020 and 2017,2019, the Income (Loss) From Discontinued Operations, net of tax on Duke Energy's Consolidated Statements of Operations is entirely attributable to controlling interest. For
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 yearthird-party investors' portion of Duke Energy's net income (loss), net assets and comprehensive income (loss) as noncontrolling interest. Noncontrolling interest is included as a component of equity on the Consolidated Balance Sheet.
Several operating agreements of Duke Energy's subsidiaries with noncontrolling interest are subject to allocations of 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 subsidiaries are not fixed, and the subsidiaries apply the 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, most of which is 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.
Other operating agreements of Duke Energy'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 allocates net income or loss and other comprehensive income or loss of these subsidiaries to the owners based on their pro rata shares.
In 2019, Duke Energy completed a sale of minority interest in a portion of certain renewable assets within the Commercial Renewables Segment for pretax proceeds to Duke Energy of $415 million. The portion of Duke Energy's commercial renewables energy portfolio sold includes 49% of 37 operating wind, solar and battery storage assets and 33% of 11 operating solar assets across the U.S. Duke Energy retained control of these assets, and, therefore, no gain or loss was recognized on the Consolidated Statements of Operations. The difference between the consideration received and the carrying value of the noncontrolling interest claim on net assets was $466 million, net of tax benefit of $8 million, and was recorded to equity.
The following table presents allocated losses to noncontrolling interest for the years ended December 31, 2016, $18 million of net income is attributable to noncontrolling interests, which consisted of $7 million included in Income from Continuing Operations2021, 2020 and $11 million included in Income (Loss) From Discontinued Operations, net of tax on Duke Energy's Consolidated Statement of Operations.2019.
| | | | | | | | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Noncontrolling Interest Allocation of Income | | | | | |
Allocated losses to noncontrolling tax equity members utilizing the HLBV method | $ | 298 | | | $ | 271 | | | $ | 165 | |
Allocated losses to noncontrolling members based on pro rata shares of ownership | 31 | | | 24 | | | 12 | |
Total Noncontrolling Interest Allocated Losses | $ | 329 | | | $ | 295 | | | $ | 177 | |
|
| | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
2021 Sale of Minority Interest in Duke Energy Indiana
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 transaction 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 purchase price. Duke Energy retained indirect control of these assets, and, therefore, no gain or loss was recognized on the Consolidated Statements of Operations. The difference between the cash consideration received, net of transaction costs of approximately $27 million, and the carrying value of the noncontrolling interest is $545 million and was recorded as an increase to equity. Under the terms of the agreement, Duke Energy has the discretion to determine the timing of the second closing, but it will occur no later than January 2023. At the second closing, Duke Energy will issue and sell additional membership interests such that GIC will own 19.9% of the membership interests for the remaining 50% of the purchase price.
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.
Significant Accounting Policies
Use of Estimates
In preparing financial statements that conform to GAAP, the Duke Energy Registrants 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.
Regulatory Accounting
The majority of the Duke Energy Registrants’ operations are subject to price regulation for the sale of electricity and natural gas by state utility commissions or FERC. When prices are set on the basis of specific costs of the regulated operations and an effective franchise is in place such that sufficient natural gas or electric services can be sold to recover those costs, the Duke Energy Registrants apply regulatory accounting. Regulatory accounting changes the timing of the recognition of costs or revenues relative to a company that does not apply regulatory accounting. As a result, regulatory assets and regulatory liabilities are recognized on the Consolidated Balance Sheets. Regulatory assets and liabilities are amortized consistent with the treatment of the related cost in the ratemaking process. Regulatory assets are reviewed for recoverability each reporting period. If a regulatory asset is no longer deemed probable of recovery, the deferred cost is charged to earnings. See Note 43 for further information.
Regulatory accounting rules also require recognition of a disallowance (also called "impairment") loss if it becomes probable that part of the cost of a plant under construction (or a recently completed plant or an abandoned plant) will be disallowed for ratemaking purposes and a reasonable estimate of the amount of the disallowance can be made. For example, if a cost cap is set for a plant still under construction, the amount of the disallowance is a result of a judgment as to the ultimate cost of the plant. These disallowances can require judgments on allowed future rate recovery.
When it becomes probable that regulated generation, transmission or distribution assets will be abandoned, the cost of the asset is removed from plant in service. The value that may be retained as a regulatory asset on the balance sheet for the abandoned property is dependent upon amounts that may be recovered through regulated rates, including any return. As such, an impairment charge could be partially or fully offset by the establishment of a regulatory asset if rate recovery is probable. The impairment charge for a disallowance of costs for regulated plants under construction, recently completed or abandoned is based on discounted cash flows.
The Duke Energy Registrants utilize cost-tracking mechanisms, commonly referred to as fuel adjustment clauses or PGA clauses. These clauses allow for the recovery of fuel and fuel-related costs, portions of purchased power, natural gas costs and hedging costs through surcharges on customer rates. The difference between the costs incurred and the surcharge revenues is recorded either as an adjustment to Operating Revenues, Operating Expenses – Fuel used in electric generation or Operating Expenses – Cost of natural gas on the Consolidated Statements of Operations, with an off-setting impact on regulatory assets or liabilities.
|
| | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Cash, Cash Equivalents and Restricted Cash
All highly liquid investments with maturities of three months or less at the date of acquisition are considered cash equivalents. Duke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. Duke Energy Carolinas and Duke Energy Progress have restricted cash balances related to VIEs from storm recovery bonds issued in 2021. See Note 17 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets on the Consolidated Balance Sheets. The following table presents the components of cash, cash equivalents and restricted cash included in the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy |
| Energy | | Carolinas | | Energy | | Progress | | Florida |
Current Assets | | | | | | | | | |
Cash and cash equivalents | $ | 343 | | | $ | 7 | | | $ | 70 | | | $ | 35 | | | $ | 23 | |
Other | 170 | | | — | | | 39 | | | — | | | 39 | |
Other Noncurrent Assets | | | | | | | | | |
Other | 7 | | | 1 | | | 4 | | | 4 | | | — | |
Total cash, cash equivalents and restricted cash | $ | 520 | | | $ | 8 | | | $ | 113 | | | $ | 39 | | | $ | 62 | |
| | | | | | | | | |
| | | December 31, 2018 | | December 31, 2017 | | December 31, 2020 |
| | Duke |
| | | Duke |
| | | Duke | | Duke | | Duke |
| Duke |
| Progress |
| Energy |
| | Duke |
| Progress |
| Energy |
| | Duke | | Energy | | Progress | | Energy | | Energy |
| Energy |
| Energy |
| Florida |
| | Energy |
| Energy |
| Florida |
| | Energy | | Carolinas | | Energy | | Progress | | Florida |
Current Assets | | | | Current Assets | |
Cash and cash equivalents | $ | 442 |
| $ | 67 |
| $ | 36 |
| | $ | 358 |
| $ | 40 |
| $ | 13 |
| Cash and cash equivalents | $ | 259 | | | $ | 21 | | | $ | 59 | | | $ | 39 | | | $ | 11 | |
Other | 141 |
| 39 |
| 39 |
| | 138 |
| 40 |
| 40 |
| Other | 194 | | | — | | | 39 | | | — | | | 39 | |
Other Noncurrent Assets | | | | Other Noncurrent Assets | |
Other | 8 |
| 6 |
| — |
| | 9 |
| 7 |
| — |
| Other | 103 | | | — | | | 102 | | | — | | | — | |
Total cash, cash equivalents and restricted cash | $ | 591 |
| $ | 112 |
| $ | 75 |
| | $ | 505 |
| $ | 87 |
| $ | 53 |
| Total cash, cash equivalents and restricted cash | $ | 556 | | | $ | 21 | | | $ | 200 | | | $ | 39 | | | $ | 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 subsequentlyInventory is charged to expense or capitalized to property, plant and equipment when installed. Inventory, including excessissued, primarily using the average cost method. Excess or obsolete inventory is written-downwritten down to the lower of cost or marketnet realizable value. Once inventory has been written-down,written down, it creates a new cost basis for the inventory that is not subsequently written-up.written up. Provisions for inventory write-offs were not material at December 31, 2018,2021, and 2017.2020, respectively. The components of inventory are presented in the tables below. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | 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 | $ | 2,238 |
| | $ | 731 |
| | $ | 1,049 |
| | $ | 734 |
| | $ | 315 |
| | $ | 84 |
| | $ | 312 |
| | $ | 2 |
|
Coal | 491 |
| | 175 |
| | 192 |
| | 106 |
| | 86 |
| | 14 |
| | 109 |
| | — |
|
Natural gas, oil and other | 355 |
| | 42 |
| | 218 |
| | 114 |
| | 103 |
| | 28 |
| | 1 |
| | 68 |
|
Total inventory | $ | 3,084 |
| | $ | 948 |
| | $ | 1,459 |
| | $ | 954 |
| | $ | 504 |
| | $ | 126 |
| | $ | 422 |
| | $ | 70 |
|
| | | December 31, 2017 | | December 31, 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 | $ | 2,293 |
| | $ | 744 |
| | $ | 1,118 |
| | $ | 774 |
| | $ | 343 |
| | $ | 82 |
| | $ | 309 |
| | $ | 2 |
| Materials and supplies | $ | 2,397 | | | $ | 793 | | | $ | 1,067 | | | $ | 729 | | | $ | 338 | | | $ | 80 | | | $ | 311 | | | $ | 14 | |
Coal | 603 |
| | 192 |
| | 255 |
| | 139 |
| | 116 |
| | 17 |
| | 139 |
| | — |
| Coal | 486 | | | 195 | | | 167 | | | 94 | | | 73 | | | 19 | | | 105 | | | — | |
Natural gas, oil and other | 354 |
| | 35 |
| | 219 |
| | 104 |
| | 115 |
| | 34 |
| | 2 |
| | 64 |
| Natural gas, oil and other | 316 | | | 38 | | | 164 | | | 98 | | | 66 | | | 17 | | | 2 | | | 95 | |
Total inventory | $ | 3,250 |
| | $ | 971 |
| | $ | 1,592 |
| | $ | 1,017 |
| | $ | 574 |
| | $ | 133 |
| | $ | 450 |
| | $ | 66 |
| Total inventory | $ | 3,199 | | | $ | 1,026 | | | $ | 1,398 | | | $ | 921 | | | $ | 477 | | | $ | 116 | | | $ | 418 | | | $ | 109 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | 294 | | | 39 | | | 183 | | | 107 | | | 76 | | | 16 | | | 1 | | | 56 | |
Total inventory | $ | 3,167 | | | $ | 1,010 | | | $ | 1,375 | | | $ | 911 | | | $ | 464 | | | $ | 110 | | | $ | 473 | | | $ | 68 | |
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Investments in Debt and Equity Securities
The Duke Energy Registrants classify investments in equity securities as FV-NI and investments in debt securities as AFS. Both categories are recorded at fair value on the Consolidated Balance Sheets. Realized and unrealized gains and losses on securities classified as FV-NI are reported through net income. Unrealized gains and losses for debt securities classified as AFS are included in AOCI until realized, except OTTIs that are included in earnings immediately. Atunless it is determined the time gains and losses for debt securities are realized, they are reported through net income.carrying value of an investment has a credit loss. For certain investments of regulated operations, such as substantially all of the NDTF, realized and unrealized gains and losses (including any OTTIs)credit losses) on debt securities are recorded as a regulatory asset or liability. The credit loss portion of debt securities of nonregulated operations are included in earnings. Investments in debt and equity securities are classified as either current or noncurrent based on management’s intent and ability to sell these securities, taking into consideration current market liquidity. See Note 15 for further information.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Goodwill and Intangible Assets
Goodwill
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont perform annual goodwill impairment tests as of August 31 each year at the reporting unit level, which is determined to be a business segment or one level below. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update these tests 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. See Note 11 for further information.
Intangible Assets
Intangible assets are included in Other in Other Noncurrent Assets on the Consolidated Balance Sheets. Generally, intangible assets are amortized using an amortization method that reflects the pattern in which the economic benefits of the intangible asset are consumed or on a straight-line basis if that pattern is not readily determinable. Amortization of intangibles is reflected in Depreciation and amortization on the Consolidated Statements of Operations. Intangible assets are subject to impairment testing and if impaired, the carrying value is accordingly reduced.
Emission allowances permit the holder of the allowance to emit certain gaseous byproducts of fossil fuel combustion, including SO2 and NOX. Allowances are issued by the EPA at zero cost and may also be bought and sold via third-party transactions. Allowances allocated to or acquired by the Duke Energy Registrants are held primarily for consumption. Carrying amounts for emission allowances are based on the cost to acquire the allowances or, in the case of a business combination, on the fair value assigned in the allocation of the purchase price of the acquired business. Emission allowances are expensed to Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.
RECs are used to measure compliance with renewable energy standards and are held primarily for consumption. See Note 11 for further information.
Long-Lived Asset Impairments
The Duke Energy Registrants evaluate long-lived assets, excluding goodwill, for impairment when circumstances indicate the carrying value of those assets may not be recoverable. An impairment exists when a long-lived asset’s carrying value exceeds the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. If the carrying value of the long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the carrying value of the asset is written-downwritten down to its then-currentthen current estimated fair value and an impairment charge is recognized.
The Duke Energy Registrants assess fair value of long-lived assets using various methods, including recent comparable third-party sales, internally developed discounted cash flow analysis and analysis from outside advisors. Triggering events to reassess cash flows may include, but are not limited to, significant changes in commodity prices, the condition of an asset or management’s interest in selling the asset.
Equity Method Investment Impairments
Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method. Equity method investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.
Impairment assessments use a discounted cash flow income approach and include consideration of the severity and duration of any decline in the fair value of the investments. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. Key inputs that involve estimates and significant management judgment include cash flow projections, selection of a discount rate, probability weighting of potential outcomes, and whether any decline in value is considered temporary.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Property, Plant and Equipment
Property, plant and equipment are stated at the lower of depreciated historical cost net of any disallowances or fair value, if impaired. The Duke Energy Registrants capitalize all construction-related direct labor and material costs, as well as indirect construction costs such as general engineering, taxes and financing costs. See “Allowance for Funds Used During Construction and Interest Capitalized” section below for information on capitalized financing costs. Costs of renewals and betterments that extend the useful life of property, plant and equipment are also capitalized. The cost of repairs, replacements and major maintenance projects, which do not extend the useful life or increase the expected output of the asset, are expensed as incurred. Depreciation is generally computed over the estimated useful life of the asset using the composite straight-line method. Depreciation studies are conducted periodically to update composite rates and are approved by state utility commissions and/or the FERC when required. The composite weighted average depreciation rates, excluding nuclear fuel, are included in the table that follows.
| | | Years Ended December 31, | | Years Ended December 31, |
| 2018 |
| | 2017 |
| | 2016 |
| | 2021 | | 2020 | | 2019 |
Duke Energy | 3.0 | % | | 2.8 | % | | 2.8 | % | Duke Energy | 2.9 | % | | 3.0 | % | | 3.1 | % |
Duke Energy Carolinas | 2.8 | % | | 2.8 | % | | 2.8 | % | Duke Energy Carolinas | 2.7 | % | | 2.8 | % | | 2.8 | % |
Progress Energy | 2.9 | % | | 2.6 | % | | 2.7 | % | Progress Energy | 3.1 | % | | 3.2 | % | | 3.1 | % |
Duke Energy Progress | 2.9 | % | | 2.6 | % | | 2.6 | % | Duke Energy Progress | 3.0 | % | | 3.1 | % | | 3.1 | % |
Duke Energy Florida | 3.0 | % | | 2.8 | % | | 2.8 | % | Duke Energy Florida | 3.3 | % | | 3.3 | % | | 3.1 | % |
Duke Energy Ohio | 2.8 | % | | 2.8 | % | | 2.6 | % | Duke Energy Ohio | 2.9 | % | | 2.9 | % | | 2.6 | % |
Duke Energy Indiana | 3.3 | % | | 3.0 | % | | 3.1 | % | Duke Energy Indiana | 3.6 | % | | 3.5 | % | | 3.3 | % |
Piedmont(a) | 2.5 | % | | 2.3 | % | | | |
Piedmont | | Piedmont | 2.1 | % | | 2.3 | % | | 2.4 | % |
| |
(a) | Piedmont's weighted average depreciation rate was 2.4 percent for the annualized two months ended December 31, 2016, and for the year ended October 31, 2016. |
In general, when the Duke Energy Registrants retire regulated property, plant and equipment, the original cost plus the cost of retirement, less salvage value and any depreciation already recognized, is charged to accumulated depreciation. However, when it becomes probable the asset will be retired substantially in advance of its original expected useful life or is abandoned, the cost of the asset and the corresponding accumulated depreciation is recognized as a separate asset. If the asset is still in operation, the net amount is classified as Generation facilitiesFacilities to be retired, net on the Consolidated Balance Sheets. If the asset is no longer operating, the net amount is classified in Regulatory assets on the Consolidated Balance Sheets if deemed recoverable (see discussion of long-lived asset impairments above). When it becomes probable an asset will be abandoned, the cost of the asset and accumulated depreciation is reclassified to Regulatory assets on the Consolidated Balance Sheets for amounts recoverable in rates. The carrying value of the asset is based on historical cost if the Duke Energy Registrants are allowed to recover the remaining net book value and a return equal to at least the incremental borrowing rate. If not, an impairment is recognized to the extent the net book value of the asset exceeds the present value of future revenues discounted at the incremental borrowing rate.
When the Duke Energy Registrants sell entire regulated operating units, or retire or sell nonregulated properties, the original cost and accumulated depreciation and amortization balances are removed from Property, Plant and Equipment on the Consolidated Balance Sheets. Any gain or loss is recorded in earnings, unless otherwise required by the applicable regulatory body. See Note 10 for additional information.
Leases
Duke Energy determines if an arrangement is a lease at contract inception based on whether the arrangement involves the use of a physically distinct identified asset and whether Duke Energy has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period as well as the right to direct the use of the asset. As a policy election, Duke Energy does not evaluate arrangements with initial contract terms of less than one year as leases.
Operating leases are included in Operating lease ROU assets, net, Other current liabilities and Operating lease liabilities on the Consolidated Balance Sheets. Finance leases are included in Property, plant and equipment, Current maturities of long-term debt and Long-Term Debt on the Consolidated Balance Sheets.
For lessee and lessor arrangements, Duke Energy has elected a policy to not separate lease and non-lease components for all asset classes. For lessor arrangements, lease and non-lease components are only combined under one arrangement and accounted for under the lease accounting framework if the non-lease components are not the predominant component of the arrangement and the lease component would be classified as an operating lease.
Nuclear Fuel
Nuclear fuel is classified as Property, Plant and Equipment on the Consolidated Balance Sheets.
Nuclear fuel in the front-end fuel processing phase is considered work in progress and not amortized until placed in service. Amortization of nuclear fuel is included within Fuel used in electric generation and purchased power on the Consolidated Statements of Operations. Amortization is recorded using the units-of-production method.
Allowance for Funds Used During Construction and Interest Capitalized
For regulated operations, the debt and equity costs of financing the construction of property, plant and equipment are reflected as AFUDC and capitalized as a component of the cost of property, plant and equipment. AFUDC equity is reported on the Consolidated Statements of Operations as non-cash income in Other income and expenses, net. AFUDC debt is reported as a non-cash offset to Interest Expense. After construction is completed, the Duke Energy Registrants are permitted to recover these costs through their inclusion in rate base and the corresponding subsequent depreciation or amortization of those regulated assets.
AFUDC equity, a permanent difference for income taxes, reduces the ETR when capitalized and increases the ETR when depreciated or amortized. See Note 23 for additional information.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
For nonregulated operations, interest is capitalized during the construction phase with an offsetting non-cash credit to Interest Expense on the Consolidated Statements of Operations.
Asset Retirement Obligations
AROs are recognized for legal obligations associated with the retirement of property, plant and equipment. Substantially all AROs are related to regulated operations. When recording an ARO, the present value of the projected liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the cost of the associated asset and depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to be probable of recovery.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the NDTF. As a result, amounts recovered in regulated revenues, earnings on the NDTF, accretion expense and depreciation of the associated asset are netted and deferred as a regulatory asset or liability.
Obligations for nuclear decommissioningAccounts Payable
During 2020, Duke Energy established a supply chain finance program (the “program”) with a global financial institution. The program is voluntary and allows Duke Energy suppliers, at their sole discretion, to sell their receivables from Duke Energy to the financial institution at a rate that leverages Duke Energy’s credit rating and, which may result in favorable terms compared to the rate available to the supplier on their own credit rating. Suppliers participating in the program, determine at their sole discretion which invoices they will sell to the financial institution. Suppliers’ decisions on which invoices are sold do not impact Duke Energy’s payment terms, which are based on site-specific cost studies.commercial terms negotiated between Duke Energy Carolinas and the supplier regardless of program participation. The commercial terms negotiated between Duke Energy Progress assume prompt dismantlementand its suppliers are consistent regardless of whether the nuclear facilities after operations are ceased.supplier elects to participate in the program. Duke Energy Florida assumes Crystal River Unit 3 will be placed into a safe storage configuration until eventual dismantlement is completed by 2074.does not issue any guarantees with respect to the program and does not participate in negotiations between suppliers and the financial institution. Duke Energy Carolinas, Duke Energy Progressdoes not have an economic interest in the supplier’s decision to participate in the program and Duke Energy Florida also assume that spent fuel will be stored on-site until such time that it can be transferredreceives no interest, fees or other benefit from the financial institution based on supplier participation in the program.
The following table presents the outstanding accounts payable balance sold to a yetthe financial institution by our suppliers and the supplier invoices sold to be built DOE facility.the financial institution under the program included within Net cash provided by operating activities on the Consolidated Statements of Cash Flows as of December 31, 2021, and December 31, 2020.
Obligations for closure of ash basins are based upon discounted cash flows of estimated costs for site-specific plans, if known, or probability weightings of the potential closure methods if the closure plans are under development and multiple closure options are being considered and evaluated on a site-by-site basis. See Note 9 for additional information. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 30, 2020 |
| | | Duke | Duke | | | | | Duke | |
| Duke | Progress | Energy | Energy | | | Duke | | Energy | |
(in millions) | Energy | Energy | Florida | Ohio | Piedmont | | Energy | | Ohio | Piedmont |
Outstanding Accounts Payable Balance Sold | $ | 19 | | $ | 9 | | $ | 9 | | $ | 6 | | $ | 4 | | | $ | 15 | | | $ | 1 | | $ | 14 | |
Suppliers Invoices Settled Through The Program | 122 | | 10 | | 10 | | 12 | | 100 | | | 45 | | | 9 | | 36 | |
Revenue Recognition
Duke Energy recognizes revenue as customers obtain control of promised goods and services in an amount that reflects consideration expected in exchange for those goods or services. Generally, the delivery of electricity and natural gas results in the transfer of control to customers at the time the commodity is delivered and the amount of revenue recognized is equal to the amount billed to each customer, including estimated volumes delivered when billings have not yet occurred. See Note 18 for further information.
Derivatives and Hedging
Derivative and non-derivative instruments may be used in connection with commodity price and interest rate activities, including swaps, futures, forwards and options. All derivative instruments, except those that qualify for the NPNS exception, are recorded on the Consolidated Balance Sheets at fair value. Qualifying derivative instruments may be designated as either cash flow hedges or fair value hedges. Other derivative instruments (undesignated contracts) either have not been designated or do not qualify as hedges. The effective portion of the change in the fair value of cash flow hedges is recorded in AOCI. The effective portion of the change in the fair value of a fair value hedge is offset in net income by changes in the hedged item. For activity subject to regulatory accounting, gains and losses on derivative contracts are reflected as regulatory assets or liabilities and not as other comprehensive income or current period income. As a result, changes in fair value of these derivatives have no immediate earnings impact.
Formal documentation, including transaction type and risk management strategy, is maintained for all contracts accounted for as a hedge. At inception and at least every three months thereafter, the hedge contract is assessed to see if it is highly effective in offsetting changes in cash flows or fair values of hedged items.
See Note 14 for further information.
Captive Insurance Reserves
Duke Energy has captive insurance subsidiaries that provide coverage, on an indemnity basis, to the Subsidiary Registrants as well as certain third parties, on a limited basis, for financial losses, primarily related to property, workers’ compensation and general liability. Liabilities include provisions for estimated losses IBNR,incurred but not reported (IBNR), as well as estimated provisions for known claims. IBNR reserve estimates are primarily based upon historical loss experience, industry data and other actuarial assumptions. Reserve estimates are adjusted in future periods as actual losses differ from experience.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Duke Energy, through its captive insurance entities, also has reinsurance coverage with third parties for certain losses above a per occurrence and/or aggregate retention. Receivables for reinsurance coverage are recognized when realization is deemed probable.
Unamortized Debt Premium, Discount and Expense
Premiums, discounts and expenses incurred with the issuance of outstanding long-term debt are amortized over the term of the debt issue. The gain or loss on extinguishment associated with refinancing higher-cost debt obligations in the regulated operations is amortized.amortized over the remaining life of the original instrument. Amortization expense is recorded as Interest Expense in the Consolidated Statements of Operations and is reflected as Depreciation, amortization and accretion within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.
Premiums, discounts and expenses are presented as an adjustment to the carrying value of the debt amount and included in Long-Term Debt on the Consolidated Balance Sheets presented.
Preferred Stock
Preferred stock is reviewed to determine the appropriate balance sheet classification and embedded features, such as call options, are evaluated to determine if they should be bifurcated and accounted for separately. Costs directly related to the issuance of preferred stock are recorded as a reduction of the proceeds received. The liability for the dividend is recognized when declared. The accumulated dividends on the cumulative preferred stock is recognized to net income available to Duke Energy Corporation in the EPS calculation. See Note 19 for further information.
Loss Contingencies and Environmental Liabilities
Contingent losses are recorded when it is probable a loss has occurred and the loss can be reasonably estimated. When a range of the probable loss exists and no amount within the range is a better estimate than any other amount, the minimum amount in the range is recorded. Unless otherwise required by GAAP, legal fees are expensed as incurred.
Environmental liabilities are recorded on an undiscounted basis when environmental remediation or other liabilities become probable and can be reasonably estimated. Environmental expenditures related to past operations that do not generate current or future revenues are expensed. Environmental expenditures related to operations that generate current or future revenues are expensed or capitalized, as appropriate. Certain environmental expenditures receive regulatory accounting treatment and are recorded as regulatory assets.
See Notes 43 and 54 for further information.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Pension and Other Post-Retirement Benefit Plans
Duke Energy maintains qualified, non-qualified and other post-retirement benefit plans. Eligible employees of the Subsidiary Registrants participate in the respective qualified, non-qualified and other post-retirement benefit plans and the Subsidiary Registrants are allocated their proportionate share of benefit costs. See Note 22 for further information, including significant accounting policies associated with these plans.
SeveranceNew Accounting Standards
See Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of the impact of new accounting standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See “Management’s Discussion and Special Termination BenefitsAnalysis of Results of Operations and Financial Condition – Quantitative and Qualitative Disclosures About Market Risk.”
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | | | | | |
Duke Energy | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations | |
Consolidated Statements of Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Carolinas | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Progress Energy | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Progress | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Florida | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Ohio | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Indiana | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Piedmont | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
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Combined Notes to Consolidated Financial Statements | |
Note 1 – Summary of Significant Accounting Policies | |
| |
Note 2 – Business Segments | |
Note 3 – Regulatory Matters | |
Note 4 – Commitments and Contingencies | |
Note 5 – Leases | |
Note 6 – Debt and Credit Facilities | |
Note 7 – Guarantees and Indemnifications | |
Note 8 – Joint Ownership of Generating and Transmission Facilities | |
Note 9 – Asset Retirement Obligations | |
Note 10 – Property, Plant and Equipment | |
Note 11 – Goodwill and Intangible Assets | |
Note 12 – Investments in Unconsolidated Affiliates | |
Note 13 – Related Party Transactions | |
Note 14 – Derivatives and Hedging | |
Note 15 – Investments in Debt and Equity Securities | |
Note 16 – Fair Value Measurements | |
Note 17 – Variable Interest Entities | |
Note 18 – Revenue | |
Note 19 – Stockholders' Equity | |
Note 20 – Severance | |
Note 21 – Stock-Based Compensation | |
Note 22 – Employee Benefit Plans | |
Note 23 – Income Taxes | |
Note 24 – Other Income and Expenses, Net | |
Note 25 – Subsequent Events | |
| |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Duke Energy Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Corporation and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to regulation by federal and state utility regulatory agencies (the “Commissions”), which have jurisdiction with respect to the rates of the Company’s electric and natural gas distribution companies. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $14.6 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We also evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
Noncontrolling Interests - Minority Interest Investment in Duke Energy Indiana – Refer to Note 1 to the financial statements
Critical Audit Matter Description
On January 28, 2021, the Company executed an agreement providing for an investment by an affiliate of GIC Private Limited 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 transaction will be completed following two closings for an aggregate purchase price of approximately $2 billion. The first closing occurred on September 8, 2021 and resulted in Duke Energy Indiana Holdco, LLC issuing 11.05% of its membership interests in exchange for 50% of the purchase price. The Company retained indirect control of these assets, and, therefore, no gain or loss was recognized on the Consolidated Statements of Operations. The difference between the net cash consideration received and the carrying value of the noncontrolling interest was recorded as an increase to equity. The Company has the discretion to determine the timing of the second closing, but the closing will occur no later than January 2023.
We identified the minority interest investment in Duke Energy Indiana as a critical audit matter because of the extensive audit effort required to audit the transaction, including the need to involve professionals in our firm with the appropriate expertise to assist us in evaluating management’s conclusions that there should be no gain or loss associated with this transaction recognized on the Consolidated Statements of Operations for the year ended December 31, 2021.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the minority interest investment in Duke Energy Indiana included the following, among others:
•We tested the effectiveness of controls over the accounting assessment of significant and non- routine transactions, including the controls over the income tax treatment of such transactions.
•We evaluated management’s conclusions related to accounting for the transaction by:
–Obtaining and reading the agreement providing for the minority investment,
–Involving professionals in our firm with the appropriate expertise to evaluate the work performed by management’s expert related to the tax treatment of the transaction,
–Assessing management’s documentation for accounting for the transaction.
•We evaluated the appropriateness of the Company’s disclosures related to the minority interest investment.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1947.
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions, except per share amounts) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | |
Regulated electric | $ | 22,319 | | | $ | 21,461 | | | $ | 22,615 | |
Regulated natural gas | 2,008 | | | 1,642 | | | 1,759 | |
Nonregulated electric and other | 770 | | | 765 | | | 705 | |
Total operating revenues | 25,097 | | | 23,868 | | | 25,079 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 6,255 | | | 6,051 | | | 6,826 | |
Cost of natural gas | 705 | | | 460 | | | 627 | |
Operation, maintenance and other | 6,042 | | | 5,788 | | | 6,066 | |
Depreciation and amortization | 4,990 | | | 4,705 | | | 4,548 | |
Property and other taxes | 1,389 | | | 1,337 | | | 1,307 | |
Impairment of assets and other charges | 356 | | | 984 | | | (8) | |
Total operating expenses | 19,737 | | | 19,325 | | | 19,366 | |
Gains (Losses) on Sales of Other Assets and Other, net | 13 | | | 10 | | | (4) | |
Operating Income | 5,373 | | | 4,553 | | | 5,709 | |
Other Income and Expenses | | | | | |
Equity in earnings (losses) of unconsolidated affiliates | 28 | | | (2,005) | | | 162 | |
| | | | | |
Other income and expenses, net | 643 | | | 453 | | | 430 | |
Total other income and expenses | 671 | | | (1,552) | | | 592 | |
Interest Expense | 2,280 | | | 2,162 | | | 2,204 | |
Income From Continuing Operations Before Income Taxes | 3,764 | | | 839 | | | 4,097 | |
Income Tax Expense (Benefit) From Continuing Operations | 192 | | | (236) | | | 519 | |
Income From Continuing Operations | 3,572 | | | 1,075 | | | 3,578 | |
Income (Loss) From Discontinued Operations, net of tax | 7 | | | 7 | | | (7) | |
Net Income | 3,579 | | | 1,082 | | | 3,571 | |
Add: Net Loss Attributable to Noncontrolling Interests | 329 | | | 295 | | | 177 | |
Net Income Attributable to Duke Energy Corporation | 3,908 | | | 1,377 | | | 3,748 | |
Less: Preferred Dividends | 106 | | | 107 | | | 41 | |
Net Income Available to Duke Energy Corporation Common Stockholders | $ | 3,802 | | | $ | 1,270 | | | $ | 3,707 | |
| | | | | |
Earnings Per Share – Basic and Diluted | | | | | |
Income from continuing operations available to Duke Energy Corporation common stockholders | | | | | |
Basic and Diluted | $ | 4.93 | | | $ | 1.71 | | | $ | 5.07 | |
| | | | | |
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | |
Basic and Diluted | $ | 0.01 | | | $ | 0.01 | | | $ | (0.01) | |
| | | | | |
Net income available to Duke Energy Corporation common stockholders | | | | | |
Basic and Diluted | $ | 4.94 | | | $ | 1.72 | | | $ | 5.06 | |
| | | | | |
Weighted average shares outstanding | | | | | |
Basic | 769 | | | 737 | | | 729 | |
Diluted | 769 | | | 738 | | | 729 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Net Income | $ | 3,579 | | | $ | 1,082 | | | $ | 3,571 | |
Other Comprehensive Income (Loss), net of tax(a) | | | | | |
| | | | | |
Pension and OPEB adjustments | 7 | | | 6 | | | 9 | |
Net unrealized losses on cash flow hedges | (68) | | | (138) | | | (47) | |
Reclassification into earnings from cash flow hedges | 13 | | | 11 | | | 6 | |
Unrealized (losses) gains on available-for-sale securities | (8) | | | 3 | | | 8 | |
| | | | | |
Other Comprehensive Loss, net of tax | (56) | | | (118) | | | (24) | |
Comprehensive Income | 3,523 | | | 964 | | | 3,547 | |
Add: Comprehensive Loss Attributable to Noncontrolling Interests | 319 | | | 306 | | | 177 | |
Comprehensive Income Attributable to Duke Energy Corporation | 3,842 | | | 1,270 | | | 3,724 | |
Less: Preferred Dividends | 106 | | | 107 | | | 41 | |
Comprehensive Income Available to Duke Energy Corporation Common Stockholders | $ | 3,736 | | | $ | 1,163 | | | $ | 3,683 | |
(a) Net of income tax impacts of approximately $17 million and $35 million for the years ended December 31, 2021, and 2020, respectively. Tax impacts are immaterial for other periods presented.
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 343 | | | $ | 259 | |
| | | |
Receivables (net of allowance for doubtful accounts of $46 at 2021 and $29 at 2020) | 1,173 | | | 1,009 | |
Receivables of VIEs (net of allowance for doubtful accounts of $76 at 2021 and $117 at 2020) | 2,437 | | | 2,144 | |
Inventory | 3,199 | | | 3,167 | |
| | | |
Regulatory assets (includes $105 at 2021 and $53 at 2020 related to VIEs) | 2,150 | | | 1,641 | |
Other (includes $256 at 2021 and $296 at 2020 related to VIEs) | 638 | | | 462 | |
Total current assets | 9,940 | | | 8,682 | |
Property, Plant and Equipment | | | |
Cost | 161,819 | | | 155,580 | |
Accumulated depreciation and amortization | (50,555) | | | (48,827) | |
Facilities to be retired, net | 144 | | | 29 | |
Net property, plant and equipment | 111,408 | | | 106,782 | |
Other Noncurrent Assets | | | |
Goodwill | 19,303 | | | 19,303 | |
Regulatory assets (includes $1,823 at 2021 and $937 at 2020 related to VIEs) | 12,487 | | | 12,421 | |
Nuclear decommissioning trust funds | 10,401 | | | 9,114 | |
Operating lease right-of-use assets, net | 1,266 | | | 1,524 | |
Investments in equity method unconsolidated affiliates | 970 | | | 961 | |
| | | |
Other (includes $92 at 2021 and $81 at 2020 related to VIEs) | 3,812 | | | 3,601 | |
Total other noncurrent assets | 48,239 | | | 46,924 | |
Total Assets | $ | 169,587 | | | $ | 162,388 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 3,629 | | | $ | 3,144 | |
Notes payable and commercial paper | 3,304 | | | 2,873 | |
Taxes accrued | 749 | | | 482 | |
Interest accrued | 533 | | | 537 | |
Current maturities of long-term debt (includes $243 at 2021 and $472 at 2020 related to VIEs) | 3,387 | | | 4,238 | |
| | | |
Asset retirement obligations | 647 | | | 718 | |
Regulatory liabilities | 1,211 | | | 1,377 | |
Other | 2,471 | | | 2,936 | |
Total current liabilities | 15,931 | | | 16,305 | |
Long-Term Debt (includes $4,854 at 2021 and $3,535 at 2020 related to VIEs) | 60,448 | | | 55,625 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 9,379 | | | 9,244 | |
Asset retirement obligations | 12,129 | | | 12,286 | |
Regulatory liabilities | 16,152 | | | 15,029 | |
Operating lease liabilities | 1,074 | | | 1,340 | |
Accrued pension and other post-retirement benefit costs | 855 | | | 969 | |
Investment tax credits | 833 | | | 687 | |
| | | |
Other (includes $319 at 2021 and $316 at 2020 related to VIEs) | 1,650 | | | 1,719 | |
Total other noncurrent liabilities | 42,072 | | | 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 | 44,371 | | | 43,767 | |
Retained earnings | 3,265 | | | 2,471 | |
Accumulated other comprehensive loss | (303) | | | (237) | |
Total Duke Energy Corporation stockholders' equity | 49,296 | | | 47,964 | |
Noncontrolling interests | 1,840 | | | 1,220 | |
Total equity | 51,136 | | | 49,184 | |
Total Liabilities and Equity | $ | 169,587 | | | $ | 162,388 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 3,579 | | | $ | 1,082 | | | $ | 3,571 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion (including amortization of nuclear fuel) | 5,663 | | | 5,486 | | | 5,176 | |
Equity in (earnings) losses of unconsolidated affiliates | (28) | | | 2,005 | | | (162) | |
Equity component of AFUDC | (171) | | | (154) | | | (139) | |
| | | | | |
Impairment of assets and other charges | 356 | | | 984 | | | (8) | |
Deferred income taxes | 191 | | | 54 | | | 806 | |
Payments for asset retirement obligations | (540) | | | (610) | | | (746) | |
Provision for rate refunds | (70) | | | (22) | | | 60 | |
Refund of AMT credit carryforwards | — | | | 572 | | | 573 | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | 50 | | | 63 | | | (48) | |
Receivables | (297) | | | (56) | | | 78 | |
Inventory | (34) | | | 66 | | | (122) | |
Other current assets | (1,136) | | | 205 | | | 10 | |
Increase (decrease) in | | | | | |
Accounts payable | 249 | | | (21) | | | (164) | |
Taxes accrued | 284 | | | 117 | | | (224) | |
Other current liabilities | (13) | | | (65) | | | 172 | |
Other assets | 112 | | | (408) | | | (555) | |
Other liabilities | 95 | | | (442) | | | (69) | |
Net cash provided by operating activities | 8,290 | | | 8,856 | | | 8,209 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (9,715) | | | (9,907) | | | (11,122) | |
Contributions to equity method investments | (81) | | | (370) | | | (324) | |
| | | | | |
Return of investment capital | 44 | | | 133 | | | 11 | |
Purchases of debt and equity securities | (6,098) | | | (8,011) | | | (3,348) | |
Proceeds from sales and maturities of debt and equity securities | 6,103 | | | 7,949 | | | 3,343 | |
| | | | | |
Disbursements to canceled equity method investments | (855) | | | — | | | — | |
Other | (333) | | | (398) | | | (517) | |
Net cash used in investing activities | (10,935) | | | (10,604) | | | (11,957) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the: | | | | | |
Issuance of long-term debt | 9,052 | | | 6,330 | | | 7,091 | |
Issuance of preferred stock | — | | | — | | | 1,962 | |
Issuance of common stock | 5 | | | 2,745 | | | 384 | |
Payments for the redemption of long-term debt | (5,294) | | | (4,506) | | | (3,476) | |
Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 332 | | | 3,009 | | | 397 | |
Payments for the redemption of short-term debt with original maturities greater than 90 days | (997) | | | (2,147) | | | (479) | |
Notes payable and commercial paper | 1,144 | | | (1,181) | | | (298) | |
| | | | | |
Contributions from noncontrolling interests | 1,575 | | | 426 | | | 843 | |
Dividends paid | (3,114) | | | (2,812) | | | (2,668) | |
| | | | | |
Other | (94) | | | (133) | | | (26) | |
Net cash provided by financing activities | 2,609 | | | 1,731 | | | 3,730 | |
| | | | | |
Net decrease in cash, cash equivalents and restricted cash | (36) | | | (17) | | | (18) | |
Cash, cash equivalents and restricted cash at beginning of period | 556 | | | 573 | | | 591 | |
Cash, cash equivalents and restricted cash at end of period | $ | 520 | | | $ | 556 | | | $ | 573 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 2,248 | | | $ | 2,186 | | | $ | 2,195 | |
Cash received from income taxes | (3) | | | (585) | | | (651) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 1,325 | | | 1,116 | | | 1,356 | |
Non-cash dividends | — | | | 110 | | | 108 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Income (Loss) | | | | | | |
| | | | | | | | | | | | | | 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, 2018 | $ | — | | 727 | | | $ | 1 | | | $ | 40,795 | | | $ | 3,113 | | | | | $ | (14) | | | $ | (3) | | | $ | (75) | | | $ | 43,817 | | | $ | 17 | | | $ | 43,834 | |
Net income (loss) | — | | — | | | — | | | — | | | 3,707 | | | | | — | | | — | | | — | | | 3,707 | | | (177) | | | 3,530 | |
Other comprehensive (loss) income | — | | — | | | — | | | — | | | — | | | | | (41) | | | 8 | | | 9 | | | (24) | | | — | | | (24) | |
Preferred stock, Series A, issuances, net of issuance costs(a) | 973 | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 973 | | | — | | | 973 | |
Preferred stock, Series B, issuances, net of issuance costs(a) | 989 | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 989 | | | — | | | 989 | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | 6 | | | — | | | 552 | | | — | | | | | — | | | — | | | — | | | 552 | | | — | | | 552 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (2,735) | | | | | — | | | — | | | — | | | (2,735) | | | — | | | (2,735) | |
Sale of noncontrolling interest(b) | — | | — | | | — | | | (466) | | | — | | | | | 10 | | | — | | | — | | | (456) | | | 863 | | | 407 | |
Contribution from noncontrolling interest (f) | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | 428 | | | 428 | |
Distributions to noncontrolling interest in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (4) | | | (4) | |
Other(c) | — | | — | | | — | | | — | | | 23 | | | | | (6) | | | (2) | | | (16) | | | (1) | | | 2 | | | 1 | |
Balance at December 31, 2019 | $ | 1,962 | | 733 | | | $ | 1 | | | $ | 40,881 | | | $ | 4,108 | | | | | $ | (51) | | | $ | 3 | | | $ | (82) | | | $ | 46,822 | | | $ | 1,129 | | | $ | 47,951 | |
Net income | — | | — | | | — | | | — | | | 1,270 | | | | | — | | | — | | | — | | | 1,270 | | | (295) | | | 975 | |
Other comprehensive (loss) Income | — | | — | | | — | | | — | | | — | | | | | (116) | | | 3 | | | 6 | | | (107) | | | (11) | | | (118) | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | 36 | | | — | | | 2,902 | | | — | | | | | — | | | — | | | — | | | 2,902 | | | — | | | 2,902 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (2,815) | | | | | — | | | — | | | — | | | (2,815) | | | — | | | (2,815) | |
| | | | | | | | | | | | | | | | | | | | | | |
Contribution from noncontrolling interest(f) | — | | — | | | — | | | (17) | | | — | | | | | — | | | — | | | — | | | (17) | | | 426 | | | 409 | |
Distributions to noncontrolling interest in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (30) | | | (30) | |
Other(d) | — | | — | | | — | | | 1 | | | (92) | | | | | — | | | — | | | — | | | (91) | | | 1 | | | (90) | |
Balance at December 31, 2020 | $ | 1,962 | | 769 | | | $ | 1 | | | $ | 43,767 | | | $ | 2,471 | | | | | $ | (167) | | | $ | 6 | | | $ | (76) | | | $ | 47,964 | | | $ | 1,220 | | | $ | 49,184 | |
Net income | — | | — | | | — | | | — | | | 3,802 | | | | | — | | | — | | | — | | | 3,802 | | | (329) | | | 3,473 | |
Other comprehensive (loss) income | — | | — | | | — | | | — | | | — | | | | | (65) | | | (8) | | | 7 | | | (66) | | | 10 | | | (56) | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | — | | | — | | | 68 | | | — | | | | | — | | | — | | | — | | | 68 | | | — | | | 68 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (3,008) | | | | | — | | | — | | | — | | | (3,008) | | | — | | | (3,008) | |
Sale of noncontrolling interest(e) | — | | — | | | — | | | 545 | | | — | | | | | — | | | — | | | — | | | 545 | | | 454 | | | 999 | |
Contribution from noncontrolling interest, net of transaction costs(f) | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | 550 | | | 550 | |
Distributions to noncontrolling interests in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (66) | | | (66) | |
Other | — | | — | | | — | | | (9) | | | — | | | | | — | | | — | | | — | | | (9) | | | 1 | | | (8) | |
Balance at December 31, 2021 | $ | 1,962 | | 769 | | | $ | 1 | | | $ | 44,371 | | | $ | 3,265 | | | | | $ | (232) | | | $ | (2) | | | $ | (69) | | | $ | 49,296 | | | $ | 1,840 | | | $ | 51,136 | |
(a) Duke Energy issued 40 million depositary shares of preferred stock, Series A, in the first quarter of 2019 and 1 million shares of preferred stock, Series B, in the third quarter of 2019.
(b) Relates to the sale of a noncontrolling interest in the Commercial Renewables segment. See Note 1 for additional discussion of the transaction.
(c) Amounts in Retained Earnings and AOCI primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
(d) 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.
(e) Relates to the sale of a noncontrolling interest in Duke Energy Indiana. See Note 1 for additional discussion.
(f) Relates to tax equity financing activity in the Commercial Renewables segment.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Carolinas, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Carolinas, LLC and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission and by the South Carolina Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $3.5 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1947.
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 7,102 | | | $ | 7,015 | | | $ | 7,395 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,601 | | | 1,682 | | | 1,804 | |
Operation, maintenance and other | 1,833 | | | 1,743 | | | 1,868 | |
Depreciation and amortization | 1,468 | | | 1,462 | | | 1,388 | |
Property and other taxes | 320 | | | 299 | | | 292 | |
Impairment of assets and other charges | 227 | | | 476 | | | 17 | |
Total operating expenses | 5,449 | | | 5,662 | | | 5,369 | |
Gains on Sales of Other Assets and Other, net | 2 | | | 1 | | | — | |
Operating Income | 1,655 | | | 1,354 | | | 2,026 | |
Other Income and Expenses, net | 270 | | | 177 | | | 151 | |
Interest Expense | 538 | | | 487 | | | 463 | |
Income Before Income Taxes | 1,387 | | | 1,044 | | | 1,714 | |
Income Tax Expense | 51 | | | 88 | | | 311 | |
Net Income | $ | 1,336 | | | $ | 956 | | | $ | 1,403 | |
Other Comprehensive Income, net of tax | | | | | |
| | | | | |
| | | | | |
Net unrealized gain on cash flow hedges | 1 | | | — | | | — | |
Other Comprehensive Income, net of tax | 1 | | | — | | | — | |
Comprehensive Income | $ | 1,337 | | | $ | 956 | | | $ | 1,403 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | | | |
| | December 31, |
(in millions) | | 2021 | | 2020 |
ASSETS | | | | |
Current Assets | | | | |
Cash and cash equivalents | | $ | 7 | | | $ | 21 | |
Receivables (net of allowance for doubtful accounts of $1 at 2021 and 2020) | | 300 | | | 247 | |
Receivables of VIEs (net of allowance for doubtful accounts of $41 at 2021 and $22 at 2020) | | 844 | | | 696 | |
Receivables from affiliated companies | | 190 | | | 124 | |
| | | | |
Inventory | | 1,026 | | | 1,010 | |
Regulatory assets (includes $12 at 2021 related to VIEs) | | 544 | | | 473 | |
Other | | 95 | | | 20 | |
Total current assets | | 3,006 | | | 2,591 | |
Property, Plant and Equipment | | | | |
Cost | | 51,874 | | | 50,640 | |
Accumulated depreciation and amortization | | (17,854) | | | (17,453) | |
Facilities to be retired, net | | 102 | | | — | |
Net property, plant and equipment | | 34,122 | | | 33,187 | |
Other Noncurrent Assets | | | | |
| | | | |
Regulatory assets (includes $220 at 2021 related to VIEs) | | 2,935 | | | 2,996 | |
Nuclear decommissioning trust funds | | 5,759 | | | 4,977 | |
Operating lease right-of-use assets, net | | 92 | | | 110 | |
Other | | 1,248 | | | 1,187 | |
Total other noncurrent assets | | 10,034 | | | 9,270 | |
Total Assets | | $ | 47,162 | | | $ | 45,048 | |
LIABILITIES AND EQUITY | | | | |
Current Liabilities | | | | |
Accounts payable | | $ | 988 | | | $ | 1,000 | |
Accounts payable to affiliated companies | | 266 | | | 199 | |
Notes payable to affiliated companies | | 226 | | | 506 | |
Taxes accrued | | 274 | | | 76 | |
Interest accrued | | 125 | | | 117 | |
Current maturities of long-term debt (includes $5 at 2021 related to VIEs) | | 362 | | | 506 | |
Asset retirement obligations | | 249 | | | 264 | |
Regulatory liabilities | | 487 | | | 473 | |
Other | | 546 | | | 546 | |
Total current liabilities | | 3,523 | | | 3,687 | |
Long-Term Debt (includes $703 at 2021 related to VIEs) | | 12,595 | | | 11,412 | |
Long-Term Debt Payable to Affiliated Companies | | 318 | | | 300 | |
Other Noncurrent Liabilities | | | | |
Deferred income taxes | | 3,634 | | | 3,842 | |
Asset retirement obligations | | 5,052 | | | 5,086 | |
Regulatory liabilities | | 7,198 | | | 6,535 | |
Operating lease liabilities | | 78 | | | 97 | |
Accrued pension and other post-retirement benefit costs | | 50 | | | 73 | |
Investment tax credits | | 287 | | | 236 | |
Other | | 536 | | | 626 | |
Total other noncurrent liabilities | | 16,835 | | | 16,495 | |
Commitments and Contingencies | | 0 | | 0 |
Equity | | | | |
Member's equity | | 13,897 | | | 13,161 | |
Accumulated other comprehensive loss | | (6) | | | (7) | |
Total equity | | 13,891 | | | 13,154 | |
Total Liabilities and Equity | | $ | 47,162 | | | $ | 45,048 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 1,336 | | | $ | 956 | | | $ | 1,403 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization (including amortization of nuclear fuel) | 1,743 | | | 1,731 | | | 1,671 | |
Equity component of AFUDC | (65) | | | (62) | | | (42) | |
| | | | | |
Impairment of assets and other charges | 227 | | | 476 | | | 17 | |
Deferred income taxes | (213) | | | (260) | | | 133 | |
Payments for asset retirement obligations | (182) | | | (162) | | | (278) | |
Provision for rate refunds | (46) | | | (5) | | | 36 | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | — | | | (4) | | | (8) | |
Receivables | (99) | | | 52 | | | (21) | |
Receivables from affiliated companies | (66) | | | (10) | | | 68 | |
Inventory | (16) | | | (14) | | | (48) | |
Other current assets | (309) | | | 209 | | | (73) | |
Increase (decrease) in | | | | | |
Accounts payable | 5 | | | 55 | | | (50) | |
Accounts payable to affiliated companies | 85 | | | (11) | | | (20) | |
Taxes accrued | 206 | | | 30 | | | (127) | |
Other current liabilities | (39) | | | (56) | | | 127 | |
Other assets | 21 | | | (102) | | | (42) | |
Other liabilities | 116 | | | (47) | | | (37) | |
Net cash provided by operating activities | 2,704 | | | 2,776 | | | 2,709 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (2,693) | | | (2,669) | | | (2,714) | |
| | | | | |
Purchases of debt and equity securities | (3,425) | | | (1,602) | | | (1,658) | |
Proceeds from sales and maturities of debt and equity securities | 3,425 | | | 1,602 | | | 1,658 | |
| | | | | |
| | | | | |
Other | (177) | | | (164) | | | (204) | |
Net cash used in investing activities | (2,870) | | | (2,833) | | | (2,918) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 1,651 | | | 998 | | | 886 | |
Payments for the redemption of long-term debt | (617) | | | (813) | | | (6) | |
Notes payable to affiliated companies | (280) | | | 477 | | | (410) | |
Distributions to parent | (600) | | | (600) | | | (275) | |
Other | (1) | | | (2) | | | (1) | |
Net cash provided by financing activities | 153 | | | 60 | | | 194 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (13) | | | 3 | | | (15) | |
Cash, cash equivalents and restricted cash at beginning of period | 21 | | | 18 | | | 33 | |
Cash, cash equivalents and restricted cash at end of period | $ | 8 | | | $ | 21 | | | $ | 18 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 508 | | | $ | 481 | | | $ | 433 | |
Cash paid for income taxes | 233 | | | 321 | | | 122 | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 359 | | | 365 | | | 347 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | |
| | | Accumulated Other | | |
| | | Comprehensive | | |
| | | Income (Loss) | | | | |
| | | Net Gains | | | | |
| | | (Losses) on | | | | |
| Member's | | Cash Flow | | | | Total |
(in millions) | Equity | | Hedges | | | | Equity |
Balance at December 31, 2018 | $ | 11,689 | | | $ | (6) | | | | | $ | 11,683 | |
Net income | 1,403 | | | — | | | | | 1,403 | |
| | | | | | | |
Distributions to parent | (275) | | | — | | | | | (275) | |
Other | 1 | | | (1) | | | | | — | |
Balance at December 31, 2019 | $ | 12,818 | | | $ | (7) | | | | | $ | 12,811 | |
Net income | 956 | | | — | | | | | 956 | |
| | | | | | | |
Distributions to parent | (600) | | | — | | | | | (600) | |
Other(a) | (13) | | | — | | | | | (13) | |
Balance at December 31, 2020 | $ | 13,161 | | | $ | (7) | | | | | $ | 13,154 | |
Net income | 1,336 | | | — | | | | | 1,336 | |
Other comprehensive income | — | | | 1 | | | | | 1 | |
Distributions to parent | (600) | | | — | | | | | (600) | |
| | | | | | | |
Balance at December 31, 2021 | $ | 13,897 | | | $ | (6) | | | | | $ | 13,891 | |
(a) Amounts primarily represent impacts due to implementation of a new accounting standard related to Credit Losses. See Note 1 for additional discussion.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Progress Energy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Progress Energy, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission, South Carolina Public Service Commission and Florida Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $6.9 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1930.
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 11,057 | | | $ | 10,627 | | | $ | 11,202 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 3,584 | | | 3,479 | | | 4,024 | |
Operation, maintenance and other | 2,529 | | | 2,479 | | | 2,495 | |
Depreciation and amortization | 1,929 | | | 1,818 | | | 1,845 | |
Property and other taxes | 542 | | | 545 | | | 561 | |
Impairment of assets and other charges | 82 | | | 495 | | | (24) | |
Total operating expenses | 8,666 | | | 8,816 | | | 8,901 | |
Gains on Sales of Other Assets and Other, net | 14 | | | 9 | | | — | |
Operating Income | 2,405 | | | 1,820 | | | 2,301 | |
Other Income and Expenses, net | 215 | | | 129 | | | 141 | |
Interest Expense | 794 | | | 790 | | | 862 | |
Income Before Income Taxes | 1,826 | | | 1,159 | | | 1,580 | |
Income Tax Expense | 227 | | | 113 | | | 253 | |
| | | | | |
| | | | | |
Net Income | 1,599 | | | 1,046 | | | 1,327 | |
Less: Net Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | |
Net Income Attributable to Parent | $ | 1,598 | | | $ | 1,045 | | | $ | 1,327 | |
| | | | | |
Net Income | $ | 1,599 | | | $ | 1,046 | | | $ | 1,327 | |
Other Comprehensive Income, net of tax | | | | | |
Pension and OPEB adjustments | 1 | | | (1) | | | 2 | |
Net unrealized gain on cash flow hedges | 3 | | | 5 | | | 5 | |
| | | | | |
| | | | | |
Unrealized (losses) gains on available-for-sale securities | — | | | (1) | | | 1 | |
| | | | | |
Other Comprehensive Income, net of tax | 4 | | | 3 | | | 8 | |
Comprehensive Income | 1,603 | | | 1,049 | | | 1,335 | |
Less: Comprehensive Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | |
Comprehensive Income Attributable to Parent | $ | 1,602 | | | $ | 1,048 | | | $ | 1,335 | |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 70 | | | $ | 59 | |
Receivables (net of allowance for doubtful accounts of $11 at 2021 and $8 at 2020) | 247 | | | 228 | |
Receivables of VIEs (net of allowance for doubtful accounts of $25 at 2021 and $29 at 2020) | 1,006 | | | 901 | |
Receivables from affiliated companies | 121 | | | 157 | |
| | | |
Inventory | 1,398 | | | 1,375 | |
Regulatory assets (includes $93 at 2021 and $53 at 2020 related to VIEs) | 1,030 | | | 758 | |
Other (includes $39 at 2021 and 2020 related to VIEs) | 125 | | | 109 | |
Total current assets | 3,997 | | | 3,587 | |
Property, Plant and Equipment | | | |
Cost | 60,894 | | | 57,892 | |
Accumulated depreciation and amortization | (19,214) | | | (18,368) | |
Facilities to be retired, net | 26 | | | 29 | |
Net property, plant and equipment | 41,706 | | | 39,553 | |
Other Noncurrent Assets | | | |
Goodwill | 3,655 | | | 3,655 | |
Regulatory assets (includes $1,603 at 2021 and $937 at 2020 related to VIEs) | 5,909 | | | 5,775 | |
Nuclear decommissioning trust funds | 4,642 | | | 4,137 | |
Operating lease right-of-use assets, net | 691 | | | 690 | |
Other | 1,242 | | | 1,227 | |
Total other noncurrent assets | 16,139 | | | 15,484 | |
Total Assets | $ | 61,842 | | | $ | 58,624 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 1,099 | | | $ | 919 | |
Accounts payable to affiliated companies | 506 | | | 289 | |
Notes payable to affiliated companies | 2,809 | | | 2,969 | |
Taxes accrued | 128 | | | 121 | |
Interest accrued | 192 | | | 202 | |
Current maturities of long-term debt (includes $71 at 2021 and $305 at 2020 related to VIEs) | 1,082 | | | 1,426 | |
Asset retirement obligations | 275 | | | 283 | |
Regulatory liabilities | 478 | | | 640 | |
Other | 868 | | | 793 | |
Total current liabilities | 7,437 | | | 7,642 | |
Long-Term Debt (includes $2,293 at 2021 and $1,252 at 2020 related to VIEs) | 19,591 | | | 17,688 | |
Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 4,564 | | | 4,396 | |
Asset retirement obligations | 5,837 | | | 5,866 | |
Regulatory liabilities | 5,566 | | | 5,051 | |
Operating lease liabilities | 606 | | | 623 | |
Accrued pension and other post-retirement benefit costs | 417 | | | 505 | |
Other | 526 | | | 462 | |
Total other noncurrent liabilities | 17,516 | | | 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 | 8,007 | | | 7,109 | |
Accumulated other comprehensive loss | (11) | | | (15) | |
Total Progress Energy, Inc. stockholder's equity | 17,145 | | | 16,237 | |
Noncontrolling interests | 3 | | | 4 | |
Total equity | 17,148 | | | 16,241 | |
Total Liabilities and Equity | $ | 61,842 | | | $ | 58,624 | |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 1,599 | | | $ | 1,046 | | | $ | 1,327 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion (including amortization of nuclear fuel) | 2,302 | | | 2,327 | | | 2,207 | |
Equity component of AFUDC | (51) | | | (42) | | | (66) | |
| | | | | |
Impairment of assets and other charges | 82 | | | 495 | | | (24) | |
Deferred income taxes | 247 | | | (197) | | | 433 | |
Payments for asset retirement obligations | (288) | | | (384) | | | (412) | |
Provision for rate refunds | (36) | | | 2 | | | 15 | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | 51 | | | (9) | | | (34) | |
Receivables | (97) | | | (69) | | | 47 | |
Receivables from affiliated companies | 18 | | | (81) | | | 81 | |
Inventory | (26) | | | 49 | | | 62 | |
Other current assets | (551) | | | 223 | | | 184 | |
Increase (decrease) in | | | | | |
Accounts payable | 59 | | | (62) | | | (4) | |
Accounts payable to affiliated companies | 217 | | | (21) | | | (50) | |
Taxes accrued | 13 | | | 75 | | | (74) | |
Other current liabilities | (32) | | | 139 | | | 25 | |
Other assets | (110) | | | (137) | | | (341) | |
Other liabilities | (99) | | | (177) | | | (167) | |
Net cash provided by operating activities | 3,298 | | | 3,177 | | | 3,209 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (3,668) | | | (3,488) | | | (3,952) | |
| | | | | |
Purchases of debt and equity securities | (2,233) | | | (5,998) | | | (1,511) | |
Proceeds from sales and maturities of debt and equity securities | 2,322 | | | 6,010 | | | 1,504 | |
| | | | | |
Notes receivable from affiliated companies | — | | | 164 | | | (164) | |
Other | (156) | | | (160) | | | (190) | |
Net cash used in investing activities | (3,735) | | | (3,472) | | | (4,313) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 3,095 | | | 1,791 | | | 2,187 | |
Payments for the redemption of long-term debt | (1,883) | | | (2,157) | | | (1,667) | |
Notes payable to affiliated companies | (160) | | | 1,148 | | | 586 | |
Dividends to parent | (700) | | | (400) | | | — | |
Other | (2) | | | (13) | | | 12 | |
Net cash provided by financing activities | 350 | | | 369 | | | 1,118 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (87) | | | 74 | | | 14 | |
Cash, cash equivalents and restricted cash at beginning of period | 200 | | | 126 | | | 112 | |
Cash, cash equivalents and restricted cash at end of period | $ | 113 | | | $ | 200 | | | $ | 126 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 813 | | | $ | 819 | | | $ | 892 | |
Cash paid for (received from) income taxes | 14 | | | 149 | | | (79) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 501 | | | 363 | | | 447 | |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | |
| | | | | | | Net Gains | | Net Unrealized | | | | Total Progress | | | | |
| | | Additional | | | | (Losses) on | | Gains (Losses) | | Pension and | | Energy, Inc. | | | | |
| | | Paid-in | | Retained | | Cash Flow | | on Available-for- | | OPEB | | Stockholder's | | Noncontrolling | | Total |
(in millions) | | | Capital | | Earnings | | Hedges | | Sale Securities | | Adjustments | | Equity | | Interests | | Equity |
Balance at December 31, 2018 | | | $ | 9,143 | | | $ | 5,131 | | | $ | (12) | | | $ | (1) | | | $ | (7) | | | $ | 14,254 | | | $ | 3 | | | $ | 14,257 | |
Net income | | | — | | | 1,327 | | | — | | | — | | | — | | | 1,327 | | | — | | | 1,327 | |
Other comprehensive income | | | — | | | — | | | 5 | | | 1 | | | 2 | | | 8 | | | — | | | 8 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other(a) | | | — | | | 7 | | | (3) | | | (1) | | | (2) | | | 1 | | | — | | | 1 | |
Balance at December 31, 2019 | | | $ | 9,143 | | | $ | 6,465 | | | $ | (10) | | | $ | (1) | | | $ | (7) | | | $ | 15,590 | | | $ | 3 | | | $ | 15,593 | |
Net income | | | — | | | 1,045 | | | — | | | — | | | — | | | 1,045 | | | 1 | | | 1,046 | |
Other comprehensive income (loss) | | | — | | | — | | | 5 | | | (1) | | | (1) | | | 3 | | | — | | | 3 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Dividends to parent | | | — | | | (400) | | | — | | | — | | | — | | | (400) | | | — | | | (400) | |
| | | | | | | | | | | | | | | | | |
Other | | | — | | | (1) | | | — | | | — | | | — | | | (1) | | | — | | | (1) | |
Balance at December 31, 2020 | | | $ | 9,143 | | | $ | 7,109 | | | $ | (5) | | | $ | (2) | | | $ | (8) | | | $ | 16,237 | | | $ | 4 | | | $ | 16,241 | |
Net income | | | — | | | 1,598 | | | — | | | — | | | — | | | 1,598 | | | 1 | | | 1,599 | |
Other comprehensive income | | | — | | | — | | | 3 | | | — | | | 1 | | | 4 | | | — | | | 4 | |
Distributions to noncontrolling interests | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Dividends to parent | | | — | | | (700) | | | — | | | — | | | — | | | (700) | | | — | | | (700) | |
| | | | | | | | | | | | | | | | | |
Other | | | 6 | | | — | | | — | | | — | | | — | | | 6 | | | (1) | | | 5 | |
Balance at December 31, 2021 | | | $ | 9,149 | | | $ | 8,007 | | | $ | (2) | | | $ | (2) | | | $ | (7) | | | $ | 17,145 | | | $ | 3 | | | $ | 17,148 | |
(a) Amounts in Retained Earnings and AOCI primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Progress, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Progress, LLC and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission and by the South Carolina Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $4.7 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1930.
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 5,780 | | | $ | 5,422 | | | $ | 5,957 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,778 | | | 1,743 | | | 2,012 | |
Operation, maintenance and other | 1,467 | | | 1,332 | | | 1,446 | |
Depreciation and amortization | 1,097 | | | 1,116 | | | 1,143 | |
Property and other taxes | 159 | | | 167 | | | 176 | |
Impairment of assets and other charges | 63 | | | 499 | | | 12 | |
Total operating expenses | 4,564 | | | 4,857 | | | 4,789 | |
Gains on Sales of Other Assets and Other, net | 13 | | | 8 | | | — | |
Operating Income | 1,229 | | | 573 | | | 1,168 | |
Other Income and Expenses, net | 143 | | | 75 | | | 100 | |
Interest Expense | 306 | | | 269 | | | 306 | |
Income Before Income Taxes | 1,066 | | | 379 | | | 962 | |
Income Tax Expense (Benefit) | 75 | | | (36) | | | 157 | |
Net Income and Comprehensive Income | $ | 991 | | | $ | 415 | | | $ | 805 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 35 | | | $ | 39 | |
Receivables (net of allowance for doubtful accounts of $4 at 2021 and $4 at 2020) | 127 | | | 132 | |
Receivables of VIEs (net of allowance for doubtful accounts of $17 at 2021 and $19 at 2020) | 574 | | | 500 | |
Receivables from affiliated companies | 65 | | | 50 | |
| | | |
Inventory | 921 | | | 911 | |
Regulatory assets (includes $39 at 2021 related to VIEs) | 533 | | | 492 | |
Other | 83 | | | 60 | |
Total current assets | 2,338 | | | 2,184 | |
Property, Plant and Equipment | | | |
Cost | 37,018 | | | 35,759 | |
Accumulated depreciation and amortization | (13,387) | | | (12,801) | |
Facilities to be retired, net | 26 | | | 29 | |
Net property, plant and equipment | 23,657 | | | 22,987 | |
Other Noncurrent Assets | | | |
Regulatory assets (includes $720 at 2021 related to VIEs) | 4,118 | | | 3,976 | |
Nuclear decommissioning trust funds | 4,089 | | | 3,500 | |
Operating lease right-of-use assets, net | 389 | | | 346 | |
Other | 792 | | | 740 | |
Total other noncurrent assets | 9,388 | | | 8,562 | |
Total Assets | $ | 35,383 | | | $ | 33,733 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 476 | | | $ | 454 | |
Accounts payable to affiliated companies | 310 | | | 215 | |
Notes payable to affiliated companies | 172 | | | 295 | |
Taxes accrued | 163 | | | 85 | |
Interest accrued | 96 | | | 99 | |
Current maturities of long-term debt (includes $15 at 2021 related to VIEs) | 556 | | | 603 | |
Asset retirement obligations | 274 | | | 283 | |
Regulatory liabilities | 381 | | | 530 | |
Other | 448 | | | 411 | |
Total current liabilities | 2,876 | | | 2,975 | |
Long-Term Debt (includes $1,097 at 2021 related to VIEs) | 9,543 | | | 8,505 | |
Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 2,208 | | | 2,298 | |
Asset retirement obligations | 5,401 | | | 5,352 | |
Regulatory liabilities | 4,868 | | | 4,394 | |
Operating lease liabilities | 350 | | | 323 | |
Accrued pension and other post-retirement benefit costs | 221 | | | 242 | |
Investment tax credits | 128 | | | 132 | |
Other | 87 | | | 102 | |
Total other noncurrent liabilities | 13,263 | | | 12,843 | |
Commitments and Contingencies | 0 | | 0 |
Equity | | | |
Member's Equity | 9,551 | | | 9,260 | |
| | | |
| | | |
| | | |
Total Liabilities and Equity | $ | 35,383 | | | $ | 33,733 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 991 | | | $ | 415 | | | $ | 805 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization (including amortization of nuclear fuel) | 1,286 | | | 1,299 | | | 1,329 | |
Equity component of AFUDC | (34) | | | (29) | | | (60) | |
| | | | | |
Impairment of assets and other charges | 63 | | | 499 | | | 12 | |
Deferred income taxes | (46) | | | (234) | | | 197 | |
Payments for asset retirement obligations | (187) | | | (304) | | | (390) | |
Provisions for rate refunds | (36) | | | 2 | | | 12 | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | 48 | | | 1 | | | (6) | |
Receivables | (52) | | | (4) | | | 21 | |
Receivables from affiliated companies | (33) | | | 2 | | | (29) | |
Inventory | (11) | | | 23 | | | 20 | |
Other current assets | (147) | | | 98 | | | 101 | |
Increase (decrease) in | | | | | |
Accounts payable | 12 | | | (127) | | | 32 | |
Accounts payable to affiliated companies | 95 | | | 12 | | | (75) | |
Taxes accrued | 83 | | | 68 | | | (46) | |
Other current liabilities | (23) | | | 157 | | | 68 | |
Other assets | (37) | | | (215) | | | (205) | |
Other liabilities | (16) | | | 3 | | | 37 | |
Net cash provided by operating activities | 1,956 | | | 1,666 | | | 1,823 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (1,746) | | | (1,581) | | | (2,108) | |
| | | | | |
Purchases of debt and equity securities | (1,931) | | | (1,555) | | | (842) | |
Proceeds from sales and maturities of debt and equity securities | 1,914 | | | 1,516 | | | 810 | |
| | | | | |
| | | | | |
Other | (20) | | | (57) | | | (119) | |
Net cash used in investing activities | (1,783) | | | (1,677) | | | (2,259) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 1,959 | | | 1,296 | | | 1,269 | |
Payments for the redemption of long-term debt | (1,308) | | | (1,085) | | | (605) | |
Notes payable to affiliated companies | (123) | | | 229 | | | (228) | |
Distributions to parent | (700) | | | (400) | | | — | |
Other | (1) | | | (12) | | | (1) | |
Net cash (used in) provided by financing activities | (173) | | | 28 | | | 435 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | — | | | 17 | | | (1) | |
Cash, cash equivalents and restricted cash at beginning of period | 39 | | | 22 | | | 23 | |
Cash, cash equivalents and restricted cash at end of period | $ | 39 | | | $ | 39 | | | $ | 22 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 335 | | | $ | 301 | | | $ | 331 | |
Cash paid for (received from) income taxes | 83 | | | 123 | | | (30) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 163 | | | 149 | | | 175 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | |
| | | | | Member's | | | | |
(in millions) | | | | | Equity | | | | |
Balance at December 31, 2018 | | | | | $ | 8,441 | | | | | |
Net income | | | | | 805 | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2019 | | | | | $ | 9,246 | | | | | |
Net income | | | | | 415 | | | | | |
Distribution to parent | | | | | (400) | | | | | |
| | | | | | | | | |
Other | | | | | (1) | | | | | |
Balance at December 31, 2020 | | | | | $ | 9,260 | | | | | |
Net income | | | | | 991 | | | | | |
Distribution to parent | | | | | (700) | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2021 | | | | | $ | 9,551 | | | | | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Florida, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Florida, LLC and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Florida Public Service Commission (the “Commission”), which has jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $2.3 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commission, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commission, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 2001.
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 5,259 | | | $ | 5,188 | | | $ | 5,231 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,806 | | | 1,737 | | | 2,012 | |
Operation, maintenance and other | 1,048 | | | 1,131 | | | 1,034 | |
Depreciation and amortization | 831 | | | 702 | | | 702 | |
Property and other taxes | 383 | | | 381 | | | 392 | |
Impairment of assets and other charges | 19 | | | (4) | | | (36) | |
Total operating expenses | 4,087 | | | 3,947 | | | 4,104 | |
Gains on Sales of Other Assets and Other, net | 1 | | | 1 | | | — | |
Operating Income | 1,173 | | | 1,242 | | | 1,127 | |
Other Income and Expenses, net | 71 | | | 53 | | | 48 | |
Interest Expense | 319 | | | 326 | | | 328 | |
Income Before Income Taxes | 925 | | | 969 | | | 847 | |
Income Tax Expense | 187 | | | 198 | | | 155 | |
Net Income | $ | 738 | | | $ | 771 | | | $ | 692 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other Comprehensive Income (Loss), net of tax | | | | | |
Unrealized (losses) gains on available-for-sale securities | (1) | | | (1) | | | 1 | |
| | | | | |
| | | | | |
Other Comprehensive (Loss) Income, net of tax | (1) | | | (1) | | | 1 | |
Comprehensive Income | $ | 737 | | | $ | 770 | | | $ | 693 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 23 | | | $ | 11 | |
Receivables (net of allowance for doubtful accounts of $8 at 2021 and $4 at 2020) | 117 | | | 94 | |
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2021 and $10 at 2020) | 432 | | | 401 | |
Receivables from affiliated companies | 16 | | | 3 | |
| | | |
Inventory | 477 | | | 464 | |
Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs) | 497 | | | 265 | |
Other (includes $39 at 2021 and 2020 related to VIEs) | 80 | | | 41 | |
Total current assets | 1,642 | | | 1,279 | |
Property, Plant and Equipment | | | |
Cost | 23,865 | | | 22,123 | |
Accumulated depreciation and amortization | (5,819) | | | (5,560) | |
Net property, plant and equipment | 18,046 | | | 16,563 | |
Other Noncurrent Assets | | | |
| | | |
Regulatory assets (includes $883 at 2021 and $937 at 2020 related to VIEs) | 1,791 | | | 1,799 | |
Nuclear decommissioning trust funds | 553 | | | 637 | |
Operating lease right-of-use assets, net | 302 | | | 344 | |
Other | 399 | | | 335 | |
Total other noncurrent assets | 3,045 | | | 3,115 | |
Total Assets | $ | 22,733 | | | $ | 20,957 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 623 | | | $ | 465 | |
Accounts payable to affiliated companies | 209 | | | 85 | |
Notes payable to affiliated companies | 199 | | | 196 | |
Taxes accrued | 51 | | | 82 | |
Interest accrued | 68 | | | 69 | |
Current maturities of long-term debt (includes $56 at 2021 and $305 at 2020 related to VIEs) | 76 | | | 823 | |
Asset retirement obligations | 1 | | | — | |
Regulatory liabilities | 98 | | | 110 | |
Other | 408 | | | 374 | |
Total current liabilities | 1,733 | | | 2,204 | |
Long-Term Debt (includes $1,196 at 2021 and $1,002 at 2020 related to VIEs) | 8,406 | | | 7,092 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 2,434 | | | 2,191 | |
| | | |
Asset retirement obligations | 436 | | | 514 | |
Regulatory liabilities | 698 | | | 658 | |
Operating lease liabilities | 256 | | | 300 | |
Accrued pension and other post-retirement benefit costs | 166 | | | 231 | |
| | | |
Other | 309 | | | 209 | |
Total other noncurrent liabilities | 4,299 | | | 4,103 | |
Commitments and Contingencies | 0 | | 0 |
| | | |
Equity | | | |
Member's equity | 8,298 | | | 7,560 | |
| | | |
| | | |
Accumulated other comprehensive loss | (3) | | | (2) | |
Total equity | 8,295 | | | 7,558 | |
Total Liabilities and Equity | $ | 22,733 | | | $ | 20,957 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 738 | | | $ | 771 | | | $ | 692 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 1,011 | | | 1,019 | | | 869 | |
Equity component of AFUDC | (16) | | | (12) | | | (6) | |
| | | | | |
Impairment of assets and other charges | 19 | | | (4) | | | (36) | |
Deferred income taxes | 279 | | | 27 | | | 180 | |
Payments for asset retirement obligations | (101) | | | (80) | | | (22) | |
| | | | | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | — | | | (14) | | | (33) | |
Receivables | (45) | | | (64) | | | 26 | |
Receivables from affiliated companies | (13) | | | (3) | | | 17 | |
Inventory | (15) | | | 26 | | | 42 | |
Other current assets | (451) | | | 40 | | | 156 | |
Increase (decrease) in | | | | | |
Accounts payable | 47 | | | 66 | | | (36) | |
Accounts payable to affiliated companies | 124 | | | (46) | | | 40 | |
Taxes accrued | (30) | | | 39 | | | (31) | |
Other current liabilities | (7) | | | (7) | | | (36) | |
Other assets | (69) | | | 84 | | | (131) | |
Other liabilities | (69) | | | (181) | | | (213) | |
Net cash provided by operating activities | 1,402 | | | 1,661 | | | 1,478 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (1,923) | | | (1,907) | | | (1,844) | |
| | | | | |
Purchases of debt and equity securities | (302) | | | (4,443) | | | (669) | |
Proceeds from sales and maturities of debt and equity securities | 408 | | | 4,495 | | | 695 | |
| | | | | |
Notes receivable from affiliated companies | — | | | 173 | | | (173) | |
Other | (136) | | | (103) | | | (67) | |
Net cash used in investing activities | (1,953) | | | (1,785) | | | (2,058) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 1,135 | | | 495 | | | 918 | |
Payments for the redemption of long-term debt | (575) | | | (572) | | | (262) | |
Notes payable to affiliated companies | 3 | | | 196 | | | (108) | |
| | | | | |
Other | — | | | (1) | | | 13 | |
Net cash provided by financing activities | 563 | | | 118 | | | 561 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 12 | | | (6) | | | (19) | |
Cash, cash equivalents and restricted cash at beginning of period | 50 | | | 56 | | | 75 | |
Cash, cash equivalents and restricted cash at end of period | $ | 62 | | | $ | 50 | | | $ | 56 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 308 | | | $ | 321 | | | $ | 332 | |
Cash (received from) paid for income taxes | (15) | | | 138 | | | 1 | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 337 | | | 214 | | | 272 | |
| | | | | |
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Accumulated | | |
| | | | | | | Other | | |
| | | | | | | Comprehensive | | |
| | | | | | | Income (Loss) | | |
| | | | | | | Net Unrealized | | | | |
| | | | | | | Gains (Losses) on | | | | |
| | | | | Member's | | Available-for- | | | | Total |
(in millions) | | | | | Equity | | Sale Securities | | | | Equity |
Balance at December 31, 2018 | | | | | $ | 6,097 | | | $ | (2) | | | | | $ | 6,095 | |
Net income | | | | | 692 | | | — | | | | | 692 | |
Other comprehensive income | | | | | — | | | 1 | | | | | 1 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2019 | | | | | $ | 6,789 | | | $ | (1) | | | | | $ | 6,788 | |
Net income | | | | | 771 | | | — | | | | | 771 | |
Other comprehensive loss | | | | | — | | | (1) | | | | | (1) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2020 | | | | | $ | 7,560 | | | $ | (2) | | | | | $ | 7,558 | |
Net income | | | | | 738 | | | — | | | | | 738 | |
Other comprehensive loss | | | | | — | | | (1) | | | | | (1) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2021 | | | | | $ | 8,298 | | | $ | (3) | | | | | $ | 8,295 | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Ohio, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Ohio, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Public Utilities Commission of Ohio and by the Kentucky Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric and gas rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $707 million recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 2002.
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | |
Regulated electric | $ | 1,493 | | | $ | 1,405 | | | $ | 1,456 | |
Regulated natural gas | 544 | | | 453 | | | 484 | |
| | | | | |
Total operating revenues | 2,037 | | | 1,858 | | | 1,940 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 409 | | | 339 | | | 388 | |
| | | | | |
Cost of natural gas | 136 | | | 73 | | | 95 | |
Operation, maintenance and other | 479 | | | 463 | | | 520 | |
Depreciation and amortization | 307 | | | 278 | | | 265 | |
Property and other taxes | 355 | | | 324 | | | 308 | |
Impairment of assets and other charges | 25 | | | — | | | — | |
Total operating expenses | 1,711 | | | 1,477 | | | 1,576 | |
Gains on Sales of Other Assets and Other, net | 1 | | | — | | | — | |
Operating Income | 327 | | | 381 | | | 364 | |
Other Income and Expenses, net | 18 | | | 16 | | | 24 | |
Interest Expense | 111 | | | 102 | | | 109 | |
Income From Continuing Operations Before Income Taxes | 234 | | | 295 | | | 279 | |
Income Tax Expense From Continuing Operations | 30 | | | 43 | | | 40 | |
Income From Continuing Operations | 204 | | | 252 | | | 239 | |
Loss From Discontinued Operations, net of tax | — | | | — | | | (1) | |
Net Income and Comprehensive Income | $ | 204 | | | $ | 252 | | | $ | 238 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 13 | | | $ | 14 | |
Receivables (net of allowance for doubtful accounts of $4 at 2021 and 2020) | 96 | | | 98 | |
Receivables from affiliated companies | 122 | | | 102 | |
Notes receivable from affiliated companies | 15 | | | — | |
Inventory | 116 | | | 110 | |
| | | |
Regulatory assets | 72 | | | 39 | |
Other | 57 | | | 31 | |
Total current assets | 491 | | | 394 | |
Property, Plant and Equipment | | | |
Cost | 11,725 | | | 11,022 | |
Accumulated depreciation and amortization | (3,106) | | | (3,013) | |
Facilities to be retired, net | 6 | | | — | |
Net property, plant and equipment | 8,625 | | | 8,009 | |
Other Noncurrent Assets | | | |
Goodwill | 920 | | | 920 | |
Regulatory assets | 635 | | | 610 | |
Operating lease right-of-use assets, net | 19 | | | 20 | |
| | | |
| | | |
| | | |
Other | 84 | | | 72 | |
Total other noncurrent assets | 1,658 | | | 1,622 | |
Total Assets | $ | 10,774 | | | $ | 10,025 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 348 | | | $ | 279 | |
Accounts payable to affiliated companies | 64 | | | 68 | |
Notes payable to affiliated companies | 103 | | | 169 | |
Taxes accrued | 275 | | | 247 | |
Interest accrued | 30 | | | 31 | |
Current maturities of long-term debt | — | | | 50 | |
| | | |
Asset retirement obligations | 13 | | | 3 | |
Regulatory liabilities | 62 | | | 65 | |
Other | 82 | | | 70 | |
Total current liabilities | 977 | | | 982 | |
Long-Term Debt | 3,168 | | | 3,014 | |
Long-Term Debt Payable to Affiliated Companies | 25 | | | 25 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 1,050 | | | 981 | |
Asset retirement obligations | 123 | | | 108 | |
Regulatory liabilities | 739 | | | 748 | |
Operating lease liabilities | 18 | | | 20 | |
Accrued pension and other post-retirement benefit costs | 109 | | | 113 | |
| | | |
| | | |
Other | 101 | | | 99 | |
Total other noncurrent liabilities | 2,140 | | | 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 | 3,100 | | | 2,776 | |
Retained earnings | 602 | | | 397 | |
| | | |
Total equity | 4,464 | | | 3,935 | |
Total Liabilities and Equity | $ | 10,774 | | | $ | 10,025 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 204 | | | $ | 252 | | | $ | 238 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 311 | | | 283 | | | 269 | |
Equity component of AFUDC | (7) | | | (7) | | | (13) | |
| | | | | |
Impairment of assets and other charges | 25 | | | — | | | — | |
Deferred income taxes | 42 | | | 31 | | | 81 | |
Payments for asset retirement obligations | (2) | | | (2) | | | (8) | |
Provision for rate refunds | 16 | | | 14 | | | 7 | |
(Increase) decrease in | | | | | |
| | | | | |
Receivables | 6 | | | (13) | | | 20 | |
Receivables from affiliated companies | (25) | | | 9 | | | 22 | |
Inventory | (6) | | | 25 | | | (9) | |
Other current assets | (60) | | | (18) | | | (5) | |
Increase (decrease) in | | | | | |
Accounts payable | 38 | | | 2 | | | (17) | |
Accounts payable to affiliated companies | (4) | | | — | | | (10) | |
Taxes accrued | 26 | | | 30 | | | 17 | |
Other current liabilities | 11 | | | 3 | | | 1 | |
Other assets | (43) | | | (32) | | | (26) | |
Other liabilities | 27 | | | (2) | | | (41) | |
Net cash provided by operating activities | 559 | | | 575 | | | 526 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (848) | | | (834) | | | (952) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Notes receivable from affiliated companies | (10) | | | (19) | | | — | |
Other | (60) | | | (48) | | | (68) | |
Net cash used in investing activities | (918) | | | (901) | | | (1,020) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 150 | | | 467 | | | 1,003 | |
Payments for the redemption of long-term debt | (50) | | | — | | | (551) | |
Notes payable to affiliated companies | (67) | | | (144) | | | 38 | |
Capital contribution from parent | 325 | | | — | | | — | |
| | | | | |
| | | | | |
Net cash provided by financing activities | 358 | | | 323 | | | 490 | |
Net decrease in cash and cash equivalents | (1) | | | (3) | | | (4) | |
Cash and cash equivalents at beginning of period | 14 | | | 17 | | | 21 | |
Cash and cash equivalents at end of period | $ | 13 | | | $ | 14 | | | $ | 17 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 107 | | | $ | 97 | | | $ | 97 | |
Cash paid for (received from) income taxes | 9 | | | — | | | (37) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 135 | | | 104 | | | 109 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | Additional | | Retained | | | | |
| Common | | Paid-in | | Earnings | | | | Total |
(in millions) | Stock | | Capital | | (Deficit) | | | | Equity |
Balance at December 31, 2018 | $ | 762 | | | $ | 2,776 | | | $ | (93) | | | | | $ | 3,445 | |
Net income | — | | | — | | | 238 | | | | | 238 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2019 | $ | 762 | | | $ | 2,776 | | | $ | 145 | | | | | $ | 3,683 | |
Net income | — | | | — | | | 252 | | | | | 252 | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2020 | $ | 762 | | | $ | 2,776 | | | $ | 397 | | | | | $ | 3,935 | |
Net income | — | | | — | | | 204 | | | | | 204 | |
Contribution from parent | — | | | 325 | | | — | | | | | 325 | |
| | | | | | | | | |
Other | — | | | (1) | | | 1 | | | | | — | |
Balance at December 31, 2021 | $ | 762 | | | $ | 3,100 | | | $ | 602 | | | | | $ | 4,464 | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Indiana, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Indiana, LLC and subsidiary (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Indiana Utility Regulatory Commission (the “Commission”), which has jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $1.6 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commission, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commission, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
Duke Energy Indiana Coal Ash Asset Retirement Obligations – Refer to Notes 1, 4, and 9 to the financial statements.
Critical Audit Matter Description
Duke Energy Indiana has asset retirement obligations associated with coal ash impoundments at operating and retired coal generation facilities. These legal obligations are the result of Indiana state and federal regulations. There is significant judgment in determining the methods to close each site since Duke Energy Indiana does not have approved closure plans for certain sites. Management has applied probability weightings for the cash flows for certain sites based the likelihood of implementing potential closure methods. Probability weightings for the cash flows associated with the different potential closure methods (“probability weightings”) creates estimation uncertainty. The liability for coal ash asset retirement obligations at Duke Energy Indiana was $949 million at December 31, 2021.
We identified the asset retirement obligations associated with coal ash impoundments at Duke Energy Indiana as a critical audit matter because of the significant management estimates and assumptions, including the different potential closure methods and the probability weightings as a result of pending legal challenges. The audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the probability weightings for the cash flows associated with the different potential closure methods required a high degree of auditor judgment and an increased extent of effort, including the need to involve our environmental specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the probability weightings for the cash flows associated with the different potential closure methods for coal ash asset retirement obligations at Duke Energy Indiana included the following, among others:
•We tested the effectiveness of controls over management’s coal ash asset retirement obligation estimate, including those over management’s determination of the probability weightings.
•We tested the mathematical accuracy of management’s coal ash asset retirement obligation calculations, including the application of probability weightings.
•We made inquiries of internal and external legal counsel regarding the status of the legal matters associated with the probability weightings.
•We inspected the opinions from internal and external legal counsel supporting the probability weightings.
•With the assistance of professionals in our firm with the appropriate expertise, we inspected the Company’s filings with and orders from the Indiana Department of Environmental Management, for evidence that might contradict management’s assertions regarding the probability weightings.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 2002.
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 3,174 | | | $ | 2,795 | | | $ | 3,004 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 985 | | | 767 | | | 935 | |
Operation, maintenance and other | 750 | | | 762 | | | 790 | |
Depreciation and amortization | 615 | | | 569 | | | 525 | |
Property and other taxes | 73 | | | 81 | | | 69 | |
Impairment of assets and other charges | 9 | | | — | | | — | |
Total operating expenses | 2,432 | | | 2,179 | | | 2,319 | |
| | | | | |
Operating Income | 742 | | | 616 | | | 685 | |
Other Income and Expenses, net | 42 | | | 37 | | | 41 | |
Interest Expense | 196 | | | 161 | | | 156 | |
Income Before Income Taxes | 588 | | | 492 | | | 570 | |
Income Tax Expense | 107 | | | 84 | | | 134 | |
Net Income and Comprehensive Income | $ | 481 | | | $ | 408 | | | $ | 436 | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 6 | | | $ | 7 | |
Receivables (net of allowance for doubtful accounts of $3 at 2021 and 2020) | 100 | | | 55 | |
Receivables from affiliated companies | 98 | | | 112 | |
Notes receivable from affiliated companies | 134 | | | — | |
Inventory | 418 | | | 473 | |
Regulatory assets | 277 | | | 125 | |
Other | 68 | | | 37 | |
Total current assets | 1,101 | | | 809 | |
Property, Plant and Equipment | | | |
Cost | 17,343 | | | 17,382 | |
Accumulated depreciation and amortization | (5,583) | | | (5,661) | |
| | | |
Net property, plant and equipment | 11,760 | | | 11,721 | |
Other Noncurrent Assets | | | |
Regulatory assets | 1,278 | | | 1,203 | |
Operating lease right-of-use assets, net | 53 | | | 55 | |
| | | |
Other | 296 | | | 253 | |
Total other noncurrent assets | 1,627 | | | 1,511 | |
Total Assets | $ | 14,488 | | | $ | 14,041 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 282 | | | $ | 188 | |
Accounts payable to affiliated companies | 221 | | | 88 | |
Notes payable to affiliated companies | — | | | 131 | |
Taxes accrued | 73 | | | 62 | |
Interest accrued | 49 | | | 51 | |
Current maturities of long-term debt | 84 | | | 70 | |
Asset retirement obligations | 110 | | | 168 | |
Regulatory liabilities | 127 | | | 111 | |
Other | 105 | | | 83 | |
Total current liabilities | 1,051 | | | 952 | |
Long-Term Debt | 4,089 | | | 3,871 | |
Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 1,303 | | | 1,228 | |
Asset retirement obligations | 877 | | | 1,008 | |
Regulatory liabilities | 1,565 | | | 1,627 | |
Operating lease liabilities | 50 | | | 53 | |
Accrued pension and other post-retirement benefit costs | 167 | | | 171 | |
Investment tax credits | 177 | | | 168 | |
Other | 44 | | | 30 | |
Total other noncurrent liabilities | 4,183 | | | 4,285 | |
Commitments and Contingencies | 0 | | 0 |
Equity | | | |
Member's Equity | 5,015 | | | 4,783 | |
| | | |
| | | |
Total Liabilities and Equity | $ | 14,488 | | | $ | 14,041 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 481 | | | $ | 408 | | | $ | 436 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 619 | | | 572 | | | 531 | |
Equity component of AFUDC | (27) | | | (23) | | | (18) | |
| | | | | |
Impairment of assets and other charges | 9 | | | — | | | — | |
Deferred income taxes | 34 | | | 29 | | | 156 | |
Payments for asset retirement obligations | (67) | | | (63) | | | (48) | |
| | | | | |
(Increase) decrease in | | | | | |
| | | | | |
Receivables | (33) | | | 8 | | | (8) | |
Receivables from affiliated companies | — | | | — | | | 41 | |
Inventory | 55 | | | 44 | | | (95) | |
Other current assets | (181) | | | (3) | | | 76 | |
Increase (decrease) in | | | | | |
Accounts payable | 76 | | | (12) | | | (10) | |
Accounts payable to affiliated companies | 8 | | | 1 | | | 4 | |
Taxes accrued | 12 | | | 13 | | | (25) | |
Other current liabilities | 13 | | | 6 | | | 15 | |
Other assets | 20 | | | (68) | | | (74) | |
Other liabilities | (15) | | | 26 | | | 16 | |
Net cash provided by operating activities | 1,004 | | | 938 | | | 997 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (818) | | | (888) | | | (876) | |
| | | | | |
Purchases of debt and equity securities | (142) | | | (37) | | | (26) | |
Proceeds from sales and maturities of debt and equity securities | 65 | | | 22 | | | 20 | |
| | | | | |
Notes receivable from affiliated companies | (120) | | | (33) | | | — | |
Other | 36 | | | 48 | | | (49) | |
Net cash used in investing activities | (979) | | | (888) | | | (931) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 300 | | | 544 | | | 485 | |
Payments for the redemption of long-term debt | (70) | | | (513) | | | (213) | |
Notes payable to affiliated companies | (131) | | | 101 | | | (137) | |
Distributions to parent | (125) | | | (200) | | | (200) | |
| | | | | |
Net cash used in financing activities | (26) | | | (68) | | | (65) | |
Net (decrease) increase in cash and cash equivalents | (1) | | | (18) | | | 1 | |
Cash and cash equivalents at beginning of period | 7 | | | 25 | | | 24 | |
Cash and cash equivalents at end of period | $ | 6 | | | $ | 7 | | | $ | 25 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 194 | | | $ | 164 | | | $ | 150 | |
Cash paid for (received from) income taxes | 56 | | | 36 | | | (6) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 118 | | | 101 | | | 102 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | Member's | | | | |
(in millions) | | | | | | | Equity | | | | |
Balance at December 31, 2018 | | | | | | | $ | 4,339 | | | | | |
Net income | | | | | | | 436 | | | | | |
| | | | | | | | | | | |
Distributions to parent | | | | | | | (200) | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2019 | | | | | | | $ | 4,575 | | | | | |
Net income | | | | | | | 408 | | | | | |
| | | | | | | | | | | |
Distributions to parent | | | | | | | (200) | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2020 | | | | | | | $ | 4,783 | | | | | |
Net income | | | | | | | 481 | | | | | |
Distributions to parent | | | | | | | (250) | | | | | |
Other | | | | | | | 1 | | | | | |
Balance at December 31, 2021 | | | | | | | $ | 5,015 | | | | | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Piedmont Natural Gas Company, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Piedmont Natural Gas Company, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission, the Public Service Commission of South Carolina, and the Tennessee Public Utility Commission (collectively the “Commissions”), which have jurisdiction with respect to the gas rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $456.8 million recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1951.
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | |
Regulated natural gas | $ | 1,555 | | | $ | 1,286 | | | $ | 1,369 | |
Nonregulated natural gas and other | 14 | | | 11 | | | 12 | |
| | | | | |
Total operating revenues | 1,569 | | | 1,297 | | | 1,381 | |
Operating Expenses | | | | | |
Cost of natural gas | 569 | | | 386 | | | 532 | |
Operation, maintenance and other | 327 | | | 322 | | | 328 | |
Depreciation and amortization | 213 | | | 180 | | | 172 | |
Property and other taxes | 55 | | | 53 | | | 45 | |
Impairment of assets and other charges | 10 | | | 7 | | | — | |
Total operating expenses | 1,174 | | | 948 | | | 1,077 | |
| | | | | |
Operating Income | 395 | | | 349 | | | 304 | |
Equity in earnings of unconsolidated affiliates | 9 | | | 9 | | | 8 | |
| | | | | |
Other income and expense, net | 55 | | | 51 | | | 20 | |
Total other income and expenses | 64 | | | 60 | | | 28 | |
Interest Expense | 119 | | | 118 | | | 87 | |
Income Before Income Taxes | 340 | | | 291 | | | 245 | |
Income Tax Expense | 30 | | | 18 | | | 43 | |
Net Income and Comprehensive Income | $ | 310 | | | $ | 273 | | | $ | 202 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
| | | |
Receivables (net of allowance for doubtful accounts of $15 at 2021 and $12 at 2020) | $ | 318 | | | $ | 250 | |
Receivables from affiliated companies | 11 | | | 10 | |
Inventory | 109 | | | 68 | |
Regulatory assets | 141 | | | 153 | |
| | | |
Other | 9 | | | 20 | |
Total current assets | 588 | | | 501 | |
Property, Plant and Equipment | | | |
Cost | 9,918 | | | 9,134 | |
Accumulated depreciation and amortization | (1,899) | | | (1,749) | |
Facilities to be retired, net | 11 | | | — | |
Net property, plant and equipment | 8,030 | | | 7,385 | |
Other Noncurrent Assets | | | |
Goodwill | 49 | | | 49 | |
Regulatory assets | 316 | | | 302 | |
Operating lease right-of-use assets, net | 16 | | | 20 | |
Investments in equity method unconsolidated affiliates | 95 | | | 88 | |
Other | 288 | | | 270 | |
Total other noncurrent assets | 764 | | | 729 | |
Total Assets | $ | 9,382 | | | $ | 8,615 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 196 | | | $ | 230 | |
Accounts payable to affiliated companies | 40 | | | 79 | |
| | | |
Notes payable to affiliated companies | 518 | | | 530 | |
Taxes accrued | 63 | | | 23 | |
Interest accrued | 37 | | | 34 | |
Current maturities of long-term debt | — | | | 160 | |
Regulatory liabilities | 56 | | | 88 | |
Other | 81 | | | 69 | |
Total current liabilities | 991 | | | 1,213 | |
Long-Term Debt | 2,968 | | | 2,620 | |
| | | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 815 | | | 821 | |
Asset retirement obligations | 22 | | | 20 | |
Regulatory liabilities | 1,058 | | | 1,044 | |
Operating lease liabilities | 14 | | | 19 | |
Accrued pension and other post-retirement benefit costs | 7 | | | 8 | |
Other | 158 | | | 155 | |
Total other noncurrent liabilities | 2,074 | | | 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 | 1,714 | | | 1,405 | |
| | | |
Total equity | 3,349 | | | 2,715 | |
Total Liabilities and Equity | $ | 9,382 | | | $ | 8,615 | |
See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 310 | | | $ | 273 | | | $ | 202 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization | 216 | | | 182 | | | 174 | |
Equity component of AFUDC | (20) | | | (19) | | | — | |
| | | | | |
Impairment of assets and other charges | 10 | | | 7 | | | — | |
Deferred income taxes | 4 | | | 53 | | | 136 | |
Equity in (earnings) losses from unconsolidated affiliates | (9) | | | (9) | | | (8) | |
| | | | | |
Provision for rate refunds | (4) | | | (33) | | | 2 | |
(Increase) decrease in | | | | | |
| | | | | |
Receivables | (77) | | | 10 | | | 28 | |
Receivables from affiliated companies | (1) | | | — | | | 12 | |
Inventory | (40) | | | 3 | | | (2) | |
Other current assets | 33 | | | (66) | | | (25) | |
Increase (decrease) in | | | | | |
Accounts payable | (25) | | | 16 | | | (7) | |
Accounts payable to affiliated companies | (39) | | | 76 | | | (35) | |
Taxes accrued | 37 | | | 3 | | | (60) | |
Other current liabilities | (26) | | | (11) | | | 1 | |
Other assets | 26 | | | (11) | | | 1 | |
Other liabilities | (4) | | | 7 | | | (10) | |
Net cash provided by operating activities | 391 | | | 481 | | | 409 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (850) | | | (901) | | | (1,053) | |
Contributions to equity method investments | (9) | | | — | | | (16) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other | (31) | | | (28) | | | (14) | |
Net cash used in investing activities | (890) | | | (929) | | | (1,083) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 347 | | | 394 | | | 596 | |
Payments for the redemption of long-term debt | (160) | | | — | | | (350) | |
Notes payable to affiliated companies | (13) | | | 54 | | | 278 | |
| | | | | |
| | | | | |
Capital contribution from parent | 325 | | | — | | | 150 | |
| | | | | |
| | | | | |
Net cash provided by financing activities | 499 | | | 448 | | | 674 | |
Net decrease in cash and cash equivalents | — | | | — | | | — | |
Cash and cash equivalents at beginning of period | — | | | — | | | — | |
Cash and cash equivalents at end of period | $ | — | | | $ | — | | | $ | — | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 114 | | | $ | 115 | | | $ | 84 | |
Cash received from income taxes | (13) | | | (36) | | | (31) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 97 | | | 106 | | | 109 | |
See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Common | | Retained | | | | Total |
(in millions) | Stock | | Earnings | | | | Equity |
Balance at December 31, 2018 | $ | 1,160 | | | $ | 931 | | | | | $ | 2,091 | |
Net income | — | | | 202 | | | | | 202 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Contribution from parent | 150 | | | — | | | | | 150 | |
| | | | | | | |
Balance at December 31, 2019 | $ | 1,310 | | | $ | 1,133 | | | | | $ | 2,443 | |
Net income | — | | | 273 | | | | | 273 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Other | — | | | (1) | | | | | (1) | |
Balance at December 31, 2020 | $ | 1,310 | | | $ | 1,405 | | | | | $ | 2,715 | |
Net income | — | | | 310 | | | | | 310 | |
| | | | | | | |
| | | | | | | |
Contribution from parent | 325 | | | — | | | | | 325 | |
Other | — | | | (1) | | | | | (1) | |
Balance at December 31, 2021 | $ | 1,635 | | | $ | 1,714 | | | | | $ | 3,349 | |
See Notes to Consolidated Financial Statements
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Index to Combined Notes To Consolidated Financial Statements
The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Applicable Notes |
Registrant | 1 | | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | |
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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Consolidation
Duke Energy is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the FERC and other regulatory agencies listed below. Duke Energy operates in the U.S. primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas; Progress Energy; 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 its separate Subsidiary Registrants, which along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Consolidated Financial Statements. However, none of the Subsidiary Registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.
These 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 control. See Note 17 for additional information on VIEs. These Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities. See Note 8 for additional information on joint ownership. 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 NCUC, PSCSC, NRC and FERC.
Progress Energy is a public utility holding company, which conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. Progress Energy is subject to regulation by FERC and other regulatory agencies listed below.
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 FPSC, NRC and FERC.
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 Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, 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 PUCO, 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 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, TPUC and FERC.
Certain prior year amounts have been reclassified to conform to the current year presentation.
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Other Current Assets and Liabilities
The following table provides a description of amounts included in Other within Current Assets or Current Liabilities that exceed 5% of total Current Assets or Current Liabilities on the Duke Energy Registrants' Consolidated Balance Sheets at either December 31, 2021, or 2020.
| | | | | | | | | | | | | | | | | |
| | | December 31, |
(in millions) | Location | | 2021 | | 2020 |
Duke Energy | | | | | |
Accrued compensation | Current Liabilities | | $ | 915 | | | $ | 662 | |
Other accrued liabilities | Current Liabilities | | 649 | | | 1,455 | |
Duke Energy Carolinas | | | | | |
Accrued compensation | Current Liabilities | | $ | 277 | | | $ | 213 | |
| | | | | |
Duke Energy Progress | | | | | |
Customer deposits | Current Liabilities | | $ | 144 | | | $ | 144 | |
Other accrued liabilities | Current Liabilities | | 163 | | | 132 | |
Duke Energy Florida | | | | | |
Customer deposits | Current Liabilities | | $ | 200 | | | $ | 203 | |
Other accrued liabilities | Current Liabilities | | 89 | | | 81 | |
Duke Energy Ohio | | | | | |
Gas Storage | Current Assets | | $ | 25 | | | $ | 21 | |
Collateral liabilities | Current Liabilities | | 57 | | | 41 | |
| | | | | |
| | | | | |
Discontinued Operations
Duke Energy has severance plans underelected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these consolidated financial statements exclude amounts related to discontinued operations for all periods presented. For the years ended December 31, 2021, 2020 and 2019, the Income (Loss) From Discontinued Operations, net of tax on Duke Energy's Consolidated Statements of Operations is entirely attributable to controlling interest.
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 third-party investors' portion of Duke Energy's net income (loss), net assets and comprehensive income (loss) as noncontrolling interest. Noncontrolling interest is included as a component of equity on the Consolidated Balance Sheet.
Several operating agreements of Duke Energy's subsidiaries with noncontrolling interest are subject to allocations of 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 subsidiaries are not fixed, and the subsidiaries apply the 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, most of which is over the IRS recapture period, upon a hypothetical liquidation of the subsidiary at the net book value of its underlying assets. The change in general, the longer a terminated employee worked prioramount that each owner would hypothetically receive at the reporting date compared to termination the greateramount it would have received on the previous reporting date represents the amount of severance benefits. Aincome or loss allocated to each owner for the reporting period.
Other operating agreements of Duke Energy'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 allocates net income or loss and other comprehensive income or loss of these subsidiaries to the owners based on their pro rata shares.
In 2019, Duke Energy completed a sale of minority interest in a portion of certain renewable assets within the Commercial Renewables Segment for pretax proceeds to Duke Energy of $415 million. The portion of Duke Energy's commercial renewables energy portfolio sold includes 49% of 37 operating wind, solar and battery storage assets and 33% of 11 operating solar assets across the U.S. Duke Energy retained control of these assets, and, therefore, no gain or loss was recognized on the Consolidated Statements of Operations. The difference between the consideration received and the carrying value of the noncontrolling interest claim on net assets was $466 million, net of tax benefit of $8 million, and was recorded to equity.
The following table presents allocated losses to noncontrolling interest for the years ended December 31, 2021, 2020 and 2019.
| | | | | | | | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Noncontrolling Interest Allocation of Income | | | | | |
Allocated losses to noncontrolling tax equity members utilizing the HLBV method | $ | 298 | | | $ | 271 | | | $ | 165 | |
Allocated losses to noncontrolling members based on pro rata shares of ownership | 31 | | | 24 | | | 12 | |
Total Noncontrolling Interest Allocated Losses | $ | 329 | | | $ | 295 | | | $ | 177 | |
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
2021 Sale of Minority Interest in Duke Energy Indiana
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 transaction 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 purchase price. Duke Energy retained indirect control of these assets, and, therefore, no gain or loss was recognized on the Consolidated Statements of Operations. The difference between the cash consideration received, net of transaction costs of approximately $27 million, and the carrying value of the noncontrolling interest is $545 million and was recorded as an increase to equity. Under the terms of the agreement, Duke Energy has the discretion to determine the timing of the second closing, but it will occur no later than January 2023. At the second closing, Duke Energy will issue and sell additional membership interests such that GIC will own 19.9% of the membership interests for the remaining 50% of the purchase price.
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.
Significant Accounting Policies
Use of Estimates
In preparing financial statements that conform to GAAP, the Duke Energy Registrants 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.
Regulatory Accounting
The majority of the Duke Energy Registrants’ operations are subject to price regulation for the sale of electricity and natural gas by state utility commissions or FERC. When prices are set on the basis of specific costs of the regulated operations and an effective franchise is in place such that sufficient natural gas or electric services can be sold to recover those costs, the Duke Energy Registrants apply regulatory accounting. Regulatory accounting changes the timing of the recognition of costs or revenues relative to a company that does not apply regulatory accounting. As a result, regulatory assets and regulatory liabilities are recognized on the Consolidated Balance Sheets. Regulatory assets and liabilities are amortized consistent with the treatment of the related cost in the ratemaking process. Regulatory assets are reviewed for recoverability each reporting period. If a regulatory asset is no longer deemed probable of recovery, the deferred cost is charged to earnings. See Note 3 for further information.
Regulatory accounting rules also require recognition of a disallowance (also called "impairment") loss if it becomes probable that part of the cost of a plant under construction (or a recently completed plant or an abandoned plant) will be disallowed for ratemaking purposes and a reasonable estimate of the amount of the disallowance can be made. For example, if a cost cap is set for a plant still under construction, the amount of the disallowance is a result of a judgment as to the ultimate cost of the plant. These disallowances can require judgments on allowed future rate recovery.
When it becomes probable that regulated generation, transmission or distribution assets will be abandoned, the cost of the asset is removed from plant in service. The value that may be retained as a regulatory asset on the balance sheet for the abandoned property is dependent upon amounts that may be recovered through regulated rates, including any return. As such, an impairment charge could be partially or fully offset by the establishment of a regulatory asset if rate recovery is probable. The impairment charge for a disallowance of costs for regulated plants under construction, recently completed or abandoned is based on discounted cash flows.
The Duke Energy Registrants utilize cost-tracking mechanisms, commonly referred to as fuel adjustment clauses or PGA clauses. These clauses allow for the recovery of fuel and fuel-related costs, portions of purchased power, natural gas costs and hedging costs through surcharges on customer rates. The difference between the costs incurred and the surcharge revenues is recorded either as an adjustment to Operating Revenues, Operating Expenses – Fuel used in electric generation or Operating Expenses – Cost of natural gas on the Consolidated Statements of Operations, with an off-setting impact on regulatory assets or liabilities.
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Cash, Cash Equivalents and Restricted Cash
All highly liquid investments with maturities of three months or less at the date of acquisition are considered cash equivalents. Duke Energy, Progress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. Duke Energy Carolinas and Duke Energy Progress have restricted cash balances related to VIEs from storm recovery bonds issued in 2021. See Note 17 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets on the Consolidated Balance Sheets. The following table presents the components of cash, cash equivalents and restricted cash included in the Consolidated Balance Sheets.
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| December 31, 2021 |
| | | Duke | | | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy |
| Energy | | Carolinas | | Energy | | Progress | | Florida |
Current Assets | | | | | | | | | |
Cash and cash equivalents | $ | 343 | | | $ | 7 | | | $ | 70 | | | $ | 35 | | | $ | 23 | |
Other | 170 | | | — | | | 39 | | | — | | | 39 | |
Other Noncurrent Assets | | | | | | | | | |
Other | 7 | | | 1 | | | 4 | | | 4 | | | — | |
Total cash, cash equivalents and restricted cash | $ | 520 | | | $ | 8 | | | $ | 113 | | | $ | 39 | | | $ | 62 | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | Duke | | | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy |
| Energy | | Carolinas | | Energy | | Progress | | Florida |
Current Assets | | | | | | | | | |
Cash and cash equivalents | $ | 259 | | | $ | 21 | | | $ | 59 | | | $ | 39 | | | $ | 11 | |
Other | 194 | | | — | | | 39 | | | — | | | 39 | |
Other Noncurrent Assets | | | | | | | | | |
Other | 103 | | | — | | | 102 | | | — | | | — | |
Total cash, cash equivalents and restricted cash | $ | 556 | | | $ | 21 | | | $ | 200 | | | $ | 39 | | | $ | 50 | |
| | | | | | | | | |
Inventory
Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Inventory is charged to expense or capitalized to property, plant and equipment when issued, primarily using the average cost method. Excess or obsolete inventory is written down to the lower of cost or net realizable 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 December 31, 2021, and 2020, respectively. The components of inventory are presented in the tables below.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | 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 | $ | 2,397 | | | $ | 793 | | | $ | 1,067 | | | $ | 729 | | | $ | 338 | | | $ | 80 | | | $ | 311 | | | $ | 14 | |
Coal | 486 | | | 195 | | | 167 | | | 94 | | | 73 | | | 19 | | | 105 | | | — | |
Natural gas, oil and other | 316 | | | 38 | | | 164 | | | 98 | | | 66 | | | 17 | | | 2 | | | 95 | |
Total inventory | $ | 3,199 | | | $ | 1,026 | | | $ | 1,398 | | | $ | 921 | | | $ | 477 | | | $ | 116 | | | $ | 418 | | | $ | 109 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | 294 | | | 39 | | | 183 | | | 107 | | | 76 | | | 16 | | | 1 | | | 56 | |
Total inventory | $ | 3,167 | | | $ | 1,010 | | | $ | 1,375 | | | $ | 911 | | | $ | 464 | | | $ | 110 | | | $ | 473 | | | $ | 68 | |
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Investments in Debt and Equity Securities
The Duke Energy Registrants classify investments in equity securities as FV-NI and investments in debt securities as AFS. Both categories are recorded at fair value on the Consolidated Balance Sheets. Realized and unrealized gains and losses on securities classified as FV-NI are reported through net income. Unrealized gains and losses for debt securities classified as AFS are included in AOCI until realized, unless it is determined the carrying value of an investment has a credit loss. For certain investments of regulated operations, such as substantially all of the NDTF, realized and unrealized gains and losses (including any credit losses) on debt securities are recorded as a regulatory asset or liability. The credit loss portion of debt securities of nonregulated operations are included in earnings. Investments in debt and equity securities are classified as either current or noncurrent based on management’s intent and ability to sell these securities, taking into consideration current market liquidity. See Note 15 for further information.
Goodwill
Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont perform annual goodwill impairment tests as of August 31 each year at the reporting unit level, which is determined to be a business segment or one level below. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update these tests 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. See Note 11 for further information.
Intangible Assets
Intangible assets are included in Other in Other Noncurrent Assets on the Consolidated Balance Sheets. Generally, intangible assets are amortized using an amortization method that reflects the pattern in which the economic benefits of the intangible asset are consumed or on a straight-line basis if that pattern is not readily determinable. Amortization of intangibles is reflected in Depreciation and amortization on the Consolidated Statements of Operations. Intangible assets are subject to impairment testing and if impaired, the carrying value is accordingly reduced.
RECs are used to measure compliance with renewable energy standards and are held primarily for consumption. See Note 11 for further information.
Long-Lived Asset Impairments
The Duke Energy Registrants evaluate long-lived assets, excluding goodwill, for impairment when circumstances indicate the carrying value of those assets may not be recoverable. An impairment exists when a long-lived asset’s carrying value exceeds the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. If the carrying value of the long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the carrying value of the asset is written down to its then current estimated fair value and an impairment charge is recognized.
The Duke Energy Registrants assess fair value of long-lived assets using various methods, including recent comparable third-party sales, internally developed discounted cash flow analysis and analysis from outside advisors. Triggering events to reassess cash flows may include, but are not limited to, significant changes in commodity prices, the condition of an asset or management’s interest in selling the asset.
Equity Method Investment Impairments
Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method. Equity method investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.
Impairment assessments use a discounted cash flow income approach and include consideration of the severity and duration of any decline in the fair value of the investments. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. Key inputs that involve estimates and significant management judgment include cash flow projections, selection of a discount rate, probability weighting of potential outcomes, and whether any decline in value is considered temporary.
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Property, Plant and Equipment
Property, plant and equipment are stated at the lower of depreciated historical cost net of any disallowances or fair value, if impaired. The Duke Energy Registrants capitalize all construction-related direct labor and material costs, as well as indirect construction costs such as general engineering, taxes and financing costs. See “Allowance for Funds Used During Construction and Interest Capitalized” section below for information on capitalized financing costs. Costs of renewals and betterments that extend the useful life of property, plant and equipment are also capitalized. The cost of repairs, replacements and major maintenance projects, which do not extend the useful life or increase the expected output of the asset, are expensed as incurred. Depreciation is generally computed over the estimated useful life of the asset using the composite straight-line method. Depreciation studies are conducted periodically to update composite rates and are approved by state utility commissions and/or the FERC when required. The composite weighted average depreciation rates, excluding nuclear fuel, are included in the table that follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
Duke Energy | 2.9 | % | | 3.0 | % | | 3.1 | % |
Duke Energy Carolinas | 2.7 | % | | 2.8 | % | | 2.8 | % |
Progress Energy | 3.1 | % | | 3.2 | % | | 3.1 | % |
Duke Energy Progress | 3.0 | % | | 3.1 | % | | 3.1 | % |
Duke Energy Florida | 3.3 | % | | 3.3 | % | | 3.1 | % |
Duke Energy Ohio | 2.9 | % | | 2.9 | % | | 2.6 | % |
Duke Energy Indiana | 3.6 | % | | 3.5 | % | | 3.3 | % |
Piedmont | 2.1 | % | | 2.3 | % | | 2.4 | % |
In general, when the Duke Energy Registrants retire regulated property, plant and equipment, the original cost plus the cost of retirement, less salvage value and any depreciation already recognized, is charged to accumulated depreciation. However, when it becomes probable the asset will be retired substantially in advance of its original expected useful life or is abandoned, the cost of the asset and the corresponding accumulated depreciation is recognized as a separate asset. If the asset is still in operation, the net amount is classified as Facilities to be retired, net on the Consolidated Balance Sheets. If the asset is no longer operating, the net amount is classified in Regulatory assets on the Consolidated Balance Sheets if deemed recoverable (see discussion of long-lived asset impairments above). The carrying value of the asset is based on historical cost if the Duke Energy Registrants are allowed to recover the remaining net book value and a return equal to at least the incremental borrowing rate. If not, an impairment is recognized to the extent the net book value of the asset exceeds the present value of future revenues discounted at the incremental borrowing rate.
When the Duke Energy Registrants sell entire regulated operating units, or retire or sell nonregulated properties, the original cost and accumulated depreciation and amortization balances are removed from Property, Plant and Equipment on the Consolidated Balance Sheets. Any gain or loss is recorded in earnings, unless otherwise required by the applicable regulatory body. See Note 10 for additional information.
Leases
Duke Energy determines if an arrangement is a lease at contract inception based on whether the arrangement involves the use of a physically distinct identified asset and whether Duke Energy has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period as well as the right to direct the use of the asset. As a policy election, Duke Energy does not evaluate arrangements with initial contract terms of less than one year as leases.
Operating leases are included in Operating lease ROU assets, net, Other current liabilities and Operating lease liabilities on the Consolidated Balance Sheets. Finance leases are included in Property, plant and equipment, Current maturities of long-term debt and Long-Term Debt on the Consolidated Balance Sheets.
For lessee and lessor arrangements, Duke Energy has elected a policy to not separate lease and non-lease components for all asset classes. For lessor arrangements, lease and non-lease components are only combined under one arrangement and accounted for under the lease accounting framework if the non-lease components are not the predominant component of the arrangement and the lease component would be classified as an operating lease.
Nuclear Fuel
Nuclear fuel is classified as Property, Plant and Equipment on the Consolidated Balance Sheets.
Nuclear fuel in the front-end fuel processing phase is considered work in progress and not amortized until placed in service. Amortization of nuclear fuel is included within Fuel used in electric generation and purchased power on the Consolidated Statements of Operations. Amortization is recorded using the units-of-production method.
Allowance for Funds Used During Construction and Interest Capitalized
For regulated operations, the debt and equity costs of financing the construction of property, plant and equipment are reflected as AFUDC and capitalized as a component of the cost of property, plant and equipment. AFUDC equity is reported on the Consolidated Statements of Operations as non-cash income in Other income and expenses, net. AFUDC debt is reported as a non-cash offset to Interest Expense. After construction is completed, the Duke Energy Registrants are permitted to recover these costs through their inclusion in rate base and the corresponding subsequent depreciation or amortization of those regulated assets.
AFUDC equity, a permanent difference for income taxes, reduces the ETR when capitalized and increases the ETR when depreciated or amortized. See Note 23 for additional information.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
For nonregulated operations, interest is capitalized during the construction phase with an offsetting non-cash credit to Interest Expense on the Consolidated Statements of Operations.
Asset Retirement Obligations
AROs are recognized for legal obligations associated with the retirement of property, plant and equipment. Substantially all AROs are related to regulated operations. When recording an ARO, the present value of the projected liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the cost of the associated asset and depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to be probable of recovery.
The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the NDTF. As a result, amounts recovered in regulated revenues, earnings on the NDTF, accretion expense and depreciation of the associated asset are netted and deferred as a regulatory asset or liability.
Accounts Payable
During 2020, Duke Energy established a supply chain finance program (the “program”) with a global financial institution. The program is voluntary and allows Duke Energy suppliers, at their sole discretion, to sell their receivables from Duke Energy to the financial institution at a rate that leverages Duke Energy’s credit rating and, which may result in favorable terms compared to the rate available to the supplier on their own credit rating. Suppliers participating in the program, determine at their sole discretion which invoices they will sell to the financial institution. Suppliers’ decisions on which invoices are sold do not impact Duke Energy’s payment terms, which are based on commercial terms negotiated between Duke Energy and the supplier regardless of program participation. The commercial terms negotiated between Duke Energy and its suppliers are consistent regardless of whether the supplier elects to participate in the program. Duke Energy does not issue any guarantees with respect to the program and does not participate in negotiations between suppliers and the financial institution. Duke Energy does not have an economic interest in the supplier’s decision to participate in the program and receives no interest, fees or other benefit from the financial institution based on supplier participation in the program.
The following table presents the outstanding accounts payable balance sold to the financial institution by our suppliers and the supplier invoices sold to the financial institution under the program included within Net cash provided by operating activities on the Consolidated Statements of Cash Flows as of December 31, 2021, and December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 30, 2020 |
| | | Duke | Duke | | | | | Duke | |
| Duke | Progress | Energy | Energy | | | Duke | | Energy | |
(in millions) | Energy | Energy | Florida | Ohio | Piedmont | | Energy | | Ohio | Piedmont |
Outstanding Accounts Payable Balance Sold | $ | 19 | | $ | 9 | | $ | 9 | | $ | 6 | | $ | 4 | | | $ | 15 | | | $ | 1 | | $ | 14 | |
Suppliers Invoices Settled Through The Program | 122 | | 10 | | 10 | | 12 | | 100 | | | 45 | | | 9 | | 36 | |
Revenue Recognition
Duke Energy recognizes revenue as customers obtain control of promised goods and services in an amount that reflects consideration expected in exchange for those goods or services. Generally, the delivery of electricity and natural gas results in the transfer of control to customers at the time the commodity is delivered and the amount of revenue recognized is equal to the amount billed to each customer, including estimated volumes delivered when billings have not yet occurred. See Note 18 for further information.
Derivatives and Hedging
Derivative and non-derivative instruments may be used in connection with commodity price and interest rate activities, including swaps, futures, forwards and options. All derivative instruments, except those that qualify for the NPNS exception, are recorded on the Consolidated Balance Sheets at fair value. Qualifying derivative instruments may be designated as either cash flow hedges or fair value hedges. Other derivative instruments (undesignated contracts) either have not been designated or do not qualify as hedges. The effective portion of the change in the fair value of cash flow hedges is recorded in AOCI. The effective portion of the change in the fair value of a fair value hedge is offset in net income by changes in the hedged item. For activity subject to regulatory accounting, gains and losses on derivative contracts are reflected as regulatory assets or liabilities and not as other comprehensive income or current period income. As a result, changes in fair value of these derivatives have no immediate earnings impact.
Formal documentation, including transaction type and risk management strategy, is maintained for all contracts accounted for as a hedge. At inception and at least every three months thereafter, the hedge contract is assessed to see if it is highly effective in offsetting changes in cash flows or fair values of hedged items.
See Note 14 for further information.
Captive Insurance Reserves
Duke Energy has captive insurance subsidiaries that provide coverage, on an indemnity basis, to the Subsidiary Registrants as well as certain third parties, on a limited basis, for financial losses, primarily related to property, workers’ compensation and general liability. Liabilities include provisions for estimated losses incurred but not reported (IBNR), as well as estimated provisions for known claims. IBNR reserve estimates are primarily based upon historical loss experience, industry data and other actuarial assumptions. Reserve estimates are adjusted in future periods as actual losses differ from experience.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Duke Energy, through its captive insurance entities, also has reinsurance coverage with third parties for certain losses above a per occurrence and/or aggregate retention. Receivables for reinsurance coverage are recognized when realization is deemed probable.
Unamortized Debt Premium, Discount and Expense
Premiums, discounts and expenses incurred with the issuance of outstanding long-term debt are amortized over the term of the debt issue. The gain or loss on extinguishment associated with refinancing higher-cost debt obligations in the regulated operations is amortized over the remaining life of the original instrument. Amortization expense is recorded as Interest Expense in the Consolidated Statements of Operations and is reflected as Depreciation, amortization and accretion within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.
Premiums, discounts and expenses are presented as an adjustment to the carrying value of the debt amount and included in Long-Term Debt on the Consolidated Balance Sheets presented.
Preferred Stock
Preferred stock is reviewed to determine the appropriate balance sheet classification and embedded features, such as call options, are evaluated to determine if they should be bifurcated and accounted for separately. Costs directly related to the issuance of preferred stock are recorded as a reduction of the proceeds received. The liability for involuntary severancethe dividend is recognized when declared. The accumulated dividends on the cumulative preferred stock is recognized to net income available to Duke Energy Corporation in the EPS calculation. See Note 19 for further information.
Loss Contingencies and Environmental Liabilities
Contingent losses are recorded oncewhen it is probable a loss has occurred and the loss can be reasonably estimated. When a range of the probable loss exists and no amount within the range is a better estimate than any other amount, the minimum amount in the range is recorded. Unless otherwise required by GAAP, legal fees are expensed as incurred.
Environmental liabilities are recorded on an involuntary severance plan is committed to by management if involuntary severances areundiscounted basis when environmental remediation or other liabilities become probable and can be reasonably estimated. For involuntary severance benefits incrementalEnvironmental expenditures related to its ongoing severance plan benefits, the fair value of the obligation ispast operations that do not generate current or future revenues are expensed. Environmental expenditures related to operations that generate current or future revenues are expensed at the communication date if there are no future service requirements or over the required future service period. Duke Energy also offers special termination benefits under voluntary severance programs. Special termination benefitscapitalized, as appropriate. Certain environmental expenditures receive regulatory accounting treatment and are recorded immediately upon employee acceptance absent a significant retention period. Otherwise, the cost is recorded over the remaining service period. Employee acceptance of voluntary severance benefits is determined by management based on the factsas regulatory assets.
See Notes 3 and circumstances of the benefits being offered. See Note 204 for further information.
Guarantees
If necessary, liabilities are recognized at the time of issuance or material modification of a guarantee for the estimated fair value of the obligation it assumes. Fair value is estimated using a probability-weighted approach. The obligation is reduced over the term of the guarantee or related contract in a systematicPension and rational method as risk is reduced. Any additional contingent loss for guarantee contracts subsequent to the initial recognition of a liability is accounted for and recognized at the time a loss is probable and can be reasonably estimated. See Note 7 for further information.
Stock-Based Compensation
Stock-based compensation represents costs related to stock-based awards granted to employees and Board of Directors members. Duke Energy recognizes stock-based compensation based upon the estimated fair value of awards, net of estimated forfeitures at the date of issuance. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period. Compensation cost is recognized as expense or capitalized as a component of property, plant and equipment. See Note 21 for further information.
Income TaxesOther Post-Retirement Benefit Plans
Duke Energy and its subsidiaries file a consolidated federal income tax returnmaintains qualified, non-qualified and other statepost-retirement benefit plans. Eligible employees of the Subsidiary Registrants participate in the respective qualified, non-qualified and foreign jurisdictional returns. Theother post-retirement benefit plans and the Subsidiary Registrants are parties to a tax-sharing agreement with Duke Energy. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. Deferred income taxes have been providedallocated their proportionate share of benefit costs. See Note 22 for temporary differences between GAAP and tax bases of assets and liabilities because the differences create taxable or tax-deductible amounts for future periods. ITCsfurther information, including significant accounting policies associated with regulated operations are deferred and amortized as a reduction of income tax expense over the estimated useful lives of the related properties.these plans.
Accumulated deferred income taxes are valued using the enacted tax rate expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be settled or realized. In the event of a change in tax rates, deferred tax assets and liabilities are remeasured as of the enactment date of the new rate. To the extent that the change in the value of the deferred tax represents an obligation to customers, the impact of the remeasurement is deferred to a regulatory liability. Remaining impacts are recorded in income from continuing operations. If Duke Energy's estimate of the tax effect of reversing temporary differences is not reflective of actual outcomes, is modified to reflect new developments or interpretations of the tax law, revised to incorporate new accounting principles, or changes in the expected timing or manner of the reversal then Duke Energy's results of operations could be impacted.
Tax-related interest and penalties are recorded in Interest Expense and Other Income and Expenses, net in the Consolidated Statements of Operations.
See Note 23 for further information.
Accounting for Renewable Energy Tax Credits
When Duke Energy receives ITCs on wind or solar facilities, it reduces the basis of the property recorded on the Consolidated Balance Sheets by the amount of the ITC and, therefore, the ITC benefit is ultimately recognized in the statement of operations through reduced depreciation expense. Additionally, certain tax credits and government grants result in an initial tax depreciable base in excess of the book carrying value by an amount equal to one half of the ITC. Deferred tax benefits are recorded as a reduction to income tax expense in the period that the basis difference is created.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Excise Taxes
Certain excise taxes levied by state or local governments are required to be paid even if not collected from the customer. These taxes are recognized on a gross basis. Otherwise, the taxes are accounted for net. Excise taxes accounted for on a gross basis within both Operating Revenues and Property and other taxes in the Consolidated Statements of Operations were as follows. |
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
|
Duke Energy | $ | 405 |
| | $ | 376 |
| | $ | 362 |
|
Duke Energy Carolinas | 35 |
| | 36 |
| | 31 |
|
Progress Energy | 241 |
| | 220 |
| | 213 |
|
Duke Energy Progress | 19 |
| | 19 |
| | 18 |
|
Duke Energy Florida | 222 |
| | 201 |
| | 195 |
|
Duke Energy Ohio | 105 |
| | 98 |
| | 100 |
|
Duke Energy Indiana | 22 |
| | 20 |
| | 17 |
|
Piedmont(a) | 2 |
| | 2 |
| | |
| |
(a) | Piedmont's excise taxes were immaterial for the two months ended December 31, 2016, and $2 million for the year ended October 31, 2016. |
Dividend Restrictions and Unappropriated Retained Earnings
Duke Energy does not have any legal, regulatory or other restrictions on paying common stock dividends to shareholders. However, as further described in Note 4, due to conditions established by regulators in conjunction with merger transaction approvals, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio, Duke Energy Indiana and Piedmont have restrictions on paying dividends or otherwise advancing funds to Duke Energy. At December 31, 2018, and 2017, an insignificant amount of Duke Energy’s consolidated Retained earnings balance represents undistributed earnings of equity method investments.
New Accounting Standards
TheSee Note 1 to the Consolidated Financial Statements, “Summary of Significant Accounting Policies,” for a discussion of the impact of new accounting standards adopted for 2018standards.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See “Management’s Discussion and 2017 had no material impact on the presentation or resultsAnalysis of operations, cash flows or financial positionResults of the Duke Energy Registrants. The following accounting standards were adopted by the Duke Energy Registrants during 2018.
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 expected in exchange for those goods or services. The amendments also required disclosure of sufficient information to allow users to understand the nature, amount, timingOperations and uncertainty of revenueFinancial Condition – Quantitative and cash flows arising from contracts with customers. The majority of Duke Energy’s revenue is in scope of the new guidance. Other revenue arrangements, such as alternative revenue programs and certain PPAs and lighting agreements accounted for as leases, are excluded from the scope of this guidance and, therefore, are accounted for and evaluated for separate presentation and disclosure under other relevant accounting guidance.
Duke Energy elected the modified retrospective method of adoption effective January 1, 2018. Under the modified retrospective method of adoption, prior year reported results are not restated. Adoption of this standard did not result in a material change in the timing or pattern of revenue recognition and a cumulative-effect adjustment was not recorded at January 1, 2018. Duke Energy utilized certain practical expedients including applying this guidance to open contracts at the date of adoption, expensing costs to obtain a contract where the amortization period of the asset would have been one year or less, ignoring the effects of a significant financing when the period between transfer of the good or service and payment is one year or less and recognizing revenues for certain contracts under the invoice practical expedient, which allows revenue recognition to be consistent with invoiced amounts (including unbilled estimates) provided certain criteria are met, including consideration of whether the invoiced amounts reasonably represent the value provided to customers.
In preparation for adoption, Duke Energy identified material revenue streams and reviewed representative contracts and tariffs, including those associated with certain long-term customer contracts such as wholesale contracts, PPAs and other customer arrangements. Duke Energy also monitored the activities of the power and utilities industry revenue recognition task force and has reviewed published positions on specific industry issues to evaluate the impact, if any, on Duke Energy’s specific contracts and conclusions. Duke Energy applied the available practical expedient to portfolios of tariffs and contracts with similar characteristics. The vast majority of sales, including energy provided to retail customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term ("at-will"). In most circumstances, revenue from contracts with customers is equivalent to the electricity or natural gas supplied and billed in that period (including unbilled estimates). As such, adoption of the new rules did not result in a shift in the timing or pattern of revenue recognition for such sales. While there have been changes to the captions and descriptions of revenues in Duke Energy’s financial statements, the most significant impact as a result of adopting the standard are additional disclosures around the nature, amount, timing and uncertainty of revenues and cash flows arising from contracts with customers. See Note 18 for further information.
Qualitative Disclosures About Market Risk.”
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | | | | | |
Duke Energy | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations | |
Consolidated Statements of Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Carolinas | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Progress Energy | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Progress | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Florida | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Ohio | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Duke Energy Indiana | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| |
Piedmont | |
Report of Independent Registered Public Accounting Firm | |
Consolidated Statements of Operations and Comprehensive Income | |
Consolidated Balance Sheets | |
Consolidated Statements of Cash Flows | |
Consolidated Statements of Changes in Equity | |
| | | | | |
| |
FINANCIAL STATEMENTSCombined Notes to Consolidated Financial Statements | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Note 1 – Summary of Significant Accounting Policies | |
| |
Note 2 – Business Segments | |
Note 3 – Regulatory Matters | |
Note 4 – Commitments and Contingencies | |
Note 5 – Leases | |
Note 6 – Debt and Credit Facilities | |
Note 7 – Guarantees and Indemnifications | |
Note 8 – Joint Ownership of Generating and Transmission Facilities | |
Note 9 – Asset Retirement Obligations | |
Note 10 – Property, Plant and Equipment | |
Note 11 – Goodwill and Intangible Assets | |
Note 12 – Investments in Unconsolidated Affiliates | |
Note 13 – Related Party Transactions | |
Note 14 – Derivatives and Hedging | |
Note 15 – Investments in Debt and Equity Securities | |
Note 16 – Fair Value Measurements | |
Note 17 – Variable Interest Entities | |
Note 18 – Revenue | |
Note 19 – Stockholders' Equity | |
Note 20 – Severance | |
Note 21 – Stock-Based Compensation | |
Note 22 – Employee Benefit Plans | |
Note 23 – Income Taxes | |
Note 24 – Other Income and Expenses, Net | |
Note 25 – Subsequent Events | |
| |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Duke Energy Corporation
Opinion on the Financial Instruments ClassificationStatements
We have audited the accompanying consolidated balance sheets of Duke Energy Corporation and Measurement.subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company's internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to regulation by federal and state utility regulatory agencies (the “Commissions”), which have jurisdiction with respect to the rates of the Company’s electric and natural gas distribution companies. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $14.6 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We also evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
Noncontrolling Interests - Minority Interest Investment in Duke Energy Indiana – Refer to Note 1 to the financial statements
Critical Audit Matter Description
On January 1, 2018,28, 2021, the Company executed an agreement providing for an investment by an affiliate of GIC Private Limited in Duke Energy adopted FASB guidance, which revisedIndiana in exchange for a 19.9% minority interest issued by Duke Energy Indiana Holdco, LLC, the classificationholding company for Duke Energy Indiana. The transaction will be completed following two closings for an aggregate purchase price of approximately $2 billion. The first closing occurred on September 8, 2021 and measurementresulted in Duke Energy Indiana Holdco, LLC issuing 11.05% of certain financial instruments. The adopted guidance changes the presentation of realized and unrealized gains and lossesits membership interests in certain equity securities that were previously recorded in AOCI. These gains and losses are now recorded in net income. An entity's equity investments that are accountedexchange for under the equity method of accounting are not included within the scope50% of the new guidance. This guidance had a minimal impact on the Duke Energy Registrant's Consolidated Statementspurchase price. The Company retained indirect control of Operations and Comprehensive Income as changes in the fair value of most of the Duke Energy Registrants' equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidance for regulated operations. The resulting adjustment of unrealized gains and losses in AOCI to retained earnings was immaterial. The primary impact to Duke Energy as a result of implementing this guidance is adding disclosure requirements to present separately the financialthese assets, and, financial liabilities by measurement category and form of financial asset. See Notes 15 and 16 for further information.
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 cashtherefore, no gain or loss was recognized on the Consolidated Statements of Cash Flows. UnderOperations. The difference between the updated guidance, restrictednet cash consideration received and restricted cash equivalents are included within beginning-of-period and end-of-period cash and cash equivalentsthe carrying value of the noncontrolling interest was recorded as an increase to equity. The Company has the discretion to determine the timing of the second closing, but the closing will occur no later than January 2023.
We identified the minority interest investment in Duke Energy Indiana as a critical audit matter because of the extensive audit effort required to audit the transaction, including the need to involve professionals in our firm with the appropriate expertise to assist us in evaluating management’s conclusions that there should be no gain or loss associated with this transaction recognized on the Consolidated Statements of Cash Flows.Operations for the year ended December 31, 2021.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the minority interest investment in Duke Energy adopted this guidanceIndiana included the following, among others:
•We tested the effectiveness of controls over the accounting assessment of significant and non- routine transactions, including the controls over the income tax treatment of such transactions.
•We evaluated management’s conclusions related to accounting for the transaction by:
–Obtaining and reading the agreement providing for the minority investment,
–Involving professionals in our firm with the appropriate expertise to evaluate the work performed by management’s expert related to the tax treatment of the transaction,
–Assessing management’s documentation for accounting for the transaction.
•We evaluated the appropriateness of the Company’s disclosures related to the minority interest investment.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1947.
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions, except per share amounts) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | |
Regulated electric | $ | 22,319 | | | $ | 21,461 | | | $ | 22,615 | |
Regulated natural gas | 2,008 | | | 1,642 | | | 1,759 | |
Nonregulated electric and other | 770 | | | 765 | | | 705 | |
Total operating revenues | 25,097 | | | 23,868 | | | 25,079 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 6,255 | | | 6,051 | | | 6,826 | |
Cost of natural gas | 705 | | | 460 | | | 627 | |
Operation, maintenance and other | 6,042 | | | 5,788 | | | 6,066 | |
Depreciation and amortization | 4,990 | | | 4,705 | | | 4,548 | |
Property and other taxes | 1,389 | | | 1,337 | | | 1,307 | |
Impairment of assets and other charges | 356 | | | 984 | | | (8) | |
Total operating expenses | 19,737 | | | 19,325 | | | 19,366 | |
Gains (Losses) on Sales of Other Assets and Other, net | 13 | | | 10 | | | (4) | |
Operating Income | 5,373 | | | 4,553 | | | 5,709 | |
Other Income and Expenses | | | | | |
Equity in earnings (losses) of unconsolidated affiliates | 28 | | | (2,005) | | | 162 | |
| | | | | |
Other income and expenses, net | 643 | | | 453 | | | 430 | |
Total other income and expenses | 671 | | | (1,552) | | | 592 | |
Interest Expense | 2,280 | | | 2,162 | | | 2,204 | |
Income From Continuing Operations Before Income Taxes | 3,764 | | | 839 | | | 4,097 | |
Income Tax Expense (Benefit) From Continuing Operations | 192 | | | (236) | | | 519 | |
Income From Continuing Operations | 3,572 | | | 1,075 | | | 3,578 | |
Income (Loss) From Discontinued Operations, net of tax | 7 | | | 7 | | | (7) | |
Net Income | 3,579 | | | 1,082 | | | 3,571 | |
Add: Net Loss Attributable to Noncontrolling Interests | 329 | | | 295 | | | 177 | |
Net Income Attributable to Duke Energy Corporation | 3,908 | | | 1,377 | | | 3,748 | |
Less: Preferred Dividends | 106 | | | 107 | | | 41 | |
Net Income Available to Duke Energy Corporation Common Stockholders | $ | 3,802 | | | $ | 1,270 | | | $ | 3,707 | |
| | | | | |
Earnings Per Share – Basic and Diluted | | | | | |
Income from continuing operations available to Duke Energy Corporation common stockholders | | | | | |
Basic and Diluted | $ | 4.93 | | | $ | 1.71 | | | $ | 5.07 | |
| | | | | |
Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | |
Basic and Diluted | $ | 0.01 | | | $ | 0.01 | | | $ | (0.01) | |
| | | | | |
Net income available to Duke Energy Corporation common stockholders | | | | | |
Basic and Diluted | $ | 4.94 | | | $ | 1.72 | | | $ | 5.06 | |
| | | | | |
Weighted average shares outstanding | | | | | |
Basic | 769 | | | 737 | | | 729 | |
Diluted | 769 | | | 738 | | | 729 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Net Income | $ | 3,579 | | | $ | 1,082 | | | $ | 3,571 | |
Other Comprehensive Income (Loss), net of tax(a) | | | | | |
| | | | | |
Pension and OPEB adjustments | 7 | | | 6 | | | 9 | |
Net unrealized losses on cash flow hedges | (68) | | | (138) | | | (47) | |
Reclassification into earnings from cash flow hedges | 13 | | | 11 | | | 6 | |
Unrealized (losses) gains on available-for-sale securities | (8) | | | 3 | | | 8 | |
| | | | | |
Other Comprehensive Loss, net of tax | (56) | | | (118) | | | (24) | |
Comprehensive Income | 3,523 | | | 964 | | | 3,547 | |
Add: Comprehensive Loss Attributable to Noncontrolling Interests | 319 | | | 306 | | | 177 | |
Comprehensive Income Attributable to Duke Energy Corporation | 3,842 | | | 1,270 | | | 3,724 | |
Less: Preferred Dividends | 106 | | | 107 | | | 41 | |
Comprehensive Income Available to Duke Energy Corporation Common Stockholders | $ | 3,736 | | | $ | 1,163 | | | $ | 3,683 | |
(a) Net of income tax impacts of approximately $17 million and $35 million for the years ended December 31, 2021, and 2020, respectively. Tax impacts are immaterial for other periods presented.
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 343 | | | $ | 259 | |
| | | |
Receivables (net of allowance for doubtful accounts of $46 at 2021 and $29 at 2020) | 1,173 | | | 1,009 | |
Receivables of VIEs (net of allowance for doubtful accounts of $76 at 2021 and $117 at 2020) | 2,437 | | | 2,144 | |
Inventory | 3,199 | | | 3,167 | |
| | | |
Regulatory assets (includes $105 at 2021 and $53 at 2020 related to VIEs) | 2,150 | | | 1,641 | |
Other (includes $256 at 2021 and $296 at 2020 related to VIEs) | 638 | | | 462 | |
Total current assets | 9,940 | | | 8,682 | |
Property, Plant and Equipment | | | |
Cost | 161,819 | | | 155,580 | |
Accumulated depreciation and amortization | (50,555) | | | (48,827) | |
Facilities to be retired, net | 144 | | | 29 | |
Net property, plant and equipment | 111,408 | | | 106,782 | |
Other Noncurrent Assets | | | |
Goodwill | 19,303 | | | 19,303 | |
Regulatory assets (includes $1,823 at 2021 and $937 at 2020 related to VIEs) | 12,487 | | | 12,421 | |
Nuclear decommissioning trust funds | 10,401 | | | 9,114 | |
Operating lease right-of-use assets, net | 1,266 | | | 1,524 | |
Investments in equity method unconsolidated affiliates | 970 | | | 961 | |
| | | |
Other (includes $92 at 2021 and $81 at 2020 related to VIEs) | 3,812 | | | 3,601 | |
Total other noncurrent assets | 48,239 | | | 46,924 | |
Total Assets | $ | 169,587 | | | $ | 162,388 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 3,629 | | | $ | 3,144 | |
Notes payable and commercial paper | 3,304 | | | 2,873 | |
Taxes accrued | 749 | | | 482 | |
Interest accrued | 533 | | | 537 | |
Current maturities of long-term debt (includes $243 at 2021 and $472 at 2020 related to VIEs) | 3,387 | | | 4,238 | |
| | | |
Asset retirement obligations | 647 | | | 718 | |
Regulatory liabilities | 1,211 | | | 1,377 | |
Other | 2,471 | | | 2,936 | |
Total current liabilities | 15,931 | | | 16,305 | |
Long-Term Debt (includes $4,854 at 2021 and $3,535 at 2020 related to VIEs) | 60,448 | | | 55,625 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 9,379 | | | 9,244 | |
Asset retirement obligations | 12,129 | | | 12,286 | |
Regulatory liabilities | 16,152 | | | 15,029 | |
Operating lease liabilities | 1,074 | | | 1,340 | |
Accrued pension and other post-retirement benefit costs | 855 | | | 969 | |
Investment tax credits | 833 | | | 687 | |
| | | |
Other (includes $319 at 2021 and $316 at 2020 related to VIEs) | 1,650 | | | 1,719 | |
Total other noncurrent liabilities | 42,072 | | | 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 | 44,371 | | | 43,767 | |
Retained earnings | 3,265 | | | 2,471 | |
Accumulated other comprehensive loss | (303) | | | (237) | |
Total Duke Energy Corporation stockholders' equity | 49,296 | | | 47,964 | |
Noncontrolling interests | 1,840 | | | 1,220 | |
Total equity | 51,136 | | | 49,184 | |
Total Liabilities and Equity | $ | 169,587 | | | $ | 162,388 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 3,579 | | | $ | 1,082 | | | $ | 3,571 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion (including amortization of nuclear fuel) | 5,663 | | | 5,486 | | | 5,176 | |
Equity in (earnings) losses of unconsolidated affiliates | (28) | | | 2,005 | | | (162) | |
Equity component of AFUDC | (171) | | | (154) | | | (139) | |
| | | | | |
Impairment of assets and other charges | 356 | | | 984 | | | (8) | |
Deferred income taxes | 191 | | | 54 | | | 806 | |
Payments for asset retirement obligations | (540) | | | (610) | | | (746) | |
Provision for rate refunds | (70) | | | (22) | | | 60 | |
Refund of AMT credit carryforwards | — | | | 572 | | | 573 | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | 50 | | | 63 | | | (48) | |
Receivables | (297) | | | (56) | | | 78 | |
Inventory | (34) | | | 66 | | | (122) | |
Other current assets | (1,136) | | | 205 | | | 10 | |
Increase (decrease) in | | | | | |
Accounts payable | 249 | | | (21) | | | (164) | |
Taxes accrued | 284 | | | 117 | | | (224) | |
Other current liabilities | (13) | | | (65) | | | 172 | |
Other assets | 112 | | | (408) | | | (555) | |
Other liabilities | 95 | | | (442) | | | (69) | |
Net cash provided by operating activities | 8,290 | | | 8,856 | | | 8,209 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (9,715) | | | (9,907) | | | (11,122) | |
Contributions to equity method investments | (81) | | | (370) | | | (324) | |
| | | | | |
Return of investment capital | 44 | | | 133 | | | 11 | |
Purchases of debt and equity securities | (6,098) | | | (8,011) | | | (3,348) | |
Proceeds from sales and maturities of debt and equity securities | 6,103 | | | 7,949 | | | 3,343 | |
| | | | | |
Disbursements to canceled equity method investments | (855) | | | — | | | — | |
Other | (333) | | | (398) | | | (517) | |
Net cash used in investing activities | (10,935) | | | (10,604) | | | (11,957) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the: | | | | | |
Issuance of long-term debt | 9,052 | | | 6,330 | | | 7,091 | |
Issuance of preferred stock | — | | | — | | | 1,962 | |
Issuance of common stock | 5 | | | 2,745 | | | 384 | |
Payments for the redemption of long-term debt | (5,294) | | | (4,506) | | | (3,476) | |
Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 332 | | | 3,009 | | | 397 | |
Payments for the redemption of short-term debt with original maturities greater than 90 days | (997) | | | (2,147) | | | (479) | |
Notes payable and commercial paper | 1,144 | | | (1,181) | | | (298) | |
| | | | | |
Contributions from noncontrolling interests | 1,575 | | | 426 | | | 843 | |
Dividends paid | (3,114) | | | (2,812) | | | (2,668) | |
| | | | | |
Other | (94) | | | (133) | | | (26) | |
Net cash provided by financing activities | 2,609 | | | 1,731 | | | 3,730 | |
| | | | | |
Net decrease in cash, cash equivalents and restricted cash | (36) | | | (17) | | | (18) | |
Cash, cash equivalents and restricted cash at beginning of period | 556 | | | 573 | | | 591 | |
Cash, cash equivalents and restricted cash at end of period | $ | 520 | | | $ | 556 | | | $ | 573 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 2,248 | | | $ | 2,186 | | | $ | 2,195 | |
Cash received from income taxes | (3) | | | (585) | | | (651) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 1,325 | | | 1,116 | | | 1,356 | |
Non-cash dividends | — | | | 110 | | | 108 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Duke Energy Corporation Stockholders' Accumulated Other Comprehensive Income (Loss) | | | | | | |
| | | | | | | | | | | | | | 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, 2018 | $ | — | | 727 | | | $ | 1 | | | $ | 40,795 | | | $ | 3,113 | | | | | $ | (14) | | | $ | (3) | | | $ | (75) | | | $ | 43,817 | | | $ | 17 | | | $ | 43,834 | |
Net income (loss) | — | | — | | | — | | | — | | | 3,707 | | | | | — | | | — | | | — | | | 3,707 | | | (177) | | | 3,530 | |
Other comprehensive (loss) income | — | | — | | | — | | | — | | | — | | | | | (41) | | | 8 | | | 9 | | | (24) | | | — | | | (24) | |
Preferred stock, Series A, issuances, net of issuance costs(a) | 973 | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 973 | | | — | | | 973 | |
Preferred stock, Series B, issuances, net of issuance costs(a) | 989 | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | 989 | | | — | | | 989 | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | 6 | | | — | | | 552 | | | — | | | | | — | | | — | | | — | | | 552 | | | — | | | 552 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (2,735) | | | | | — | | | — | | | — | | | (2,735) | | | — | | | (2,735) | |
Sale of noncontrolling interest(b) | — | | — | | | — | | | (466) | | | — | | | | | 10 | | | — | | | — | | | (456) | | | 863 | | | 407 | |
Contribution from noncontrolling interest (f) | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | 428 | | | 428 | |
Distributions to noncontrolling interest in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (4) | | | (4) | |
Other(c) | — | | — | | | — | | | — | | | 23 | | | | | (6) | | | (2) | | | (16) | | | (1) | | | 2 | | | 1 | |
Balance at December 31, 2019 | $ | 1,962 | | 733 | | | $ | 1 | | | $ | 40,881 | | | $ | 4,108 | | | | | $ | (51) | | | $ | 3 | | | $ | (82) | | | $ | 46,822 | | | $ | 1,129 | | | $ | 47,951 | |
Net income | — | | — | | | — | | | — | | | 1,270 | | | | | — | | | — | | | — | | | 1,270 | | | (295) | | | 975 | |
Other comprehensive (loss) Income | — | | — | | | — | | | — | | | — | | | | | (116) | | | 3 | | | 6 | | | (107) | | | (11) | | | (118) | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | 36 | | | — | | | 2,902 | | | — | | | | | — | | | — | | | — | | | 2,902 | | | — | | | 2,902 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (2,815) | | | | | — | | | — | | | — | | | (2,815) | | | — | | | (2,815) | |
| | | | | | | | | | | | | | | | | | | | | | |
Contribution from noncontrolling interest(f) | — | | — | | | — | | | (17) | | | — | | | | | — | | | — | | | — | | | (17) | | | 426 | | | 409 | |
Distributions to noncontrolling interest in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (30) | | | (30) | |
Other(d) | — | | — | | | — | | | 1 | | | (92) | | | | | — | | | — | | | — | | | (91) | | | 1 | | | (90) | |
Balance at December 31, 2020 | $ | 1,962 | | 769 | | | $ | 1 | | | $ | 43,767 | | | $ | 2,471 | | | | | $ | (167) | | | $ | 6 | | | $ | (76) | | | $ | 47,964 | | | $ | 1,220 | | | $ | 49,184 | |
Net income | — | | — | | | — | | | — | | | 3,802 | | | | | — | | | — | | | — | | | 3,802 | | | (329) | | | 3,473 | |
Other comprehensive (loss) income | — | | — | | | — | | | — | | | — | | | | | (65) | | | (8) | | | 7 | | | (66) | | | 10 | | | (56) | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock issuances, including dividend reinvestment and employee benefits | — | | — | | | — | | | 68 | | | — | | | | | — | | | — | | | — | | | 68 | | | — | | | 68 | |
| | | | | | | | | | | | | | | | | | | | | | |
Common stock dividends | — | | — | | | — | | | — | | | (3,008) | | | | | — | | | — | | | — | | | (3,008) | | | — | | | (3,008) | |
Sale of noncontrolling interest(e) | — | | — | | | — | | | 545 | | | — | | | | | — | | | — | | | — | | | 545 | | | 454 | | | 999 | |
Contribution from noncontrolling interest, net of transaction costs(f) | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | 550 | | | 550 | |
Distributions to noncontrolling interests in subsidiaries | — | | — | | | — | | | — | | | — | | | | | — | | | — | | | — | | | — | | | (66) | | | (66) | |
Other | — | | — | | | — | | | (9) | | | — | | | | | — | | | — | | | — | | | (9) | | | 1 | | | (8) | |
Balance at December 31, 2021 | $ | 1,962 | | 769 | | | $ | 1 | | | $ | 44,371 | | | $ | 3,265 | | | | | $ | (232) | | | $ | (2) | | | $ | (69) | | | $ | 49,296 | | | $ | 1,840 | | | $ | 51,136 | |
(a) Duke Energy issued 40 million depositary shares of preferred stock, Series A, in the first quarter of 2019 and 1 million shares of preferred stock, Series B, in the third quarter of 2019.
(b) Relates to the sale of a noncontrolling interest in the Commercial Renewables segment. See Note 1 for additional discussion of the transaction.
(c) Amounts in Retained Earnings and AOCI primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
(d) 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.
(e) Relates to the sale of a noncontrolling interest in Duke Energy Indiana. See Note 1 for additional discussion.
(f) Relates to tax equity financing activity in the Commercial Renewables segment.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Carolinas, LLC
Opinion on Januarythe Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Carolinas, LLC and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 2018. 3, and 9 to the financial statements.
Critical Audit Matter Description
The guidanceCompany is subject to rate regulation by the North Carolina Utilities Commission and by the South Carolina Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has beendetermined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $3.5 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1947.
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 7,102 | | | $ | 7,015 | | | $ | 7,395 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,601 | | | 1,682 | | | 1,804 | |
Operation, maintenance and other | 1,833 | | | 1,743 | | | 1,868 | |
Depreciation and amortization | 1,468 | | | 1,462 | | | 1,388 | |
Property and other taxes | 320 | | | 299 | | | 292 | |
Impairment of assets and other charges | 227 | | | 476 | | | 17 | |
Total operating expenses | 5,449 | | | 5,662 | | | 5,369 | |
Gains on Sales of Other Assets and Other, net | 2 | | | 1 | | | — | |
Operating Income | 1,655 | | | 1,354 | | | 2,026 | |
Other Income and Expenses, net | 270 | | | 177 | | | 151 | |
Interest Expense | 538 | | | 487 | | | 463 | |
Income Before Income Taxes | 1,387 | | | 1,044 | | | 1,714 | |
Income Tax Expense | 51 | | | 88 | | | 311 | |
Net Income | $ | 1,336 | | | $ | 956 | | | $ | 1,403 | |
Other Comprehensive Income, net of tax | | | | | |
| | | | | |
| | | | | |
Net unrealized gain on cash flow hedges | 1 | | | — | | | — | |
Other Comprehensive Income, net of tax | 1 | | | — | | | — | |
Comprehensive Income | $ | 1,337 | | | $ | 956 | | | $ | 1,403 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | | | | |
| | December 31, |
(in millions) | | 2021 | | 2020 |
ASSETS | | | | |
Current Assets | | | | |
Cash and cash equivalents | | $ | 7 | | | $ | 21 | |
Receivables (net of allowance for doubtful accounts of $1 at 2021 and 2020) | | 300 | | | 247 | |
Receivables of VIEs (net of allowance for doubtful accounts of $41 at 2021 and $22 at 2020) | | 844 | | | 696 | |
Receivables from affiliated companies | | 190 | | | 124 | |
| | | | |
Inventory | | 1,026 | | | 1,010 | |
Regulatory assets (includes $12 at 2021 related to VIEs) | | 544 | | | 473 | |
Other | | 95 | | | 20 | |
Total current assets | | 3,006 | | | 2,591 | |
Property, Plant and Equipment | | | | |
Cost | | 51,874 | | | 50,640 | |
Accumulated depreciation and amortization | | (17,854) | | | (17,453) | |
Facilities to be retired, net | | 102 | | | — | |
Net property, plant and equipment | | 34,122 | | | 33,187 | |
Other Noncurrent Assets | | | | |
| | | | |
Regulatory assets (includes $220 at 2021 related to VIEs) | | 2,935 | | | 2,996 | |
Nuclear decommissioning trust funds | | 5,759 | | | 4,977 | |
Operating lease right-of-use assets, net | | 92 | | | 110 | |
Other | | 1,248 | | | 1,187 | |
Total other noncurrent assets | | 10,034 | | | 9,270 | |
Total Assets | | $ | 47,162 | | | $ | 45,048 | |
LIABILITIES AND EQUITY | | | | |
Current Liabilities | | | | |
Accounts payable | | $ | 988 | | | $ | 1,000 | |
Accounts payable to affiliated companies | | 266 | | | 199 | |
Notes payable to affiliated companies | | 226 | | | 506 | |
Taxes accrued | | 274 | | | 76 | |
Interest accrued | | 125 | | | 117 | |
Current maturities of long-term debt (includes $5 at 2021 related to VIEs) | | 362 | | | 506 | |
Asset retirement obligations | | 249 | | | 264 | |
Regulatory liabilities | | 487 | | | 473 | |
Other | | 546 | | | 546 | |
Total current liabilities | | 3,523 | | | 3,687 | |
Long-Term Debt (includes $703 at 2021 related to VIEs) | | 12,595 | | | 11,412 | |
Long-Term Debt Payable to Affiliated Companies | | 318 | | | 300 | |
Other Noncurrent Liabilities | | | | |
Deferred income taxes | | 3,634 | | | 3,842 | |
Asset retirement obligations | | 5,052 | | | 5,086 | |
Regulatory liabilities | | 7,198 | | | 6,535 | |
Operating lease liabilities | | 78 | | | 97 | |
Accrued pension and other post-retirement benefit costs | | 50 | | | 73 | |
Investment tax credits | | 287 | | | 236 | |
Other | | 536 | | | 626 | |
Total other noncurrent liabilities | | 16,835 | | | 16,495 | |
Commitments and Contingencies | | 0 | | 0 |
Equity | | | | |
Member's equity | | 13,897 | | | 13,161 | |
Accumulated other comprehensive loss | | (6) | | | (7) | |
Total equity | | 13,891 | | | 13,154 | |
Total Liabilities and Equity | | $ | 47,162 | | | $ | 45,048 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 1,336 | | | $ | 956 | | | $ | 1,403 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization (including amortization of nuclear fuel) | 1,743 | | | 1,731 | | | 1,671 | |
Equity component of AFUDC | (65) | | | (62) | | | (42) | |
| | | | | |
Impairment of assets and other charges | 227 | | | 476 | | | 17 | |
Deferred income taxes | (213) | | | (260) | | | 133 | |
Payments for asset retirement obligations | (182) | | | (162) | | | (278) | |
Provision for rate refunds | (46) | | | (5) | | | 36 | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | — | | | (4) | | | (8) | |
Receivables | (99) | | | 52 | | | (21) | |
Receivables from affiliated companies | (66) | | | (10) | | | 68 | |
Inventory | (16) | | | (14) | | | (48) | |
Other current assets | (309) | | | 209 | | | (73) | |
Increase (decrease) in | | | | | |
Accounts payable | 5 | | | 55 | | | (50) | |
Accounts payable to affiliated companies | 85 | | | (11) | | | (20) | |
Taxes accrued | 206 | | | 30 | | | (127) | |
Other current liabilities | (39) | | | (56) | | | 127 | |
Other assets | 21 | | | (102) | | | (42) | |
Other liabilities | 116 | | | (47) | | | (37) | |
Net cash provided by operating activities | 2,704 | | | 2,776 | | | 2,709 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (2,693) | | | (2,669) | | | (2,714) | |
| | | | | |
Purchases of debt and equity securities | (3,425) | | | (1,602) | | | (1,658) | |
Proceeds from sales and maturities of debt and equity securities | 3,425 | | | 1,602 | | | 1,658 | |
| | | | | |
| | | | | |
Other | (177) | | | (164) | | | (204) | |
Net cash used in investing activities | (2,870) | | | (2,833) | | | (2,918) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 1,651 | | | 998 | | | 886 | |
Payments for the redemption of long-term debt | (617) | | | (813) | | | (6) | |
Notes payable to affiliated companies | (280) | | | 477 | | | (410) | |
Distributions to parent | (600) | | | (600) | | | (275) | |
Other | (1) | | | (2) | | | (1) | |
Net cash provided by financing activities | 153 | | | 60 | | | 194 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (13) | | | 3 | | | (15) | |
Cash, cash equivalents and restricted cash at beginning of period | 21 | | | 18 | | | 33 | |
Cash, cash equivalents and restricted cash at end of period | $ | 8 | | | $ | 21 | | | $ | 18 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 508 | | | $ | 481 | | | $ | 433 | |
Cash paid for income taxes | 233 | | | 321 | | | 122 | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 359 | | | 365 | | | 347 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY CAROLINAS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | |
| | | Accumulated Other | | |
| | | Comprehensive | | |
| | | Income (Loss) | | | | |
| | | Net Gains | | | | |
| | | (Losses) on | | | | |
| Member's | | Cash Flow | | | | Total |
(in millions) | Equity | | Hedges | | | | Equity |
Balance at December 31, 2018 | $ | 11,689 | | | $ | (6) | | | | | $ | 11,683 | |
Net income | 1,403 | | | — | | | | | 1,403 | |
| | | | | | | |
Distributions to parent | (275) | | | — | | | | | (275) | |
Other | 1 | | | (1) | | | | | — | |
Balance at December 31, 2019 | $ | 12,818 | | | $ | (7) | | | | | $ | 12,811 | |
Net income | 956 | | | — | | | | | 956 | |
| | | | | | | |
Distributions to parent | (600) | | | — | | | | | (600) | |
Other(a) | (13) | | | — | | | | | (13) | |
Balance at December 31, 2020 | $ | 13,161 | | | $ | (7) | | | | | $ | 13,154 | |
Net income | 1,336 | | | — | | | | | 1,336 | |
Other comprehensive income | — | | | 1 | | | | | 1 | |
Distributions to parent | (600) | | | — | | | | | (600) | |
| | | | | | | |
Balance at December 31, 2021 | $ | 13,897 | | | $ | (6) | | | | | $ | 13,891 | |
(a) Amounts primarily represent impacts due to implementation of a new accounting standard related to Credit Losses. See Note 1 for additional discussion.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Progress Energy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Progress Energy, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission, South Carolina Public Service Commission and Florida Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $6.9 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1930.
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 11,057 | | | $ | 10,627 | | | $ | 11,202 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 3,584 | | | 3,479 | | | 4,024 | |
Operation, maintenance and other | 2,529 | | | 2,479 | | | 2,495 | |
Depreciation and amortization | 1,929 | | | 1,818 | | | 1,845 | |
Property and other taxes | 542 | | | 545 | | | 561 | |
Impairment of assets and other charges | 82 | | | 495 | | | (24) | |
Total operating expenses | 8,666 | | | 8,816 | | | 8,901 | |
Gains on Sales of Other Assets and Other, net | 14 | | | 9 | | | — | |
Operating Income | 2,405 | | | 1,820 | | | 2,301 | |
Other Income and Expenses, net | 215 | | | 129 | | | 141 | |
Interest Expense | 794 | | | 790 | | | 862 | |
Income Before Income Taxes | 1,826 | | | 1,159 | | | 1,580 | |
Income Tax Expense | 227 | | | 113 | | | 253 | |
| | | | | |
| | | | | |
Net Income | 1,599 | | | 1,046 | | | 1,327 | |
Less: Net Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | |
Net Income Attributable to Parent | $ | 1,598 | | | $ | 1,045 | | | $ | 1,327 | |
| | | | | |
Net Income | $ | 1,599 | | | $ | 1,046 | | | $ | 1,327 | |
Other Comprehensive Income, net of tax | | | | | |
Pension and OPEB adjustments | 1 | | | (1) | | | 2 | |
Net unrealized gain on cash flow hedges | 3 | | | 5 | | | 5 | |
| | | | | |
| | | | | |
Unrealized (losses) gains on available-for-sale securities | — | | | (1) | | | 1 | |
| | | | | |
Other Comprehensive Income, net of tax | 4 | | | 3 | | | 8 | |
Comprehensive Income | 1,603 | | | 1,049 | | | 1,335 | |
Less: Comprehensive Income Attributable to Noncontrolling Interests | 1 | | | 1 | | | — | |
Comprehensive Income Attributable to Parent | $ | 1,602 | | | $ | 1,048 | | | $ | 1,335 | |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 70 | | | $ | 59 | |
Receivables (net of allowance for doubtful accounts of $11 at 2021 and $8 at 2020) | 247 | | | 228 | |
Receivables of VIEs (net of allowance for doubtful accounts of $25 at 2021 and $29 at 2020) | 1,006 | | | 901 | |
Receivables from affiliated companies | 121 | | | 157 | |
| | | |
Inventory | 1,398 | | | 1,375 | |
Regulatory assets (includes $93 at 2021 and $53 at 2020 related to VIEs) | 1,030 | | | 758 | |
Other (includes $39 at 2021 and 2020 related to VIEs) | 125 | | | 109 | |
Total current assets | 3,997 | | | 3,587 | |
Property, Plant and Equipment | | | |
Cost | 60,894 | | | 57,892 | |
Accumulated depreciation and amortization | (19,214) | | | (18,368) | |
Facilities to be retired, net | 26 | | | 29 | |
Net property, plant and equipment | 41,706 | | | 39,553 | |
Other Noncurrent Assets | | | |
Goodwill | 3,655 | | | 3,655 | |
Regulatory assets (includes $1,603 at 2021 and $937 at 2020 related to VIEs) | 5,909 | | | 5,775 | |
Nuclear decommissioning trust funds | 4,642 | | | 4,137 | |
Operating lease right-of-use assets, net | 691 | | | 690 | |
Other | 1,242 | | | 1,227 | |
Total other noncurrent assets | 16,139 | | | 15,484 | |
Total Assets | $ | 61,842 | | | $ | 58,624 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 1,099 | | | $ | 919 | |
Accounts payable to affiliated companies | 506 | | | 289 | |
Notes payable to affiliated companies | 2,809 | | | 2,969 | |
Taxes accrued | 128 | | | 121 | |
Interest accrued | 192 | | | 202 | |
Current maturities of long-term debt (includes $71 at 2021 and $305 at 2020 related to VIEs) | 1,082 | | | 1,426 | |
Asset retirement obligations | 275 | | | 283 | |
Regulatory liabilities | 478 | | | 640 | |
Other | 868 | | | 793 | |
Total current liabilities | 7,437 | | | 7,642 | |
Long-Term Debt (includes $2,293 at 2021 and $1,252 at 2020 related to VIEs) | 19,591 | | | 17,688 | |
Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 4,564 | | | 4,396 | |
Asset retirement obligations | 5,837 | | | 5,866 | |
Regulatory liabilities | 5,566 | | | 5,051 | |
Operating lease liabilities | 606 | | | 623 | |
Accrued pension and other post-retirement benefit costs | 417 | | | 505 | |
Other | 526 | | | 462 | |
Total other noncurrent liabilities | 17,516 | | | 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 | 8,007 | | | 7,109 | |
Accumulated other comprehensive loss | (11) | | | (15) | |
Total Progress Energy, Inc. stockholder's equity | 17,145 | | | 16,237 | |
Noncontrolling interests | 3 | | | 4 | |
Total equity | 17,148 | | | 16,241 | |
Total Liabilities and Equity | $ | 61,842 | | | $ | 58,624 | |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 1,599 | | | $ | 1,046 | | | $ | 1,327 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion (including amortization of nuclear fuel) | 2,302 | | | 2,327 | | | 2,207 | |
Equity component of AFUDC | (51) | | | (42) | | | (66) | |
| | | | | |
Impairment of assets and other charges | 82 | | | 495 | | | (24) | |
Deferred income taxes | 247 | | | (197) | | | 433 | |
Payments for asset retirement obligations | (288) | | | (384) | | | (412) | |
Provision for rate refunds | (36) | | | 2 | | | 15 | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | 51 | | | (9) | | | (34) | |
Receivables | (97) | | | (69) | | | 47 | |
Receivables from affiliated companies | 18 | | | (81) | | | 81 | |
Inventory | (26) | | | 49 | | | 62 | |
Other current assets | (551) | | | 223 | | | 184 | |
Increase (decrease) in | | | | | |
Accounts payable | 59 | | | (62) | | | (4) | |
Accounts payable to affiliated companies | 217 | | | (21) | | | (50) | |
Taxes accrued | 13 | | | 75 | | | (74) | |
Other current liabilities | (32) | | | 139 | | | 25 | |
Other assets | (110) | | | (137) | | | (341) | |
Other liabilities | (99) | | | (177) | | | (167) | |
Net cash provided by operating activities | 3,298 | | | 3,177 | | | 3,209 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (3,668) | | | (3,488) | | | (3,952) | |
| | | | | |
Purchases of debt and equity securities | (2,233) | | | (5,998) | | | (1,511) | |
Proceeds from sales and maturities of debt and equity securities | 2,322 | | | 6,010 | | | 1,504 | |
| | | | | |
Notes receivable from affiliated companies | — | | | 164 | | | (164) | |
Other | (156) | | | (160) | | | (190) | |
Net cash used in investing activities | (3,735) | | | (3,472) | | | (4,313) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 3,095 | | | 1,791 | | | 2,187 | |
Payments for the redemption of long-term debt | (1,883) | | | (2,157) | | | (1,667) | |
Notes payable to affiliated companies | (160) | | | 1,148 | | | 586 | |
Dividends to parent | (700) | | | (400) | | | — | |
Other | (2) | | | (13) | | | 12 | |
Net cash provided by financing activities | 350 | | | 369 | | | 1,118 | |
Net (decrease) increase in cash, cash equivalents and restricted cash | (87) | | | 74 | | | 14 | |
Cash, cash equivalents and restricted cash at beginning of period | 200 | | | 126 | | | 112 | |
Cash, cash equivalents and restricted cash at end of period | $ | 113 | | | $ | 200 | | | $ | 126 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 813 | | | $ | 819 | | | $ | 892 | |
Cash paid for (received from) income taxes | 14 | | | 149 | | | (79) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 501 | | | 363 | | | 447 | |
See Notes to Consolidated Financial Statements
PROGRESS ENERGY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Accumulated Other Comprehensive Income (Loss) | | | | | | |
| | | | | | | Net Gains | | Net Unrealized | | | | Total Progress | | | | |
| | | Additional | | | | (Losses) on | | Gains (Losses) | | Pension and | | Energy, Inc. | | | | |
| | | Paid-in | | Retained | | Cash Flow | | on Available-for- | | OPEB | | Stockholder's | | Noncontrolling | | Total |
(in millions) | | | Capital | | Earnings | | Hedges | | Sale Securities | | Adjustments | | Equity | | Interests | | Equity |
Balance at December 31, 2018 | | | $ | 9,143 | | | $ | 5,131 | | | $ | (12) | | | $ | (1) | | | $ | (7) | | | $ | 14,254 | | | $ | 3 | | | $ | 14,257 | |
Net income | | | — | | | 1,327 | | | — | | | — | | | — | | | 1,327 | | | — | | | 1,327 | |
Other comprehensive income | | | — | | | — | | | 5 | | | 1 | | | 2 | | | 8 | | | — | | | 8 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Other(a) | | | — | | | 7 | | | (3) | | | (1) | | | (2) | | | 1 | | | — | | | 1 | |
Balance at December 31, 2019 | | | $ | 9,143 | | | $ | 6,465 | | | $ | (10) | | | $ | (1) | | | $ | (7) | | | $ | 15,590 | | | $ | 3 | | | $ | 15,593 | |
Net income | | | — | | | 1,045 | | | — | | | — | | | — | | | 1,045 | | | 1 | | | 1,046 | |
Other comprehensive income (loss) | | | — | | | — | | | 5 | | | (1) | | | (1) | | | 3 | | | — | | | 3 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Dividends to parent | | | — | | | (400) | | | — | | | — | | | — | | | (400) | | | — | | | (400) | |
| | | | | | | | | | | | | | | | | |
Other | | | — | | | (1) | | | — | | | — | | | — | | | (1) | | | — | | | (1) | |
Balance at December 31, 2020 | | | $ | 9,143 | | | $ | 7,109 | | | $ | (5) | | | $ | (2) | | | $ | (8) | | | $ | 16,237 | | | $ | 4 | | | $ | 16,241 | |
Net income | | | — | | | 1,598 | | | — | | | — | | | — | | | 1,598 | | | 1 | | | 1,599 | |
Other comprehensive income | | | — | | | — | | | 3 | | | — | | | 1 | | | 4 | | | — | | | 4 | |
Distributions to noncontrolling interests | | | — | | | — | | | — | | | — | | | — | | | — | | | (1) | | | (1) | |
Dividends to parent | | | — | | | (700) | | | — | | | — | | | — | | | (700) | | | — | | | (700) | |
| | | | | | | | | | | | | | | | | |
Other | | | 6 | | | — | | | — | | | — | | | — | | | 6 | | | (1) | | | 5 | |
Balance at December 31, 2021 | | | $ | 9,149 | | | $ | 8,007 | | | $ | (2) | | | $ | (2) | | | $ | (7) | | | $ | 17,145 | | | $ | 3 | | | $ | 17,148 | |
(a) Amounts in Retained Earnings and AOCI primarily represent impacts to accumulated other comprehensive income due to implementation of a new accounting standard related to Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Progress, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Progress, LLC and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1, 3, and 9 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission and by the South Carolina Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As discussed in Note 3, regulatory proceedings in recent years in North Carolina and South Carolina have focused on the recoverability of asset retirement obligations specific to coal ash. As a result, assessing the potential outcomes of future regulatory orders in North Carolina and South Carolina requires significant management judgment. As of December 31, 2021, the Company has approximately $4.7 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission-approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained an analysis from management and letters from internal legal counsel for asset retirement obligations specific to coal ash costs, regarding probability of recovery for deferred costs not yet addressed in a regulatory order to assess management’s assertion that amounts are probable of recovery.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1930.
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 5,780 | | | $ | 5,422 | | | $ | 5,957 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,778 | | | 1,743 | | | 2,012 | |
Operation, maintenance and other | 1,467 | | | 1,332 | | | 1,446 | |
Depreciation and amortization | 1,097 | | | 1,116 | | | 1,143 | |
Property and other taxes | 159 | | | 167 | | | 176 | |
Impairment of assets and other charges | 63 | | | 499 | | | 12 | |
Total operating expenses | 4,564 | | | 4,857 | | | 4,789 | |
Gains on Sales of Other Assets and Other, net | 13 | | | 8 | | | — | |
Operating Income | 1,229 | | | 573 | | | 1,168 | |
Other Income and Expenses, net | 143 | | | 75 | | | 100 | |
Interest Expense | 306 | | | 269 | | | 306 | |
Income Before Income Taxes | 1,066 | | | 379 | | | 962 | |
Income Tax Expense (Benefit) | 75 | | | (36) | | | 157 | |
Net Income and Comprehensive Income | $ | 991 | | | $ | 415 | | | $ | 805 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 35 | | | $ | 39 | |
Receivables (net of allowance for doubtful accounts of $4 at 2021 and $4 at 2020) | 127 | | | 132 | |
Receivables of VIEs (net of allowance for doubtful accounts of $17 at 2021 and $19 at 2020) | 574 | | | 500 | |
Receivables from affiliated companies | 65 | | | 50 | |
| | | |
Inventory | 921 | | | 911 | |
Regulatory assets (includes $39 at 2021 related to VIEs) | 533 | | | 492 | |
Other | 83 | | | 60 | |
Total current assets | 2,338 | | | 2,184 | |
Property, Plant and Equipment | | | |
Cost | 37,018 | | | 35,759 | |
Accumulated depreciation and amortization | (13,387) | | | (12,801) | |
Facilities to be retired, net | 26 | | | 29 | |
Net property, plant and equipment | 23,657 | | | 22,987 | |
Other Noncurrent Assets | | | |
Regulatory assets (includes $720 at 2021 related to VIEs) | 4,118 | | | 3,976 | |
Nuclear decommissioning trust funds | 4,089 | | | 3,500 | |
Operating lease right-of-use assets, net | 389 | | | 346 | |
Other | 792 | | | 740 | |
Total other noncurrent assets | 9,388 | | | 8,562 | |
Total Assets | $ | 35,383 | | | $ | 33,733 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 476 | | | $ | 454 | |
Accounts payable to affiliated companies | 310 | | | 215 | |
Notes payable to affiliated companies | 172 | | | 295 | |
Taxes accrued | 163 | | | 85 | |
Interest accrued | 96 | | | 99 | |
Current maturities of long-term debt (includes $15 at 2021 related to VIEs) | 556 | | | 603 | |
Asset retirement obligations | 274 | | | 283 | |
Regulatory liabilities | 381 | | | 530 | |
Other | 448 | | | 411 | |
Total current liabilities | 2,876 | | | 2,975 | |
Long-Term Debt (includes $1,097 at 2021 related to VIEs) | 9,543 | | | 8,505 | |
Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 2,208 | | | 2,298 | |
Asset retirement obligations | 5,401 | | | 5,352 | |
Regulatory liabilities | 4,868 | | | 4,394 | |
Operating lease liabilities | 350 | | | 323 | |
Accrued pension and other post-retirement benefit costs | 221 | | | 242 | |
Investment tax credits | 128 | | | 132 | |
Other | 87 | | | 102 | |
Total other noncurrent liabilities | 13,263 | | | 12,843 | |
Commitments and Contingencies | 0 | | 0 |
Equity | | | |
Member's Equity | 9,551 | | | 9,260 | |
| | | |
| | | |
| | | |
Total Liabilities and Equity | $ | 35,383 | | | $ | 33,733 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 991 | | | $ | 415 | | | $ | 805 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization (including amortization of nuclear fuel) | 1,286 | | | 1,299 | | | 1,329 | |
Equity component of AFUDC | (34) | | | (29) | | | (60) | |
| | | | | |
Impairment of assets and other charges | 63 | | | 499 | | | 12 | |
Deferred income taxes | (46) | | | (234) | | | 197 | |
Payments for asset retirement obligations | (187) | | | (304) | | | (390) | |
Provisions for rate refunds | (36) | | | 2 | | | 12 | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | 48 | | | 1 | | | (6) | |
Receivables | (52) | | | (4) | | | 21 | |
Receivables from affiliated companies | (33) | | | 2 | | | (29) | |
Inventory | (11) | | | 23 | | | 20 | |
Other current assets | (147) | | | 98 | | | 101 | |
Increase (decrease) in | | | | | |
Accounts payable | 12 | | | (127) | | | 32 | |
Accounts payable to affiliated companies | 95 | | | 12 | | | (75) | |
Taxes accrued | 83 | | | 68 | | | (46) | |
Other current liabilities | (23) | | | 157 | | | 68 | |
Other assets | (37) | | | (215) | | | (205) | |
Other liabilities | (16) | | | 3 | | | 37 | |
Net cash provided by operating activities | 1,956 | | | 1,666 | | | 1,823 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (1,746) | | | (1,581) | | | (2,108) | |
| | | | | |
Purchases of debt and equity securities | (1,931) | | | (1,555) | | | (842) | |
Proceeds from sales and maturities of debt and equity securities | 1,914 | | | 1,516 | | | 810 | |
| | | | | |
| | | | | |
Other | (20) | | | (57) | | | (119) | |
Net cash used in investing activities | (1,783) | | | (1,677) | | | (2,259) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 1,959 | | | 1,296 | | | 1,269 | |
Payments for the redemption of long-term debt | (1,308) | | | (1,085) | | | (605) | |
Notes payable to affiliated companies | (123) | | | 229 | | | (228) | |
Distributions to parent | (700) | | | (400) | | | — | |
Other | (1) | | | (12) | | | (1) | |
Net cash (used in) provided by financing activities | (173) | | | 28 | | | 435 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | — | | | 17 | | | (1) | |
Cash, cash equivalents and restricted cash at beginning of period | 39 | | | 22 | | | 23 | |
Cash, cash equivalents and restricted cash at end of period | $ | 39 | | | $ | 39 | | | $ | 22 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 335 | | | $ | 301 | | | $ | 331 | |
Cash paid for (received from) income taxes | 83 | | | 123 | | | (30) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 163 | | | 149 | | | 175 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY PROGRESS, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | |
| | | | | Member's | | | | |
(in millions) | | | | | Equity | | | | |
Balance at December 31, 2018 | | | | | $ | 8,441 | | | | | |
Net income | | | | | 805 | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2019 | | | | | $ | 9,246 | | | | | |
Net income | | | | | 415 | | | | | |
Distribution to parent | | | | | (400) | | | | | |
| | | | | | | | | |
Other | | | | | (1) | | | | | |
Balance at December 31, 2020 | | | | | $ | 9,260 | | | | | |
Net income | | | | | 991 | | | | | |
Distribution to parent | | | | | (700) | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2021 | | | | | $ | 9,551 | | | | | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Florida, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Florida, LLC and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters — Impact of Rate Regulation on the Financial Statements — Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Florida Public Service Commission (the “Commission”), which has jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $2.3 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commission, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commission, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 2001.
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 5,259 | | | $ | 5,188 | | | $ | 5,231 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 1,806 | | | 1,737 | | | 2,012 | |
Operation, maintenance and other | 1,048 | | | 1,131 | | | 1,034 | |
Depreciation and amortization | 831 | | | 702 | | | 702 | |
Property and other taxes | 383 | | | 381 | | | 392 | |
Impairment of assets and other charges | 19 | | | (4) | | | (36) | |
Total operating expenses | 4,087 | | | 3,947 | | | 4,104 | |
Gains on Sales of Other Assets and Other, net | 1 | | | 1 | | | — | |
Operating Income | 1,173 | | | 1,242 | | | 1,127 | |
Other Income and Expenses, net | 71 | | | 53 | | | 48 | |
Interest Expense | 319 | | | 326 | | | 328 | |
Income Before Income Taxes | 925 | | | 969 | | | 847 | |
Income Tax Expense | 187 | | | 198 | | | 155 | |
Net Income | $ | 738 | | | $ | 771 | | | $ | 692 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other Comprehensive Income (Loss), net of tax | | | | | |
Unrealized (losses) gains on available-for-sale securities | (1) | | | (1) | | | 1 | |
| | | | | |
| | | | | |
Other Comprehensive (Loss) Income, net of tax | (1) | | | (1) | | | 1 | |
Comprehensive Income | $ | 737 | | | $ | 770 | | | $ | 693 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 23 | | | $ | 11 | |
Receivables (net of allowance for doubtful accounts of $8 at 2021 and $4 at 2020) | 117 | | | 94 | |
Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2021 and $10 at 2020) | 432 | | | 401 | |
Receivables from affiliated companies | 16 | | | 3 | |
| | | |
Inventory | 477 | | | 464 | |
Regulatory assets (includes $54 at 2021 and $53 at 2020 related to VIEs) | 497 | | | 265 | |
Other (includes $39 at 2021 and 2020 related to VIEs) | 80 | | | 41 | |
Total current assets | 1,642 | | | 1,279 | |
Property, Plant and Equipment | | | |
Cost | 23,865 | | | 22,123 | |
Accumulated depreciation and amortization | (5,819) | | | (5,560) | |
Net property, plant and equipment | 18,046 | | | 16,563 | |
Other Noncurrent Assets | | | |
| | | |
Regulatory assets (includes $883 at 2021 and $937 at 2020 related to VIEs) | 1,791 | | | 1,799 | |
Nuclear decommissioning trust funds | 553 | | | 637 | |
Operating lease right-of-use assets, net | 302 | | | 344 | |
Other | 399 | | | 335 | |
Total other noncurrent assets | 3,045 | | | 3,115 | |
Total Assets | $ | 22,733 | | | $ | 20,957 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 623 | | | $ | 465 | |
Accounts payable to affiliated companies | 209 | | | 85 | |
Notes payable to affiliated companies | 199 | | | 196 | |
Taxes accrued | 51 | | | 82 | |
Interest accrued | 68 | | | 69 | |
Current maturities of long-term debt (includes $56 at 2021 and $305 at 2020 related to VIEs) | 76 | | | 823 | |
Asset retirement obligations | 1 | | | — | |
Regulatory liabilities | 98 | | | 110 | |
Other | 408 | | | 374 | |
Total current liabilities | 1,733 | | | 2,204 | |
Long-Term Debt (includes $1,196 at 2021 and $1,002 at 2020 related to VIEs) | 8,406 | | | 7,092 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 2,434 | | | 2,191 | |
| | | |
Asset retirement obligations | 436 | | | 514 | |
Regulatory liabilities | 698 | | | 658 | |
Operating lease liabilities | 256 | | | 300 | |
Accrued pension and other post-retirement benefit costs | 166 | | | 231 | |
| | | |
Other | 309 | | | 209 | |
Total other noncurrent liabilities | 4,299 | | | 4,103 | |
Commitments and Contingencies | 0 | | 0 |
| | | |
Equity | | | |
Member's equity | 8,298 | | | 7,560 | |
| | | |
| | | |
Accumulated other comprehensive loss | (3) | | | (2) | |
Total equity | 8,295 | | | 7,558 | |
Total Liabilities and Equity | $ | 22,733 | | | $ | 20,957 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 738 | | | $ | 771 | | | $ | 692 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 1,011 | | | 1,019 | | | 869 | |
Equity component of AFUDC | (16) | | | (12) | | | (6) | |
| | | | | |
Impairment of assets and other charges | 19 | | | (4) | | | (36) | |
Deferred income taxes | 279 | | | 27 | | | 180 | |
Payments for asset retirement obligations | (101) | | | (80) | | | (22) | |
| | | | | |
(Increase) decrease in | | | | | |
Net realized and unrealized mark-to-market and hedging transactions | — | | | (14) | | | (33) | |
Receivables | (45) | | | (64) | | | 26 | |
Receivables from affiliated companies | (13) | | | (3) | | | 17 | |
Inventory | (15) | | | 26 | | | 42 | |
Other current assets | (451) | | | 40 | | | 156 | |
Increase (decrease) in | | | | | |
Accounts payable | 47 | | | 66 | | | (36) | |
Accounts payable to affiliated companies | 124 | | | (46) | | | 40 | |
Taxes accrued | (30) | | | 39 | | | (31) | |
Other current liabilities | (7) | | | (7) | | | (36) | |
Other assets | (69) | | | 84 | | | (131) | |
Other liabilities | (69) | | | (181) | | | (213) | |
Net cash provided by operating activities | 1,402 | | | 1,661 | | | 1,478 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (1,923) | | | (1,907) | | | (1,844) | |
| | | | | |
Purchases of debt and equity securities | (302) | | | (4,443) | | | (669) | |
Proceeds from sales and maturities of debt and equity securities | 408 | | | 4,495 | | | 695 | |
| | | | | |
Notes receivable from affiliated companies | — | | | 173 | | | (173) | |
Other | (136) | | | (103) | | | (67) | |
Net cash used in investing activities | (1,953) | | | (1,785) | | | (2,058) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 1,135 | | | 495 | | | 918 | |
Payments for the redemption of long-term debt | (575) | | | (572) | | | (262) | |
Notes payable to affiliated companies | 3 | | | 196 | | | (108) | |
| | | | | |
Other | — | | | (1) | | | 13 | |
Net cash provided by financing activities | 563 | | | 118 | | | 561 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 12 | | | (6) | | | (19) | |
Cash, cash equivalents and restricted cash at beginning of period | 50 | | | 56 | | | 75 | |
Cash, cash equivalents and restricted cash at end of period | $ | 62 | | | $ | 50 | | | $ | 56 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 308 | | | $ | 321 | | | $ | 332 | |
Cash (received from) paid for income taxes | (15) | | | 138 | | | 1 | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 337 | | | 214 | | | 272 | |
| | | | | |
See Notes to Consolidated Financial Statements
DUKE ENERGY FLORIDA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Accumulated | | |
| | | | | | | Other | | |
| | | | | | | Comprehensive | | |
| | | | | | | Income (Loss) | | |
| | | | | | | Net Unrealized | | | | |
| | | | | | | Gains (Losses) on | | | | |
| | | | | Member's | | Available-for- | | | | Total |
(in millions) | | | | | Equity | | Sale Securities | | | | Equity |
Balance at December 31, 2018 | | | | | $ | 6,097 | | | $ | (2) | | | | | $ | 6,095 | |
Net income | | | | | 692 | | | — | | | | | 692 | |
Other comprehensive income | | | | | — | | | 1 | | | | | 1 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2019 | | | | | $ | 6,789 | | | $ | (1) | | | | | $ | 6,788 | |
Net income | | | | | 771 | | | — | | | | | 771 | |
Other comprehensive loss | | | | | — | | | (1) | | | | | (1) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2020 | | | | | $ | 7,560 | | | $ | (2) | | | | | $ | 7,558 | |
Net income | | | | | 738 | | | — | | | | | 738 | |
Other comprehensive loss | | | | | — | | | (1) | | | | | (1) | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2021 | | | | | $ | 8,298 | | | $ | (3) | | | | | $ | 8,295 | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Ohio, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Ohio, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Public Utilities Commission of Ohio and by the Kentucky Public Service Commission (collectively the “Commissions”), which have jurisdiction with respect to the electric and gas rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $707 million recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commissions, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 2002.
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | |
Regulated electric | $ | 1,493 | | | $ | 1,405 | | | $ | 1,456 | |
Regulated natural gas | 544 | | | 453 | | | 484 | |
| | | | | |
Total operating revenues | 2,037 | | | 1,858 | | | 1,940 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 409 | | | 339 | | | 388 | |
| | | | | |
Cost of natural gas | 136 | | | 73 | | | 95 | |
Operation, maintenance and other | 479 | | | 463 | | | 520 | |
Depreciation and amortization | 307 | | | 278 | | | 265 | |
Property and other taxes | 355 | | | 324 | | | 308 | |
Impairment of assets and other charges | 25 | | | — | | | — | |
Total operating expenses | 1,711 | | | 1,477 | | | 1,576 | |
Gains on Sales of Other Assets and Other, net | 1 | | | — | | | — | |
Operating Income | 327 | | | 381 | | | 364 | |
Other Income and Expenses, net | 18 | | | 16 | | | 24 | |
Interest Expense | 111 | | | 102 | | | 109 | |
Income From Continuing Operations Before Income Taxes | 234 | | | 295 | | | 279 | |
Income Tax Expense From Continuing Operations | 30 | | | 43 | | | 40 | |
Income From Continuing Operations | 204 | | | 252 | | | 239 | |
Loss From Discontinued Operations, net of tax | — | | | — | | | (1) | |
Net Income and Comprehensive Income | $ | 204 | | | $ | 252 | | | $ | 238 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 13 | | | $ | 14 | |
Receivables (net of allowance for doubtful accounts of $4 at 2021 and 2020) | 96 | | | 98 | |
Receivables from affiliated companies | 122 | | | 102 | |
Notes receivable from affiliated companies | 15 | | | — | |
Inventory | 116 | | | 110 | |
| | | |
Regulatory assets | 72 | | | 39 | |
Other | 57 | | | 31 | |
Total current assets | 491 | | | 394 | |
Property, Plant and Equipment | | | |
Cost | 11,725 | | | 11,022 | |
Accumulated depreciation and amortization | (3,106) | | | (3,013) | |
Facilities to be retired, net | 6 | | | — | |
Net property, plant and equipment | 8,625 | | | 8,009 | |
Other Noncurrent Assets | | | |
Goodwill | 920 | | | 920 | |
Regulatory assets | 635 | | | 610 | |
Operating lease right-of-use assets, net | 19 | | | 20 | |
| | | |
| | | |
| | | |
Other | 84 | | | 72 | |
Total other noncurrent assets | 1,658 | | | 1,622 | |
Total Assets | $ | 10,774 | | | $ | 10,025 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 348 | | | $ | 279 | |
Accounts payable to affiliated companies | 64 | | | 68 | |
Notes payable to affiliated companies | 103 | | | 169 | |
Taxes accrued | 275 | | | 247 | |
Interest accrued | 30 | | | 31 | |
Current maturities of long-term debt | — | | | 50 | |
| | | |
Asset retirement obligations | 13 | | | 3 | |
Regulatory liabilities | 62 | | | 65 | |
Other | 82 | | | 70 | |
Total current liabilities | 977 | | | 982 | |
Long-Term Debt | 3,168 | | | 3,014 | |
Long-Term Debt Payable to Affiliated Companies | 25 | | | 25 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 1,050 | | | 981 | |
Asset retirement obligations | 123 | | | 108 | |
Regulatory liabilities | 739 | | | 748 | |
Operating lease liabilities | 18 | | | 20 | |
Accrued pension and other post-retirement benefit costs | 109 | | | 113 | |
| | | |
| | | |
Other | 101 | | | 99 | |
Total other noncurrent liabilities | 2,140 | | | 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 | 3,100 | | | 2,776 | |
Retained earnings | 602 | | | 397 | |
| | | |
Total equity | 4,464 | | | 3,935 | |
Total Liabilities and Equity | $ | 10,774 | | | $ | 10,025 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 204 | | | $ | 252 | | | $ | 238 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 311 | | | 283 | | | 269 | |
Equity component of AFUDC | (7) | | | (7) | | | (13) | |
| | | | | |
Impairment of assets and other charges | 25 | | | — | | | — | |
Deferred income taxes | 42 | | | 31 | | | 81 | |
Payments for asset retirement obligations | (2) | | | (2) | | | (8) | |
Provision for rate refunds | 16 | | | 14 | | | 7 | |
(Increase) decrease in | | | | | |
| | | | | |
Receivables | 6 | | | (13) | | | 20 | |
Receivables from affiliated companies | (25) | | | 9 | | | 22 | |
Inventory | (6) | | | 25 | | | (9) | |
Other current assets | (60) | | | (18) | | | (5) | |
Increase (decrease) in | | | | | |
Accounts payable | 38 | | | 2 | | | (17) | |
Accounts payable to affiliated companies | (4) | | | — | | | (10) | |
Taxes accrued | 26 | | | 30 | | | 17 | |
Other current liabilities | 11 | | | 3 | | | 1 | |
Other assets | (43) | | | (32) | | | (26) | |
Other liabilities | 27 | | | (2) | | | (41) | |
Net cash provided by operating activities | 559 | | | 575 | | | 526 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (848) | | | (834) | | | (952) | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Notes receivable from affiliated companies | (10) | | | (19) | | | — | |
Other | (60) | | | (48) | | | (68) | |
Net cash used in investing activities | (918) | | | (901) | | | (1,020) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 150 | | | 467 | | | 1,003 | |
Payments for the redemption of long-term debt | (50) | | | — | | | (551) | |
Notes payable to affiliated companies | (67) | | | (144) | | | 38 | |
Capital contribution from parent | 325 | | | — | | | — | |
| | | | | |
| | | | | |
Net cash provided by financing activities | 358 | | | 323 | | | 490 | |
Net decrease in cash and cash equivalents | (1) | | | (3) | | | (4) | |
Cash and cash equivalents at beginning of period | 14 | | | 17 | | | 21 | |
Cash and cash equivalents at end of period | $ | 13 | | | $ | 14 | | | $ | 17 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 107 | | | $ | 97 | | | $ | 97 | |
Cash paid for (received from) income taxes | 9 | | | — | | | (37) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 135 | | | 104 | | | 109 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY OHIO, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | Additional | | Retained | | | | |
| Common | | Paid-in | | Earnings | | | | Total |
(in millions) | Stock | | Capital | | (Deficit) | | | | Equity |
Balance at December 31, 2018 | $ | 762 | | | $ | 2,776 | | | $ | (93) | | | | | $ | 3,445 | |
Net income | — | | | — | | | 238 | | | | | 238 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2019 | $ | 762 | | | $ | 2,776 | | | $ | 145 | | | | | $ | 3,683 | |
Net income | — | | | — | | | 252 | | | | | 252 | |
| | | | | | | | | |
| | | | | | | | | |
Balance at December 31, 2020 | $ | 762 | | | $ | 2,776 | | | $ | 397 | | | | | $ | 3,935 | |
Net income | — | | | — | | | 204 | | | | | 204 | |
Contribution from parent | — | | | 325 | | | — | | | | | 325 | |
| | | | | | | | | |
Other | — | | | (1) | | | 1 | | | | | — | |
Balance at December 31, 2021 | $ | 762 | | | $ | 3,100 | | | $ | 602 | | | | | $ | 4,464 | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Duke Energy Indiana, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Duke Energy Indiana, LLC and subsidiary (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the Indiana Utility Regulatory Commission (the “Commission”), which has jurisdiction with respect to the electric rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $1.6 billion recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commission, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commission, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of the recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commission’s treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commission, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
Duke Energy Indiana Coal Ash Asset Retirement Obligations – Refer to Notes 1, 4, and 9 to the financial statements.
Critical Audit Matter Description
Duke Energy Indiana has asset retirement obligations associated with coal ash impoundments at operating and retired coal generation facilities. These legal obligations are the result of Indiana state and federal regulations. There is significant judgment in determining the methods to close each site since Duke Energy Indiana does not have approved closure plans for certain sites. Management has applied usingprobability weightings for the cash flows for certain sites based the likelihood of implementing potential closure methods. Probability weightings for the cash flows associated with the different potential closure methods (“probability weightings”) creates estimation uncertainty. The liability for coal ash asset retirement obligations at Duke Energy Indiana was $949 million at December 31, 2021.
We identified the asset retirement obligations associated with coal ash impoundments at Duke Energy Indiana as a retrospective transition methodcritical audit matter because of the significant management estimates and assumptions, including the different potential closure methods and the probability weightings as a result of pending legal challenges. The audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to the probability weightings for the cash flows associated with the different potential closure methods required a high degree of auditor judgment and an increased extent of effort, including the need to involve our environmental specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the probability weightings for the cash flows associated with the different potential closure methods for coal ash asset retirement obligations at Duke Energy Indiana included the following, among others:
•We tested the effectiveness of controls over management’s coal ash asset retirement obligation estimate, including those over management’s determination of the probability weightings.
•We tested the mathematical accuracy of management’s coal ash asset retirement obligation calculations, including the application of probability weightings.
•We made inquiries of internal and external legal counsel regarding the status of the legal matters associated with the probability weightings.
•We inspected the opinions from internal and external legal counsel supporting the probability weightings.
•With the assistance of professionals in our firm with the appropriate expertise, we inspected the Company’s filings with and orders from the Indiana Department of Environmental Management, for evidence that might contradict management’s assertions regarding the probability weightings.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 2002.
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | $ | 3,174 | | | $ | 2,795 | | | $ | 3,004 | |
Operating Expenses | | | | | |
Fuel used in electric generation and purchased power | 985 | | | 767 | | | 935 | |
Operation, maintenance and other | 750 | | | 762 | | | 790 | |
Depreciation and amortization | 615 | | | 569 | | | 525 | |
Property and other taxes | 73 | | | 81 | | | 69 | |
Impairment of assets and other charges | 9 | | | — | | | — | |
Total operating expenses | 2,432 | | | 2,179 | | | 2,319 | |
| | | | | |
Operating Income | 742 | | | 616 | | | 685 | |
Other Income and Expenses, net | 42 | | | 37 | | | 41 | |
Interest Expense | 196 | | | 161 | | | 156 | |
Income Before Income Taxes | 588 | | | 492 | | | 570 | |
Income Tax Expense | 107 | | | 84 | | | 134 | |
Net Income and Comprehensive Income | $ | 481 | | | $ | 408 | | | $ | 436 | |
| | | | | |
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| | | | | |
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
Cash and cash equivalents | $ | 6 | | | $ | 7 | |
Receivables (net of allowance for doubtful accounts of $3 at 2021 and 2020) | 100 | | | 55 | |
Receivables from affiliated companies | 98 | | | 112 | |
Notes receivable from affiliated companies | 134 | | | — | |
Inventory | 418 | | | 473 | |
Regulatory assets | 277 | | | 125 | |
Other | 68 | | | 37 | |
Total current assets | 1,101 | | | 809 | |
Property, Plant and Equipment | | | |
Cost | 17,343 | | | 17,382 | |
Accumulated depreciation and amortization | (5,583) | | | (5,661) | |
| | | |
Net property, plant and equipment | 11,760 | | | 11,721 | |
Other Noncurrent Assets | | | |
Regulatory assets | 1,278 | | | 1,203 | |
Operating lease right-of-use assets, net | 53 | | | 55 | |
| | | |
Other | 296 | | | 253 | |
Total other noncurrent assets | 1,627 | | | 1,511 | |
Total Assets | $ | 14,488 | | | $ | 14,041 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 282 | | | $ | 188 | |
Accounts payable to affiliated companies | 221 | | | 88 | |
Notes payable to affiliated companies | — | | | 131 | |
Taxes accrued | 73 | | | 62 | |
Interest accrued | 49 | | | 51 | |
Current maturities of long-term debt | 84 | | | 70 | |
Asset retirement obligations | 110 | | | 168 | |
Regulatory liabilities | 127 | | | 111 | |
Other | 105 | | | 83 | |
Total current liabilities | 1,051 | | | 952 | |
Long-Term Debt | 4,089 | | | 3,871 | |
Long-Term Debt Payable to Affiliated Companies | 150 | | | 150 | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 1,303 | | | 1,228 | |
Asset retirement obligations | 877 | | | 1,008 | |
Regulatory liabilities | 1,565 | | | 1,627 | |
Operating lease liabilities | 50 | | | 53 | |
Accrued pension and other post-retirement benefit costs | 167 | | | 171 | |
Investment tax credits | 177 | | | 168 | |
Other | 44 | | | 30 | |
Total other noncurrent liabilities | 4,183 | | | 4,285 | |
Commitments and Contingencies | 0 | | 0 |
Equity | | | |
Member's Equity | 5,015 | | | 4,783 | |
| | | |
| | | |
Total Liabilities and Equity | $ | 14,488 | | | $ | 14,041 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 481 | | | $ | 408 | | | $ | 436 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation, amortization and accretion | 619 | | | 572 | | | 531 | |
Equity component of AFUDC | (27) | | | (23) | | | (18) | |
| | | | | |
Impairment of assets and other charges | 9 | | | — | | | — | |
Deferred income taxes | 34 | | | 29 | | | 156 | |
Payments for asset retirement obligations | (67) | | | (63) | | | (48) | |
| | | | | |
(Increase) decrease in | | | | | |
| | | | | |
Receivables | (33) | | | 8 | | | (8) | |
Receivables from affiliated companies | — | | | — | | | 41 | |
Inventory | 55 | | | 44 | | | (95) | |
Other current assets | (181) | | | (3) | | | 76 | |
Increase (decrease) in | | | | | |
Accounts payable | 76 | | | (12) | | | (10) | |
Accounts payable to affiliated companies | 8 | | | 1 | | | 4 | |
Taxes accrued | 12 | | | 13 | | | (25) | |
Other current liabilities | 13 | | | 6 | | | 15 | |
Other assets | 20 | | | (68) | | | (74) | |
Other liabilities | (15) | | | 26 | | | 16 | |
Net cash provided by operating activities | 1,004 | | | 938 | | | 997 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (818) | | | (888) | | | (876) | |
| | | | | |
Purchases of debt and equity securities | (142) | | | (37) | | | (26) | |
Proceeds from sales and maturities of debt and equity securities | 65 | | | 22 | | | 20 | |
| | | | | |
Notes receivable from affiliated companies | (120) | | | (33) | | | — | |
Other | 36 | | | 48 | | | (49) | |
Net cash used in investing activities | (979) | | | (888) | | | (931) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 300 | | | 544 | | | 485 | |
Payments for the redemption of long-term debt | (70) | | | (513) | | | (213) | |
Notes payable to affiliated companies | (131) | | | 101 | | | (137) | |
Distributions to parent | (125) | | | (200) | | | (200) | |
| | | | | |
Net cash used in financing activities | (26) | | | (68) | | | (65) | |
Net (decrease) increase in cash and cash equivalents | (1) | | | (18) | | | 1 | |
Cash and cash equivalents at beginning of period | 7 | | | 25 | | | 24 | |
Cash and cash equivalents at end of period | $ | 6 | | | $ | 7 | | | $ | 25 | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 194 | | | $ | 164 | | | $ | 150 | |
Cash paid for (received from) income taxes | 56 | | | 36 | | | (6) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 118 | | | 101 | | | 102 | |
See Notes to Consolidated Financial Statements
DUKE ENERGY INDIANA, LLC
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
| | | | | | | | | | | | | | | |
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| | | | | | | | | | | |
| | | | | | | Member's | | | | |
(in millions) | | | | | | | Equity | | | | |
Balance at December 31, 2018 | | | | | | | $ | 4,339 | | | | | |
Net income | | | | | | | 436 | | | | | |
| | | | | | | | | | | |
Distributions to parent | | | | | | | (200) | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2019 | | | | | | | $ | 4,575 | | | | | |
Net income | | | | | | | 408 | | | | | |
| | | | | | | | | | | |
Distributions to parent | | | | | | | (200) | | | | | |
| | | | | | | | | | | |
Balance at December 31, 2020 | | | | | | | $ | 4,783 | | | | | |
Net income | | | | | | | 481 | | | | | |
Distributions to parent | | | | | | | (250) | | | | | |
Other | | | | | | | 1 | | | | | |
Balance at December 31, 2021 | | | | | | | $ | 5,015 | | | | | |
See Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholder and the Board of Directors of Piedmont Natural Gas Company, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Piedmont Natural Gas Company, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020 and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Regulatory Matters – Impact of Rate Regulation on the Financial Statements – Refer to Notes 1 and 3 to the financial statements.
Critical Audit Matter Description
The Company is subject to rate regulation by the North Carolina Utilities Commission, the Public Service Commission of South Carolina, and the Tennessee Public Utility Commission (collectively the “Commissions”), which have jurisdiction with respect to the gas rates of the Company. Management has determined it meets the criteria for the application of regulated operations accounting in preparing its financial statements under accounting principles generally accepted in the United States of America. Significant judgment can be required to determine if otherwise recognizable incurred costs qualify to be presented as a regulatory asset and deferred because such costs are probable of future recovery in customer rates. As of December 31, 2021, the Company has approximately $456.8 million recorded as regulatory assets.
We identified the impact of rate regulation related to regulatory assets as a critical audit matter due to the significant judgments made by management, including assumptions regarding the outcome of future decisions by the Commissions, to support its assertions on the likelihood of future recovery for deferred costs. Given that management’s accounting judgments are based on assumptions about the outcome of future decisions by the Commissions, auditing these judgments required specialized knowledge of accounting for rate regulation and the ratemaking process due to its inherent complexities as it relates to regulatory assets.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the recovery of regulatory assets included the following, among others:
•We tested the effectiveness of management’s controls over the evaluation of the likelihood of recovery in future rates and the monitoring and evaluation of regulatory developments that may affect the likelihood of recovering costs in future rates.
•We evaluated the Company’s disclosures related to the impacts of rate regulation, including the balances recorded and regulatory developments.
•We read relevant regulatory orders issued by the Commission, regulatory statutes, interpretations, procedural memorandums, filings made by intervenors, and other publicly available information to assess the likelihood of recovery in future rates based on precedents of the Commissions’ treatment of similar costs under similar circumstances. We evaluated the external information and compared it to management’s recorded balances for completeness.
•For regulatory matters in process, we inspected the Company’s and intervenors’ filings with the Commissions, that may impact the Company’s future rates, for any evidence that might contradict management’s assertions.
•We evaluated the reasonableness of management’s judgments regarding the recoverability of regulatory asset balances by performing the following:
–We inquired of management regarding changes in regulatory orders and regulatory asset balances during the year.
–We evaluated the reasonableness of such changes based on our knowledge of commission- approved amortization, expected incurred costs, and recently approved regulatory orders, as applicable.
–We utilized trend analyses to evaluate the historical consistency of regulatory asset balances.
–We compared the recorded regulatory asset balance to an independently developed expectation of the corresponding balance.
•We obtained representation from management asserting that regulatory assets recorded in the financial statements are probable of recovery.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 24, 2022
We have served as the Company's auditor since 1951.
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Operating Revenues | | | | | |
Regulated natural gas | $ | 1,555 | | | $ | 1,286 | | | $ | 1,369 | |
Nonregulated natural gas and other | 14 | | | 11 | | | 12 | |
| | | | | |
Total operating revenues | 1,569 | | | 1,297 | | | 1,381 | |
Operating Expenses | | | | | |
Cost of natural gas | 569 | | | 386 | | | 532 | |
Operation, maintenance and other | 327 | | | 322 | | | 328 | |
Depreciation and amortization | 213 | | | 180 | | | 172 | |
Property and other taxes | 55 | | | 53 | | | 45 | |
Impairment of assets and other charges | 10 | | | 7 | | | — | |
Total operating expenses | 1,174 | | | 948 | | | 1,077 | |
| | | | | |
Operating Income | 395 | | | 349 | | | 304 | |
Equity in earnings of unconsolidated affiliates | 9 | | | 9 | | | 8 | |
| | | | | |
Other income and expense, net | 55 | | | 51 | | | 20 | |
Total other income and expenses | 64 | | | 60 | | | 28 | |
Interest Expense | 119 | | | 118 | | | 87 | |
Income Before Income Taxes | 340 | | | 291 | | | 245 | |
Income Tax Expense | 30 | | | 18 | | | 43 | |
Net Income and Comprehensive Income | $ | 310 | | | $ | 273 | | | $ | 202 | |
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See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| December 31, |
(in millions) | 2021 | | 2020 |
ASSETS | | | |
Current Assets | | | |
| | | |
Receivables (net of allowance for doubtful accounts of $15 at 2021 and $12 at 2020) | $ | 318 | | | $ | 250 | |
Receivables from affiliated companies | 11 | | | 10 | |
Inventory | 109 | | | 68 | |
Regulatory assets | 141 | | | 153 | |
| | | |
Other | 9 | | | 20 | |
Total current assets | 588 | | | 501 | |
Property, Plant and Equipment | | | |
Cost | 9,918 | | | 9,134 | |
Accumulated depreciation and amortization | (1,899) | | | (1,749) | |
Facilities to be retired, net | 11 | | | — | |
Net property, plant and equipment | 8,030 | | | 7,385 | |
Other Noncurrent Assets | | | |
Goodwill | 49 | | | 49 | |
Regulatory assets | 316 | | | 302 | |
Operating lease right-of-use assets, net | 16 | | | 20 | |
Investments in equity method unconsolidated affiliates | 95 | | | 88 | |
Other | 288 | | | 270 | |
Total other noncurrent assets | 764 | | | 729 | |
Total Assets | $ | 9,382 | | | $ | 8,615 | |
LIABILITIES AND EQUITY | | | |
Current Liabilities | | | |
Accounts payable | $ | 196 | | | $ | 230 | |
Accounts payable to affiliated companies | 40 | | | 79 | |
| | | |
Notes payable to affiliated companies | 518 | | | 530 | |
Taxes accrued | 63 | | | 23 | |
Interest accrued | 37 | | | 34 | |
Current maturities of long-term debt | — | | | 160 | |
Regulatory liabilities | 56 | | | 88 | |
Other | 81 | | | 69 | |
Total current liabilities | 991 | | | 1,213 | |
Long-Term Debt | 2,968 | | | 2,620 | |
| | | |
Other Noncurrent Liabilities | | | |
Deferred income taxes | 815 | | | 821 | |
Asset retirement obligations | 22 | | | 20 | |
Regulatory liabilities | 1,058 | | | 1,044 | |
Operating lease liabilities | 14 | | | 19 | |
Accrued pension and other post-retirement benefit costs | 7 | | | 8 | |
Other | 158 | | | 155 | |
Total other noncurrent liabilities | 2,074 | | | 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 | 1,714 | | | 1,405 | |
| | | |
Total equity | 3,349 | | | 2,715 | |
Total Liabilities and Equity | $ | 9,382 | | | $ | 8,615 | |
See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | |
Net income | $ | 310 | | | $ | 273 | | | $ | 202 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
Depreciation and amortization | 216 | | | 182 | | | 174 | |
Equity component of AFUDC | (20) | | | (19) | | | — | |
| | | | | |
Impairment of assets and other charges | 10 | | | 7 | | | — | |
Deferred income taxes | 4 | | | 53 | | | 136 | |
Equity in (earnings) losses from unconsolidated affiliates | (9) | | | (9) | | | (8) | |
| | | | | |
Provision for rate refunds | (4) | | | (33) | | | 2 | |
(Increase) decrease in | | | | | |
| | | | | |
Receivables | (77) | | | 10 | | | 28 | |
Receivables from affiliated companies | (1) | | | — | | | 12 | |
Inventory | (40) | | | 3 | | | (2) | |
Other current assets | 33 | | | (66) | | | (25) | |
Increase (decrease) in | | | | | |
Accounts payable | (25) | | | 16 | | | (7) | |
Accounts payable to affiliated companies | (39) | | | 76 | | | (35) | |
Taxes accrued | 37 | | | 3 | | | (60) | |
Other current liabilities | (26) | | | (11) | | | 1 | |
Other assets | 26 | | | (11) | | | 1 | |
Other liabilities | (4) | | | 7 | | | (10) | |
Net cash provided by operating activities | 391 | | | 481 | | | 409 | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | |
Capital expenditures | (850) | | | (901) | | | (1,053) | |
Contributions to equity method investments | (9) | | | — | | | (16) | |
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Other | (31) | | | (28) | | | (14) | |
Net cash used in investing activities | (890) | | | (929) | | | (1,083) | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | |
Proceeds from the issuance of long-term debt | 347 | | | 394 | | | 596 | |
Payments for the redemption of long-term debt | (160) | | | — | | | (350) | |
Notes payable to affiliated companies | (13) | | | 54 | | | 278 | |
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Capital contribution from parent | 325 | | | — | | | 150 | |
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Net cash provided by financing activities | 499 | | | 448 | | | 674 | |
Net decrease in cash and cash equivalents | — | | | — | | | — | |
Cash and cash equivalents at beginning of period | — | | | — | | | — | |
Cash and cash equivalents at end of period | $ | — | | | $ | — | | | $ | — | |
Supplemental Disclosures: | | | | | |
Cash paid for interest, net of amount capitalized | $ | 114 | | | $ | 115 | | | $ | 84 | |
Cash received from income taxes | (13) | | | (36) | | | (31) | |
Significant non-cash transactions: | | | | | |
Accrued capital expenditures | 97 | | | 106 | | | 109 | |
See Notes to Consolidated Financial Statements
PIEDMONT NATURAL GAS COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
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| Common | | Retained | | | | Total |
(in millions) | Stock | | Earnings | | | | Equity |
Balance at December 31, 2018 | $ | 1,160 | | | $ | 931 | | | | | $ | 2,091 | |
Net income | — | | | 202 | | | | | 202 | |
| | | | | | | |
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Contribution from parent | 150 | | | — | | | | | 150 | |
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Balance at December 31, 2019 | $ | 1,310 | | | $ | 1,133 | | | | | $ | 2,443 | |
Net income | — | | | 273 | | | | | 273 | |
| | | | | | | |
| | | | | | | |
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Other | — | | | (1) | | | | | (1) | |
Balance at December 31, 2020 | $ | 1,310 | | | $ | 1,405 | | | | | $ | 2,715 | |
Net income | — | | | 310 | | | | | 310 | |
| | | | | | | |
| | | | | | | |
Contribution from parent | 325 | | | — | | | | | 325 | |
Other | — | | | (1) | | | | | (1) | |
Balance at December 31, 2021 | $ | 1,635 | | | $ | 1,714 | | | | | $ | 3,349 | |
See Notes to Consolidated Financial Statements
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Index to Combined Notes To Consolidated Financial Statements
The notes to the consolidated financial statements are a combined presentation. The following table indicates the registrants to which the notes apply.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Applicable Notes |
Registrant | 1 | | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | |
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.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations and Basis of Consolidation
Duke Energy is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the FERC and other regulatory agencies listed below. Duke Energy operates in the U.S. primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas; Progress Energy; 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 its separate Subsidiary Registrants, which along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
The information in these combined notes relates to each period presented. The adoption by Duke Energy of the revised guidance resulted in a change to the amount of Cash, cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the Consolidated Statements of Cash Flows. In addition, a reconciliation has been provided of Cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sums to the total of the same such amounts in the Consolidated Statements of Cash Flows. Prior to adoption, the Duke Energy Registrants reflected changesas noted in noncurrent restricted cash within Cash Flows from Investing Activities and changes in current restricted cash within Cash Flows from Operating Activities on the Index to Combined Notes to Consolidated StatementsFinancial Statements. However, none of Cash Flows.
In August 2016, the FASB issued accounting guidance addressing diversity in practice for eight separate cash flow issues. The guidance requires entitiesSubsidiary Registrants make any representation as to classify distributions received from equity method investees using either the cumulative earnings approachinformation related solely to Duke Energy or the natureSubsidiary Registrants of Duke Energy other than itself.
These Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the distribution approach. Duke Energy adopted this guidanceRegistrants and subsidiaries or VIEs where the respective Duke Energy Registrants have control. See Note 17 for additional information on January 1, 2018,VIEs. These Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and elected the nature of distribution approach. This approach requirestransmission facilities. See Note 8 for additional information on joint ownership. Substantially all distributions received to be categorized based on legal documentation describing the nature of the activities generatingSubsidiary Registrants' operations qualify for regulatory accounting.
Duke Energy Carolinas is a regulated public utility primarily engaged in the distribution. Cash inflows resultinggeneration, transmission, distribution and sale of electricity in a return on investment (surplus) will be reflected in Cash Flows from Operating Activities on the Consolidated Statementsportions of Cash Flows, whereas cash inflows resulting in a return of investment (capital) will be reflected in Cash Flows from Investing Activities on the Consolidated Statements of Cash Flows. The guidance has been applied using the retrospective transition method to each period presented. There are no changesNorth Carolina and South Carolina. Duke Energy Carolinas is subject to the Consolidated Statementsregulatory provisions of Cash Flowsthe NCUC, PSCSC, NRC and FERC.
Progress Energy is a public utility holding company, which conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. Progress Energy is subject to regulation by FERC and other regulatory agencies listed below.
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 FPSC, NRC and FERC.
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 periods presented as a result of this accounting change.
Retirement Benefits. In March 2017, the FASB issued revised accounting guidance for the presentation of net periodic costs related to benefit plans. Previous guidance required the aggregation of all the components of net periodic costsenergy price is recovered from retail customers and recorded in Operating Revenues on the Consolidated Statements of Operations and did not requireComprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, 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 disclosureregulatory provisions of the locationPUCO, 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 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, TPUC and FERC.
Certain prior year amounts have been reclassified to conform to the current year presentation.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Other Current Assets and Liabilities
The following table provides a description of amounts included in Other within Current Assets or Current Liabilities that exceed 5% of total Current Assets or Current Liabilities on the Duke Energy Registrants' Consolidated Balance Sheets at either December 31, 2021, or 2020.
| | | | | | | | | | | | | | | | | |
| | | December 31, |
(in millions) | Location | | 2021 | | 2020 |
Duke Energy | | | | | |
Accrued compensation | Current Liabilities | | $ | 915 | | | $ | 662 | |
Other accrued liabilities | Current Liabilities | | 649 | | | 1,455 | |
Duke Energy Carolinas | | | | | |
Accrued compensation | Current Liabilities | | $ | 277 | | | $ | 213 | |
| | | | | |
Duke Energy Progress | | | | | |
Customer deposits | Current Liabilities | | $ | 144 | | | $ | 144 | |
Other accrued liabilities | Current Liabilities | | 163 | | | 132 | |
Duke Energy Florida | | | | | |
Customer deposits | Current Liabilities | | $ | 200 | | | $ | 203 | |
Other accrued liabilities | Current Liabilities | | 89 | | | 81 | |
Duke Energy Ohio | | | | | |
Gas Storage | Current Assets | | $ | 25 | | | $ | 21 | |
Collateral liabilities | Current Liabilities | | 57 | | | 41 | |
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Discontinued 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 consolidated financial statements exclude amounts related to discontinued operations for all periods presented. For the years ended December 31, 2021, 2020 and 2019, the Income (Loss) From Discontinued Operations, net periodic costsof tax on Duke Energy's Consolidated Statements of Operations is entirely attributable to controlling interest.
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 third-party investors' portion of Duke Energy's net income (loss), net assets and comprehensive income (loss) as noncontrolling interest. Noncontrolling interest is included as a component of equity on the Consolidated StatementsBalance Sheet.
Several operating agreements of Operations. UnderDuke Energy's subsidiaries with noncontrolling interest are subject to allocations of tax attributes and cash flows in accordance with contractual agreements that vary throughout the amended guidance,lives of the service cost componentsubsidiaries. Therefore, Duke Energy and the other investors' (the owners) interests in the subsidiaries are not fixed, and the subsidiaries apply the 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, most of which is over the IRS recapture period, upon a hypothetical liquidation of the subsidiary at the net periodic costs is included within Operating Incomebook 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.
Other operating agreements of Duke Energy'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 allocates net income or loss and other comprehensive income or loss of these subsidiaries to the owners based on their pro rata shares.
In 2019, Duke Energy completed a sale of minority interest in a portion of certain renewable assets within the same line as other compensation expenses. All other components of net periodic costs are outside of Operating Income. In addition, the updated guidance permits only the service cost component of net periodic costsCommercial Renewables Segment for pretax proceeds to be capitalized to Inventory or Property, Plant and Equipment. This represents a change from previous guidance, which permitted all components of net periodic costs to be eligible for capitalization.
Duke Energy adopted this guidance on January 1, 2018. Under previous guidance,of $415 million. The portion of Duke Energy's commercial renewables energy portfolio sold includes 49% of 37 operating wind, solar and battery storage assets and 33% of 11 operating solar assets across the U.S. Duke Energy presented the total non-capitalized net periodic costs within Operation, maintenanceretained control of these assets, and, othertherefore, no gain or loss was recognized on the Consolidated Statements of Operations. The adoption of this guidance resulted in a retrospective change to reclassifydifference between the presentationconsideration received and the carrying value of the non-service cost (benefit) components ofnoncontrolling interest claim on net periodic costs to Other income and expenses. Duke Energy utilized the practical expedient for retrospective presentation. The change in components of net periodic costs eligible for capitalization is applicable prospectively. Since Duke Energy’s service cost component is greater than the total net periodic costs, the change results in increased capitalization of net periodic costs, higher Operation, maintenance and other and higher Other income and expenses. The resulting prospective impact to Duke Energy is an immaterial increase in Net Income. See Note 22 for further information.
For Duke Energy, the retrospective change resulted in higher Operation, maintenance and other and higher Other income and expenses,assets was $466 million, net of $156tax benefit of $8 million, and $139 millionwas recorded to equity.
The following table presents allocated losses to noncontrolling interest for the years ended December 31, 2017,2021, 2020 and 2016, respectively. There was no change to Net Income for these prior periods.2019.
The following new accounting standards have been issued, but have not yet been adopted by the Duke Energy Registrants, as of December 31, 2018.
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. The guidance will be applied using a modified retrospective approach. Under the modified retrospective approach of adoption, prior year reported results are not restated and a cumulative-effect adjustment, if applicable, is recorded to retained earnings at January 1, 2019. Upon adoption, agreements considered leases for the use of certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and railcars), land and office space will be recognized on the balance sheet. Duke Energy expects to adopt the following practical expedients:
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| December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Noncontrolling Interest Allocation of Income | | | | | |
Allocated losses to noncontrolling tax equity members utilizing the HLBV method | $ | 298 | | | $ | 271 | | | $ | 165 | |
Allocated losses to noncontrolling members based on pro rata shares of ownership | 31 | | | 24 | | | 12 | |
Total Noncontrolling Interest Allocated Losses | $ | 329 | | | $ | 295 | | | $ | 177 | |
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Practical Expedient | Description | Election |
Package of transition practical expedients (for leases commenced prior to adoption date and must be adopted as a package) | Do not need to 1) reassess whether any expired or existing contracts are/or contain leases, 2) reassess the lease classification for any expired or existing leases and 3) reassess initial direct costs for any existing leases. | Duke Energy plans to elect this practical expedient. |
Short-term lease expedient (elect by class of underlying asset) | Elect as an accounting policy to not apply the recognition requirements to short-term leases by asset class. | Duke Energy plans to elect this practical expedient for all asset classes. |
Lease and non-lease components (elect by class of underlying asset) | Elect as an accounting policy to not separate non-lease components from lease components and instead account for each lease and associated non-lease component as a single lease component by asset class. | Duke Energy plans to elect this practical expedient for all asset classes. |
Hindsight expedient (when determining lease term) | Elect to use hindsight to determine the lease term. | Duke Energy plans to elect this practical expedient. |
Existing and expired land easements not previously accounted for as leases | Elect to not evaluate existing or expired easements under the new guidance and carry forward current accounting treatment. | Duke Energy plans to elect this practical expedient. |
Comparative reporting requirements for initial adoption
| Elect to apply transition requirements at adoption date, recognize cumulative effect adjustment to retained earnings2021 Sale of Minority Interest in period of adoption and not apply ASC 842 to comparative periods, including disclosures. | Duke Energy plans to elect this practical expedient. |
Lessor expedient (elect by class of underlying asset)
| Elect as an accounting policy to aggregate non-lease components with the related lease component when specified conditions are met by asset class. Account for the combined component based on its predominant characteristic (revenue or operating lease). | Duke Energy plans to elect this practical expedient for all asset classes. |
Duke Energy currently expects to record right-of-useIndiana
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 transaction 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 purchase price. Duke Energy retained indirect control of these assets, and,
operating lease liabilities on its balance sheet as shown in approximate amounts in the table below: |
| | | |
| (in millions) |
|
Duke Energy | $ | 1,700 |
|
Duke Energy Carolinas | 150 |
|
Progress Energy | 850 |
|
Duke Energy Progress | 400 |
|
Duke Energy Florida | 450 |
|
Duke Energy Ohio | 25 |
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Duke Energy Indiana | 60 |
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Piedmont | 30 |
|
In addition to the recognition of operating leasestherefore, no gain or loss was recognized on the balance sheet,Consolidated Statements of Operations. The difference between the cash consideration received, net of transaction costs of approximately $27 million, and the carrying value of the noncontrolling interest is $545 million and was recorded as an increase to equity. Under the terms of the agreement, Duke Energy expects additional disclosures including both finance and operating lease costs, short-term lease costs, variable lease costs, weighted-average remaining lease term as well as weighted-average discount rates.has the discretion to determine the timing of the second closing, but it will occur no later than January 2023. At the second closing, Duke Energy does not expect a material change to its financial statements from adoptionwill issue and sell additional membership interests such that GIC will own 19.9% of the new standardmembership interests for contracts where it is the lessor.remaining 50% of the purchase price.
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONSAcquisitions
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 AcquisitionSignificant Accounting Policies
Use of Piedmont Natural GasEstimates
On October 3, 2016,In preparing financial statements that conform to GAAP, the Duke Energy acquired all outstanding common stockRegistrants must make estimates and assumptions that affect the reported amounts of Piedmontassets 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.
Regulatory Accounting
The majority of the Duke Energy Registrants’ operations are subject to price regulation for the sale of electricity and natural gas by state utility commissions or FERC. When prices are set on the basis of specific costs of the regulated operations and an effective franchise is in place such that sufficient natural gas or electric services can be sold to recover those costs, the Duke Energy Registrants apply regulatory accounting. Regulatory accounting changes the timing of the recognition of costs or revenues relative to a company that does not apply regulatory accounting. As a result, regulatory assets and regulatory liabilities are recognized on the Consolidated Balance Sheets. Regulatory assets and liabilities are amortized consistent with the treatment of the related cost in the ratemaking process. Regulatory assets are reviewed for recoverability each reporting period. If a regulatory asset is no longer deemed probable of recovery, the deferred cost is charged to earnings. See Note 3 for further information.
Regulatory accounting rules also require recognition of a disallowance (also called "impairment") loss if it becomes probable that part of the cost of a plant under construction (or a recently completed plant or an abandoned plant) will be disallowed for ratemaking purposes and a reasonable estimate of the amount of the disallowance can be made. For example, if a cost cap is set 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 atplant still under construction, the timeamount of the acquisition.disallowance is a result of a judgment as to the ultimate cost of the plant. These disallowances can require judgments on allowed future rate recovery.
When it becomes probable that regulated generation, transmission or distribution assets will be abandoned, the cost of the asset is removed from plant in service. The acquisition providesvalue that may be retained as a foundationregulatory asset on the balance sheet for the abandoned property is dependent upon amounts that may be recovered through regulated rates, including any return. As such, an impairment charge could be partially or fully offset by the establishment of a regulatory asset if rate recovery is probable. The impairment charge for a disallowance of costs for regulated plants under construction, recently completed or abandoned is based on discounted cash flows.
The Duke Energy Registrants utilize cost-tracking mechanisms, commonly referred to establish a broader, long-term strategicas fuel adjustment clauses or PGA clauses. These clauses allow for the recovery of fuel and fuel-related costs, portions of purchased power, natural gas infrastructure platformcosts and hedging costs through surcharges on customer rates. The difference between the costs incurred and the surcharge revenues is recorded either as an adjustment to complement its existingOperating Revenues, Operating Expenses – Fuel used in electric generation or Operating Expenses – Cost of 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.
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FINANCIAL STATEMENTS | ACQUISITIONS AND DISPOSITIONS |
Accounting Charges Related to the Acquisition
Duke Energy incurred pretax transaction and integration costs associated with the acquisition of $84 million, $103 million and $439 million for the years ended December 31, 2018, 2017 and 2016, respectively. Amounts recorded on the Consolidated Statements of Operations, in 2018 and 2017 were primarily system integration costs of $78 million and $71 million, respectively, related to combining the various operational and financial systems of Duke Energy and Piedmont, including a one-time software impairment resulting from planned accounting system and process integration in 2017. A $7 million charge was recorded within Impairment Charges, with the remaining $64 million recorded within Operation, maintenance and other in 2017.
Amounts recorded in 2016 include:
Interest expense of $234 million related to the acquisition financing, including realized lossesan off-setting impact on forward-starting interest rate swaps of $190 million. See Note 14 for additional information on the swaps.
Charges of $104 million related to commitments made in conjunction with the transaction, including charitable contributions and a one-time bill credit to Piedmont customers. $10 million was recorded as a reduction in Operating Revenues, with the remaining $94 million recorded within Operation, maintenance and other.
Other transaction and integration costs of $101 million recorded to Operation, maintenance and other, including professional fees and severance charges.
The majority of transition and integration activities were completed by the end of 2018.
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, 2015. The pro forma financial information does not include potential cost savings, intercompany revenues, Piedmont’s earnings from a certain equity method investment sold immediately prior to the mergerregulatory assets or non-recurring transaction and integration costs incurred by Duke Energy and Piedmont. The after-tax transaction and integration costs incurred by Duke Energy and Piedmont were $279 million for the year ended December 31, 2016.
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. |
| | | |
| Year Ended December 31, |
(in millions) | 2016 |
Operating Revenues | $ | 23,504 |
|
Net Income Attributable to Duke Energy Corporation | 2,442 |
|
Piedmont's Earnings
Piedmont's revenues and net income included in Duke Energy's Consolidated Statements of Operations for the year ended December 31, 2016, were $367 million and $20 million, respectively. Piedmont's revenues and net income for the year ended December 31, 2016, include the impact of non-recurring transaction costs of $10 million and $46 million, respectively.
DISPOSITIONS
For the years ended December 31, 2018, and 2017, the Income (Loss) from Discontinued Operations, net of tax, was immaterial. The following table summarizes the Loss from Discontinued Operations, net of tax recorded on Duke Energy's Consolidated Statements of Operations for the year ended December 31, 2016: |
| | | |
| Year Ended December 31, |
(in millions) | 2016 |
|
International Disposal Group | $ | (534 | ) |
Other(a) | 126 |
|
Loss from Discontinued Operations, net of tax | $ | (408 | ) |
| |
(a) | Amount represents an income tax benefit resulting from immaterial out of period deferred tax liability adjustments for previously sold businesses not related to the International Disposal Group. |
2016 Sale of International Energy
In February 2016, Duke Energy announced it had initiated a process to divest the International Disposal Group, and in October 2016, announced it had entered into two separate purchase and sale agreements to execute the divestiture. Both sales closed in December of 2016, resulting in available cash proceeds of $1.9 billion, excluding transaction costs. Proceeds were primarily used to reduce the Parent debt. Existing favorable tax attributes result in no immediate U.S. federal-level cash tax impacts. Details of each transaction are as follows:
liabilities.
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FINANCIAL STATEMENTS | ACQUISITIONS AND DISPOSITIONSSUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Cash, Cash Equivalents and Restricted Cash
On December 20, 2016,All highly liquid investments with maturities of three months or less at the date of acquisition are considered cash equivalents. Duke Energy, closedProgress Energy and Duke Energy Florida have restricted cash balances related primarily to collateral assets, escrow deposits and VIEs. Duke Energy Carolinas and Duke Energy Progress have restricted cash balances related to VIEs from storm recovery bonds issued in 2021. See Note 17 for additional information. Restricted cash amounts are included in Other within Current Assets and Other Noncurrent Assets on the sale of its ownership interests in businesses in Argentina, Chile, Ecuador, El Salvador, Guatemala and Peru to I Squared Capital. The assets sold included approximately 2,230 MW of hydroelectric and natural gas generation capacity, transmission infrastructure and natural gas processing facilities. I Squared Capital purchased the businesses for an enterprise value of $1.2 billion.
On December 29, 2016, Duke Energy closed on the sale of its Brazilian business, which included approximately 2,090 MW of hydroelectric generation capacity, to CTG for an enterprise value of $1.2 billion. With the closing of the CTG deal, Duke Energy finalized its exit from the Latin American market.
Assets Held For Sale and Discontinued Operations
As a result of the transactions, the International Disposal Group was classified as held for sale and as discontinued operations in the fourth quarter of 2016. 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.
Consolidated Balance Sheets. The following table presents the resultscomponents of cash, cash equivalents and restricted cash included in the International Disposal GroupConsolidated Balance Sheets.
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| December 31, 2021 |
| | | Duke | | | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy |
| Energy | | Carolinas | | Energy | | Progress | | Florida |
Current Assets | | | | | | | | | |
Cash and cash equivalents | $ | 343 | | | $ | 7 | | | $ | 70 | | | $ | 35 | | | $ | 23 | |
Other | 170 | | | — | | | 39 | | | — | | | 39 | |
Other Noncurrent Assets | | | | | | | | | |
Other | 7 | | | 1 | | | 4 | | | 4 | | | — | |
Total cash, cash equivalents and restricted cash | $ | 520 | | | $ | 8 | | | $ | 113 | | | $ | 39 | | | $ | 62 | |
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| December 31, 2020 |
| | | Duke | | | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy |
| Energy | | Carolinas | | Energy | | Progress | | Florida |
Current Assets | | | | | | | | | |
Cash and cash equivalents | $ | 259 | | | $ | 21 | | | $ | 59 | | | $ | 39 | | | $ | 11 | |
Other | 194 | | | — | | | 39 | | | — | | | 39 | |
Other Noncurrent Assets | | | | | | | | | |
Other | 103 | | | — | | | 102 | | | — | | | — | |
Total cash, cash equivalents and restricted cash | $ | 556 | | | $ | 21 | | | $ | 200 | | | $ | 39 | | | $ | 50 | |
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Inventory
Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Inventory is charged to expense or capitalized to property, plant and equipment when issued, primarily using the average cost method. Excess or obsolete inventory is written down to the lower of cost or net realizable value. Once inventory has been written down, it creates a new cost basis for the year endedinventory that is not subsequently written up. Provisions for inventory write-offs were not material at December 31, 2016, which2021, and 2020, respectively. The components of inventory are presented in the tables below.
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| December 31, 2021 |
| | | 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 | $ | 2,397 | | | $ | 793 | | | $ | 1,067 | | | $ | 729 | | | $ | 338 | | | $ | 80 | | | $ | 311 | | | $ | 14 | |
Coal | 486 | | | 195 | | | 167 | | | 94 | | | 73 | | | 19 | | | 105 | | | — | |
Natural gas, oil and other | 316 | | | 38 | | | 164 | | | 98 | | | 66 | | | 17 | | | 2 | | | 95 | |
Total inventory | $ | 3,199 | | | $ | 1,026 | | | $ | 1,398 | | | $ | 921 | | | $ | 477 | | | $ | 116 | | | $ | 418 | | | $ | 109 | |
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| 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 | 294 | | | 39 | | | 183 | | | 107 | | | 76 | | | 16 | | | 1 | | | 56 | |
Total inventory | $ | 3,167 | | | $ | 1,010 | | | $ | 1,375 | | | $ | 911 | | | $ | 464 | | | $ | 110 | | | $ | 473 | | | $ | 68 | |
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Investments in Debt and Equity Securities
The Duke Energy Registrants classify investments in equity securities as FV-NI and investments in debt securities as AFS. Both categories are recorded at fair value on the Consolidated Balance Sheets. Realized and unrealized gains and losses on securities classified as FV-NI are reported through net income. Unrealized gains and losses for debt securities classified as AFS are included in Loss from Discontinued Operations, netAOCI until realized, unless it is determined the carrying value of taxan investment has a credit loss. For certain investments of regulated operations, such as substantially all of the NDTF, realized and unrealized gains and losses (including any credit losses) on debt securities are recorded as a regulatory asset or liability. The credit loss portion of debt securities of nonregulated operations are included in earnings. Investments in debt and equity securities are classified as either current or noncurrent based on management’s intent and ability to sell these securities, taking into consideration current market liquidity. See Note 15 for further information.
Goodwill
Duke Energy'sEnergy, Progress Energy, Duke Energy Ohio and Piedmont perform annual goodwill impairment tests as of August 31 each year at the reporting unit level, which is determined to be a business segment or one level below. Duke Energy, Progress Energy, Duke Energy Ohio and Piedmont update these tests 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. See Note 11 for further information.
Intangible Assets
Intangible assets are included in Other in Other Noncurrent Assets on the Consolidated Balance Sheets. Generally, intangible assets are amortized using an amortization method that reflects the pattern in which the economic benefits of the intangible asset are consumed or on a straight-line basis if that pattern is not readily determinable. Amortization of intangibles is reflected in Depreciation and amortization on the Consolidated Statements of Operations. Intangible assets are subject to impairment testing and if impaired, the carrying value is accordingly reduced.
RECs are used to measure compliance with renewable energy standards and are held primarily for consumption. See Note 11 for further information.
Long-Lived Asset Impairments
The Duke Energy Registrants evaluate long-lived assets, excluding goodwill, for impairment when circumstances indicate the carrying value of those assets may not be recoverable. An impairment exists when a long-lived asset’s carrying value exceeds the estimated undiscounted cash flows expected to result from the use and eventual disposition of the asset. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. If the carrying value of the long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the carrying value of the asset is written down to its then current estimated fair value and an impairment charge is recognized.
The Duke Energy Registrants assess fair value of long-lived assets using various methods, including recent comparable third-party sales, internally developed discounted cash flow analysis and analysis from outside advisors. Triggering events to reassess cash flows may include, but are not limited to, significant changes in commodity prices, the condition of an asset or management’s interest in selling the asset.
Equity Method Investment Impairments
Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method. Equity method investments are assessed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. If the decline in value is considered to be other than temporary, the investment is written down to its estimated fair value, which establishes a new cost basis in the investment.
Impairment assessments use a discounted cash flow income approach and include consideration of the severity and duration of any decline in the fair value of the investments. The estimated cash flows may be based on alternative expected outcomes that are probability weighted. Key inputs that involve estimates and significant management judgment include cash flow projections, selection of a discount rate, probability weighting of potential outcomes, and whether any decline in value is considered temporary.
|
| | | |
| Year Ended December 31, |
(in millions) | 2016 |
|
Operating Revenues | $ | 988 |
|
Fuel used in electric generation and purchased power | 227 |
|
Cost of natural gas | 43 |
|
Operation, maintenance and other | 341 |
|
Depreciation and amortization(a) | 62 |
|
Property and other taxes | 15 |
|
Impairment charges (b) | 194 |
|
(Losses) Gains on Sales of Other Assets and Other, net | (3 | ) |
Other Income and Expenses, net | 58 |
|
Interest Expense | 82 |
|
Pretax loss on disposal(c) | (514 | ) |
Loss before income taxes(d) | (435 | ) |
Income tax expense(e)(f) | 99 |
|
Loss from discontinued operations of the International Disposal Group | $ | (534 | ) |
| | | | | |
(a)FINANCIAL STATEMENTS | Upon meeting the criteria for assets held for sale, beginning in the fourth quarter of 2016 depreciation expense ceased.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
| |
(b) | 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 of 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. |
| |
(c) | The pretax loss on disposal includes the recognition of cumulative foreign currency translation losses of $620 million as of the disposal date. See the Consolidated Statements of Changes in Equity for additional information. |
| |
(d) | Pretax Loss attributable to Duke Energy Corporation was $(445) million for the year ended December 31, 2016. |
| |
(e) | Amount includes $126 million of income tax expense on the disposal, which primarily reflects in-country taxes incurred as a result of the sale. The after-tax loss on disposal was $640 million. |
| |
(f) | Amount includes an income tax benefit of $95 million. See Note 23, "Income Taxes," for additional information. |
Property, Plant and Equipment
Property, plant and equipment are stated at the lower of depreciated historical cost net of any disallowances or fair value, if impaired. The Duke Energy Registrants capitalize all construction-related direct labor and material costs, as well as indirect construction costs such as general engineering, taxes and financing costs. See “Allowance for Funds Used During Construction and Interest Capitalized” section below for information on capitalized financing costs. Costs of renewals and betterments that extend the useful life of property, plant and equipment are also capitalized. The cost of repairs, replacements and major maintenance projects, which do not extend the useful life or increase the expected output of the asset, are expensed as incurred. Depreciation is generally computed over the estimated useful life of the asset using the composite straight-line method. Depreciation studies are conducted periodically to update composite rates and are approved by state utility commissions and/or the FERC when required. The composite weighted average depreciation rates, excluding nuclear fuel, are included in the table that follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
Duke Energy | 2.9 | % | | 3.0 | % | | 3.1 | % |
Duke Energy Carolinas | 2.7 | % | | 2.8 | % | | 2.8 | % |
Progress Energy | 3.1 | % | | 3.2 | % | | 3.1 | % |
Duke Energy Progress | 3.0 | % | | 3.1 | % | | 3.1 | % |
Duke Energy Florida | 3.3 | % | | 3.3 | % | | 3.1 | % |
Duke Energy Ohio | 2.9 | % | | 2.9 | % | | 2.6 | % |
Duke Energy Indiana | 3.6 | % | | 3.5 | % | | 3.3 | % |
Piedmont | 2.1 | % | | 2.3 | % | | 2.4 | % |
In general, when the Duke Energy Registrants retire regulated property, plant and equipment, the original cost plus the cost of retirement, less salvage value and any depreciation already recognized, is charged to accumulated depreciation. However, when it becomes probable the asset will be retired substantially in advance of its original expected useful life or is abandoned, the cost of the asset and the corresponding accumulated depreciation is recognized as a separate asset. If the asset is still in operation, the net amount is classified as Facilities to be retired, net on the Consolidated Balance Sheets. If the asset is no longer operating, the net amount is classified in Regulatory assets on the Consolidated Balance Sheets if deemed recoverable (see discussion of long-lived asset impairments above). The carrying value of the asset is based on historical cost if the Duke Energy Registrants are allowed to recover the remaining net book value and a return equal to at least the incremental borrowing rate. If not, an impairment is recognized to the extent the net book value of the asset exceeds the present value of future revenues discounted at the incremental borrowing rate.
When the Duke Energy Registrants sell entire regulated operating units, or retire or sell nonregulated properties, the original cost and accumulated depreciation and amortization balances are removed from Property, Plant and Equipment on the Consolidated Balance Sheets. Any gain or loss is recorded in earnings, unless otherwise required by the applicable regulatory body. See Note 10 for additional information.
Leases
Duke Energy determines if an arrangement is a lease at contract inception based on whether the arrangement involves the use of a physically distinct identified asset and whether Duke Energy has the right to obtain substantially all of the economic benefits from the use of the asset throughout the period as well as the right to direct the use of the asset. As a policy election, Duke Energy does not evaluate arrangements with initial contract terms of less than one year as leases.
Operating leases are included in Operating lease ROU assets, net, Other current liabilities and Operating lease liabilities on the Consolidated Balance Sheets. Finance leases are included in Property, plant and equipment, Current maturities of long-term debt and Long-Term Debt on the Consolidated Balance Sheets.
For lessee and lessor arrangements, Duke Energy has elected a policy to not separate lease and non-lease components for all asset classes. For lessor arrangements, lease and non-lease components are only combined under one arrangement and accounted for under the lease accounting framework if the non-lease components are not the predominant component of the arrangement and the lease component would be classified as an operating lease.
Nuclear Fuel
Nuclear fuel is classified as Property, Plant and Equipment on the Consolidated Balance Sheets.
Nuclear fuel in the front-end fuel processing phase is considered work in progress and not amortized until placed in service. Amortization of nuclear fuel is included within Fuel used in electric generation and purchased power on the Consolidated Statements of Operations. Amortization is recorded using the units-of-production method.
Allowance for Funds Used During Construction and Interest Capitalized
For regulated operations, the debt and equity costs of financing the construction of property, plant and equipment are reflected as AFUDC and capitalized as a component of the cost of property, plant and equipment. AFUDC equity is reported on the Consolidated Statements of Operations as non-cash income in Other income and expenses, net. AFUDC debt is reported as a non-cash offset to Interest Expense. After construction is completed, the Duke Energy Registrants are permitted to recover these costs through their inclusion in rate base and the corresponding subsequent depreciation or amortization of those regulated assets.
AFUDC equity, a permanent difference for income taxes, reduces the ETR when capitalized and increases the ETR when depreciated or amortized. See Note 23 for additional information.
| | | | | |
FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
For nonregulated operations, interest is capitalized during the construction phase with an offsetting non-cash credit to Interest Expense on the Consolidated Statements of Operations.
Asset Retirement Obligations
AROs are recognized for legal obligations associated with the retirement of property, plant and equipment. Substantially all AROs are related to regulated operations. When recording an ARO, the present value of the projected liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The liability is accreted over time. For operating plants, the present value of the liability is added to the cost of the associated asset and depreciated over the remaining life of the asset. For retired plants, the present value of the liability is recorded as a regulatory asset unless determined not to separately disclose discontinuedbe probable of recovery.
The present value of the initial obligation and subsequent updates are based on discounted cash flows, which include estimates regarding timing of future cash flows, selection of discount rates and cost escalation rates, among other factors. These estimates are subject to change. Depreciation expense is adjusted prospectively for any changes to the carrying amount of the associated asset. The Duke Energy Registrants receive amounts to fund the cost of the ARO for regulated operations through a combination of regulated revenues and earnings on the NDTF. As a result, amounts recovered in regulated revenues, earnings on the NDTF, accretion expense and depreciation of the associated asset are netted and deferred as a regulatory asset or liability.
Accounts Payable
During 2020, Duke Energy established a supply chain finance program (the “program”) with a global financial institution. The program is voluntary and allows Duke Energy suppliers, at their sole discretion, to sell their receivables from Duke Energy to the financial institution at a rate that leverages Duke Energy’s credit rating and, which may result in favorable terms compared to the rate available to the supplier on their own credit rating. Suppliers participating in the program, determine at their sole discretion which invoices they will sell to the financial institution. Suppliers’ decisions on which invoices are sold do not impact Duke Energy’s payment terms, which are based on commercial terms negotiated between Duke Energy and the supplier regardless of program participation. The commercial terms negotiated between Duke Energy and its suppliers are consistent regardless of whether the supplier elects to participate in the program. Duke Energy does not issue any guarantees with respect to the program and does not participate in negotiations between suppliers and the financial institution. Duke Energy does not have an economic interest in the supplier’s decision to participate in the program and receives no interest, fees or other benefit from the financial institution based on supplier participation in the program.
The following table presents the outstanding accounts payable balance sold to the financial institution by our suppliers and the supplier invoices sold to the financial institution under the program included within Net cash provided by operating activities on the Consolidated Statements of Cash
Flows. The following table summarizes Duke Energy's cash flows from discontinued operations related to the International Disposal Group. |
| | | |
| Year Ended December 31, |
(in millions) | 2016 |
|
Cash flows provided by (used in): | |
Operating activities | $ | 204 |
|
Investing activities | (434 | ) |
Other Sale Related Matters
During 2017, Duke Energy provided certain transition services to CTG and I Squared Capital. Cash flows related to providing the transition services were not materialFlows as of December 31, 2017.2021, and December 31, 2020.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 30, 2020 |
| | | Duke | Duke | | | | | Duke | |
| Duke | Progress | Energy | Energy | | | Duke | | Energy | |
(in millions) | Energy | Energy | Florida | Ohio | Piedmont | | Energy | | Ohio | Piedmont |
Outstanding Accounts Payable Balance Sold | $ | 19 | | $ | 9 | | $ | 9 | | $ | 6 | | $ | 4 | | | $ | 15 | | | $ | 1 | | $ | 14 | |
Suppliers Invoices Settled Through The Program | 122 | | 10 | | 10 | | 12 | | 100 | | | 45 | | | 9 | | 36 | |
Revenue Recognition
Duke Energy recognizes revenue as customers obtain control of promised goods and services in an amount that reflects consideration expected in exchange for those goods or services. Generally, the delivery of electricity and natural gas results in the transfer of control to customers at the time the commodity is delivered and the amount of revenue recognized is equal to the amount billed to each customer, including estimated volumes delivered when billings have not yet occurred. See Note 18 for further information.
Derivatives and Hedging
Derivative and non-derivative instruments may be used in connection with commodity price and interest rate activities, including swaps, futures, forwards and options. All transition servicesderivative instruments, except those that qualify for the NPNS exception, are recorded on the Consolidated Balance Sheets at fair value. Qualifying derivative instruments may be designated as either cash flow hedges or fair value hedges. Other derivative instruments (undesignated contracts) either have not been designated or do not qualify as hedges. The effective portion of the change in the fair value of cash flow hedges is recorded in AOCI. The effective portion of the change in the fair value of a fair value hedge is offset in net income by changes in the hedged item. For activity subject to regulatory accounting, gains and losses on derivative contracts are reflected as regulatory assets or liabilities and not as other comprehensive income or current period income. As a result, changes in fair value of these derivatives have no immediate earnings impact.
Formal documentation, including transaction type and risk management strategy, is maintained for all contracts accounted for as a hedge. At inception and at least every three months thereafter, the hedge contract is assessed to see if it is highly effective in offsetting changes in cash flows or fair values of hedged items.
See Note 14 for further information.
Captive Insurance Reserves
Duke Energy has captive insurance subsidiaries that provide coverage, on an indemnity basis, to the Subsidiary Registrants as well as certain third parties, on a limited basis, for financial losses, primarily related to property, workers’ compensation and general liability. Liabilities include provisions for estimated losses incurred but not reported (IBNR), as well as estimated provisions for known claims. IBNR reserve estimates are primarily based upon historical loss experience, industry data and other actuarial assumptions. Reserve estimates are adjusted in future periods as actual losses differ from experience.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Duke Energy, through its captive insurance entities, also has reinsurance coverage with third parties for certain losses above a per occurrence and/or aggregate retention. Receivables for reinsurance coverage are recognized when realization is deemed probable.
Unamortized Debt Premium, Discount and Expense
Premiums, discounts and expenses incurred with the issuance of outstanding long-term debt are amortized over the term of the debt issue. The gain or loss on extinguishment associated with refinancing higher-cost debt obligations in the regulated operations is amortized over the remaining life of the original instrument. Amortization expense is recorded as Interest Expense in the Consolidated Statements of Operations and is reflected as Depreciation, amortization and accretion within Net cash provided by operating activities on the Consolidated Statements of Cash Flows.
Premiums, discounts and expenses are presented as an adjustment to the carrying value of the debt amount and included in Long-Term Debt on the Consolidated Balance Sheets presented.
Preferred Stock
Preferred stock is reviewed to determine the appropriate balance sheet classification and embedded features, such as call options, are evaluated to determine if they should be bifurcated and accounted for separately. Costs directly related to the International Disposal Group ended in 2017. Additionally,issuance of preferred stock are recorded as a reduction of the proceeds received. The liability for the dividend is recognized when declared. The accumulated dividends on the cumulative preferred stock is recognized to net income available to Duke Energy will reimburse CTGCorporation in the EPS calculation. See Note 19 for further information.
Loss Contingencies and I Squared CapitalEnvironmental Liabilities
Contingent losses are recorded when it is probable a loss has occurred and the loss can be reasonably estimated. When a range of the probable loss exists and no amount within the range is a better estimate than any other amount, the minimum amount in the range is recorded. Unless otherwise required by GAAP, legal fees are expensed as incurred.
Environmental liabilities are recorded on an undiscounted basis when environmental remediation or other liabilities become probable and can be reasonably estimated. Environmental expenditures related to past operations that do not generate current or future revenues are expensed. Environmental expenditures related to operations that generate current or future revenues are expensed or capitalized, as appropriate. Certain environmental expenditures receive regulatory accounting treatment and are recorded as regulatory assets.
See Notes 3 and 4 for allfurther information.
Pension and Other Post-Retirement Benefit Plans
Duke Energy maintains qualified, non-qualified and other post-retirement benefit plans. Eligible employees of the Subsidiary Registrants participate in the respective qualified, non-qualified and other post-retirement benefit plans and the Subsidiary Registrants are allocated their proportionate share of benefit costs. See Note 22 for further information, including significant accounting policies associated with these plans.
Severance and Special Termination Benefits
Duke Energy has severance plans under which in general, the longer a terminated employee worked prior to termination the greater the amount of severance benefits. A liability for involuntary severance is recorded once an involuntary severance plan is committed to by management if involuntary severances are probable and can be reasonably estimated. For involuntary severance benefits incremental to its ongoing severance plan benefits, the fair value of the obligation is expensed at the communication date if there are no future service requirements or over the required future service period. Duke Energy also offers special termination benefits under voluntary severance programs. Special termination benefits are recorded immediately upon employee acceptance absent a significant retention period. Otherwise, the cost is recorded over the remaining service period. Employee acceptance of voluntary severance benefits is determined by management based on the facts and circumstances of the benefits being offered. See Note 20 for further information.
Guarantees
If necessary, liabilities are recognized at the time of issuance or material modification of a guarantee for the estimated fair value of the obligation it assumes. Fair value is estimated using a probability weighted approach. The obligation is reduced over the term of the guarantee or related contract in a systematic and rational method as risk is reduced. Duke Energy recognizes a liability for the best estimate of its loss due to the nonperformance of the guaranteed party. This liability is recognized at the inception of a guarantee and is updated periodically. See Note 7 for further information.
Stock-Based Compensation
Stock-based compensation represents costs related to stock-based awards granted to employees and Board of Directors members. Duke Energy recognizes stock-based compensation based upon the estimated fair value of awards, net of estimated forfeitures at the date of issuance. The recognition period for these costs begins at either the applicable service inception date or grant date and continues throughout the requisite service period. Compensation cost is recognized as expense or capitalized as a component of property, plant and equipment. See Note 21 for further information.
Income Taxes
Duke Energy and its subsidiaries file a consolidated federal income tax obligations arisingreturn and other state and foreign jurisdictional returns. The Subsidiary Registrants are parties to a tax-sharing agreement with Duke Energy. Income taxes recorded represent amounts the Subsidiary Registrants would incur as separate C-Corporations. Deferred income taxes have been provided for temporary differences between GAAP and tax bases of assets and liabilities because the differences create taxable or tax-deductible amounts for future periods. ITCs associated with regulated operations are deferred and amortized as a reduction of income tax expense over the estimated useful lives of the related properties. For ITCs associated with nonregulated operations see “Accounting for Renewable Energy Tax Credits.”
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Accumulated deferred income taxes are valued using the enacted tax rate expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be settled or realized. In the event of a change in tax rates, deferred tax assets and liabilities are remeasured as of the enactment date of the new rate. To the extent that the change in the value of the deferred tax represents an obligation to customers, the impact of the remeasurement is deferred to a regulatory liability. Remaining impacts are recorded in income from continuing operations. Duke Energy's results of operations could be impacted if the estimate of the tax effect of reversing temporary differences is not reflective of actual outcomes, is modified to reflect new developments or interpretations of the tax law, revised to incorporate new accounting principles, or changes in the expected timing or manner of a reversal.
Tax-related interest and penalties are recorded in Interest Expense and Other Income and Expenses, net in the Consolidated Statements of Operations.
See Note 23 for further information.
Accounting for Renewable Energy Tax Credits
When Duke Energy receives ITCs on wind or solar facilities associated with its nonregulated operations, it reduces the basis of the property recorded on the Consolidated Balance Sheets by the amount of the ITC and, therefore, the ITC benefit is ultimately recognized in the statement of operations through reduced depreciation expense. Additionally, certain tax credits and government grants result in an initial tax depreciable base in excess of the book carrying value by an amount equal to one half of the ITC. Deferred tax benefits are recorded as a reduction to income tax expense in the period that the basis difference is created.
Duke Energy receives PTCs on wind facilities that are recognized as electricity is produced and records related amounts as a reduction of income tax expense.
Excise Taxes
Certain excise taxes levied by state or local governments are required to be paid even if not collected from the period preceding consummationcustomer. These taxes are recognized on a gross basis. Taxes for which Duke Energy operates merely as a collection agent for the state and local government are accounted for on a net basis. Excise taxes accounted for on a gross basis within both Operating Revenues and Property and other taxes in the Consolidated Statements of Operations were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Duke Energy | $ | 420 | | | $ | 415 | | | $ | 421 | |
Duke Energy Carolinas | 44 | | | 43 | | | 39 | |
Progress Energy | 250 | | | 249 | | | 256 | |
Duke Energy Progress | 22 | | | 26 | | | 21 | |
Duke Energy Florida | 228 | | | 223 | | | 235 | |
Duke Energy Ohio | 102 | | | 96 | | | 101 | |
Duke Energy Indiana | 23 | | | 25 | | | 23 | |
Piedmont | 1 | | | 2 | | | 2 | |
Dividend Restrictions and Unappropriated Retained Earnings
Duke Energy does not have any current legal, regulatory or other restrictions on paying common stock dividends to shareholders. However, if Duke Energy were to defer dividend payments on the transactions,preferred stock, the declaration of common stock dividends would be prohibited. See Note 19 for more information. Additionally, as further described in Note 3, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio, Duke Energy Indiana and Piedmont have restrictions on paying dividends or otherwise advancing funds to Duke Energy due to conditions established by regulators in conjunction with merger transaction approvals. At December 31, 2021, and 2020, an insignificant amount of Duke Energy’s consolidated Retained earnings balance represents undistributed earnings of equity method investments.
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 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 to be classified as a sales-type or direct financing lease under prior guidance, and (2) the lessor would have recognized a day-one loss. Duke Energy elected to adopt the guidance immediately upon issuance of the new standard and will be applying the new standard prospectively to new lease arrangements meeting the criteria. Duke Energy did not have any lease arrangements that this new accounting guidance materially impacted.
The following new accounting standard was adopted by Duke Energy Registrants in 2020.
Current Expected Credit Losses. In June 2016, the FASB issued new accounting guidance for credit losses. Duke Energy adopted the new accounting guidance for credit losses effective January 1, 2020, using the modified retrospective method of adoption, which does not require restatement of prior year results. Duke Energy did not adopt any practical expedients.
Duke Energy recognizes allowances for credit losses based on management's estimate of losses expected to be incurred 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.
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FINANCIAL STATEMENTS | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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 and credit losses of trade and other receivables, insurance receivables and financial guarantees. These amounts are included in the Consolidated Balance Sheets in Receivables, Receivables of VIEs, Other Noncurrent Assets and Other Noncurrent Liabilities. See Notes 7 and 18 for more information.
Duke Energy recorded an adjustment for the cumulative effect of a liabilitychange in accounting principle due to the adoption of $54 million and $78 millionthis 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 December 31, 2018,2021.
Reference Rate Reform. In March 2020, the FASB issued new accounting guidance for reference rate reform. This guidance is elective and 2017, respectively. provides expedients to facilitate financial reporting for the anticipated transition away from the London Inter-bank Offered Rate (LIBOR) and other interbank reference rates starting in 2021 with all rates expected to be fully phased out in 2023. 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 the phase out of the applicable LIBOR rate 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 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 the phase out of the applicable LIBOR rate. The full outcome of the transition away from LIBOR cannot be determined at this time, but is not recorded any other liabilities, contingent liabilities or indemnifications relatedexpected to have a material impact on the International Disposal Group.financial statements.
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| |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
3.2. BUSINESS SEGMENTS
Reportable 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.interests and preferred stock dividends. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated on the Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.
Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost. Segment assets as presented in the tables that follow exclude all intercompany assets.
Duke Energy
Duke Energy's segment structure includes the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.
The Electric Utilities and Infrastructure segment includes Duke Energy's regulated electric utilities in the Carolinas, Florida and the Midwest. The regulated electric utilities conduct operations through the Subsidiary Registrants that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. Electric Utilities and Infrastructure also includes Duke Energy's commercial electric transmission infrastructure investments.
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.
The Commercial Renewables segment is primarily comprised of nonregulated utility scaleutility-scale wind and solar generation assets located throughout the U.S.
The remainder of Duke Energy’s operations is presented as Other, which is primarily comprised of interest expense on holding company debt, unallocated corporate costs and Duke Energy’s wholly owned captive insurance company, Bison. Other also includes Duke Energy's interest in NMC. See Note 12 for additional information on the investment in NMC.
| | | | | |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets.
| | | Year Ended December 31, 2018 | | Year Ended December 31, 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 |
| | Total |
| (in millions) | Infrastructure | | Infrastructure | | Renewables | | Segments | | Other | | Eliminations | | Total |
Unaffiliated Revenues | $ | 22,242 |
| | $ | 1,783 |
| | $ | 477 |
| | $ | 24,502 |
| | $ | 19 |
| | $ | — |
| | $ | 24,521 |
| Unaffiliated Revenues | $ | 22,570 | | | $ | 2,022 | | | $ | 476 | | | $ | 25,068 | | | $ | 29 | | | $ | — | | | $ | 25,097 | |
Intersegment Revenues | 31 |
| | 98 |
| | — |
| | 129 |
| | 70 |
| | (199 | ) | | — |
| Intersegment Revenues | 33 | | | 90 | | | — | | | 123 | | | 82 | | | (205) | | | — | |
Total Revenues | $ | 22,273 |
| | $ | 1,881 |
| | $ | 477 |
| | $ | 24,631 |
| | $ | 89 |
| | $ | (199 | ) | | $ | 24,521 |
| Total Revenues | $ | 22,603 | | | $ | 2,112 | | | $ | 476 | | | $ | 25,191 | | | $ | 111 | | | $ | (205) | | | $ | 25,097 | |
Interest Expense | $ | 1,288 |
| | $ | 106 |
| | $ | 88 |
| | $ | 1,482 |
| | $ | 657 |
| | $ | (45 | ) | | $ | 2,094 |
| Interest Expense | $ | 1,432 | | | $ | 142 | | | $ | 72 | | | $ | 1,646 | | | $ | 643 | | | $ | (9) | | | $ | 2,280 | |
Depreciation and amortization | 3,523 |
| | 245 |
| | 155 |
| | 3,923 |
| | 152 |
| | (1 | ) | | 4,074 |
| Depreciation and amortization | 4,251 | | | 303 | | | 225 | | | 4,779 | | | 237 | | | (26) | | | 4,990 | |
Equity in earnings (losses) of unconsolidated affiliates | 5 |
| | 27 |
| | (1 | ) | | 31 |
| | 52 |
| | — |
| | 83 |
| Equity in earnings (losses) of unconsolidated affiliates | 7 | | | 8 | | | (34) | | | (19) | | | 47 | | | — | | | 28 | |
Income tax expense (benefit)(a) | 799 |
| | 78 |
| | (147 | ) | | 730 |
| | (282 | ) | | — |
| | 448 |
| |
Segment income (loss)(b)(c)(d)(e) | 3,058 |
| | 274 |
| | 9 |
| | 3,341 |
| | (694 | ) | | — |
| | 2,647 |
| |
Add back noncontrolling interest component | |
| | |
| | |
| | |
| | |
| | |
| | (22 | ) | |
Income tax expense (benefit) | | Income tax expense (benefit) | 494 | | | 55 | | | (78) | | | 471 | | | (279) | | | — | | | 192 | |
Segment income (loss)(a)(b)(c)(d) | | Segment income (loss)(a)(b)(c)(d) | 3,850 | | | 396 | | | 201 | | | 4,447 | | | (652) | | | — | | | 3,795 | |
Less noncontrolling interest | | Less noncontrolling interest | | 329 | |
Add back preferred stock dividend | | Add back preferred stock dividend | | 106 | |
Income from discontinued operations, net of tax | |
| | |
| | |
| | |
| | |
| | |
| | 19 |
| Income from discontinued operations, net of tax | | 7 | |
Net income | |
| | |
| | |
| | |
| | |
| | |
| | $ | 2,644 |
| Net income | | $ | 3,579 | |
Capital investments expenditures and acquisitions | $ | 8,086 |
| | $ | 1,133 |
| | $ | 193 |
| | $ | 9,412 |
| | $ | 256 |
| | $ | — |
| | $ | 9,668 |
| Capital investments expenditures and acquisitions | $ | 7,653 | | | $ | 1,271 | | | $ | 543 | | | $ | 9,467 | | | $ | 285 | | | $ | — | | | $ | 9,752 | |
Segment assets | 125,364 |
| | 12,361 |
| | 4,204 |
| | 141,929 |
| | 3,275 |
| | 188 |
| | 145,392 |
| Segment assets | 143,841 | | | 15,179 | | | 6,977 | | | 165,997 | | | 3,590 | | | — | | | 169,587 | |
| |
(a) | All segments include adjustments to the December 31, 2017 estimate of the income tax effects of the Tax Act. Electric Utilities and Infrastructure includes a $24 million expense, Gas Utilities and Infrastructure includes a $1 million expense, Commercial Renewables includes a $3 million benefit and Other includes a $2 million benefit. See Note 23 for additional information. |
| |
(b) | Electric Utilities and Infrastructure includes after-tax regulatory and legislative impairment charges of $202 million related to rate case orders, settlements or other actions of regulators or legislative bodies and an after-tax impairment charge of $46 million related to the Citrus County CC at Duke Energy Florida. See Note 4 for additional information. |
| |
(c) | Gas Utilities and Infrastructure includes an after-tax impairment charge of $42 million for the investment in Constitution. See Note 12 for additional information. |
| |
(d) | Commercial Renewables includes an impairment charge of $91 million, net of $2 million Noncontrolling interests, related to goodwill. See Note 11 for additional information. |
(a)Electric Utilities and Infrastructure includes $160 million of expense recorded within Impairment of assets and other charges, $77 million of income within Other Income and expenses, $5 million of expense within Operations, maintenance and other, $13 million of income within regulated operating revenues, $3 million of expense within interest expense and $6 million of expense within Depreciation and amortization on the Duke Energy Carolinas' Consolidated Statement of Operations related to the South Carolina Supreme Court decision on coal ash and insurance proceeds; it also includes $42 million of expense recorded within Impairment of assets and other charges, $34 million of income within Other Income and expenses, $7 million of expense within Operations, maintenance, and other, $15 million of income within Regulated electric operating revenues, $5 million of expense within interest expense and $1 million of expense within Depreciation and amortization on the Duke Energy Progress' Consolidated Statement of Operations. See Notes 3 and 4 for more information.
(b) Gas Utilities and Infrastructure includes $20 million, recorded within Equity in earnings (losses) of unconsolidated affiliates on the Consolidated Statements of Operations, related to natural gas pipeline investments. See Note 3 for additional information.
(c) 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 Consolidated Statements of Operations. See Note 4 for additional information.
(d) Other includes $133 million recorded within Impairment of assets and other charges, $42 million within Operations, maintenance and other, and $17 million within Depreciation and amortization on the Consolidated Statements of Operations, related to the workplace and workplace realignment. See Note 10 for additional information.
|
| | | | |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 |
| Electric | | Gas | | | | Total | | | | | | |
| Utilities and | | Utilities and | | Commercial | | Reportable | | | | | | |
(in millions) | Infrastructure | | Infrastructure | | Renewables | | Segments | | Other | | Eliminations | | Total |
Unaffiliated Revenues | $ | 21,687 | | | $ | 1,653 | | | $ | 502 | | | $ | 23,842 | | | $ | 26 | | | $ | — | | | $ | 23,868 | |
Intersegment Revenues | 33 | | | 95 | | | — | | | 128 | | | 71 | | | (199) | | | — | |
Total Revenues | $ | 21,720 | | | $ | 1,748 | | | $ | 502 | | | $ | 23,970 | | | $ | 97 | | | $ | (199) | | | $ | 23,868 | |
Interest Expense | $ | 1,320 | | | $ | 135 | | | $ | 66 | | | $ | 1,521 | | | $ | 657 | | | $ | (16) | | | $ | 2,162 | |
Depreciation and amortization | 4,068 | | | 258 | | | 199 | | | 4,525 | | | 209 | | | (29) | | | 4,705 | |
Equity in earnings (losses) of unconsolidated affiliates | (1) | | | (2,017) | | | — | | | (2,018) | | | 13 | | | — | | | (2,005) | |
Income tax expense (benefit) | 340 | | | (349) | | | (65) | | | (74) | | | (162) | | | — | | | (236) | |
Segment income (loss)(a)(b)(c) | 2,669 | | | (1,266) | | | 286 | | | 1,689 | | | (426) | | | — | | | 1,263 | |
Less noncontrolling interest | | | | | | | | | | | | | 295 | |
Add back preferred stock dividend | | | | | | | | | | | | | 107 | |
Income from discontinued operations, net of tax | | | | | | | | | | | | | 7 | |
Net income | | | | | | | | | | | | | $ | 1,082 | |
Capital investments expenditures and acquisitions | $ | 7,629 | | | $ | 1,309 | | | $ | 1,219 | | | $ | 10,157 | | | $ | 264 | | | $ | — | | | $ | 10,421 | |
Segment assets | 138,225 | | | 13,849 | | | 6,716 | | | 158,790 | | | 3,598 | | | — | | | 162,388 | |
| |
(e) | Other includes $65 million of after-tax costs to achieve the Piedmont merger, $144 million of after-tax severance(a) Electric Utilities and Infrastructure includes $948 million of Impairment of assets and other charges related to a companywide initiative and an $82 million after-tax loss on the sale of the retired Beckjord Generating Station described below. For additional information, see Note 2 for the Piedmont Merger and Note 20 for severance charges. |
In February 2018, Duke Energy sold Beckjord, a nonregulated facility retired during 2014,reversal of $152 million included in Regulated electric operating revenue related to the CCR Settlement Agreement filed with the NCUC. Additionally, Electric Utilities and recorded a pretax lossInfrastructure includes $19 million of $106Impairment of assets and other charges related to the Clemson University Combined Heat and Power Plant, $5 million of Impairment charges related to the natural gas pipeline assets and $16 million of shareholder contributions within (Losses) Gains on Sales of Other Assets and Other, net and $1 million within Operation,Operations, maintenance and other onrelated to Duke Energy's Consolidated StatementsEnergy Carolinas' and Duke Energy Progress' 2019 North Carolina rate cases. See Note 3 for additional information.
(b) Gas Utilities and Infrastructure includes $2.1 billion recorded within Equity in (losses) earnings of Operations for the year ended December 31, 2018. The sale included the transferunconsolidated affiliates and $7 million of coal ash basinsImpairment of assets and other real propertycharges related to natural gas pipeline investments. See Notes 3 and indemnification from any 12 for additional information.
(c) Other includes a $98 million reversal of 2018 severance costs due to a partial settlement in the Duke Energy Carolinas' 2019 North Carolina rate case. See Note 20 for additional information.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Electric | | Gas | | | | Total | | | | | | |
| Utilities and | | Utilities and | | Commercial | | Reportable | | | | | | |
(in millions) | Infrastructure | | Infrastructure | | Renewables | | Segments | | Other | | Eliminations | | Total |
Unaffiliated Revenues | $ | 22,798 | | | $ | 1,770 | | | $ | 487 | | | $ | 25,055 | | | $ | 24 | | | $ | — | | | $ | 25,079 | |
Intersegment Revenues | 33 | | | 96 | | | — | | | 129 | | | 71 | | | (200) | | | — | |
Total Revenues | $ | 22,831 | | | $ | 1,866 | | | $ | 487 | | | $ | 25,184 | | | $ | 95 | | | $ | (200) | | | $ | 25,079 | |
Interest Expense | $ | 1,345 | | | $ | 117 | | | $ | 95 | | | $ | 1,557 | | | $ | 705 | | | $ | (58) | | | $ | 2,204 | |
Depreciation and amortization | 3,951 | | | 256 | | | 168 | | | 4,375 | | | 178 | | | (5) | | | 4,548 | |
Equity in earnings (losses) of unconsolidated affiliates | 9 | | | 114 | | | (4) | | | 119 | | | 43 | | | — | | | 162 | |
Income tax expense (benefit) | 785 | | | 22 | | | (115) | | | 692 | | | (173) | | | — | | | 519 | |
Segment income (loss)(a)(b) | 3,536 | | | 432 | | | 198 | | | 4,166 | | | (452) | | | — | | | 3,714 | |
Less noncontrolling interest | | | | | | | | | | | | | 177 | |
Add back preferred stock dividend | | | | | | | | | | | | | 41 | |
Loss from discontinued operations, net of tax | | | | | | | | | | | | | (7) | |
Net income | | | | | | | | | | | | | $ | 3,571 | |
Capital investments expenditures and acquisitions | $ | 8,263 | | | $ | 1,539 | | | $ | 1,423 | | | $ | 11,225 | | | $ | 221 | | | $ | — | | | $ | 11,446 | |
Segment assets | 135,561 | | | 13,921 | | | 6,020 | | | 155,502 | | | 3,148 | | | 188 | | | 158,838 | |
(a) Electric Utilities and all potential future claimsInfrastructure includes a $27 million reduction of a prior year impairment at Citrus County CC related to the property, whether arising under environmental laws or otherwise.plant's cost cap.
(b) Gas Utilities and Infrastructure includes an after-tax impairment charge of $19 million for the remaining investment in Constitution. See Note 12 for additional information.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| Electric |
| | Gas |
| | | | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Unaffiliated Revenues | $ | 21,300 |
|
| $ | 1,743 |
|
| $ | 460 |
| | $ | 23,503 |
| | $ | 62 |
| | $ | — |
| | $ | 23,565 |
|
Intersegment Revenues | 31 |
|
| 93 |
|
| — |
| | 124 |
| | 76 |
| | (200 | ) | | — |
|
Total Revenues | $ | 21,331 |
| | $ | 1,836 |
| | $ | 460 |
| | $ | 23,627 |
| | $ | 138 |
| | $ | (200 | ) | | $ | 23,565 |
|
Interest Expense | $ | 1,240 |
|
| $ | 105 |
|
| $ | 87 |
| | $ | 1,432 |
| | $ | 574 |
| | $ | (20 | ) | | $ | 1,986 |
|
Depreciation and amortization | 3,010 |
|
| 231 |
|
| 155 |
| | 3,396 |
| | 131 |
| | — |
| | 3,527 |
|
Equity in earnings (losses) of unconsolidated affiliates | 5 |
|
| 62 |
|
| (5 | ) | | 62 |
| | 57 |
| | — |
| | 119 |
|
Income tax expense (benefit)(a) | 1,355 |
| | 116 |
| | (628 | ) | | 843 |
| | 353 |
| | — |
| | 1,196 |
|
Segment income (loss)(b)(c)(d) | 3,210 |
| | 319 |
| | 441 |
| | 3,970 |
| | (905 | ) | | — |
| | 3,065 |
|
Add back noncontrolling interest component | |
| | |
| | |
| | |
| | |
| | |
| | 5 |
|
Loss from discontinued operations, net of tax | |
| | |
| | |
| | |
| | |
| | |
| | (6 | ) |
Net income | |
| | |
| | |
| | |
| | |
| | |
| | $ | 3,064 |
|
Capital investments expenditures and acquisitions | $ | 7,024 |
| | $ | 907 |
| | $ | 92 |
| | $ | 8,023 |
| | $ | 175 |
| | $ | — |
| | $ | 8,198 |
|
Segment assets | 119,423 |
| | 11,462 |
| | 4,156 |
| | 135,041 |
| | 2,685 |
| | 188 |
| | 137,914 |
|
| |
(a) | All segments include impacts of the Tax Act. Electric Utilities and Infrastructure includes a $231 million benefit, Gas Utilities and Infrastructure includes a $26 million benefit, Commercial Renewables includes a $442 million benefit and Other includes charges of $597 million. |
| |
(b) | Electric Utilities and Infrastructure includes after-tax regulatory settlement charges of $98 million. See Note 4 for additional information. |
| |
(c) | Commercial Renewables includes after-tax impairment charges of $74 million related to certain wind projects and the Energy Management Solutions reporting unit. See Notes 10 and 11 for additional information. |
| |
(d) | Other includes $64 million of after-tax costs to achieve the Piedmont merger. See Note 2 for additional information. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| Electric |
| | Gas |
| | | | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Unaffiliated Revenues | $ | 21,336 |
| | $ | 875 |
| | $ | 484 |
| | $ | 22,695 |
| | $ | 48 |
| | $ | — |
| | $ | 22,743 |
|
Intersegment Revenues | 30 |
| | 26 |
| | — |
| | 56 |
| | 69 |
| | (125 | ) | | — |
|
Total Revenues | $ | 21,366 |
| | $ | 901 |
| | $ | 484 |
| | $ | 22,751 |
| | $ | 117 |
| | $ | (125 | ) | | $ | 22,743 |
|
Interest Expense | $ | 1,136 |
| | $ | 46 |
| | $ | 53 |
| | $ | 1,235 |
| | $ | 693 |
| | $ | (12 | ) | | $ | 1,916 |
|
Depreciation and amortization | 2,897 |
| | 115 |
| | 130 |
| | 3,142 |
| | 152 |
| | — |
| | 3,294 |
|
Equity in earnings (losses) of unconsolidated affiliates(a) | 5 |
| | 19 |
| | (82 | ) | | (58 | ) | | 43 |
| | — |
| | (15 | ) |
Income tax expense (benefit) | 1,672 |
| | 90 |
| | (160 | ) | | 1,602 |
| | (446 | ) | | — |
| | 1,156 |
|
Segment income (loss)(b)(c) | 3,040 |
| | 152 |
| | 23 |
| | 3,215 |
| | (645 | ) | | 1 |
| | 2,571 |
|
Add back noncontrolling interest component | |
| | |
| | |
| | |
| | |
| | |
| | 7 |
|
Loss from discontinued operations, net of tax(d) | |
| | |
| | |
| | |
| | |
| | |
| | (408 | ) |
Net income | |
| | |
| | |
| | |
| | |
| | |
| | $ | 2,170 |
|
Capital investments expenditures and acquisitions(e) | $ | 6,649 |
| | $ | 5,519 |
| | $ | 857 |
| | $ | 13,025 |
| | $ | 190 |
| | $ | — |
| | $ | 13,215 |
|
Segment assets | 114,993 |
| | 10,760 |
| | 4,377 |
| | 130,130 |
| | 2,443 |
| | 188 |
| | 132,761 |
|
|
| |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
| |
(a) | Commercial Renewables includes a pretax impairment charge of $71 million. See Note 12 for additional information. |
| |
(b) | Other includes $329 million of after-tax costs to achieve mergers. See Note 2 for additional information on costs related to the Piedmont merger. |
| |
(c) | Other includes after-tax charges of $57 million related to cost savings initiatives. See Note 20 for further information. |
| |
(d) | Includes a loss on sale of the International Disposal Group. Refer to Note 2 for further information. |
| |
(e) | Other includes $26 million of capital investment expenditures related to the International Disposal Group. Gas Utilities and Infrastructure includes the Piedmont acquisition of $5 billion. See Note 2 for more information on the Piedmont acquisition. |
Geographical Information
AllSubstantially all assets and revenues from continuing operations are within the U.S.
| | | | | |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
Major Customers
For the year ended December 31, 2018,2021, revenues from one customer of Duke Energy Progress are $633$586 million. Duke Energy Progress has one1 reportable segment, Electric Utilities and Infrastructure. No other Subsidiary Registrant has an individual customer representing more than 10 percent10% of its revenues.
Products and Services
The following table summarizes revenues of the reportable segments by type. | | | Retail |
| | Wholesale |
| | Retail |
| | | | Total |
| | Retail | | Wholesale | | Retail | | | | Total |
(in millions) | Electric |
| | Electric |
| | Natural Gas |
| | Other |
| | Revenues |
| (in millions) | Electric | | Electric | | Natural Gas | | | Other | | Revenues |
2018 | | | | | | | | |
| |
2021 | | 2021 | | | |
Electric Utilities and Infrastructure | $ | 19,013 |
| | $ | 2,345 |
| | $ | — |
| | $ | 915 |
| | $ | 22,273 |
| Electric Utilities and Infrastructure | $ | 19,410 | | | $ | 2,216 | | | $ | — | | | | $ | 977 | | | $ | 22,603 | |
Gas Utilities and Infrastructure | — |
| | — |
| | 1,817 |
| | 64 |
| | 1,881 |
| Gas Utilities and Infrastructure | — | | | — | | | 2,025 | | | | 87 | | | 2,112 | |
Commercial Renewables | — |
| | 375 |
| | — |
| | 102 |
| | 477 |
| Commercial Renewables | — | | | 411 | | | — | | | | 65 | | | 476 | |
Total Reportable Segments | $ | 19,013 |
| | $ | 2,720 |
| | $ | 1,817 |
|
| $ | 1,081 |
| | $ | 24,631 |
| Total Reportable Segments | $ | 19,410 | | | $ | 2,627 | | | $ | 2,025 | | | | $ | 1,129 | | | $ | 25,191 | |
2017 | | | | | | | | |
| |
2020 | | 2020 | | | |
Electric Utilities and Infrastructure | $ | 18,177 |
| | $ | 2,104 |
| | $ | — |
| | $ | 1,050 |
| | $ | 21,331 |
| Electric Utilities and Infrastructure | $ | 18,898 | | | $ | 1,878 | | | $ | — | | | | $ | 944 | | | $ | 21,720 | |
Gas Utilities and Infrastructure | — |
| | — |
| | 1,732 |
| | 104 |
| | 1,836 |
| Gas Utilities and Infrastructure | — | | | — | | | 1,691 | | | | 57 | | | 1,748 | |
Commercial Renewables | — |
| | 375 |
| | — |
| | 85 |
| | 460 |
| Commercial Renewables | — | | | 434 | | | — | | | | 68 | | | 502 | |
Total Reportable Segments | $ | 18,177 |
| | $ | 2,479 |
| | $ | 1,732 |
|
| $ | 1,239 |
| | $ | 23,627 |
| Total Reportable Segments | $ | 18,898 | | | $ | 2,312 | | | $ | 1,691 | | | | $ | 1,069 | | | $ | 23,970 | |
2016 | | | | | | | | |
| |
2019 | | 2019 | | | |
Electric Utilities and Infrastructure | $ | 18,338 |
| | $ | 2,095 |
| | $ | — |
| | $ | 933 |
| | $ | 21,366 |
| Electric Utilities and Infrastructure | $ | 19,745 | | | $ | 2,231 | | | $ | — | | | | $ | 855 | | | $ | 22,831 | |
Gas Utilities and Infrastructure | — |
| | — |
| | 871 |
| | 30 |
| | 901 |
| Gas Utilities and Infrastructure | — | | | — | | | 1,782 | | | | 84 | | | 1,866 | |
Commercial Renewables | — |
| | 303 |
| | — |
| | 181 |
| | 484 |
| Commercial Renewables | — | | | 389 | | | — | | | | 98 | | | 487 | |
Total Reportable Segments | $ | 18,338 |
| | $ | 2,398 |
| | $ | 871 |
|
| $ | 1,144 |
| | $ | 22,751 |
| Total Reportable Segments | $ | 19,745 | | | $ | 2,620 | | | $ | 1,782 | | | | $ | 1,037 | | | $ | 25,184 | |
Duke Energy Ohio
Duke Energy Ohio has two2 reportable 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. Both reportable segments conduct 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. In December 2018, the PUCO approved an order which allows the recovery or credit of revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from OVEC power plants. Due to the change in regulatory treatment of these amounts, OVEC revenues and expenses are now reflected in the Electric Utilities and Infrastructure segment. Previously, OVEC revenues and expense were included in Other. These amounts are deemed immaterial for Duke Energy Ohio. Therefore, no prior period amounts were restated. See Note 4 for additional information on the PUCO order.
|
| |
FINANCIAL STATEMENTS | BUSINESS SEGMENTS |
All Duke Energy Ohio assets and revenues from continuing operations are within the U.S. | | | Year Ended December 31, 2018 | | Year Ended December 31, 2021 |
| Electric |
| | Gas |
| | Total |
| | | | | | Electric | | Gas | | Total | |
| Utilities and |
| | Utilities and |
| | Reportable |
| | | | | | Utilities and | | Utilities and | | Reportable | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Total |
| (in millions) | Infrastructure | | Infrastructure | | Segments | | Other | | Eliminations | | Total |
| Total revenues | $ | 1,450 |
| | $ | 506 |
| | $ | 1,956 |
| | $ | 1 |
| | $ | 1,957 |
| Total revenues | $ | 1,493 | | | $ | 544 | | | $ | 2,037 | | | $ | — | | | $ | — | | | $ | 2,037 | |
Interest expense | $ | 67 |
| | $ | 24 |
| | $ | 91 |
| | $ | 1 |
| | $ | 92 |
| Interest expense | $ | 87 | | | $ | 24 | | | $ | 111 | | | $ | — | | | $ | — | | | $ | 111 | |
Depreciation and amortization | 183 |
| | 85 |
| | 268 |
| | — |
| | 268 |
| Depreciation and amortization | 217 | | | 90 | | | 307 | | | — | | | — | | | 307 | |
Income tax expense (benefit) | 47 |
| | 24 |
| | 71 |
| | (28 | ) | | 43 |
| Income tax expense (benefit) | 15 | | | 19 | | | 34 | | | (4) | | | — | | | 30 | |
Segment income (loss)/Net income(a) | 186 |
| | 93 |
| | 279 |
| | (103 | ) | | 176 |
| |
Segment income (loss)/Net income | | Segment income (loss)/Net income | 141 | | | 78 | | | 219 | | | (15) | | | — | | | 204 | |
| Capital expenditures | $ | 655 |
| | $ | 172 |
| | $ | 827 |
| | $ | — |
| | $ | 827 |
| Capital expenditures | $ | 486 | | | $ | 362 | | | $ | 848 | | | $ | — | | | $ | — | | | $ | 848 | |
Segment assets | 5,643 |
| | 2,874 |
| | 8,517 |
| | 38 |
| | 8,555 |
| Segment assets | 6,882 | | | 3,892 | | | 10,774 | | | 29 | | | (29) | | | 10,774 | |
(a) Other includes the loss on the sale of Beckjord, see discussion above. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2020 |
| Electric | | Gas | | Total | | | | | | |
| Utilities and | | Utilities and | | Reportable | | | | | | |
(in millions) | Infrastructure | | Infrastructure | | Segments | | Other | | Eliminations | | Total |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total revenues | $ | 1,405 | | | $ | 453 | | | $ | 1,858 | | | $ | — | | | $ | — | | | $ | 1,858 | |
Interest expense | $ | 85 | | | $ | 17 | | | $ | 102 | | | $ | — | | | $ | — | | | $ | 102 | |
Depreciation and amortization | 200 | | | 78 | | | 278 | | | — | | | — | | | 278 | |
Income tax expense (benefit) | 19 | | | 26 | | | 45 | | | (2) | | | — | | | 43 | |
Segment income (loss)/Net Income | 162 | | | 96 | | | 258 | | | (6) | | | — | | | 252 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Capital expenditures | $ | 548 | | | $ | 286 | | | $ | 834 | | | $ | — | | | $ | — | | | $ | 834 | |
Segment assets | 6,615 | | | 3,380 | | | 9,995 | | | 32 | | | (2) | | | 10,025 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| Electric |
| | Gas |
| | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Total revenues | $ | 1,373 |
| | $ | 508 |
| | $ | 1,881 |
| | $ | 42 |
| | $ | — |
| | $ | 1,923 |
|
Interest expense | $ | 62 |
| | $ | 28 |
| | $ | 90 |
| | $ | 1 |
| | $ | — |
| | $ | 91 |
|
Depreciation and amortization | 178 |
| | 83 |
| | 261 |
| | — |
| | — |
| | 261 |
|
Income tax expense (benefit) | 40 |
| | 39 |
| | 79 |
| | (20 | ) | | — |
| | 59 |
|
Segment income (loss) | 138 |
| | 85 |
| | 223 |
| | (30 | ) | | — |
| | 193 |
|
Loss from discontinued operations, net of tax | | | | | | | | | | | (1 | ) |
Net income |
|
| |
|
| |
|
| |
|
| | | | $ | 192 |
|
Capital expenditures | $ | 491 |
| | $ | 195 |
| | $ | 686 |
| | $ | — |
| | $ | — |
| | $ | 686 |
|
Segment assets | 5,066 |
| | 2,758 |
| | 7,824 |
| | 66 |
| | (15 | ) | | 7,875 |
|
134
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| Electric |
| | Gas |
| | Total |
| | | | | | |
| Utilities and |
| | Utilities and |
| | Reportable |
| | | | | | |
(in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Eliminations |
| | Total |
|
Total revenues | $ | 1,410 |
| | $ | 503 |
| | $ | 1,913 |
| | $ | 31 |
| | $ | — |
| | $ | 1,944 |
|
Interest expense | $ | 58 |
| | $ | 27 |
| | $ | 85 |
| | $ | 1 |
| | $ | — |
| | $ | 86 |
|
Depreciation and amortization | 151 |
| | 80 |
| | 231 |
| | 2 |
| | — |
| | 233 |
|
Income tax expense (benefit) | 55 |
| | 44 |
| | 99 |
| | (21 | ) | | — |
| | 78 |
|
Segment income (loss) | 154 |
| | 77 |
| | 231 |
| | (39 | ) | | — |
| | 192 |
|
Income from discontinued operations, net of tax | | | | | | | | | | | 36 |
|
Net income |
|
| |
|
| |
|
| |
|
| | | | $ | 228 |
|
Capital expenditures | $ | 322 |
| | $ | 154 |
| | $ | 476 |
| | $ | — |
| | $ | — |
| | $ | 476 |
|
Segment assets | 4,782 |
| | 2,696 |
| | 7,478 |
| | 62 |
| | (12 | ) | | 7,528 |
|
|
| | | | |
FINANCIAL STATEMENTS | REGULATORY MATTERSBUSINESS SEGMENTS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| Electric | | Gas | | Total | | | | | | |
| Utilities and | | Utilities and | | Reportable | | | | | | |
(in millions) | Infrastructure | | Infrastructure | | Segments | | Other | | Eliminations | | Total |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total revenues | $ | 1,456 | | | $ | 484 | | | $ | 1,940 | | | $ | — | | | $ | — | | | $ | 1,940 | |
Interest expense | $ | 80 | | | $ | 29 | | | $ | 109 | | | $ | — | | | $ | — | | | $ | 109 | |
Depreciation and amortization | 182 | | | 83 | | | 265 | | | — | | | — | | | 265 | |
Income tax expense (benefit) | 20 | | | 21 | | | 41 | | | (1) | | | — | | | 40 | |
Segment income (loss) | 159 | | | 85 | | | 244 | | | (5) | | | — | | | 239 | |
Loss from discontinued operations, net of tax | | | | | | | | | | | (1) | |
Net income | | | | | | | | | | | $ | 238 | |
Capital expenditures | $ | 680 | | | $ | 272 | | | $ | 952 | | | $ | — | | | $ | — | | | $ | 952 | |
Segment assets | 6,188 | | | 3,116 | | | 9,304 | | | 34 | | | — | | | 9,338 | |
4.3. REGULATORY MATTERS
REGULATORY ASSETS AND LIABILITIES
The Duke Energy Registrants record regulatory assets and liabilities that result from the ratemaking process. See Note 1 for further information.
| | | | | |
FINANCIAL STATEMENTS | REGULATORY MATTERS |
The following tables present the regulatory assets and liabilities recorded on the Consolidated Balance Sheets of Duke Energy and Progress Energy. See separate tables below for balances by individual registrant.
| | | Duke Energy | | Progress Energy | | Duke Energy | | Progress Energy | |
| December 31, | | December 31, | | December 31, | | December 31, | |
(in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 | |
Regulatory Assets | | | | | | | | Regulatory Assets | | |
AROs – coal ash | $ | 4,255 |
| | $ | 4,025 |
| | $ | 2,061 |
| | $ | 1,984 |
| AROs – coal ash | $ | 3,408 | | | $ | 3,408 | | | $ | 1,399 | | | $ | 1,357 | | |
AROs – nuclear and other | 772 |
| | 852 |
| | 601 |
| | 655 |
| AROs – nuclear and other | 684 | | | 754 | | | 620 | | | 685 | | |
Accrued pension and OPEB | 2,654 |
| | 2,249 |
| | 1,074 |
| | 906 |
| Accrued pension and OPEB | 2,017 | | | 2,317 | | | 725 | | | 875 | | |
Deferred fuel and purchased power | | Deferred fuel and purchased power | 1,253 | | | 213 | | | 718 | | | 162 | | |
Storm cost securitized balance, net | | Storm cost securitized balance, net | 991 | | | — | | | 759 | | | — | | |
Nuclear asset securitized balance, net | | Nuclear asset securitized balance, net | 937 | | | 991 | | | 937 | | | 991 | | |
Debt fair value adjustment | | Debt fair value adjustment | 884 | | | 950 | | | — | | | — | | |
Retired generation facilities | 445 |
| | 480 |
| | 367 |
| | 386 |
| Retired generation facilities | 357 | | | 417 | | | 265 | | | 363 | | |
Debt fair value adjustment | 1,099 |
| | 1,197 |
| | — |
| | — |
| |
Deferred asset – Lee COLA | 383 |
| | — |
| | — |
| | — |
| |
Post-in-service carrying costs (PISCC) and deferred operating expenses | | Post-in-service carrying costs (PISCC) and deferred operating expenses | 356 | | | 397 | | | 47 | | | 51 | | |
Hedge costs deferrals | | Hedge costs deferrals | 348 | | | 351 | | | 137 | | | 148 | | |
Deferred asset – Lee and Harris COLA | | Deferred asset – Lee and Harris COLA | 317 | | | 356 | | | 21 | | | 32 | | |
Advanced metering infrastructure (AMI) | | Advanced metering infrastructure (AMI) | 311 | | | 311 | | | 130 | | | 102 | | |
Customer connect project | | Customer connect project | 242 | | | 136 | | | 124 | | | 55 | | |
Demand side management (DSM)/Energy efficiency (EE) | | Demand side management (DSM)/Energy efficiency (EE) | 235 | | | 242 | | | 230 | | | 241 | | |
Vacation accrual | | Vacation accrual | 221 | | | 221 | | | 42 | | | 42 | | |
Storm cost deferrals | 1,117 |
| | 531 |
| | 953 |
| | 526 |
| Storm cost deferrals | 213 | | | 1,102 | | | 189 | | | 893 | | |
Nuclear asset securitized balance, net | 1,093 |
| | 1,142 |
| | 1,093 |
| | 1,142 |
| |
Hedge costs deferrals | 204 |
| | 234 |
| | 74 |
| | 94 |
| |
NCEMPA deferrals | | NCEMPA deferrals | 165 | | | 124 | | | 165 | | | 124 | | |
CEP deferral | | CEP deferral | 161 | | | 117 | | | — | | | — | | |
Derivatives – natural gas supply contracts | 141 |
| | 142 |
| | — |
| | — |
| Derivatives – natural gas supply contracts | 139 | | | 122 | | | — | | | — | | |
Demand side management (DSM)/Energy efficiency (EE) | 449 |
| | 530 |
| | 256 |
| | 281 |
| |
Grid modernization | 31 |
| | 39 |
| | — |
| | — |
| |
Vacation accrual | 213 |
| | 213 |
| | 41 |
| | 42 |
| |
Deferred fuel and purchased power | 838 |
| | 507 |
| | 600 |
| | 349 |
| |
COR settlement | | COR settlement | 123 | | | 128 | | | 32 | | | 33 | | |
Nuclear deferral | 133 |
| | 119 |
| | 46 |
| | 35 |
| Nuclear deferral | 120 | | | 123 | | | 42 | | | 35 | | |
Post-in-service carrying costs (PISCC) and deferred operating expenses | 320 |
| | 366 |
| | 36 |
| | 38 |
| |
Transmission expansion obligation | 39 |
| | 46 |
| | — |
| | — |
| |
Deferred pipeline integrity costs | | Deferred pipeline integrity costs | 108 | | | 92 | | | — | | | — | | |
Costs of removal regulatory asset | | Costs of removal regulatory asset | 107 | | | — | | | 107 | | | — | | |
Manufactured gas plant (MGP) | 99 |
| | 91 |
| | — |
| | — |
| Manufactured gas plant (MGP) | 104 | | | 104 | | | — | | | — | | |
Advanced metering infrastructure (AMI) | 367 |
| | 362 |
| | 127 |
| | 150 |
| |
NCEMPA deferrals | 50 |
| | 53 |
| | 50 |
| | 53 |
| |
East Bend deferrals | 47 |
| | 45 |
| | — |
| | — |
| |
Deferred pipeline integrity costs | 65 |
| | 54 |
| | — |
| | — |
| |
Qualifying facility contract buyouts | | Qualifying facility contract buyouts | 94 | | | 107 | | | 94 | | | 107 | | |
ABSAT, coal ash basin closure | | ABSAT, coal ash basin closure | 90 | | | 98 | | | 23 | | | 27 | | |
Incremental COVID-19 expenses | | Incremental COVID-19 expenses | 87 | | | 76 | | | 28 | | | 23 | | |
Amounts due from customers | 24 |
| | 64 |
| | — |
| | — |
| Amounts due from customers | 85 | | | 110 | | | — | | | — | | |
Deferred severance charges | | Deferred severance charges | 54 | | | 86 | | | 18 | | | 29 | | |
| Other | 784 |
| | 538 |
| | 322 |
| | 110 |
| Other | 426 | | | 609 | | | 87 | | | 158 | | |
Total regulatory assets | 15,622 |
| | 13,879 |
|
| 7,701 |
|
| 6,751 |
| Total regulatory assets | 14,637 | | | 14,062 | | | 6,939 | | | 6,533 | | |
Less: current portion | 2,005 |
| | 1,437 |
| | 1,137 |
| | 741 |
| Less: current portion | 2,150 | | | 1,641 | | | 1,030 | | | 758 | | |
Total noncurrent regulatory assets | $ | 13,617 |
| | $ | 12,442 |
|
| $ | 6,564 |
|
| $ | 6,010 |
| Total noncurrent regulatory assets | $ | 12,487 | | | $ | 12,421 | | | $ | 5,909 | | | $ | 5,775 | | |
Regulatory Liabilities | | | | | | | | Regulatory Liabilities | | | |
Net regulatory liability related to income taxes | | Net regulatory liability related to income taxes | $ | 7,199 | | | $ | 7,368 | | | $ | 2,394 | | | $ | 2,411 | | |
Costs of removal | $ | 5,421 |
| | $ | 5,968 |
| | $ | 2,135 |
| | $ | 2,537 |
| Costs of removal | 6,150 | | | 5,883 | | | 2,955 | | | 2,666 | | |
AROs – nuclear and other | 538 |
| | 806 |
| | — |
| | — |
| AROs – nuclear and other | 2,053 | | | 1,512 | | | — | | | — | | |
Net regulatory liability related to income taxes | 8,058 |
| | 8,113 |
| | 2,710 |
| | 2,802 |
| |
Amounts to be refunded to customers | 34 |
| | 10 |
| | — |
| | — |
| |
Storm reserve | — |
| | 20 |
| | — |
| | — |
| |
Provision for rate refunds | | Provision for rate refunds | 274 | | | 344 | | | 87 | | | 123 | | |
Hedge cost deferrals | | Hedge cost deferrals | 271 | | | 24 | | | 117 | | | 8 | | |
Accrued pension and OPEB | 301 |
| | 146 |
| | 149 |
| | — |
| Accrued pension and OPEB | 213 | | | 177 | | | — | | | — | | |
Deferred fuel and purchased power | 16 |
| | 47 |
| | 16 |
| | 1 |
| |
| Other | 1,064 |
| | 622 |
| | 319 |
| | 179 |
| Other | 1,203 | | | 1,098 | | | 491 | | | 483 | | |
Total regulatory liabilities | 15,432 |
| | 15,732 |
| | 5,329 |
| | 5,519 |
| Total regulatory liabilities | 17,363 | | | 16,406 | | | 6,044 | | | 5,691 | | |
Less: current portion | 598 |
| | 402 |
| | 280 |
| | 213 |
| Less: current portion | 1,211 | | | 1,377 | | | 478 | | | 640 | | |
Total noncurrent regulatory liabilities | $ | 14,834 |
| | $ | 15,330 |
| | $ | 5,049 |
| | $ | 5,306 |
| Total noncurrent regulatory liabilities | $ | 16,152 | | | $ | 15,029 | | | $ | 5,566 | | | $ | 5,051 | | |
Descriptions of regulatory assets and liabilities summarized in the tables above and below follow. See tables below for recovery and amortization periods at the separate registrants.
|
| |
FINANCIAL STATEMENTS | REGULATORY MATTERS |
AROs – coal ash. Represents deferred depreciation and accretion related to the legal obligation to close ash basins. The costs are deferred until recovery treatment has been determined. See Notes 1 and 9 for additional information.
| | | | | |
FINANCIAL STATEMENTS | REGULATORY MATTERS |
AROs – nuclear and other. Represents regulatory assets or liabilities, including deferred depreciation and accretion, related to legal obligations associated with the future retirement of property, plant and equipment, excluding amounts related to coal ash. The AROs relate primarily to decommissioning nuclear power facilities. The amounts also include certain deferred gains and losses on NDTF investments. See Notes 1 and 9 for additional information.
Accrued pension and OPEB. Accrued pension and OPEB represent regulatory assets and liabilities related to each of the Duke Energy Registrants’ respective shares of unrecognized actuarial gains and losses and unrecognized prior service cost and credit attributable to Duke Energy’s pension plans and OPEB plans. The regulatory asset or liability is amortized with the recognition of actuarial gains and losses and prior service cost and credit to net periodic benefit costs for pension and OPEB plans. The accrued pension and OPEB regulatory asset isassets are expected to be recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
Retired generation facilities.Deferred fuel and purchased power. Represents amounts to be recovered for facilitiescertain energy-related costs that have been retired and are probablerecoverable or refundable as approved by the applicable regulatory body.
Storm cost securitized balance, net. Represents the North Carolina portion of recovery.
Debt fair value adjustment. Purchase accounting adjustments recorded to state the carrying value of Progress Energy and Piedmont at fair value in connection with the 2012 and 2016 mergers, respectively. Amount is amortized over the life of the related debt.
Net regulatory asset or liabilitystorm restoration expenditures related to income taxes. Amounts for all registrants include regulatory liabilities related primarily to impacts from the Tax Act. See Note 23 for additional information. Amounts have no immediate impact on rate base as regulatory assets are offset by deferred tax liabilities.Hurricane Florence, Hurricane Michael, Hurricane Dorian and Winter Storm Diego (2018 and 2019 events).
Deferred asset – Lee COLA. Represents deferred costs incurred for the canceled Lee nuclear project.
Storm cost deferrals. Represents deferred incremental costs incurred related to extraordinary weather-related events.
Nuclear asset securitized balance, net.Represents the balance associated with Crystal River Unit 3 retirement approved for recovery by the FPSC on September 15, 2015, and the upfront financing costs securitized in 2016 with issuance of the associated bonds. The regulatory asset balance is net of the AFUDC equity portion.
HedgeDebt fair value adjustment. Purchase accounting adjustments recorded to state the carrying value of Progress Energy and Piedmont at fair value in connection with the 2012 and 2016 mergers, respectively. Amount is amortized over the life of the related debt.
Retired generation facilities. Represents amounts to be recovered for facilities that have been retired and are probable of recovery.
Post-in-service carrying costs (PISCC) and other deferrals. Amounts relate to unrealized gains and losses on derivatives recorded as a regulatory asset or liability, respectively, until the contracts are settled.
Derivatives – natural gas supply contracts.deferred operating expenses. Represents costs for certain long-dated, fixed quantity forward gas supply contracts, which are recoverable through PGA clauses.
DSM/EE. Deferred costs related to various DSM and EE programs recoverable through various mechanisms.
Grid modernization. Amounts represent deferred depreciation and operating expenses as well as carrying costs on the portion of capital expenditures placed in service but not yet reflected in retail rates as plant in service.
Hedge costs deferrals. Amounts relate to unrealized gains and losses on derivatives recorded as a regulatory asset or liability, respectively, until the contracts are settled.
Deferred asset – Lee and Harris COLA. Represents deferred costs incurred for the canceled Lee and Harris nuclear projects.
AMI. Represents deferred costs related to the installation of AMI meters and remaining net book value of non-AMI meters to be replaced at Duke Energy Carolinas, net book value of existing meters at Duke Energy Florida, Duke Energy Progress and Duke Energy Ohio and future recovery of net book value of electromechanical meters that have been replaced with AMI meters at Duke Energy Indiana.
Customer connect project. Represents incremental operating expenses and carrying costs on deferred amounts related to the deployment of the new customer information system.
DSM/EE. Deferred costs related to various DSM and EE programs recoverable through various mechanisms.
Vacation accrual. Represents.vacation Represents vacation entitlement, which is generally recovered in the following year.
Deferred fuelStorm cost deferrals. Represents deferred incremental costs incurred related to major weather-related events.
NCEMPA deferrals. Represents retail allocated cost deferrals and purchased power.returns associated with the additional ownership interest in assets acquired from NCEMPA in 2015.
CEP deferral. Represents deferred depreciation, PISCC and deferred property tax for Duke Energy Ohio Gas capital assets for the Capital Expenditure Program (CEP).
Derivatives – natural gas supply contracts. Represents costs for certain energy-related costslong-dated, fixed quantity forward natural gas supply contracts, which are recoverable through PGA clauses.
COR settlement. Represents approved COR settlements that are recoverable or refundable as approved bybeing amortized over the applicable regulatory body.average remaining lives, at the time of approval, of the associated assets.
Nuclear deferral. Includes amounts related to levelizing nuclear plant outage costs, which allows for the recognition of nuclear outage expenses over the refueling cycle rather than when the outage occurs, resulting in the deferral of operations and maintenance costs associated with refueling.
Post-in-service carryingDeferred pipeline integrity costs. Represents pipeline integrity management costs in compliance with federal regulations.
Costs of removal regulatory asset. Represents the excess of spend over funds received from customers to cover the future removal of property, plant and equipment from retired or abandoned sites as property is retired, net of certain deferred operating expenses. Represents deferred depreciation and operating expenses as well as carrying costsgains on the portion of capital expenditures placed in service but not yet reflected in retail rates as plant in service.NDTF investments.
Transmission expansion obligation. Represents transmission expansion obligations related to Duke Energy Ohio’s withdrawal from Midcontinent Independent System Operator, Inc. (MISO).
MGP. Represents remediation costs incurred at former MGP sites and the deferral of costs to be incurred at Duke Energy Ohio's East End and West End sites.
AMI. Qualifying facility contract buyouts. Represents termination payments for regulatory recovery through the capacity clause.
ABSAT, coal ash basin closure. Represents deferred costs related to the installation of AMI meters and remaining net book value of non-AMI meters to be replaced at Duke Energy Carolinas, net book value of existing meters at Duke Energy Florida, Duke Energy Progress and Duke Energy Ohio and expected future recovery of net book value of electromechanical meters that have been replaced with AMI meters at Duke Energy Indiana.
NCEMPA deferrals. Represents retail allocated cost deferralsdepreciation and returns associated with Ash Basin Strategic Action Team (ABSAT) capital assets related to converting the additional ownership interest in assets acquiredash handling system from NCEMPA in 2015.
East Bend deferrals. Represents both deferred operating expenses and deferred depreciation as well as carrying costs on the portion of East Bend that was acquired from Dayton Power and Light and that had been previously operated as a jointly owned facility.
Deferred pipeline integrity costs. Represents pipeline integrity management costs in compliance with federal regulations recovered through a rider mechanism.
wet to dry.
|
| | | | |
FINANCIAL STATEMENTS | REGULATORY MATTERS |
Incremental COVID-19 expenses. Representsincremental costs related to ensuring continuity and quality of service in a safe manner during the COVID-19 pandemic.
Amounts due from customers. Relates primarily to margin decoupling and IMR recovery mechanisms.
Deferred severance charges. Represents costs incurred for employees separation from Duke Energy.
Net regulatory liability related to income taxes. Amounts for all registrants include regulatory liabilities related primarily to impacts from the Tax Act. See Note 23 for additional information. Amounts have no immediate impact on rate base as regulatory assets are offset by deferred tax liabilities.
Costs of removal. Represents funds received from customers to cover the future removal of property, plant and equipment from retired or abandoned sites as property is retired. Also includes certain deferred gains on NDTF investments.
Provision for rate refunds. Represents estimated amounts due to customers based on recording interim rates subject to refund.
Amounts to be refunded to customers. Represents required rate reductions to retail customers by the applicable regulatory body.
Storm reserve. Amounts are used to offset future incurred costs for named storms as approved by regulatory commissions.
RESTRICTIONS ON THE ABILITY OF CERTAIN SUBSIDIARIES TO MAKE DIVIDENDS, ADVANCES AND LOANS TO DUKE ENERGY
As a condition to the approval of merger transactions, the NCUC, PSCSC, PUCO, KPSC and IURC imposed conditions on the ability of Duke Energy Carolinas, Duke Energy Progress, Duke Energy Ohio, Duke Energy Kentucky, Duke Energy Indiana and Piedmont to transfer funds to Duke Energy through loans or advances, as well as restricted amounts available to pay dividends to Duke Energy. Certain subsidiaries may transfer funds to the parentParent by obtaining approval of the respective state regulatory commissions. These conditions imposed restrictions on the ability of the public utility subsidiaries to pay cash dividends as discussed below.
Duke Energy Progress and Duke Energy Florida also have restrictions imposed by their first mortgage bond indentures, which in certain circumstances, limit their ability to make cash dividends or distributions on common stock. Amounts restricted as a result of these provisions were not material at December 31, 2018.2021.
Duke Energy Indiana has certain dividend restrictions as a result of the minority interest investment agreement entered in January 2021 with GIC. Duke Energy Indiana will declare dividends before the second closing, which is required to be completed no later than January 2023, in accordance with the agreement. See additional information in Note 1.
Additionally, certain other subsidiaries of Duke Energy have restrictions on their ability to dividend, loan or advance funds to Duke Energy due to specific legal or regulatory restrictions, including, but not limited to, minimum working capital and tangible net worth requirements.
The restrictions discussed below were not a material amount of Duke Energy's and Progress Energy's net assets at December 31, 2018.2021.
Duke Energy Carolinas
Duke Energy Carolinas must limit cumulative distributions subsequent to mergers to (i) the amount of retained earnings on the day prior to the closing of the mergers, plus (ii) any future earnings recorded.
Duke Energy Progress
Duke Energy Progress must limit cumulative distributions subsequent to the mergers between Duke Energy and Progress Energy and Duke Energy and Piedmont to (i) the amount of retained earnings on the day prior to the closing of the respective mergers, plus (ii) any future earnings recorded.
Duke Energy Ohio
Duke Energy Ohio will not declare and pay dividends out of capital or unearned surplus without the prior authorization of the PUCO. Duke Energy Ohio received FERC and PUCO approval to pay dividends from its equity accounts that are reflective of the amount that it would have in its retained earnings account had push-down accounting for the Cinergy merger not been applied to Duke Energy Ohio’s balance sheet. The conditions include a commitment from Duke Energy Ohio that equity, adjusted to remove the impacts of push-down accounting, will not fall below 30 percent30% of total capital.
Duke Energy Kentucky is required to pay dividends solely out of retained earnings and to maintain a minimum of 35 percent35% equity in its capital structure.
Duke Energy Indiana
Duke Energy Indiana must limit cumulative distributions subsequent to the merger between Duke Energy and Cinergy to (i) the amount of retained earnings on the day prior to the closing of the merger, plus (ii) any future earnings recorded. In addition, Duke Energy Indiana will not declare and pay dividends out of capital or unearned surplus without prior authorization of the IURC.
Piedmont
Piedmont must limit cumulative distributions subsequent to the acquisition of Piedmont by Duke Energy to (i) the amount of retained earnings on the day prior to the closing of the merger, plus (ii) any future earnings recorded.
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.
| | | | | |
FINANCIAL STATEMENTS | REGULATORY MATTERS |
Duke Energy Carolinas and Duke Energy Progress
Grid Improvement – South2021 Coal Ash Settlement
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 of assets and other 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 Settling Rates and Imposing Penalties in the 2017 rate cases on June 25, 2021.
Carbon Plan
The NCUC is required by North Carolina House Bill 951 (HB 951) to adopt an initial Carbon Plan on or before December 31, 2022. The NCUC has directed Duke Energy Carolinas and Duke Energy Progress to file a proposed Carbon Plan on or before May 16, 2022. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
Performance-Based Regulation Rules
On June 22, 2018,February 10, 2022, the NCUC adopted rules to govern the application and review process for the Performance-Based Regulation (PBR) authorized under HB 951. The PBR rules are constructive and consistent with the policy objectives of HB 951.
2020 North Carolina Storm Securitization Filings
On October 26, 2020, Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the PSCSCNCUC, as agreed to in partial settlements reached in the 2019 North Carolina Rate Cases for Duke Energy Carolinas and Duke Energy Progress, 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 storm 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 orderissues, including agreement to support an 18- to 20-year bond period. In the NCUC Orders in the 2019 rate cases issued on March 31, 2021, and April 16, 2021, for Duke Energy Carolinas and Duke Energy Progress, respectively, the reasonableness and prudence of the deferred storm costs was approved. On May 20, 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. The storm recovery bonds were issued by Duke Energy Carolinas and Duke Energy Progress on November 24, 2021.
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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 certainincremental costs incurred in connection with grid reliability, resiliency and modernization work that is being performed under the companies’ grid improvement initiative.cost of waived customer fees due to the COVID-19 pandemic. On October 3, 2018,December 29, 2021, the PSCSC grantedNCUC approved Duke Energy Carolinas' and Duke Energy Progress' joint petition which authorizes the deferral of theseto defer estimated incremental pandemic-related costs, until the rate effective dates of each Company’s next general rate case.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Hurricane Florence, Hurricane Michael and Winter Storm Diego
In September 2018, Hurricane Florence made landfall and inflicted severe damagewithout prejudice, to the Duke Energy Carolinas and Duke Energy Progress territories in North Carolina and South Carolina. Approximately 2 million customers were impacted. The companies incurred approximately $500 million in incremental operation and maintenance expenses ($70 million and $430 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) and approximately $90 million in capital costs ($5 million and $85 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) which are included in Net property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2018, resulting from the hurricane restoration efforts. MostNCUC's future determination of the operation and maintenance expenses are deferredappropriate ratemaking treatment ultimately to be accorded such costs in Regulatory assets within Other Noncurrent Assets on the Consolidated Balance Sheets as of December 31, 2018. The balance of operation and maintenance expenses are included in Operation, maintenance and other on the Consolidated Statements of Operations for the year ended December 31, 2018.future rate case proceedings.
In October 2018, the remnants of Hurricane Michael inflicted severe damage to the Duke Energy Carolinas and Duke Energy Progress territories in North Carolina and South Carolina. Approximately 1 million customers were impacted. The companies incurred approximately $100 million in incremental operation and maintenance expenses ($75 million and $25 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) and approximately $21 million in capital costs ($12 million and $9 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) which are included in Net property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2018, resulting from the hurricane restoration efforts. Most of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Consolidated Balance Sheets as of December 31, 2018. The balance of operation and maintenance expenses are included in Operation, maintenance and other on the Consolidated Statements of Operations for the year ended December 31, 2018.
In December 2018, Winter Storm Diego inflicted severe damage to the Duke Energy Carolinas and Duke Energy Progress territories in North Carolina and South Carolina. Approximately 800,000 customers were impacted. The companies incurred approximately $85 million in incremental operation and maintenance expenses ($60 million and $25 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) and approximately $9 million in capital costs ($7 million and $2 million for Duke Energy Carolinas and Duke Energy Progress, respectively,) which are included in Net property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2018, resulting from the winter storm restoration efforts. Most of the operation and maintenance expenses are deferred in Regulatory assets within Other Noncurrent Assets on the Consolidated Balance Sheets as of December 31, 2018. The balance of operation and maintenance expenses are included in Operation, maintenance and other on the Consolidated Statements of Operations for the year ended December 31, 2018.
On December 21, 2018, Duke Energy Carolinas and Duke Energy Progress filed with the NCUC petitions for approval to defer the incremental costs incurred to a regulatory asset for recovery in the next base rate case. The NCUC issued an order requesting comments on the deferral positions. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter. Duke Energy Progress filed a similar request with the PSCSC on January 11, 2019, which also included a request for the continuation of prior deferrals requested for ice storms and Hurricane Matthew, and on January 30, 2019, the PSCSC issued a directive approving the deferral request.
North Carolina State Corporate Income Tax
On December 12, 2018, Duke Energy Carolinas and Duke Energy Progress filed requests to reduce their rates effective January 1, 2019, based on a reduction in North Carolina’s corporate income tax rate from 3 to 2.5 percent, as enacted by the General Assembly in Session Law 2017-57, which became law on June 28, 2017, with an effective date of January 1, 2019. On December 17, 2018, the NCUC issued orders approving the Duke Energy Carolinas and Duke Energy Progress rate decrements.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Duke Energy Carolinas
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Duke Energy Carolinas' Consolidated Balance Sheets.
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| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2021 | 2020 | | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – coal ash | $ | 1,227 | | $ | 1,414 | | | (h) | (b) |
| | | | | |
Accrued pension and OPEB(c) | 365 | | 427 | | | Yes | (i) |
Deferred fuel and purchased power | 339 | | 42 | | | (e) | 2023 |
Storm cost securitized balance, net | 232 | | — | | | | 2041 |
| | | | | |
| | | | | |
Retired generation facilities(c) | 54 | | 11 | | | Yes | 2023 |
PISCC(c) | 31 | | 32 | | | Yes | (b) |
Hedge costs deferrals(c) | 171 | | 174 | | | Yes | (b) |
Deferred asset – Lee COLA | 296 | | 324 | | | | (b) |
AMI | 140 | | 154 | | | Yes | (b) |
Customer connect project | 66 | | 50 | | | Yes | (b) |
| | | | | |
Vacation accrual | 83 | | 84 | | | | 2022 |
Storm cost deferrals | 22 | | 205 | | | Yes | (b) |
| | | | | |
| | | | | |
| | | | | |
COR settlement | 91 | | 95 | | | Yes | (b) |
Nuclear deferral | 78 | | 88 | | | | 2023 |
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ABSAT, coal ash basin closure | 67 | | 71 | | | Yes | (b) |
Incremental COVID-19 expenses | 51 | | 31 | | | Yes | (b) |
| | | | | |
Deferred severance charges | 36 | | 57 | | | | 2023 |
| | | | | |
| | | | | |
| | | | | |
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Other | 130 | | 210 | | | | (b) |
Total regulatory assets | 3,479 | | 3,469 | | | | |
Less: current portion | 544 | | 473 | | | | |
Total noncurrent regulatory assets | $ | 2,935 | | $ | 2,996 | | | | |
Regulatory Liabilities(a) | | | | | |
Net regulatory liability related to income taxes(d) | $ | 2,785 | | $ | 2,874 | | | | (b) |
Costs of removal(c) | 2,009 | | 1,975 | | | Yes | (f) |
AROs – nuclear and other | 2,053 | | 1,512 | | | | (b) |
Provision for rate refunds(c) | 124 | | 170 | | | Yes | |
Hedge cost deferrals | 154 | | 16 | | | | (b) |
Accrued pension and OPEB(c) | 44 | | 32 | | | Yes | (i) |
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Other | 516 | | 429 | | | | (b) |
Total regulatory liabilities | 7,685 | | 7,008 | | | | |
Less: current portion | 487 | | 473 | | | | |
Total noncurrent regulatory liabilities | $ | 7,198 | | $ | 6,535 | | | | |
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c) Included in rate base.
(d) Includes regulatory liabilities related to the change in the federal tax rate as a result of the Tax Act and the change in the North Carolina tax rate, both discussed in Note 23. Portions are included in rate base.
(e) Pays interest on over-recovered costs in North Carolina. Includes certain purchased power costs in North Carolina and South Carolina and costs of distributed energy in South Carolina.
(f) Recovered over the life of the associated assets.
(g) Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism.
(h) Earns a debt and equity return on coal ash expenditures for North Carolina and South Carolina retail customers as permitted by various regulatory orders.
(i) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
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| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2018 |
| 2017 |
| | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – coal ash | $ | 1,725 |
| $ | 1,645 |
| | (i) | (b) |
Accrued pension and OPEB | 581 |
| 410 |
| | | (j) |
Retired generation facilities(c) | 21 |
| 29 |
| | X | 2023 |
Deferred Asset – Lee COLA | 383 |
| — |
| | | (b) |
Storm cost deferrals | 160 |
| — |
| | X | (b) |
Hedge costs deferrals(c) | 101 |
| 109 |
| | X | 2041 |
DSM/EE | 169 |
| 210 |
| | (h) | (h) |
Vacation accrual | 78 |
| 83 |
| | (e) | 2019 |
Deferred fuel and purchased power | 196 |
| 140 |
| | (f) | 2020 |
Nuclear deferral | 87 |
| 84 |
| | | 2020 |
PISCC(c) | 34 |
| 35 |
| | X | (b) |
AMI | 176 |
| 185 |
| | X | (b) |
Other | 266 |
| 222 |
| | | (b) |
Total regulatory assets | 3,977 |
| 3,152 |
| | | |
Less: current portion | 520 |
| 299 |
| | | |
Total noncurrent regulatory assets | $ | 3,457 |
| $ | 2,853 |
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Regulatory Liabilities(a) | | | | | |
Costs of removal(c) | $ | 1,968 |
| $ | 2,054 |
| | X | (g) |
ARO – nuclear and other | 538 |
| 806 |
| | | (b) |
Net regulatory liability related to income taxes(d) | 3,082 |
| 3,028 |
| | | (b) |
Storm reserve(c) | — |
| 20 |
| | | (b) |
Accrued pension and OPEB | 38 |
| 44 |
| | | (j) |
Deferred fuel and purchased power | — |
| 46 |
| | (f) | 2020 |
Other | 572 |
| 359 |
| | | (b) |
Total regulatory liabilities | 6,198 |
| 6,357 |
| | | |
Less: current portion | 199 |
| 126 |
| | | |
Total noncurrent regulatory liabilities | $ | 5,999 |
| $ | 6,231 |
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(a)FINANCIAL STATEMENTS | Regulatory assets and liabilities are excluded from rate base unless otherwise noted.REGULATORY MATTERS |
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(b) | The expected recovery or refund period varies or has not been determined. |
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(c) | Included in rate base. |
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(d) | Includes regulatory liabilities related to the change in the federal tax rate as a result of the Tax Act and the change in the North Carolina tax rate, both discussed in Note 23. |
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(e) | Earns a return on outstanding balance in North Carolina. |
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(f) | Pays interest on over-recovered costs in North Carolina. Includes certain purchased power costs in North Carolina and South Carolina and costs of distributed energy in South Carolina. |
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(g) | Recovered over the life of the associated assets. |
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(h) | Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism. |
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(i) | Earns a debt and equity return on coal ash expenditures for North Carolina and South Carolina retail customers as permitted by various regulatory orders. |
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(j) | Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail. |
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 represented an approximate 13.6 percent increase in annual base revenues. The rate increase was driven by capital investments subsequent to the previous base rate case, including the W.S. Lee CC discussed below, grid improvement projects, AMI, investments in customer service technologies, costs of complying with CCR regulations and the Coal Ash Act and recovery of costs related to licensing and development of the Lee Nuclear Station discussed below.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
million. On February 28, 2018, Duke Energy Carolinas and the North Carolina Public Staff (Public Staff) filed an Agreement and Stipulation of Partial Settlement resolving certain portions of the proceeding. Terms of the settlement included a return on equityan ROE of 9.9 percent9.9% and a capital structure of 52 percent52% equity and 48 percent48% debt. As a result of the settlement, Duke Energy Carolinas recorded a pretax charge of approximately $4 million to Operation, maintenance and other on the Consolidated Statements of Operations.
On June 1, 2018, Duke Energy Carolinas and certain intervenors filed a Pilot Grid Rider Agreement and Stipulation (Grid Rider Stipulation) in which the parties agreed to the proposal Duke Energy Carolinas introduced in a post-hearing brief on April 27, 2018, along with additional commitments by Duke Energy Carolinas. Also on June 1, 2018, Duke Energy Carolinas and the Commercial Group filed a Partial Stipulation and Settlement Agreement to be considered in conjunction with the Stipulation.
Components of the Grid Rider Stipulation included:
Duke Energy Carolinas would recover grid improvement costs through a pilot, three-year Grid Rider except for costs related to targeted undergrounding of power lines, cable and conduit replacement, and power pole replacement;
Excluded costs were to be deferred with a return until Duke Energy Carolinas’ next base rate case proceeding; and
Costs incurred during the three-year pilot, both rider recoverable and deferred, were subject to a 4.5 percent cumulative cap of total annual electric service revenue.
On June 22, 2018, the NCUC issued an order approving the Stipulation of Partial Settlement and requiring a revenue reduction. The order also included the following material components not covered in the Stipulation:
Recovery of $554 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Carolinas' WACC;
Assessment of a $70 million management penalty ratably over a five-year period by reducing the annual recovery of the deferred coal ash costs;
Denial of Duke Energy Carolinas' request for recovery of future estimated ongoing annual coal ash costs of $201 million with approval to defer such costs with a return at Duke Energy Carolinas' WACC, to be considered for recovery in the next rate case;
Inclusion in rates of costs related to the W.S. Lee CC, two new solar facilities, and AMI deployment as requested;
Recovery of Lee Nuclear Station licensing and development cost of $347 million over a 12-year period, but denial of a return on the deferred balance of costs;
Reduction in revenue related to lower income tax expense resulting from the Tax Act, and a requirement to maintain all excess deferred income tax (EDIT) resulting from the Tax Act in a regulatory liability account pending flow back to customers as approved by the commission at the earlier of three years or Duke Energy Carolinas’ next general rate case proceeding; and
Denial of the proposed Grid Rider Stipulation related to grid improvement costs and denial of deferral accounting treatment of the costs at this time. Duke Energy Carolinas may petition for deferral of grid modernization costs outside of a general rate case proceeding if it can show financial hardship or a stipulation that includes greater consensus among intervening parties on costs being classified as grid modernization.
As a result of the Order, Duke Energy Carolinas recorded a pretax charge of approximately $150 million to Impairment charges and Operation, maintenance and other on the Consolidated Statements of Operations. The charge is primarily related to the denial of a return on the Lee Nuclear Project and for previously recognized return impacted by the coal ash management penalty described above. On July 27, 2018, NCUC approved Duke Energy Carolinas' compliance filing. As a result, revised customer rates were effective on August 1, 2018.
On July 20, 2018, the North Carolina Attorney General filed a Notice of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Attorney General contends the commission’s order should be reversed and remanded, as it is in excess of the commission’s statutory authority; affected by errors of law; unsupported by competent, material and substantial evidence in view of the entire record as submitted; and arbitrary or capricious. The Sierra Club, North Carolina Sustainable Energy Association, North Carolina Justice Center, North Carolina Housing Coalition, Natural Resource Defense Council and Southern Alliance for Clean Energy have alsoother parties separately filed Notices of Appeal to the North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction. On August 8, 2018, the Public Staff filed a Notice of Cross Appeal to theCourt. The North Carolina Supreme Court from the June 22, 2018, Order Accepting Stipulation, Deciding Contested Issues and Requiring Revenue Reduction issued by the NCUC. The Public Staff contends the commission’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by substantial evidence with regard to the commission’s failure to consider substantial evidence of coal ash related environmental violations. On November 29, 2018, the North Carolina Attorney General's Office filed a motion with the North Carolina Supreme Court requesting the court consolidate the Duke Energy Carolinas and Duke Energy Progress appeals and enter an order adopting the parties’ proposed briefing schedule as set out in the filing. On November 29, 2018, the North Carolina Supreme Court adopted a schedule for briefing set forth in the motion to consolidateconsolidated 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 Appellee response briefs are due July 29, 2019.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 cannot predictand Duke Energy Progress entered into the outcomeCCR 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.
2019 North Carolina Rate Case
On September 30, 2019, Duke Energy Carolinas filed an application with the NCUC for a net rate increase for retail customers of this matter.approximately $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 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.
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. |
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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.
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,million.
After hearings in March 2019, the PSCSC issued an order on May 21, 2019, which representsincluded an approximate 10.0 percent increase in retail revenues.ROE of 9.5% and a capital structure of 53% equity and 47% debt. The rate increase is driven by capital investments and environmental compliance progress made byorder also included the following material components:
•Approval of cancellation of the Lee Nuclear Project, with Duke Energy Carolinas since its previous rate case, includingmaintaining the further implementationcombined 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’ generation modernization program, which consistsCarolinas' WACC;
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
•Denial of retiring, replacingrecovery of $115 million of certain coal ash costs deemed to be related to the Coal Ash Act and upgrading generation plants, investments in customer service technologies and continued investments inincremental to the federal CCR rule;
•Approval of a $66 million decrease to base work to maintain its transmission and distribution systems. The request includes net tax benefits resulting from the Tax Act of $66 millionrates to reflect the change in ongoing tax expense, primarily from the reduction in the federal income tax rate from 3535% to 21 percent, and $4621%;
•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 the Average Rate Assumption Method (ARAM) for protected EDIT, over a 20-year period for unprotected EDIT associated with Property, Plant and benefitsEquipment, 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 from a reductiondecrease through the EDIT Rider related to reductions in the North Carolina state income taxes allocabletax rate from 6.9% 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 capricious 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 and maintenance expenses. An order detailing the commission's decision in the directive was issued 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 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 insurance litigation expenses;
•Disallow a return on certain deferred expenses; and
•Allow recovery of Lee Nuclear Project preconstruction costs.
The Supreme Court of South Carolinas' 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 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 Consolidated Statements of Operations for the year ended December 31, 2021, principally related to coal ash remediation at retired coal ash basin sites. On November 29, 2021, Duke Energy Carolinas filed a petition for rehearing on several grounds, including the Supreme Court of South Carolinas’ decision on coal ash cost recovery and certain deferred expenses. On February 1, 2022, the Supreme Court of South Carolina denied the petition for rehearing.
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 proposed 3 contentions purporting to challenge Duke Energy Carolinas’ environmental report (ER). In general, the proposed contentions claimed that the ER did not consider certain information regarding the environmental aspects of severe accidents caused by a hypothetical failure of the Jocassee Dam, and therefore did not satisfy the National Environmental Policy Act (NEPA) of 1969, as amended, or the NRC’s NEPA-implementing regulations. Duke Energy Carolinas filed its answer to the proposed contentions on October 22, 2021, and the Petitioners filed their reply to Duke Energy Carolinas’ answer on November 5, 2021. On February 11, 2022, the Atomic Safety and Licensing Board (ASLB) issued its decision on the Hearing Request and found that the Petitioners failed to establish that the proposed contentions are litigable. The ASLB also denied the Petitioners' Petition for Waiver and terminated the proceeding.
Duke Energy Carolinas also requested approvaland Duke Energy Progress intend to seek renewal of its proposed Grid Improvement Plan, adjustments to its Prepaid Advantage Programoperating licenses and a variety20-year license extensions for all of accounting orders related to ongoing costs for environmental compliance, including recovery over a five-year period of $242 million of deferred coal ash related compliance costs, grid investments between rate changes, incremental depreciation expense, a result of newtheir nuclear stations. New depreciation rates from the depreciation study approved in the 2017 North Carolina Rate Case above, and the balance of development costs associated with the cancellationwere implemented for all of the Lee Nuclear Project. Finally,nuclear facilities during the second quarter of 2021. Duke Energy Carolinas sought approval to establish a reserve and accrual for end of life nuclear costs for nuclear fuel and materials and supplies. An evidentiary hearing is scheduled to begin on March 21, 2019, and a decision and revised customer rates are expected by mid-2019. Duke Energy CarolinasProgress cannot predict the outcome of this matter.
On July 31, 2017, PMPA filed a complaint with FERC alleging that Duke Energy Carolinas misapplied the formula rate under the PPA between the parties by including in its rates amortization expense associated with regulatory assets and recorded in a certain account without FERC approval. On February 15, 2018, FERC issued an order ruling in favor of PMPA and ordered Duke Energy Carolinas to refund to PMPA all amounts improperly collected under the PPA. Duke Energy Carolinas has issued to PMPA and similarly situated wholesale customers refunds of approximately $25 million. FERC also set the matter for settlement and hearing. PMPA and other customers filed a protest to Duke Energy Carolinas' refund report claiming that the refunds are inadequate in that (1) Duke Energy Carolinas invoked the limitations periods in the contracts to limit the time period for which the refunds were paid and the customers disagree that this limitation applies, and (2) Duke Energy Carolinas refunded only amounts recovered through a certain account and the customers have asserted that the order applies to all regulatory assets. On July 3, 2018, FERC issued an order accepting Duke Energy Carolinas' refund report and ruling that these two claims are outside the scope of FERC's February order. The settlement agreements and revised formula rates for all parties to the proceeding were filed on December 28, 2018. Duke Energy Carolinas cannot predict the outcome of this matter.
W.S. Lee CC
On April 9, 2014, the PSCSC granted Duke Energy Carolinas and NCEMC a CECPCN for the construction and operation of a 750-megawatt (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 its share of the cost to build the facility was approximately $650 million, including AFUDC. Approximately $600 million is being recovered through base rate or deferral filings in North Carolina and South Carolina. The remaining amount will be included in future rate filings. The project commenced commercial operation on April 5, 2018. NCEMC owns approximately 13 percent of the project.
Lee Nuclear Station
In December 2007, Duke Energy Carolinas applied to the NRC for COLs for two Westinghouse AP1000 reactors for the proposed William States Lee III 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 incurring certain project development and preconstruction costs through several separately issued orders, 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.
The Duke Energy Carolinas 2017 North Carolina Rate Case filing discussed above included a request to cancel the development of the Lee Nuclear project, recover incurred licensing and development costs and maintain the license issued by the NRC as an option for potential future development. The cancellation request was due to the Westinghouse bankruptcy filing and other market activity. The NCUC Order issued on June 22, 2018, approved the cancellation of the Lee Nuclear Project, allowed Duke Energy Carolinas to continue to maintain the COLs, provided for recovery of the North Carolina retail allocation of project development costs, including AFUDC accrued through December 31, 2017, over 12 years and disallowed any return on the unamortized balance during the 12-year recovery period.
Given the repeal of certain sections of the Base Load Review Act in South Carolina combined with the cancellation of the project, Duke Energy Carolinas determined that it was no longer probable it would be allowed a return on its share of project development costs attributable to South Carolina. As a result, Duke Energy Carolinas recorded a pretax impairment in the second quarter of 2018 of $29 million within Impairment charges on the Consolidated Statements of Operations and Comprehensive Income.
South Carolina Petition
On June 22, 2018, Duke Energy Carolinas filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred in connection with the addition of the W.S. Lee CC, the ongoing deployment of Duke Energy Carolinas new billing and Customer Information System and the addition of the Carolinas West Primary Distribution Control Center. This request totaling approximately $33 million was approved on July 25, 2018.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Sale of Hydroelectric (Hydro) Plants
In May 2018, Duke Energy Carolinas entered an agreement for the sale of five hydro plants with a combined 18.7-MW generation capacity in the Western Carolinas region to Northbrook Energy. The completion of the transaction is subject to approval from FERC for the four FERC-licensed plants, as well as other state regulatory agencies and is contingent upon regulatory approval from the NCUC and PSCSC to defer the total estimated loss on the sale of approximately $40 million. On July 5, 2018, Duke Energy Carolinas filed with NCUC for approval of the sale of the five hydro plants to Northbrook, to transfer the CPCNs for the four North Carolina hydro plants and to establish a regulatory asset for the North Carolina retail portion of the difference between sales proceeds and net book value. On September 4, 2018, the Public Staff filed comments supporting the CPCN transfer with conditions. On September 18, 2018, Duke Energy Carolinas filed reply comments opposing the Public Staff’s proposed conditions. On November 29, 2018, the NCUC issued a procedural order and held an evidentiary hearing on this matter on February 5, 2019. On August 28, 2018, Duke Energy Carolinas filed with PSCSC its Application for Approval of Transfer and Sale of Hydroelectric Generation Facilities, Acceptance for Filing of a Power Purchase Agreement and an Accounting Order to Establish a Regulatory Asset. On September 10, 2018, the ORS provided a letter to the commission stating its position on the application and on September 18, 2018, Duke Energy Carolinas requested this matter be carried over to allow Duke Energy Carolinas time to discuss certain accounting issues with the ORS. On August 9, 2018, Duke Energy Carolinas and Northbrook filed a joint Application for Transfer of Licenses with the FERC. On December 27, 2018, the FERC issued its Order Approving Transfer of Licenses (“Order”) for the four FERC-licensed hydro plants. On January 18, 2019, Duke Energy Carolinas and Northbrook Carolina Hydro II, LLC requested a six-month extension of time to comply with the requirement of the Order that Northbrook submit to FERC certified copies of all instruments of conveyance and signed acceptance sheets within 60 days of the date of the Order, given that compliance by the deadline set in the Order is not possible because the conveyance of the projects is contingent on the receipt of state regulatory approvals, which are not anticipated to be issued by February 25, 2019.
If commission approvals are not received, Duke Energy Carolinas can cancel the sales agreement and retain the hydro facilities. If commission approvals are received, the closing is expected to occur during the second quarter of 2019. After closing, Duke Energy Carolinas will purchase all the capacity and energy generated by these facilities at the avoided cost for five years through power purchase agreements. Duke Energy Carolinas cannot predict the outcome of this matter.
Duke Energy Progress
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Duke Energy Progress' Consolidated Balance Sheets. | | | December 31, | | Earns/Pays | Recovery/Refund | | December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2018 |
| 2017 |
| | a Return | Period Ends | (in millions) | 2021 | 2020 | | a Return | Period Ends |
Regulatory Assets(a) | | | Regulatory Assets(a) | |
AROs – coal ash | $ | 2,051 |
| $ | 1,975 |
| | (h) | (b) | AROs – coal ash | $ | 1,389 | | $ | 1,347 | | | (h) | (b) |
AROs – nuclear and other | 429 |
| 359 |
| | (c) | AROs – nuclear and other | 613 | | 683 | | | (c) |
Accrued pension and OPEB | 542 |
| 430 |
| | (k) | Accrued pension and OPEB | 351 | | 393 | | | (k) |
Deferred fuel and purchased power | | Deferred fuel and purchased power | 303 | | 158 | | | (f) | 2023 |
Storm cost securitized balance, net | | Storm cost securitized balance, net | 759 | | — | | | 2041 |
| Retired generation facilities | 148 |
| 170 |
| | X | (b) | Retired generation facilities | 171 | | 189 | | | Yes | (b) |
Storm cost deferrals(d) | 571 |
| 150 |
| | X | (b) | |
PISCC and deferred operating expenses | | PISCC and deferred operating expenses | 47 | | 51 | | | Yes | 2054 |
Hedge costs deferrals | 54 |
| 64 |
| | (b) | Hedge costs deferrals | 60 | | 89 | | | (b) |
Deferred asset – Harris COLA | | Deferred asset – Harris COLA | 21 | | 32 | | | (b) |
AMI | | AMI | 92 | | 57 | | | Yes | (b) |
Customer connect project | | Customer connect project | 57 | | 25 | | | Yes | (b) |
DSM/EE(e) | 235 |
| 264 |
| | (i) | DSM/EE(e) | 218 | | 224 | | | (i) |
Vacation accrual | 41 |
| 42 |
| | 2019 | Vacation accrual | 42 | | 42 | | | 2022 |
Deferred fuel and purchased power | 397 |
| 130 |
| | (f) | 2020 | |
Storm cost deferrals(d) | | Storm cost deferrals(d) | 170 | | 785 | | | Yes | (b) |
NCEMPA deferrals | | NCEMPA deferrals | 165 | | 124 | | | (g) | 2042 |
| COR settlement | | COR settlement | 32 | | 33 | | | Yes | (b) |
Nuclear deferral | 46 |
| 35 |
| | 2020 | Nuclear deferral | 42 | | 35 | | | 2023 |
PISCC and deferred operating expenses | 36 |
| 38 |
| | X | 2054 | |
AMI | 67 |
| 75 |
| | (b) | |
NCEMPA deferrals | 50 |
| 53 |
| | (g) | 2042 | |
| ABSAT, coal ash basin closure | | ABSAT, coal ash basin closure | 23 | | 27 | | | Yes | (b) |
Incremental COVID-19 expenses | | Incremental COVID-19 expenses | 28 | | 23 | | | Yes | (b) |
| Deferred severance charges | | Deferred severance charges | 18 | | 29 | | | 2023 |
| Other | 147 |
| 74 |
| | (b) | Other | 50 | | 122 | | | (b) |
Total regulatory assets | 4,814 |
| 3,859 |
| | Total regulatory assets | 4,651 | | 4,468 | | |
Less: current portion | 703 |
| 352 |
| | Less: current portion | 533 | | 492 | | |
Total noncurrent regulatory assets | $ | 4,111 |
| $ | 3,507 |
| | Total noncurrent regulatory assets | $ | 4,118 | | $ | 3,976 | | |
Regulatory Liabilities(a) | | | Regulatory Liabilities(a) | |
Net regulatory liability related to income taxes(l) | | Net regulatory liability related to income taxes(l) | $ | 1,695 | | $ | 1,662 | | | (b) |
Costs of removal | $ | 1,878 |
| $ | 2,122 |
| | X | (j) | Costs of removal | 2,955 | | 2,666 | | | Yes | (j) |
Accrued pension and OPEB | 93 |
| — |
| | (k) | |
Net regulatory liability related to income taxes(l) | 1,863 |
| 1,854 |
| | (b) | |
Deferred fuel and purchased power | — |
| 1 |
| | (f) | 2020 | |
| Provision for rate refunds | | Provision for rate refunds | 87 | | 123 | | | Yes | |
Hedge cost deferrals | | Hedge cost deferrals | 117 | | 8 | | | (b) |
| Other | 299 |
| 161 |
| | (b) | Other | 395 | | 465 | | | (b) |
Total regulatory liabilities | 4,133 |
| 4,138 |
| | Total regulatory liabilities | 5,249 | | 4,924 | | |
Less: current portion | 178 |
| 139 |
| | Less: current portion | 381 | | 530 | | |
Total noncurrent regulatory liabilities | $ | 3,955 |
| $ | 3,999 |
| | Total noncurrent regulatory liabilities | $ | 4,868 | | $ | 4,394 | | |
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c) Recovery period for costs related to nuclear facilities runs through the decommissioning period of each unit.
(d) South Carolina storm costs are included in rate base.
(e) Included in rate base.
(f) Pays interest on over-recovered costs in North Carolina. Includes certain purchased power costs in North Carolina and South Carolina and costs of distributed energy in South Carolina.
(g) South Carolina retail allocated costs are earning a return.
(h) Earns a debt and equity return on coal ash expenditures for North Carolina and South Carolina retail customers as permitted by various regulatory orders.
(i) Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism.
(j) Recovered over the life of the associated assets.
(k) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
(l) Includes regulatory liabilities related to the change in the federal tax rate as a result of the Tax Act and the change in the North Carolina tax rate, both discussed in Note 23. Portions are included in rate base.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
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(a) | Regulatory assets and liabilities are excluded from rate base unless otherwise noted. |
| |
(b) | The expected recovery or refund period varies or has not been determined. |
| |
(c) | Recovery period for costs related to nuclear facilities runs through the decommissioning period of each unit. |
| |
(d) | South Carolina storm costs are included in rate base. |
| |
(e) | Included in rate base. |
| |
(f) | Pays interest on over-recovered costs in North Carolina. Includes certain purchased power costs in North Carolina and South Carolina and costs of distributed energy in South Carolina. |
| |
(g) | South Carolina retail allocated costs are earning a return. |
| |
(h) | Earns a debt and equity return on coal ash expenditures for North Carolina and South Carolina retail customers as permitted by various regulatory orders. |
| |
(i) | Includes incentives on DSM/EE investments and is recovered through an annual rider mechanism. |
| |
(j) | Recovered over the life of the associated assets. |
| |
(k) | Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail. |
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(l) | Includes regulatory liabilities related to the change in the federal tax rate as a result of the Tax Act and the change in the North Carolina tax rate, both discussed in Note 23. |
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 represented an approximate 14.9 percent increase in annual base revenues. Subsequent to the filing, Duke Energy Progresswas subsequently adjusted the requested amount to $420 million, representing an approximate 13 percent increase. The rate increase is driven by capital investments subsequent to the previous base rate case, costs of complying with CCR regulations and the Coal Ash Act, costs relating to storm recovery, investments in customer service technologies and recovery of costs associated with renewable purchased power.
On December 16, 2016, Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer certain costs incurred in connection with response to Hurricane Matthew and other significant storms in 2016. The final estimate of incremental operation and maintenance and capital costs of $116 million was filed with the NCUC in September 2017. On July 10, 2017, the NCUC consolidated Duke Energy Progress' storm deferral request into the Duke Energy Progress rate case docket for decision.
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 a return on equityan ROE of 9.9 percent9.9% and a capital structure of 52 percent52% equity and 48 percent48% debt. As a result of the settlement, in 2017 Duke Energy Progress recorded pretax charges totaling approximately $25 million to Impairment charges and Operation, maintenance and other on the Consolidated Statements of Operations, principally related to disallowances from rate base of certain projects at the Mayo and Sutton plants. On February 23, 2018, the NCUC issued an order approving the stipulation. The order also includedPublic Staff, the following material components not covered inNorth Carolina Attorney General and the stipulation:Sierra Club filed notices of appeal to the North Carolina Supreme Court.
Recovery ofThe North Carolina Supreme Court consolidated the remaining $234 million of deferred coal ash basin closure costs over a five-year period with a return at Duke Energy Progress' WACC, excluding $10 million of retail deferred coal ash basin costs related to ash hauling atCarolinas and Duke Energy Progress' Asheville Plant;
Assessment of a $30 million management penalty ratably over a five-year period by reducingProgress appeals. On December 11, 2020, the annual recovery ofNorth Carolina Supreme Court issued an opinion, which affirmed, in part, and reversed and remanded, in part, the deferred coal ash costs;
Denial of Duke Energy Progress' request for recovery of future estimated ongoing annualNCUC’s decisions. In the Opinion, the court upheld the NCUC's decision to include coal ash costs of $129 million with approval to defer such costs with a return at Duke Energy Progress' WACC, to be considered for recovery in the next rate case; and
Approvalcost of service, as well as the NCUC’s discretion to recover $51 million of the approximately $80 million deferred storm costs over a five-year period with amortization beginning in October 2016. The order did not allow the deferral of the associated capital costs or a return on the deferredunamortized balance duringof coal ash costs. The court also remanded to the deferral period.
The order also impacted certain amounts that were similarly recorded on Duke Energy Carolinas' Consolidated Balance Sheets. AsNCUC a resultsingle issue to consider the assessment of support for the order,Public Staff’s equitable sharing argument. On January 22, 2021, Duke Energy Progress and Duke Energy Carolinas recorded pretax chargesentered 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 $68approximately $464 million, which represented an approximate 12.3% 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 $14 million, respectively,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 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 the 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 first quarter of 2018 to Impairment charges, Operation, maintenancebase rate proceeding. On July 27, 2020, Duke Energy Progress filed a joint motion with Duke Energy Carolinas and otherthe 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 Interest Expense on the Consolidated Statements of Operations. These charges primarily related to the coal ash basin disallowance and previously recognized return impacted by the coal ash management penalty and deferred storm cost adjustments. Revised customer rates became effective on March 16, 2018.
On May 15, 2018, the Public Staff filed a NoticeSecond Agreement and Stipulation of Cross AppealPartial Settlement, subject to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested Issuesreview and Granting Partial Rate Increase issued by the NCUC. The Public Staff contend the commission’s order should be reversed and remanded, as it is affected by errors of law, and is unsupported by competent, material and substantial evidence in viewapproval of the entire record as submitted.NCUC, resolving certain remaining issues in the base rate proceeding. The North Carolina Attorney Generalremaining items litigated at hearing included recovery of deferred coal ash compliance costs that are subject to asset retirement obligation accounting and Sierra Club have also filed Noticesimplementation of Appeal to the North Carolina Supreme Court from the February 23, 2018, Order Accepting Stipulation, Deciding Contested Issues and Granting Partial Rate Increase. new depreciation rates.
On November 29, 2018, the North Carolina Attorney General's OfficeAugust 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 North Carolina Supreme Court requestingterms of the court consolidatebase 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.
On January 22, 2021, Duke Energy Progress and Duke Energy Carolinas appeals and enterentered into the CCR Settlement Agreement with the Settling Parties, which was filed with the NCUC on January 25, 2021.
On April 16, 2021, the NCUC issued an order adoptingapproving the parties’ proposed briefing schedule as set out inJune 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 filing. On November 29, 2018,reasonableness and prudence of approximately $714 million of deferred storm costs, which were removed from the North Carolina Supreme Court adopted a schedulerate case and for briefing set forth in the motion to consolidate thewhich Duke Energy Progress andfiled a petition seeking securitization in October 2020. Additionally, the order approved without modification the CCR Settlement Agreement.
The order denied Duke Energy Carolinas appeals. The Appellee response briefs are due July 29, 2019.Progress' proposal to shorten the remaining depreciable lives of certain Duke Energy Progress cannot predictcoal-fired generating units, indicating the outcomeNCUC has not had the chance to fully examine the issue within the context of this matter.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.
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2016 South CarolinaOn May 21, 2021, the NCUC issued an Order Approving Rate Case
In December 2016, the PSCSC approvedSchedules, which resulted in a rate case settlement agreement among the ORS, intervenors and Duke Energy Progress. Terms of the settlement agreement included an approximate $56 million increase in revenues over a two-year period. Annet increase of approximately $38 million in revenues was$178 million. Revised customer rates became effective Januaryon June 1, 2017, and an additional increase of approximately $19 million in revenues was effective January 1, 2018. Duke Energy Progress amortized approximately $19 million from the cost of removal reserve in 2017. Other settlement terms included a rate of return on equity of 10.1 percent, recovery of coal ash costs incurred from January 1, 2015, through June 30, 2016, over a 15‑year period and ongoing deferral of allocated ash basin closure costs from July 1, 2016, until the next base rate case. The settlement also provides that Duke Energy Progress will not seek an increase in rates in South Carolina to occur prior to 2019, with limited exceptions.2021.
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 which represents an approximate 10.3 percent increase in annual base revenues. The rate increase is driven by capital investments and environmental compliance progress made byof coal ash costs over a five-year period with a return at Duke Energy Progress since its previous rate case, includingProgress' WACC;
•Denial of recovery of $65 million of certain coal ash costs deemed to be related to the further implementation of Duke Energy Progress’ generation modernization program, which consists of retiring, replacingCoal Ash Act and upgrading generation plants, investments in customer service technologies and continued investments in base workincremental to maintain its transmission and distribution systems. The request includes net tax benefits of $15 million consistingthe federal CCR rule;
•Approval of a $12$17 million increase duedecrease to the expiration of EDITs related to reductions in North Carolina state income taxes allocable to South Carolina and decreases resulting from the Tax Act of $17 millionbase rates to reflect the change in ongoing tax expense, primarily the reduction in the federal income tax rate from 3535% to 21 percent, and $1021%;
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
•Approval of a $12 million to returndecrease through the EDIT Tax Savings Rider resulting from the federal tax rate change and deferred revenues since January 2018 related to the change.
Duke Energy Progress also requested approval of its proposed Grid Improvement Plan, approval ofchange, to be returned in accordance with ARAM for protected EDIT, over a Prepaid Advantage Program20-year period for unprotected EDIT associated with Property, Plant and a variety of accounting orders related to ongoing costs for environmental compliance, including recoveryEquipment, 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 $51a $12 million increase due to the expiration of deferred coal ash related compliance costs, AMI deployment, grid investments between rate changes and regulatory asset treatmentEDIT related to reductions in the retirementNorth Carolina state income tax rate from 6.9% to 2.5%.
As a result of a generating plant located in Asheville, North Carolina. Finally,the order, revised customer rates were effective June 1, 2019. On May 31, 2019, Duke Energy Progress sought approvalfiled 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 establishrehear 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 reservereturn on deferred operation and accrual for endmaintenance expenses, but allowing additional litigation-related costs. As a result of life nuclearthe directive allowing litigation-related costs, customer rates were revised effective July 1, 2019. An order detailing the commission's decision in the directive was issued on October 18, 2019. In November 2019, Duke Energy Progress appealed the decision to the Supreme Court of South Carolina.
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 insurance litigation expenses; and
•Disallow a return on certain deferred expenses.
The Supreme Court of South Carolinas' decision notes the prior determination made by the PSCSC that Duke Energy could submit coal ash costs for materialsrecovery 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 suppliesother charges, and nuclear fuel. An evidentiary hearing is scheduleda $6 million increase in Other income and expenses, net, in the Consolidated Statements of Operations for the year ended December 31, 2021, principally related to begincoal ash remediation at retired coal ash basin sites. On November 29, 2021, Duke Energy Progress filed a petition for rehearing on Aprilseveral grounds, including the Supreme Court of South Carolinas’ decision on coal ash cost recovery and certain deferred expenses. On February 1, 2022, the Supreme Court of South Carolina denied the petition for rehearing.
FERC Return on Equity Complaints
On October 11, 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 is unjust and unreasonable. On July 16, 2020, the FERC set this matter for hearing and settlement judge procedures and established a decisionrefund 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 revised customer ratescircumstances” 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 unjust 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 the complaint on November 20, 2020, seeking dismissal, demonstrating that the 11% ROE is just and reasonable for the service provided. The parties filed responsive pleadings and are expected by mid-2019.awaiting an order from the FERC. Duke Energy Progress cannot predict the outcome of this matter.
Western Carolinas Modernization PlanOn 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, 2018, 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 complete and construction of these plants began in 2017, with an expected in-service date in late 2019.
On October 8, 2018, Duke Energy Progress filed an application with the NCUC for a CPCN to construct the Hot Springs Microgrid Solar and Battery Storage Facility. On November 30, 2018, the NCUC issued an order scheduling hearings, requiring filing of testimony, establishing discovery guidelines and requiring public notice. On February 7, 2019, Duke Energy Progress made a joint filing with the Public Staff, which accepted the Public Staff’s proposed conditions and requested that the NCUC cancel the evidentiary hearing. Duke Energy Progress cannot predict the outcome of this matter.
The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $327 million and $385 million is included in Generation facilities to be retired, net on Duke Energy Progress' Consolidated Balance Sheets as of December 31, 2018, and 2017, respectively. Duke Energy Progress' request for a regulatory asset at the time of retirement with amortization over a 10-year period was approved by the NCUC on February 23, 2018.
Shearon Harris Nuclear Plant Expansion
In 2006, Duke Energy Progress selected a site at Harris to evaluate for possible future nuclear expansion. On February 19, 2008, Duke Energy Progress filed its COL application with the NRC for two Westinghouse AP1000 reactors at Harris, which the NRC docketed for review. On May 2, 2013, Duke Energy Progress filed a letter with the NRC requesting the NRC to suspend its review activities associated with the COL at the Harris site. The NCUC and PSCSC approved deferral of retail costs. Total deferred costs are approximately $43 million as of December 31, 2018, and are recorded in Regulatory assets on Duke Energy Progress’ Consolidated Balance Sheets. On November 17, 2016, the FERC approved Duke Energy Progress’ rate recovery request filing for the wholesale ratepayers’ share of the abandonment costs, including a debt-only return to be recovered through revised formula rates and amortized over a 15-year period beginning May 1, 2014. As part of the settlement agreement for the 2017 North Carolina Rate Case discussed above, Duke Energy Progress will amortize the regulatory asset over an eight-year period. NCUC approved the settlement on February 23, 2018.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
South Carolina Petitions
On June 22, 2018, Duke Energy Progress filed a petition with the PSCSC seeking an accounting order authorizing Duke Energy Progress to adopt new depreciation rates, effective March 16, 2018, that reflect the results of Duke Energy Progress’ most recent depreciation study. Also on June 22, 2018, Duke Energy Progress filed a petition with the PSCSC requesting an accounting order to defer certain costs incurred in connection with the deployment of AMI, the ongoing deployment of Duke Energy Progress' new billing and Customer Information System, new depreciation rates and costs incurred in connection with the return of certain excess deferred state income taxes from North Carolina. These requests totaling approximately $20 million were approved on July 25, 2018.
FERC Form 1 Reporting Matter
On October 18, 2017, Fayetteville Public Works Commission (FPWC) filed with FERC a complaint against Duke Energy Progress. In the complaint, FPWC alleges that Duke Energy Progress’ change in its method of reporting materials and supplies inventory on FERC Form 1 for 2015 constituted a change in accounting practice that Duke Energy Progress was not permitted to implement without first obtaining FERC approval. On April 23, 2018, FERC issued an order finding that Duke Energy Progress’ new reporting methodology was not proper and required Duke Energy Progress to revise its FERC Form 1s beginning in 2014 and to issue refunds to formula rate customers. Duke Energy Progress estimates that these refunds will total approximately $14 million. On May 23, 2018, Duke Energy Progress filed a request for rehearing alleging that FERC’s order is incorrect. Duke Energy Progress revised its FERC Form 1 filings in June 2018. On August 31, 2018, Duke Energy Progress filed with FERC a refund report memorializing its payment of refunds to FPWC. Duke Energy Progress cannot predict the outcome of this matter.
Tax Act
As ordered by the NCUC on October 5, 2018, Duke Energy Progress filed a proposal on October 25, 2018, to adjust rates to reflect the reduction in federal corporate income tax rate from 35 to 21 percent for taxable years beginning after December 31, 2017, as outlined in the Tax Act. Duke Energy Progress proposed that this rate decrement be effective for service rendered on and after December 1, 2018. On November 28, 2018, the NCUC approved the proposal to implement the change in the federal corporate income tax rate and effective December 1, 2018, Duke Energy Progress implemented the rate reduction. Also, as ordered by the NCUC on October 5, 2018, Duke Energy Progress shall continue to hold in a deferred regulatory liability account the difference between revenues billed under the prior federal corporate income tax rate and the federal corporate income tax rate resulting from the Tax Act for the period January 1, 2018 through November 30, 2018. The disposition of such regulatory liability may be considered in Duke Energy Progress' next general rate case proceeding or in three years, whichever is sooner. EDIT related to the corporate income tax rate reduction shall be held in a deferred tax regulatory liability account until they can be addressed for ratemaking purposes in the next general rate case proceeding or in three years, whichever is sooner.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Duke Energy Florida
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Duke Energy Florida's Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | |
| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2021 | 2020 | | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – coal ash | $ | 10 | | $ | 10 | | | | (b) |
AROs – nuclear and other | 7 | | 2 | | | | (b) |
Accrued pension and OPEB(c) | 374 | | 482 | | | Yes | (g) |
Deferred fuel and purchased power | 415 | | 4 | | | (f) | 2022 |
| | | | | |
Nuclear asset securitized balance, net | 937 | | 991 | | | | 2036 |
| | | | | |
Retired generation facilities(c) | 94 | | 174 | | | Yes | 2044 |
| | | | | |
Hedge costs deferrals(c) | 77 | | 59 | | | Yes | 2038 |
| | | | | |
AMI(c) | 38 | | 45 | | | Yes | 2032 |
Customer connect project | 67 | | 30 | | | | 2037 |
DSM/EE(c) | 12 | | 17 | | | Yes | 2025 |
| | | | | |
Storm cost deferrals(c) | 19 | | 108 | | | (e) | (b) |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Costs of removal regulatory asset(c) | 107 | | — | | | (d) | (b) |
| | | | | |
Qualifying facility contract buyouts(c) | 94 | | 107 | | | Yes | 2034 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other | 37 | | 35 | | | (d) | (b) |
Total regulatory assets | 2,288 | | 2,064 | | | | |
Less: current portion | 497 | | 265 | | | | |
Total noncurrent regulatory assets | $ | 1,791 | | $ | 1,799 | | | | |
Regulatory Liabilities(a) | | | | | |
Net regulatory liability related to income taxes(c) | $ | 699 | | $ | 749 | | | | (b) |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other | 97 | | 19 | | | (d) | (b) |
Total regulatory liabilities | 796 | | 768 | | | | |
Less: current portion | 98 | | 110 | | | | |
Total noncurrent regulatory liabilities | $ | 698 | | $ | 658 | | | | |
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c) Included in rate base.
(d) Certain costs earn/pay a return.
(e) Earns a debt return/interest once collections begin.
(f) Earns commercial paper rate.
(g) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
2021 Settlement Agreement
On January 14, 2021, Duke Energy Florida 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 retail portion of 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 contained 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 resolved remaining unrecovered storm costs for Hurricane Michael and Hurricane Dorian.
The FPSC approved the 2021 Settlement on May 4, 2021, issuing an order on June 4, 2021. Revised customer rates became effective January 1, 2022, with subsequent base rate increases effective January 1, 2023, and January 1, 2024.
|
| | | | | | | | | |
| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2018 |
| 2017 |
| | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – coal ash(c) | $ | 10 |
| $ | 9 |
| | | (b) |
AROs – nuclear and other(c) | 172 |
| 296 |
| | | (b) |
Accrued pension and OPEB(c) | 532 |
| 476 |
| | X | (g) |
Retired generation facilities(c) | 219 |
| 216 |
| | X | (b) |
Storm cost deferrals(c)(h) | 382 |
| 376 |
| | (e) | 2021 |
Nuclear asset securitized balance, net | 1,093 |
| 1,142 |
| | | 2036 |
Hedge costs deferrals | 20 |
| 30 |
| | | 2020 |
DSM/EE(c) | 21 |
| 17 |
| | X | 2023 |
Deferred fuel and purchased power(c) | 203 |
| 219 |
| | (f) | 2020 |
AMI(c) | 60 |
| 75 |
| | X | 2032 |
Other | 176 |
| 36 |
| | (d) | (b) |
Total regulatory assets | 2,888 |
| 2,892 |
| | | |
Less: current portion | 434 |
| 389 |
| | | |
Total noncurrent regulatory assets | $ | 2,454 |
| $ | 2,503 |
| | | |
Regulatory Liabilities(a) | | | | | |
Costs of removal(c) | $ | 257 |
| $ | 415 |
| | (d) | (b) |
Net regulatory liability related to income taxes(c) | 847 |
| 948 |
| | | (b) |
Accrued pension and OPEB | 56 |
| — |
| | X | (g) |
Deferred fuel and purchased power(c) | 16 |
| — |
| | (f) | 2020 |
Other | 20 |
| 18 |
| | (d) | (b) |
Total regulatory liabilities | 1,196 |
| 1,381 |
| | | |
Less: current portion | 102 |
| 74 |
| | | |
Total noncurrent regulatory liabilities | $ | 1,094 |
| $ | 1,307 |
| | | |
| | | | | |
(a)FINANCIAL STATEMENTS | Regulatory assets and liabilities are excluded from rate base unless otherwise noted.REGULATORY MATTERS |
| |
(b) | The expected recovery or refund period varies or has not been determined. |
| |
(c) | Included in rate base. |
| |
(d) | Certain costs earn a return. |
| |
(e) | Earns a debt return/interest once collections begin. |
| |
(f) | Earns commercial paper rate. |
| |
(g) | Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail. |
| |
(h) | Balance includes $165 million for Hurricane Michael. Duke Energy Florida expects to seek recovery of these costs in the first half of 2019. |
Storm Restoration Cost Recovery
In September 2017, Duke Energy Florida’s service territory suffered significant damage from Hurricane Irma, resulting in approximately 1 million customers experiencing outages. In the fourth quarter of 2017, Duke Energy Florida also incurred preparation costs related to Hurricane Nate. On December 28, 2017, Duke Energy Florida filed a petition with the FPSC on April 30, 2019, to recover $223 million of estimated retail incremental storm restoration costs for Hurricane IrmaMichael, consistent with the provisions in the 2017 Settlement, and Hurricane Nate and to replenish the storm reserve. On February 6, 2018, the FPSC approved a stipulation that would applythe petition on June 11, 2019. The FPSC also approved allowing Duke Energy Florida to use the tax savings resulting from the Tax Act towardto recover these storm costs effective January 2018 in lieu of implementing a storm surcharge. StormApproved storm costs are currently expected to bewere fully recovered by approximately mid-2021.year-end 2021. On May 31, 2018,November 22, 2019, Duke Energy Florida filed a petition for approval of actual retail recoverable storm restoration costs and associated recovery process related to Hurricane Irma and Hurricane Nate. The petition is seeking the approval for the recoveryMichael in the amount of $510$191 million inplus interest. On May 19, 2020, Duke Energy Florida filed a supplemental true up reducing the actual retail recoverable storm restoration costs including the replenishment of Duke Energy Florida’s storm reserve of $132related to Hurricane Michael by approximately $3 million, and the process for recovering theseresulting in a total request to recover $188 million actual retail recoverable storm costs. On August 20, 2018, the FPSC approved Duke Energy Florida's unopposed Motion for Continuance filed August 17, 2018, to allow for an evidentiary hearing in this matter. On January 28, 2019, Duke Energy Florida made a supplemental filing to reduce the total storm cost recovery from $510 million to $508 million. The commission has scheduled the hearing to begin on May 21, 2019. At December 31, 2018, Duke Energy Florida's Consolidated Balance Sheets included approximately $217restoration costs, plus interest. Approximately $80 million of recoverablethese costs under the FPSC's storm ruleare included in Regulatory assets within Current Assets and Other Noncurrent Assets related to storm recovery for Hurricane Irma and Hurricane Nate. Duke Energy Florida cannot predict the outcome of this matter.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
In October 2018, Duke Energy Florida’s service territory suffered damage when Hurricane Michael made landfall as a strong Category 4 hurricane with maximum sustained winds of 155 mph. The storm caused catastrophic damage from wind and storm surge, particularly from Panama City Beach to Mexico Beach, resulting in widespread outages and significant damage to transmission and distribution facilities across the central Florida Panhandle. In response to Hurricane Michael, Duke Energy Florida restored service to approximately 72,000 customers. Duke Energy Florida incurred approximately $200 million of costs resulting from the hurricane restoration efforts. Approximately $35 million of the costs are included in Net property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2018. The remaining $165 million of costs represent recoverable costs under the FPSC’s storm rule and Duke Energy Florida's Open Access Transmission Tariff formula rates and are included in Regulatory assets within Other Noncurrent Assets on the Consolidated Balance Sheets as of December 31, 2018. 2020.
Duke Energy Florida anticipates filingfiled a petition with the FPSC in the first half ofon December 19, 2019, to recover these$169 million of estimated retail incremental storm restoration costs for Hurricane Dorian, consistent with the provisions in the 2017 Settlement. Duke Energy Florida cannot predict and the outcomeFPSC approved the petition on February 24, 2020. The final actual amount of this matter.
Tax Act
Pursuant to Duke Energy Florida's 2017$145 million was filed on September 30, 2020. The 2021 Settlement on May 31, 2018, Duke Energy Florida filed a petition related to the Tax Act, which included revenue requirement impacts of annual tax savings of $134 million and estimated annual amortization of EDIT of $67 million for a total of $201 million. Of this amount, $50 million would be offset by accelerated depreciation of Crystal River 4 and 5 coal units and an estimated $151 million would be offset by Hurricane Irmaresolved all matters regarding storm cost recovery as explained in the Storm Restoration Cost Recovery section above. On December 27, 2018, Dukerelating to Hurricane Michael and Hurricane Dorian.
Clean Energy Florida filed actual EDIT balances and amortization based on its 2017 filed tax return. This increased the revenue requirement impact of the amortization of EDIT by $4 million, from $67 million to $71 million. On January 8, 2019, the FPSC approved a joint motion by Duke Energy Florida and the Office of Public Counsel resolving all stipulated positions. As part of that stipulation, Duke Energy Florida will seek a Private Letter Ruling from the IRS on its treatment of COR as mostly protected by tax normalization rules. If the IRS rules that COR is not protected by tax normalization rules, then Duke Energy Florida will make a final adjustment to the amortization of EDIT and an adjustment to the storm recovery amount retroactive to January 2018. Duke Energy Florida cannot predict the outcome of this matter.
Citrus County CC
On October 2, 2014, the FPSC granted Duke Energy Florida a Determination of Need for the construction of a 1,640-MW combined-cycle natural gas plant in Citrus County, Florida. At that time, the estimated cost of the facility was $1.5 billion, including AFUDC. On May 5, 2015, the Florida Department of Environmental Protection approved Duke Energy Florida's Site Certification Application and construction began in October 2015. On July 10, 2018, the FPSC approved Duke Energy Florida's request to include the annual revenue requirement of $200 million for the new Citrus County combined-cycle units in base rates. The first 820-MW power block came on-line on October 26, 2018, and the rate increase for this unit was effective in December 2018. The second 820-MW power block came on-line November 24, 2018. The rate increase for the second unit was effective in January 2019. The ultimate cost of the facility is estimated to be $1.6 billion, and Duke Energy Florida recorded Impairment charges on Duke Energy’s Consolidated Statements of Operations of $60 million in the fourth quarter of 2018 for the overrun, which may change in light of recoveries from the EPC contractor. The plant began receiving natural gas from the Sabal Trail pipeline in August 2018. As a result of the combined-cycle natural gas plant coming on-line, Crystal River coal-fired units 1 and 2 were retired in December 2018. See Note 5 for additional information on Citrus.
Solar Base Rate AdjustmentConnection
On July 31, 2018,1, 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 includesupport 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 three years, and this investment will be included in base rates offset by the revenue requirementsfrom the subscription fees. The credits will be included for its first two solar generation projects,recovery in the Hamilton Project and the Columbia Project, as authorized by the 2017 Settlement.fuel cost recovery clause. The Hamilton Project, which was placed into service on December 22, 2018, has an annual retail revenue requirement of $15 million and the increase was effective in January 2019. The Columbia Project has a projected annual revenue requirement of $14 million and a projected in-service date in early 2020; the associated rate increase would take place with the first month’s billing cycle after the Columbia Project goes into service. At its October 30, 2018, Agenda Conference, the FPSC approved the rate increase relatedprogram in January 2021.
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 Hamilton Project to go intoSupreme 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 Supreme Court of Florida heard the oral argument on February 9, 2022. The FPSC approval order remains in effect beginning with the first billing cycle in January 2019 under its file and suspend authority. Rates are subject to true up pending the outcome of the final hearing, which is scheduled to take place on April 2, 2019.appeal. Duke Energy Florida cannot predict the outcome of this matter.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Duke Energy Ohio
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Duke Energy Ohio's Consolidated Balance Sheets. |
| | | | | | | | | |
| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2018 |
| 2017 |
| | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – coal ash | $ | 20 |
| $ | 17 |
| | X | (b) |
Accrued pension and OPEB | 146 |
| 139 |
| | | (g) |
Storm cost deferrals | 4 |
| 5 |
| | | 2023 |
Hedge costs deferrals | 5 |
| 6 |
| | | (b) |
DSM/EE | 10 |
| 18 |
| | (f) | (e) |
Grid modernization | 31 |
| 39 |
| | X | (e) |
Vacation accrual | 5 |
| 5 |
| | | 2019 |
Deferred fuel and purchased power | 2 |
| — |
| | | 2019 |
PISCC and deferred operating expenses(c) | 17 |
| 19 |
| | X | 2083 |
Transmission expansion obligation | 43 |
| 50 |
| | | (e) |
MGP | 99 |
| 91 |
| | | (b) |
AMI | 46 |
| 6 |
| | | (b) |
East Bend deferrals | 47 |
| 45 |
| | X | (b) |
Deferred pipeline integrity costs | 14 |
| 12 |
| | X | (b) |
Other | 75 |
| 42 |
| | | (b) |
Total regulatory assets | 564 |
| 494 |
| | | |
Less: current portion | 33 |
| 49 |
| | | |
Total noncurrent regulatory assets | $ | 531 |
| $ | 445 |
| | | |
Regulatory Liabilities(a) | | | | | |
Costs of removal | $ | 126 |
| $ | 189 |
| | | (d) |
Net regulatory liability related to income taxes | 678 |
| 688 |
| | | (b) |
Accrued pension and OPEB | 18 |
| 16 |
| | | (g) |
Other | 75 |
| 34 |
| | | (b) |
Total regulatory liabilities | 897 |
| 927 |
| | | |
Less: current portion | 57 |
| 36 |
| | | |
Total noncurrent regulatory liabilities | $ | 840 |
| $ | 891 |
| | | |
| |
(a) | Regulatory assets and liabilities are excluded from rate base unless otherwise noted. |
| |
(b) | The expected recovery or refund period varies or has not been determined. |
| |
(c) | Included in rate base. |
| |
(d) | Recovery over the life of the associated assets. |
| |
(e) | Recovered via a rider mechanism. |
| |
(f) | Includes incentives on DSM/EE investments. |
| |
(g) | Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail. |
2017 Electric Security Plan | | | | | | | | | | | | | | | | | |
| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2021 | 2020 | | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – coal ash | $ | 33 | | $ | 22 | | | Yes | (b) |
| | | | | |
Accrued pension and OPEB | 133 | | 149 | | | | (g) |
Deferred fuel and purchased power | 38 | | — | | | | 2022 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
PISCC and deferred operating expenses(c) | 16 | | 16 | | | Yes | 2083 |
Hedge costs deferrals | 5 | | 7 | | | | (b) |
| | | | | |
AMI | 24 | | 36 | | | | (b) |
Customer connect project | 41 | | 26 | | | | (b) |
DSM/EE | 5 | | 1 | | | (f) | (e) |
Vacation accrual | 6 | | 6 | | | | 2022 |
Storm cost deferrals | 2 | | 4 | | | | 2023 |
| | | | | |
CEP deferral | 161 | | 117 | | | Yes | (b) |
| | | | | |
| | | | | |
| | | | | |
Deferred pipeline integrity costs | 24 | | 21 | | | Yes | (b) |
| | | | | |
MGP | 104 | | 104 | | | | (b) |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other | 115 | | 140 | | | | (b) |
Total regulatory assets | 707 | | 649 | | | | |
Less: current portion | 72 | | 39 | | | | |
Total noncurrent regulatory assets | $ | 635 | | $ | 610 | | | | |
Regulatory Liabilities(a) | | | | | |
Net regulatory liability related to income taxes | $ | 602 | | $ | 628 | | | | (b) |
Costs of removal | 39 | | 68 | | | | (d) |
| | | | | |
Provision for rate refunds | 61 | | 45 | | | | (b) |
| | | | | |
Accrued pension and OPEB | 21 | | 17 | | | | (g) |
| | | | | |
| | | | | |
Other | 78 | | 55 | | | | (b) |
Total regulatory liabilities | 801 | | 813 | | | | |
Less: current portion | 62 | | 65 | | | | |
Total noncurrent regulatory liabilities | $ | 739 | | $ | 748 | | | | |
On June 1, 2017, (a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c) Included in rate base.
(d) Recovery over the life of the associated assets.
(e) Recovered via a rider mechanism.
(f) Includes incentives on DSM/EE investments.
(g) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
Duke Energy Ohio filed with the PUCO a request for a standard service offer in the form of an ESP. On February 15, 2018, the procedural schedule was suspended to facilitate ongoing settlement discussions. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO, including, but not limited to, its Electric Base Rate Case. Additionally, on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation and Recommendation (Stipulation) with the PUCO resolving certain issues in this proceeding. The term of the ESP would be from June 1, 2018, to May 31, 2025, and includes 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. The Stipulation establishes a regulatory model for the next seven years via the approval of the ESP and continues the current model for procuring supply for non-shopping customers, including recovery mechanisms. On December 19, 2018, the PUCO approved the Stipulation without material modification. Several parties have filed applications for rehearing. On February 6, 2019, the PUCO granted the parties rehearing. Duke Energy Ohio cannot predict the outcome of this matter.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Electric 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 in the customer's total bill 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 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 included requests to continue certain current riders and establish new riders. On September 26, 2017, the PUCO staff filed a report recommending a revenue decrease between approximately $18 million and $29 million and a return on equity between 9.22 percent and 10.24 percent. On April 13, 2018,its Distribution Capital Investment (DCI) Rider. Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases pending before the PUCO. On April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed the Stipulation withanticipates the PUCO resolving numerous issues including those in this base rate proceeding. Major componentswill rule on the request by the summer of the Stipulation related to the base distribution rate case include a $19 million decrease in annual base distribution revenue with a return on equity unchanged from the current rate of 9.84 percent based upon a capital structure of 50.75 percent equity and 49.25 percent debt. Upon approval of new rates, Duke Energy Ohio's rider for recovering its initial SmartGrid implementation ends as these costs will be recovered through base rates. The Stipulation also renews 14 existing riders, some of which were included in the company's ESP, and adds two new riders including the Enhanced Service Reliability Rider to recover vegetation management costs not included in base rates, up to $10 million per year (operation and maintenance only) and the PowerForward Rider to recover costs incurred to enhance the customer experience and further transform the grid (operation and maintenance and capital). In addition to the changes in revenue attributable to the Stipulation, Duke Energy Ohio’s capital-related riders, including the Distribution Capital Investments Rider, began to reflect the lower federal income tax rate associated with the Tax Act with updates to customers’ bills beginning April 1, 2018. This change reduces electric revenue by approximately $20 million on an annualized basis. On December 19, 2018, the PUCO approved the Stipulation without material modification. New base rates were implemented effective January 2, 2019. Several parties have filed applications for rehearing. On February 6, 2019, the PUCO granted the parties rehearing.2022. Duke Energy Ohio cannot predict the outcome of this matter.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Ohio Valley Electric CorporationHouse Bill 6 and House Bill 128
On March 31, 2017,July 23, 2019, House Bill 6 was signed into law and became effective January 1, 2020. Among other things, the bill allowed for funding through a rider mechanism referred to as the Clean Air Fund (CAF) Rider, 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 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 fromcreated the generating assets owned by OVEC. Duke Energy Ohio sought deferral authority for net costs incurred from April 1, 2017, untilLegacy Generation Rider that replaced the new rates underPrice Stabilization Rider PSR are put into effect. On April 13, 2018, Duke Energy Ohio filed a Motion to consolidate this proceeding with several other cases currently pending before the PUCO. Also on April 13, 2018, Duke Energy Ohio, along with certain intervenors, filed a Stipulation with the PUCO resolving numerous issues including those related to Rider PSR. The Stipulation activates Rider PSR for recovery of net costs incurred fromeffective January 1, 2018 through May 2025. On December 19, 2018, the PUCO approved the Stipulation without material modification. Several parties have filed applications2020. The amounts recoverable from customers are subject to an annual cap, with incremental costs that exceed such cap eligible for rehearing. On February 6, 2019, the PUCO granted the parties rehearing. Duke Energy Ohio cannot predict the outcome of this matter.deferral and recovery, subject to review. See Note 17 for additional discussion of Duke Energy Ohio's ownership interest in OVEC.
Tax Act – Ohio
On July 25, 2018, Duke Energy Ohio filed an application House Bill 128 (HB 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 the CAF Rider and establishes the Solar Generation Fund Rider to establish a new rider to implementrecover the benefits of the Tax Act for electricrenewable investments originally included in HB 6. HB 128 does not impact OVEC cost recovery or any transmission or distribution customers. Duke Energy Ohio requested commission approval to implement the rider effective October 1, 2018, as a credit to all distribution customers based upon a percent reduction to Duke Energy Ohio’s distribution rates. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from 35 to 21 percent 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. Duke Energy Ohio's transmission rates reflect lower federal income tax but guidance from FERC on amortization of both protected and unprotected transmission-related EDITs is still pending. On October 24, 2018, the PUCO issued a Finding and Order that, among other things, directed all utilities over which the commission has rate-making authority to file an application to pass the benefits of the Tax Act to customers by January 1, 2019, unless otherwise exempted or directed by the PUCO. Duke Energy Ohio's July 25, 2018, filing for electric distribution operations is consistent with the commission's October 24, 2018, Finding and Order and no further action is needed. On February 20, 2019, the PUCO approved the application without material modification. Rates will be effective March 1, 2019. On December 21, 2018, Duke Energy Ohio filed an application to change its base rates and establish a new rider to implement the benefits of the Tax Act for natural gas customers. Duke Energy Ohio requested commission approval to implement the changes and rider effective April 1, 2019. The new rider will flow through to customers the benefit of the lower statutory federal tax rate from 35 to 21 percent 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 has not yet ruled on the application for changes for natural gas customers. Duke Energy Ohio cannot predict the outcome of this matter.rider.
Energy Efficiency Cost Recovery
On March 28, 2014, Duke EnergyIn response to changes in Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to itslaw that eliminated Ohio's energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates, set forth in Ohio law. The PUCO approved Duke Energy Ohio’s application but found that Duke Energy Ohio 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 by Duke Energy Ohio and an intervenor. On January 6, 2016, Duke Energy Ohio and the PUCO Staff entered into 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, Duke Energy Ohio re-established approximately $20 million of the revenues that had been previously reversed. On October 26, 2016, the PUCO issued an order approvingon February 26, 2020, directing utilities to wind down their demand-side management programs by September 30, 2020, and to terminate the stipulation without modification. Inprograms by December 2016, the PUCO granted the intervenors request for rehearing for the purpose of further review.31, 2020. Duke Energy Ohio cannot predicttook the outcome of this matter.following actions:
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
•On June 15, 2016, Duke Energy Ohio filed an application for approval of a three-year energy efficiency and peak demand reduction portfolio of programs. A stipulation and modified stipulation were filed on December 22, 2016, and JanuaryMarch 27, 2017, respectively. Under the terms of the stipulations, which included support for deferral authority of all costs and a cap on shared savings incentives, 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. 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. The PUCO approved the waiver request for 2017 up to a total cost of $56 million. On November 21, 2017, the PUCO granted Duke Energy Ohio's and intervenor's applications for rehearing of the September 27, 2017, order. On January 10, 2018, the PUCO denied the Ohio Consumers' Counsel’s application for rehearing of the PUCO order granting Duke Energy Ohio's waiver request; however, a decision on Duke Energy Ohio's application for rehearing remains pending. Duke Energy Ohio cannot predict the outcome of this matter.
2014 Electric Security Plan
In April 2015, the PUCO modified and approved Duke Energy Ohio's proposed ESP, with a three-year term and an effective date of June 1, 2015. The PUCO approved a competitive procurement process for SSO load, a distribution capital investment rider (Rider DCI) and a tracking mechanism for incremental distribution expenses caused by major storms. The PUCO also approved a placeholder tariff for a price stabilization rider, but denied Duke Energy Ohio's specific request to include Duke Energy Ohio's entitlement to generation from OVEC in the rider at this time; however, the order allows Duke Energy Ohio to submit additional information to request recovery in the future. On May 4, 2015,2020, Duke Energy Ohio filed an application for rehearing requestingseeking clarification on the PUCO to modify or amend certain aspects of the order.final true up and reconciliation process after 2020. On May 28, 2015, the PUCO granted all applications for rehearing filed in the case for future consideration. On March 21, 2018,November 18, 2020, the PUCO issued an order denyingreplacing the cost cap previously imposed upon Duke Energy Ohio's issuesOhio with a cap on rehearing.shared savings recovery. On April 20, 2018,December 18, 2020, Duke Energy Ohio filed a secondan additional application for rehearing based uponchallenging, among other things, the commission’s March 21, 2018, Order.imposition of the cap on shared savings. On May 16, 2018,January 13, 2021, the commission issued its third Entry on Rehearing granting in part, and denying in part, Duke Energy Ohio’sapplication for rehearing request.was granted for further consideration.
•On MarchOctober 9, 2018,2020, Duke Energy Ohio filed an application to implement a motionvoluntary energy efficiency program portfolio to extend its then-current ESP, including all termscommence on January 1, 2021. The application proposed a mechanism for recovery of program costs and conditions thereof, pending approval of a new ESP. benefit associated with avoided transmission and distribution costs. The application remains under review.
•On May 30, 2018, the PUCO granted the request, with modification. Specifically, the PUCO did not extend the cap applicable to Rider DCI beyond July 31, 2018. Duke Energy Ohio sought rehearing of this finding. On July 25, 2018, the PUCO granted the request and allowed a continuing cap on recovery under Rider DCI. On August 24, 2018, OMA and OCC filed an Application for Rehearing of the commission's decision. Duke Energy Ohio filed a Memorandum Contra OCC's request for rehearing of the commission's continuation of Rider DCI on September 4, 2018. On September 19, 2018,November 18, 2020, the PUCO issued an Order granting rehearing on the matterorder directing all utilities to set their energy efficiency riders to zero effective January 1, 2021, and to file a separate application for further consideration.final reconciliation of all energy efficiency costs prior to December 31, 2020.
•Effective January 1, 2021, Duke Energy Ohio cannot predictsuspended its energy efficiency programs.
•On June 14, 2021, the outcome of this matter.
On May 21, 2018, the Ohio Manufacturers' Association (OMA) filedPUCO issued an entry for each utility to file by July 15, 2021, a notice of appeal of PUCO's approval ofproposal to reestablish low-income programs through December 31, 2021. Duke Energy Ohio’s ESP with the Ohio Supreme Court, challenging PUCO's approval of Duke Energy Ohio’s Price Stability Rider as a placeholder and its Rider DCI to recover incremental revenue requirement for distribution capital since Duke Energy Ohio’s last base rate case. On July 16, 2018, the Office of the Ohio Consumers' Counsel (OCC)Oho filed its own appeal of Duke Energy Ohio’s ESP with the Ohio Supreme Court raising similar issues to that of the OMA. Duke Energy Ohio filed a Motion to Intervene in the two Ohio Supreme Court appeals. OMA's Supreme Court brief was filedapplication on August 20, 2018. PUCO submitted its brief on October 26, 2018, and Duke Energy Ohio filed its brief on October 29, 2018. The OCC’s Supreme Court brief was filed on October 15, 2018. Duke Energy Ohio filed its brief on December 20, 2018. The PUCO submitted its brief on December 21, 2018. 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. Duke Energy Ohio currently estimates the pipeline development costs and construction activities will range from $163$185 million to $245$195 million in direct costs (excluding overheads and AFUDC). On January 20, 2017, and that construction of the pipeline extension will be completed in February 2022. An evidentiary hearing on Duke Energy Ohio filed an amendedOhio'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 (OPSB) approved Duke Energy Ohio's application subject to 41 conditions on construction. Applications for rehearing were filed by several stakeholders on December 23, 2019, arguing that the OPSB approval was incorrect. On February 20, 2020, the OPSB denied the rehearing requests. On April 15, 2020, those stakeholders filed a notice of appeal at the Supreme Court of Ohio of the OPSB’s decision approving Duke Energy Ohio’s Central Corridor Project application. The Supreme Court of Ohio affirmed the OPSB order on September 22, 2021.
On September 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.
MGP Cost Recovery
In an order issued in 2013, the PUCO approved Duke Energy Ohio's deferral and recovery of onecosts related to environmental remediation at 2 sites (East End and West End) that housed former MGP operations. Duke Energy Ohio has collected approximately $55 million in environmental remediation costs incurred between 2008 through 2012 through Rider MGP, which is currently suspended. Duke Energy Ohio has made annual applications with the PUCO to recover its incremental remediation costs consistent with the PUCO’s directive in Duke Energy Ohio’s 2012 natural gas base 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 two proposed routes. A public hearing was heldthe 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 the Staff believes are not eligible for recovery. The Staff interprets the PUCO’s 2013 order granting Duke Energy Ohio recovery of MGP remediation as limiting the recovery to work directly on June 15, 2017. In Aprilthe East End and West End sites. On October 30, 2018, Duke Energy Ohio filed a motion with OPSBreply comments objecting to establish a procedural schedulethe Staff’s recommendations and filed supplemental information supporting its application. On December 18, 2018,explaining, among other things, the OPSB established a procedural schedule that includes a local public hearing on March 21, 2019, and an evidentiary hearing starting on April 9, 2019. If approved, construction of the pipeline extension is expected to be completed before the 2021/2022 winter season.obligation Duke Energy Ohio cannot predicthas under Ohio law to remediate all areas impacted by the outcomeformer 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 the calendar year 2018 seeking recovery of this matter.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 authorized for recovery. Additionally, the Staff recommended that any discussion pertaining to Duke Energy Ohio's recovery 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 reply briefs were filed on February 14, 2020.
2012 Natural Gas Rate Case/MGP Cost Recovery
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
On November 13, 2013, the PUCO issued an order approving a settlement ofMarch 31, 2020, Duke Energy Ohio’s natural gas base rate case and authorizing theOhio filed its annual application to recover incremental MGP remediation expense seeking recovery of approximately $39 million in remediation costs incurred between 2008during 2019. On July 23, 2020, the Staff recommended a disallowance of approximately $4 million for work the Staff believes occurred in areas not authorized for recovery. Additionally, the Staff recommended insurance proceeds, net of litigation costs and 2012 for environmentalattorney fees, should be paid to customers and not be held by Duke Energy Ohio until all investigation and remediation of two former MGP sites. The PUCO order also authorizedis complete. 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 decisionfiled comments in response to the Ohio Supreme CourtStaff's report on August 21, 2020, and intervenor comments were filed 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.November 9, 2020.
The 2013 PUCO order also contained conditional deadlines for completing the MGP environmental investigationremediation and the deferral of related remediation costs atcosts. Subsequent to the MGP sites. As oforder, the deadline was extended to December 31, 2018,2019. On May 10, 2019, Duke Energy Ohio had approximately $24 millionfiled an application requesting a continuation of its existing deferral authority for futureMGP 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 request for continuation of existing deferral authority and on October 2, 2019, Duke Energy Ohio filed reply comments.
A Stipulation and Recommendation was filed jointly by Duke Energy Ohio, the Staff, the Office of the Ohio Consumers' Counsel and 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 expected to be incurred at the East End sitebetween 2013 and approximately $23 million for future remediation costs expected to be incurred at the West End site included in Regulatory assets within Other Noncurrent Assets on the Consolidated Balance Sheets.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
2019, Duke Energy Kentucky Electric 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. Subsequent to the filing, Duke Energy Kentucky adjusted the requested amount to $30.1 million, in part to reflect the benefits of the Tax Act, representing an approximate 9 percent increase on the average customer bill. The rate increase was driven by increased investment in utility plant, increased operations and maintenance expenses and recovery of regulatory assets. The application also includes requests to implement an Environmental Surcharge Mechanism to recover environmental costs not recovered in base rates, to establish a Distribution Capital Investment Rider to recover incremental costs of specific programs, to establish a FERC Transmission Cost Reconciliation Rider to recover escalating transmission costs and to modify existing Profit Sharing Mechanism to increase customers' share of proceeds from the benefits of owning generation and to mitigate shareholder risks associated with that generation. An evidentiary hearing concluded on March 8, 2018,Ohio’s request for additional deferral authority beyond 2019 and the KPSC issued an order on April 13, 2018. Major components of the Order include approval of an $8 million increase in base rates with a return on equity at 9.725 percent based upon a capital structure of 49 percent equity on a total allocable capitalization of approximately $650 million. The Order approved the Environmental Surcharge Mechanism Rider and in June 2018 recovery began of capital-related environmental costs, including costspending issues related to ash and ash disposal, and environmental operation and maintenance expenses formerly recovered in base rates, including expenses for environmental reagents and emission allowances. The incremental revenue from this rider will be approximately $13 million on an annualized basis. The order settles all issues associated with the Tax Act as it relates to the electric business by lowering the income tax component of the revenue requirement and refunding protected EDIT under allowable normalization rules and unprotected EDIT over 10 years. The Order denied requests to implement riders for certain transmission costs and distribution capital investments. Duke Energy Kentucky implemented new base ratesOhio’s natural gas operations. These impacts are not expected to have a material impact on May 1, 2018.Duke Energy Ohio's 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 May 3,October 15, 2021, the PUCO granted motions to intervene filed in September 2021 by Interstate Gas Supply, Inc. and Retail Energy Supply Association on a limited basis. An evidentiary hearing was held on November 18, 2021, and briefing was concluded on December 23, 2021. Duke Energy Ohio cannot predict the outcome of this matter.
Tax Act – Ohio
On December 21, 2018, Duke Energy KentuckyOhio filed an application for rehearing on certain aspectsto change its base rate tariffs and establish a new rider to implement the benefits of the order;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 May 23, 2018,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 KPSC granted a rehearing.MGP Cost Recovery matter above, also resolves the outstanding issues in this proceeding. On October 2, 2018, 15, 2021, the KPSC issued its rehearing order correcting certain findingsPUCO granted motions to intervene filed in its initial orderSeptember 2021 by Interstate Gas Supply, Inc. and making additional changes that are immaterial toRetail Energy Supply Association on a limited basis. An evidentiary hearing was held on November 18, 2021, and briefing was concluded on December 23, 2021. Duke Energy Ohio cannot predict the company's earnings.outcome of this matter.
Duke Energy Kentucky Natural Gas Base Rate Case
On August 31, 2018,June 1, 2021, Duke Energy Kentucky filed an application with the KPSC requesting an increase in natural gas base rates of approximately $11$15 million, an approximate 11.1 percent13% average increase across all customer classes. The increase is net of approximately $5 million in annual savings as a result of the Tax Act. The drivers for this case are capital invested since Duke Energy Kentucky’sKentucky's last natural gas base rate case in 2009.2018. Duke Energy Kentucky is also seekingsought implementation of a Weather Normalization Adjustment Mechanism, amortizationrider in order to recover from or pay to customers the financial impact of regulatory assetsgovernmental directives and to implementmandates, including changes in federal or state tax rates and regulations issued by the impacts of the Tax Act, prospectively. Pipeline and Hazardous Materials Safety Administration (PHMSA). On January 30, 2019,October 8, 2021, Duke Energy Kentucky entered intofiled a settlement agreementStipulation and Recommendation jointly with the Kentucky Attorney General, of Kentucky,subject to review and approval by the only intervenor in the case,KPSC, which if approved, would resolve the matter.case. The settlement provides for an approximate $7Stipulation and Recommendation included a $9 million increase in base revenues, an ROE of 9.375% for natural gas base rates and approval of the proposed Weather Normalization Mechanism. A9.3% 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 evidentiary hearing was held on February 5, 2019. A ruling is expected in late first quarter 2019. October 18, 2021. On December 28, 2021, the KPSC approved the Stipulation and Recommendation with minor modifications, authorizing a $9 million increase. Rates were effective January 4, 2022.
Midwest Propane Caverns
Duke Energy KentuckyOhio 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. On January 6, 2022, the Staff issued a report recommending deferral authority for costs related to propane inventory and decommissioning but not for the net book value of the remaining assets. As a result of the Staff's report, Duke Energy Ohio recorded a $19 million charge to Impairment of assets and other charges on the Consolidated Statements of Operations and Comprehensive Income in the fourth quarter of 2021. There is approximately $6 million and $27 million in Net, property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2021, and December 31, 2020, respectively, related to the propane caverns. The PUCO established a procedural schedule for the submission of comments by March 7, 2022. Duke Energy Ohio cannot predict the outcome of this matter.
FERC 494 Refund of Regional Transmission Enhancement Projects
FERC Order No. 494 Settlement Agreement (FERC 494 Settlement Agreement) was entered into by most of the PJM transmission owners, including Duke Energy Ohio and Duke Energy Kentucky, and the PJM state regulatory commissions approximately two years ago and was planned to be effective on January 1, 2016; however, it was not approved by FERC until May 31, 2018. The FERC 494 Settlement Agreement was due to the Seventh Circuit Court of Appeals finding that FERC had failed to adequately justify the costs that the customers in the western part of PJM were being charged for high voltage transmission projects, or Regional Transmission Expansion Plan (RTEP) projects (500 kV and above) built in the east. These costs were being allocated to all PJM customers on a load-ratio share basis but the court determined that these costs were not justifiable to customers in the west, including Duke Energy Ohio and Duke Energy Kentucky, that did not benefit from the RTEP projects. Costs for the periods 2012 through 2015 are expected to be refunded to Duke Energy Ohio and Duke Energy Kentucky on a monthly basis through December 2025. The refund amount for similar costs incurred beginning in 2016 through June 30, 2018, prior to the change in cost allocation by PJM was determined in the third quarter of 2018 and these amounts will be refunded over a 12-month period beginning in July 2018. These refunds, totaling approximately $47 million for Duke Energy Ohio and Duke Energy Kentucky, have been recorded to Operation, maintenance and other on the Consolidated Statements of Operations for the year ended December 31, 2018.
Regional Transmission Organization Realignment
Duke Energy Ohio, including Duke Energy Kentucky, transferred control of its transmission assets from MISO to PJM, effective December 31, 2011. The PUCO approved a settlement related to Duke Energy Ohio’s recovery of certain costs of the RTO realignment via a non-bypassable rider. Duke Energy Ohio is allowed to recover all MTEPMISO Transmission Expansion Planning (MTEP) costs directly or indirectly charged to Ohio customers. 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.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
The following table provides a reconciliation of the beginning and ending balance of Duke Energy Ohio’s recorded liability for its exit obligation and share of MTEP costs recorded in Other within Current Liabilities and Other Noncurrent Liabilities on the 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 December 31,
2018,2021, and
2017, $432020, $33 million and
$50$37 million,, respectively, are recorded in Regulatory assets on Duke Energy Ohio's Consolidated Balance Sheets. | | | | | Provisions/ |
| | Cash |
| | | | Provisions/ | | Cash | |
(in millions) | December 31, 2017 |
| | Adjustments |
| | Reductions |
| | December 31, 2018 |
| (in millions) | December 31, 2020 | | Adjustments | | Reductions | | December 31, 2021 |
Duke Energy Ohio | $ | 66 |
| | $ | (4 | ) | | $ | (4 | ) | | $ | 58 |
| Duke Energy Ohio | $ | 50 | | | $ | — | | | $ | (4) | | | $ | 46 | |
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Duke Energy Indiana
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Duke Energy Indiana's Consolidated Balance Sheets.
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| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2021 | 2020 | | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – coal ash | $ | 749 | | $ | 615 | | | Yes | (b) |
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Accrued pension and OPEB | 222 | | 245 | | | | (e) |
Deferred fuel and purchased power | 158 | | 9 | | | | 2022 |
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Retired generation facilities(c) | 38 | | 43 | | | Yes | 2030 |
PISCC and deferred operating expenses(c) | 262 | | 298 | | | Yes | (b) |
Hedge costs deferrals | 35 | | 22 | | | | (b) |
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AMI | 17 | | 19 | | | | 2031 |
Customer connect project | 11 | | 5 | | | | (b) |
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Vacation accrual | 13 | | 12 | | | | 2022 |
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Other | 50 | | 60 | | | | (b) |
Total regulatory assets | 1,555 | | 1,328 | | | | |
Less: current portion | 277 | | 125 | | | | |
Total noncurrent regulatory assets | $ | 1,278 | | $ | 1,203 | | | | |
Regulatory Liabilities(a) | | | | | |
Net regulatory liability related to income taxes | $ | 908 | | $ | 956 | | | | (b) |
Costs of removal | 575 | | 599 | | | | (d) |
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Accrued pension and OPEB | 113 | | 100 | | | | (e) |
| | | | | |
| | | | | |
Other | 96 | | 83 | | | | (b) |
Total regulatory liabilities | 1,692 | | 1,738 | | | | |
Less: current portion | 127 | | 111 | | | | |
Total noncurrent regulatory liabilities | $ | 1,565 | | $ | 1,627 | | | | |
(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c) Included in rate base.
(d) Refunded over the life of the associated assets.
(e) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
|
| | | | | | | | | |
| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2018 |
| 2017 |
| | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – coal ash | $ | 450 |
| $ | 380 |
| | | (b) |
Accrued pension and OPEB | 222 |
| 197 |
| | | (f) |
Retired generation facilities(c) | 57 |
| 65 |
| | X | 2026 |
Hedge costs deferrals | 24 |
| 25 |
| | | (b) |
DSM/EE | 14 |
| 21 |
| | (e) | (e) |
Vacation accrual | 11 |
| 11 |
| | | 2019 |
Deferred fuel and purchased power | 40 |
| 18 |
| | | 2019 |
PISCC and deferred operating expenses(c) | 233 |
| 274 |
| | X | (b) |
AMI(c) | 18 |
| 21 |
| | X | (b) |
Other | 88 |
| 131 |
| | | (b) |
Total regulatory assets | 1,157 |
| 1,143 |
| | | |
Less: current portion | 175 |
| 165 |
| | | |
Total noncurrent regulatory assets | $ | 982 |
| $ | 978 |
| | | |
Regulatory Liabilities(a) | | | | | |
Costs of removal | $ | 628 |
| $ | 644 |
| | | (d) |
Net regulatory liability related to income taxes | 1,009 |
| 998 |
| | | (b) |
Amounts to be refunded to customers | 1 |
| 10 |
| | | 2019 |
Accrued pension and OPEB | 67 |
| 64 |
| | | (f) |
Other | 42 |
| 31 |
| | | (b) |
Total regulatory liabilities | 1,747 |
| 1,747 |
| | | |
Less: current portion | 25 |
| 24 |
| | | |
Total noncurrent regulatory liabilities | $ | 1,722 |
| $ | 1,723 |
| | | |
| | | | | |
(a)FINANCIAL STATEMENTS | Regulatory assets and liabilities are excluded from rate base unless otherwise noted.REGULATORY MATTERS |
| |
(b) | The expected recovery or refund period varies or has not been determined. |
| |
(c) | Included in rate base. |
| |
(d) | Recovery over the life of the associated assets. |
| |
(e) | Includes incentives on DSM/EE investments and is recovered through a tracker mechanism over a two-year period. |
| |
(f) | Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail. |
FERC Transmission Return on Equity Complaint
Customer groups have filed with the FERC complaints against Midcontinent Independent System Operator, Inc. (MISO) and its transmission-owning members, including2019 Indiana Rate Case
On July 2, 2019, Duke Energy Indiana alleging, among other things, thatfiled a general rate case with the current baseIURC for a rate increase for retail customers of returnapproximately $395 million. The rebuttal case, filed on equity earned by MISO transmission ownersDecember 4, 2019, updated the requested revenue requirement to result in a 15.6% or $396 million average retail rate increase, including the impacts of 12.38 percent is unjust and unreasonable. The complaints claim, among other things, that the current base rate of returnUtility Receipts Tax. Hearings concluded on equity earned by MISO transmission owners should be reduced to 8.67 percent.February 7, 2020. On January 5, 2015,June 29, 2020, the FERCIURC issued an order acceptingin the MISO transmission owners' adderrate case approving a revenue increase of 0.50 percent$146 million before certain adjustments and ratemaking refinements. The order approved Duke Energy Indiana'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 the utility receipts tax and other adjustments. Approximately 50% of the reduction was due to a prospective change in depreciation and use of regulatory asset for the end-of-life inventory at retired generating plants, approximately 20% is due to the baseapproved ROE of 9.7% versus the requested ROE of 10.4% and approximately 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 of returnincrease. Step two rates were approved on equityJuly 28, 2021, and implemented in August 2021. Step two rates are based on participation in an RTO subject to it being applied to a return on equity that is shown to be justof 9.7% and reasonable in the pending return onactual December 31, 2020 capital structure with a 54% 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 establishcomponent. Step two rates of return on equity. On October 16, 2018, FERC issued an order in response to the Emera remand proceeding proposing a new method for determining whether an existing return on equity is unjust and unreasonable, and a new process for determining a just and reasonable return on equity. On November 14, 2018, FERC directed parties to the MISO complaints to file briefs on how the new process for determining return on equity proposed in the Emera proceeding should be applied to the complaints involving the MISO transmission owners’ return on equity. Initial briefs were filed on February 13, 2019, and reply briefs will be due April 10, 2019. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Benton County Wind Farm Dispute
On December 16, 2013, BCWF filed a lawsuit against Duke Energy Indiana seeking damages for past generation losses alleging Duke Energy Indiana violated its obligations under a 2006 PPA by refusingreconciled 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. BCWFJanuary 1, 2021. Several groups appealed the decision and on December 9, 2016, the appeals court ruled in favor of BCWF. Duke Energy Indiana recorded an obligation and a regulatory asset related to the settlement amount in fourth quarter 2016. 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. 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. The IURC order has been appealed to the Indiana Court of Appeals. On May 21, 2018,Appellate briefs were filed on October 14, 2020, focusing on three issues: wholesale sales allocations, coal ash basin cost recovery and the Indiana Court of Appeals upheld the commission's decision.Edwardsport IGCC operating and maintenance expense level approved. The appellants have requested rehearing at the Indiana Court of Appeals.appeal was fully briefed in January 2021, and an oral argument was held on April 8, 2021. The Indiana Court of Appeals deniedaffirmed the request for rehearing.IURC decision on May 13, 2021. The appellants have requested transfer to the Indiana Supreme Court, including briefs in support from environmental groups. The Indiana Supreme Court denied transfer concluding this matter in favor of Duke Energy Indiana.
Edwardsport Integrated Gasification Combined Cycle Plant
On September 20, 2018, Duke Energy Indiana, the Indiana Office of Utility Consumer Counselor (OUCC) and the Duke 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 Nucor Steel – Indiana entered into a settlement agreement to resolve IGCC ratemaking issues for calendar years 2018 and 2019. The agreement will remain in effect until new rates are established inoral arguments were heard on November 16, 2021. Duke Energy Indiana's next base rate case, which is expected to be filed in mid-2019 with rates effective in mid-2020. It addressesIndiana cannot predict the pending Edwardsport filing at the commission and eliminates the need for future filings until the overall rate case. This settlement includes caps onoutcome of this matter.
2020 Indiana Coal Ash Recovery Case
In Duke Energy Indiana’s retail operating expenses for2019 rate case, the IURC approved coal ash basin closure costs expended through 2018 and 2019, reduces Duke Energy Indiana'sincluding financing costs as a regulatory asset by $30 million (with a corresponding reduction of the amount of amortization of the regulatory assetand included in rates by $10 million annually beginning with the implementation of final IGCC 17 rates), and provides fundingrate base. The IURC also opened a subdocket for low-income assistance and clean energy projects.post-2018 coal ash related expenditures. Duke Energy Indiana recognized pretax impairment and related charges of $32 millionfiled testimony on April 15, 2020, in the third quartercoal ash subdocket requesting recovery for the post-2018 coal ash basin closure costs for plans that have been approved by the Indiana Department of 2018. The settlement is subject to IURC approval.Environmental Management (IDEM) as well as continuing deferral, with carrying costs, on the balance. An evidentiary hearing was held on September 14, 2020. Briefing was completed by mid-September 2021. On November 3, 2021, the IURC issued an order allowing recovery for post-2018 coal ash basin closure costs for the plans that have been approved by IDEM, as well as continuing deferral, with carrying costs, on the balance. The OUCC filed a notice of appeal to the Indiana Court of Appeals on December 2018 and an IURC Order is expected in March 2019.3, 2021. Duke Energy Indiana cannot predict the outcome of this matter.
Tax Act
On June 27, 2018, Duke Energy Indiana, the Indiana Office of Utility Consumer Counselor, the Indiana Industrial Group and Nucor Steel – Indiana filed testimony consistent with their Stipulation and Settlement Agreement (Settlement Agreement) in the federal tax act proceeding with the IURC. The Settlement Agreement outlines how Duke Energy Indiana will implement the impacts of the Tax Act. Material components of the Settlement Agreement were as follows:
Riders to reflect the change in the statutory federal tax rate from 35 to 21 percent as they are filed in 2018;
Base rates to reflect the change in the statutory federal tax rate from 35 to 21 percent upon IURC approval, but no later than September 1, 2018;
Duke Energy Indiana to continue to defer protected federal EDIT until January 1, 2020, at which time it will be returned to customers according to the Average Rate Assumption Method required by the Internal Revenue Service over approximately 26 years; and
Duke Energy Indiana to begin returning unprotected federal EDIT upon IURC approval, over 10 years. In order to mitigate the negative impacts to cash flow and credit metrics, the Settlement Agreement allows Duke Energy Indiana to return $7 million per year over the first five years, with a step up to $35 million per year in the following five years.
On August 22, 2018, the IURC approved the settlement and rates were adjusted effective September 1, 2018.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Piedmont
Regulatory Assets and Liabilities
The following tables present the regulatory assets and liabilities recorded on Piedmont's Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | |
| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2021 | 2020 | | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
| | | | | |
AROs – nuclear and other | $ | 22 | | $ | 20 | | | | (d) |
Accrued pension and OPEB(c) | 82 | | 88 | | | | (g) |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Vacation accrual | 12 | | 12 | | | | 2022 |
| | | | | |
| | | | | |
| | | | | |
Derivatives – natural gas supply contracts(f) | 139 | | 122 | | | | |
| | | | | |
| | | | | |
Deferred pipeline integrity costs(c) | 84 | | 71 | | | | 2025 |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Amounts due from customers | 85 | | 110 | | | (e) | (b) |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other | 33 | | 32 | | | | (b) |
Total regulatory assets | 457 | | 455 | | | | |
Less: current portion | 141 | | 153 | | | | |
Total noncurrent regulatory assets | $ | 316 | | $ | 302 | | | | |
Regulatory Liabilities(a) | | | | | |
Net regulatory liability related to income taxes | $ | 510 | | $ | 499 | | | | (b) |
Costs of removal(c) | 572 | | 575 | | | | (d) |
| | | | | |
Provision for rate refunds | 2 | | 6 | | | | |
| | | | | |
Accrued pension and OPEB(c) | 5 | | 3 | | | | (g) |
| | | | | |
| | | | | |
Other | 25 | | 49 | | | (e) | (b) |
Total regulatory liabilities | 1,114 | | 1,132 | | | | |
Less: current portion | 56 | | 88 | | | | |
Total noncurrent regulatory liabilities | $ | 1,058 | | $ | 1,044 | | | | |
|
| | | | | | | | | |
| December 31, | | Earns/Pays | Recovery/Refund |
(in millions) | 2018 |
| 2017 |
| | a Return | Period Ends |
Regulatory Assets(a) | | | | | |
AROs – other | $ | 19 |
| $ | 15 |
| | | (d) |
Accrued pension and OPEB(c) | 99 |
| 91 |
| | X | (f) |
Derivatives – gas supply contracts(e) | 141 |
| 142 |
| | | |
Vacation accrual | 12 |
| 10 |
| | | |
Deferred pipeline integrity costs(c) | 51 |
| 42 |
| | X | (b) |
Amount due from customers | 24 |
| 64 |
| | X | (b) |
Other | 11 |
| 14 |
| | | (b) |
Total regulatory assets | 357 |
| 378 |
| | | |
Less: current portion | 54 |
| 95 |
| | | |
Total noncurrent regulatory assets | $ | 303 |
| $ | 283 |
| | | |
Regulatory Liabilities(a) | | | | | |
Costs of removal | $ | 564 |
| $ | 544 |
| | | (d) |
Net regulatory liability related to income taxes | 579 |
| 597 |
| | | (b) |
Accrued pension and OPEB(c) | 1 |
| — |
| | X | (f) |
Amount due to customers | 33 |
| — |
| | X | (b) |
Other | 41 |
| 3 |
| | | (b) |
Total regulatory liabilities | 1,218 |
| 1,144 |
| | | |
Less: current portion | 37 |
| 3 |
| | | |
Total noncurrent regulatory liabilities | $ | 1,181 |
| $ | 1,141 |
| | | |
| | | | | |
(a)FINANCIAL STATEMENTS | Regulatory assets and liabilities are excluded from rate base unless otherwise noted.REGULATORY MATTERS |
| |
(b) | The expected recovery or refund period varies or has not been determined. |
| |
(c) | Included in rate base. |
| |
(d) | Recovery over the life of the associated assets. |
| |
(e) | Balance will fluctuate with changes in the market. Current contracts extend into 2031. |
| |
(f) | Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail. |
South Carolina(a) Regulatory assets and liabilities are excluded from rate base unless otherwise noted.
(b) The expected recovery or refund period varies or has not been determined.
(c) Included in rate base.
(d) Recovery over the life of the associated assets.
(e) Certain costs earn/pay a return.
(f) Balance will fluctuate with changes in the market. Current contracts extend into 2031.
(g) Recovered primarily over the average remaining service periods or life expectancies of employees covered by the benefit plans. See Note 22 for additional detail.
2020 Tennessee Rate Stabilization Adjustment FilingCase
On June 15, 2018,July 2, 2020, Piedmont filed an application with the PSCSC under the South Carolina Rate Stabilization ActTPUC, its quarterly monitoring report for the 12-month period ending March 31, 2018. The filing included a revenue deficiency calculation and tariff rates in order to permit Piedmont the opportunity to earn the rate of return on common equity established in its lastfirst 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. The filing also incorporated the impactsApproximately half of the Tax Act by lowering the income tax componentplant additions being added to rate base are categories of the revenue requirement, refunding protected EDIT under allowable normalization rules, unprotected EDIT and amounts over collected from the customers from January 1, 2018, through the end of the review period for this proceeding. A settlement agreement reached between Piedmont and ORS was filed with the PSCSC on September 14, 2018, and approved by the PSCSC on October 3, 2018. Terms of the settlement include implementation of rates for the 12-month period beginning November 2018 with a return on equity of 10.2 percent.
North Carolina Integrity Management Rider Filing
In October 2018, Piedmont filed a petitioncapital investment not covered under the IMR mechanism, which was approved in 2013. Piedmont amended its requested increase to collect an additional $10approximately $26 million in annual revenues, effective December 2018, based2020. As authorized under Tennessee law, Piedmont implemented interim rates on January 2, 2021, at the eligible capital investments closed to integrity and safety projects overlevel requested in its adjusted request. A settlement reached with the six-month period ended September 30, 2018. On November 27, 2018,Tennessee Consumer Advocate in mid-January was approved by the NCUC approved the requested rate adjustment.
In May 2018, Piedmont filed, and the NCUC approved, a petition under the IMR mechanism to update rates, effective June 2018, basedTPUC on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2018, and the decreaseFebruary 16, 2021. The settlement results in the corporate federal income tax rate effective January 1, 2018. The combined effectan increase of the update was a reduction to annual revenues of approximately $6 million.$16 million and an ROE of 9.8%. Revised customer rates became effective on 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.
Tennessee Integrity Management Rider Filing
In November 2018, Piedmont filed a petition with the TPUC under the IMR mechanism to collect an additional $3 million in annual revenues, effective January 2019, based on the eligible capital investments closed to integrity and safety projects over the 12-month period ending October 31, 2018. A hearing on this matter is scheduled for March 2019.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
20182021 North Carolina Rate Case
On February 27, 2019,March 22, 2021, Piedmont filed an application with the NCUC for a notice withrate 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 IMR mechanism, which was originally approved as part of the 2013 North Carolina Rate Case. On July 28, 2021, Piedmont amended its requested increase to approximately $97 million.
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 NCUC, resolving most issues between these parties. Major components of the Stipulation include:
•A return on equity of 9.6% and a capital structure of 51.6% equity and 48.4% debt;
•Continuation of the IMR mechanism and margin decoupling; and
•A base rate increase of approximately $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 12, 2021, Piedmont notified the NCUC of its intent to fileimplement the stipulated rates effective November 1, 2021, on a base rate adjustment application no earlier than 30 days fromtemporary basis and subject to refund. On October 18, 2021, Piedmont and the notice submittal date.
OTHER REGULATORY MATTERS
Progress Energy Merger FERC Mitigation
Since December 2014,Public Staff filed supplemental testimony attesting to the FERC Office of Enforcement has conducted an investigation of Duke Energy’s market power filings in its application for approvalcompletion of the Progress Energy merger submittedRobeson County LNG facility and the Pender Onslow County expansion project and to the propriety of including the capital investment for these two projects in 2012.this proceeding. On June 8, 2018,January 6, 2022, the FERCNCUC issued an order approving a settlement agreement under which Duke Energy paid a penaltythe Stipulation. No refunds need to be rendered to customers arising from Piedmont's implementation of $3.5 million. The FERC Office of Enforcement stated in its conclusion that Duke Energy violated FERC regulations by failing to fully and accurately describe certain specific matters in its market power filings. Duke Energy neither admitted nor denied the alleged violations.interim rates.
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, in part, the needs identified by Duke Energy Carolinas, Duke Energy Progress and Piedmont. Dominion will be responsible for building and operating 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 Gas maintains
As a 5 percent interest. See Notes 12 and 17 for additional information related to Duke Energy's ownership interest. Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customersresult of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval.
In 2018,uncertainty created by various legal rulings, the FERC issued a series of Notices to Proceed, which authorized the project to begin certain construction-related activities along the pipeline route, including supply header and compressors. On May 11, 2018, and October 19, 2018, FERC issued Notices to Proceed allowing full construction activities in all areas of West Virginia except in the Monongahela National Forest. On July 24, 2018, FERC issued a Notice to Proceed allowing full construction activities along the project route in North Carolina. On October 19, 2018, the conditions to effectiveness of the Virginia 401 water quality certification were satisfied. Immediately following receipt of the Virginia 401 certification, ACP filed a request for FERC to issue a Notice to Proceed with full construction activities in Virginia. We appreciate the professional and collaborative process by the permitting agencies designed to ensure that this critical energy infrastructure project will meet the stringent environmental standards required by law and regulation.
ACP is the subject of challenges in state and federal courts and agencies, including, among others, challenges of the project’s incidental take statement (ITS), crossings of the Blue Ridge Parkway, the Appalachian Trail, and the Monongahela and George Washington National Forests, the project’s U.S. Army Corps of Engineers (USACE) 404 permit, the Virginia conditional 401 water quality certification, the FERC Environmental Impact Statement order and the FERC order approving the Certificate of Public Convenience and Necessity. Each of these challenges alleges non-compliancepotential impact on the part of federal and state permitting authorities and adverse ecological consequences if the project is permitted to proceed. ACP is vigorously defending these challenges and coordinating with the federal and state authorities which are the direct parties to the challenges. Since July 2018, notable developments in these challenges include a stay issued by the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) on construction activities through the Monongahela and George Washington National Forests, a reissuance of the project’s ITS and Blue Ridge Parkway right-of-way and renewed challenges of these reissued permits, a stay issued by the Fourth Circuit of the project's biological opinion and ITS (which stay has halted most project construction activity), a Fourth Circuit decision vacating the project's permits to cross the Monongahela and George Washington National Forests and the Appalachian Trail and the Fourth Circuit's remand to USACE of ACP's Huntington District 404 verification.
The delays resulting from the legal challenges described above have impacted 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. As a result, project cost estimates have increased to $7.0 billion to $7.8 billion, excluding financing costs. ACP expects to achieve a lateOn July 5, 2020, in-service date for key segmentsDuke Energy and Dominion announced the cancellation of the project, while it expectsACP pipeline project.
As part of the remainderpretax charges to extend into 2021. Abnormal weather, work delays (including delays dueearnings of approximately $2.1 billion recorded in June 2020, within Equity in earnings (losses) of unconsolidated affiliates on the Duke Energy Consolidated Statements of Operations, Duke Energy established liabilities related to judicial or regulatory action)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 December 31, 2021, there is $47 million and other conditions may result in cost or schedule modifications$53 million within Other Current Liabilities and Other Noncurrent Liabilities, respectively, in the future.Gas Utilities and Infrastructure segment. The liabilities represent Duke Energy's obligation of approximately $100 million to satisfy remaining ARO requirements to restore construction sites.
Sabal Trail Transmission, LLC
On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail, which is accounted for as an equity method investment, 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 FP&L have each contracted to buy pipeline capacity for 25-year initial terms. See Notes 127 and 1712 for additional information related to Duke Energy's ownership interest.
On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. The Sabal Trail pipeline received other required regulatory approvals and the Phase 1 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 CC. This request is required to support commissioning and testing activities at the facility. On March 16, 2018, FERC approved the Citrus lateral and it was placed in service.
regarding this transaction.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
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 (D.C. Circuit Court of Appeals). 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, vacated the CPCN order and remanded the case to FERC. In response to the August 2017 court decision, the FERC issued a draft Supplemental Environmental Impact Statement (SEIS) on September 27, 2017. On October 6, 2017, FERC and a group of industry intervenors, including Sabal Trail and Duke Energy Florida, filed separate petitions with the D.C. Circuit Court of Appeals requesting rehearing regarding the court's decision to vacate the CPCN order. On January 31, 2018, the D.C. Circuit Court of Appeals denied the requests for rehearing. On February 2, 2018, Sabal Trail filed a request with FERC for expedited issuance of its order on remand and reissuance of the CPCN. In the alternative, the pipeline requested that FERC issue a temporary emergency CPCN to allow for continued operations. On February 5, 2018, FERC issued the final SEIS. On February 6, 2018, FERC and the intervenors in this case each filed motions for stay with the D.C. Circuit Court to stay the court's mandate. On March 7, 2018, the D.C. Circuit Court of Appeals granted FERC and Sabal Trail’s stay request. On March 14, 2018, FERC issued its final order on remand, which recertified the project. On August 10, 2018, FERC denied requests for rehearing of the final order on remand.
Constitution Pipeline Company, LLC
Duke Energy owns a 24 percent ownership interest in Constitution, which is accounted for as an equity method investment. 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. Before the permitting delays discussed below, Duke Energy's total anticipated contributions were approximately $229 million. As a result of the permitting delays and project uncertainty, total anticipated contributions by Duke Energy can no longer be reasonably estimated. Since April 2016, with the actions of the New York State Department of Environmental Conservation (NYSDEC), Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved.
In December 2014, Constitution received approval from the FERC to construct and operate the proposed pipeline. However, on April 22, 2016, the 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. In September 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. In January 2018, Constitution petitioned the Supreme Court of the United States to review the U.S. Court of Appeals decision, and on April 30, 2018, the Supreme Court denied Constitution's petition. In October 2017, Constitution filed a petition for declaratory order requesting FERC to find that the NYSDEC waived its rights to issue a Section 401 water quality certification by not acting on Constitution's application within a reasonable period of time as required by statute. This petition was based on precedent established by another pipeline’s successful petition with FERC following a District of Columbia Circuit Court ruling. On January 11, 2018, FERC denied Constitution's petition. In February 2018, Constitution filed a rehearing request with FERC of its finding that the NYSDEC did not waive the Section 401 certification requirement. On July 19, 2018, FERC denied Constitution's rehearing request. Constitution is currently unable to approximate an in-service date for the project due to the NYSDEC's denial of the water quality certification. The Constitution partners remain committed to the project and are evaluating next steps to move the project forward. On June 25, 2018, Constitution filed with FERC a Request for Extension of Time until December 2, 2020, for construction of the project. On November 5, 2018, FERC issued an Order Granting Extension of Time.
See Notes 12 and 17 for additional information related to ownership interest and carrying value of the investment.
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file IRPsintegrated resource plans (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. IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in North Carolina and Indiana earlier than their current estimated useful lives primarily because facilities do not have the requisite emission control equipment to meet regulatory requirements expected to apply in the near future.lives. Duke Energy continues to evaluate the potential need to retire these coal-fired generating facilities earlier than the current estimated useful lives and plans to seek regulatory recovery for amounts that would not 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 due to a lack of requisite environmental control equipment.retirement. Dollar amounts in the table below are included in Net property, plant and equipment on the Consolidated Balance Sheets as of December 31, 2018,2021, and exclude capitalized asset retirement costs. |
| | | | | | |
| | | Remaining Net |
|
| Capacity |
| | Book Value |
|
| (in MW) |
| | (in millions) |
|
Duke Energy Carolinas | | | |
Allen Steam Station Units 1-3(a) | 585 |
| | $ | 162 |
|
Duke Energy Indiana | | | |
Gallagher Units 2 and 4(b) | 280 |
| | 121 |
|
Total Duke Energy | 865 |
| | $ | 283 |
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| |
(a) | 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. |
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(b) | Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the 2016 settlement of Edwardsport IGCC matters. |
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| | | | | | | | | Remaining Net | | | | |
| Capacity | | | | | | | | Book Value | | | | |
| (in MW) | | | | | | | | (in millions) | | | | |
Duke Energy Carolinas | | | | | | | | | | | | | |
Allen Steam Station Unit 1(a) | 167 | | | | | | | | | $ | 12 | | | | | |
Allen Steam Station Unit 5(b) | 259 | | | | | | | | | 277 | | | | | |
Cliffside Unit 5(b) | 546 | | | | | | | | | 365 | | | | | |
Duke Energy Progress | | | | | | | | | | | | | |
Mayo Unit 1(b) | 713 | | | | | | | | | 631 | | | | | |
Roxboro Units 3-4(b) | 1,409 | | | | | | | | | 457 | | | | | |
Duke Energy Florida | | | | | | | | | | | | | |
Crystal River Units 4-5(c) | 1,442 | | | | | | | | | 1,650 | | | | | |
Duke Energy Indiana(d) | | | | | | | | | | | | | |
Gibson Units 1-5(e) | 2,845 | | | | | | | | | 1,829 | | | | | |
Cayuga Units 1-2(e) | 1,005 | | | | | | | | | 696 | | | | | |
Total Duke Energy | 8,386 | | | | | | | | | $ | 5,917 | | | | | |
(a) As part of the 2015 resolution of a lawsuit involving alleged New Source Review violations, Duke Energy Carolinas must 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, and unit 2 with a capacity of 167 MW and a net book value of $44 million at December 31, 2020, was retired in December 2021.
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FINANCIAL STATEMENTS | REGULATORY MATTERS |
Refer to(b) These units were included in the "WesternIRP filed by Duke Energy Carolinas Modernization Plan" discussion aboveand 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. Allen Unit 4 with a capacity of 267 MW and a net book value of $170 million at December 31, 2020, was retired in December 2021.
(c) On January 14, 2021, Duke Energy Florida filed the 2021 Settlement 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 FPSC approved the 2021 Settlement on May 4, 2021. 5.(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.
(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.
4. COMMITMENTS AND CONTINGENCIES
INSURANCE
General Insurance
The Duke Energy Registrants have insurance and reinsurance coverage either directly or through indemnification from Duke Energy’s captive insurance company, Bison, and its affiliates, consistent with companies engaged in similar commercial operations with similar type properties. The Duke Energy Registrants’ coverage includes (i) commercial general liability coverage for liabilities arising to third parties for bodily injury and property damage; (ii) workers’ compensation; (iii) automobile liability coverage; and (iv) property coverage for all real and personal property damage. Real and personal property damage coverage excludes electric transmission and distribution lines, but includes damages arising from boiler and machinery breakdowns, earthquakes, flood damage and extra expense, but not outage or replacement power coverage. All coverage is subject to certain deductibles or retentions, sublimits, exclusions, terms and conditions common for companies with similar types of operations. The Duke Energy Registrants self-insure their electric transmission and distribution lines against loss due to storm damage and other natural disasters. As discussed further in Note 4,3, Duke Energy Florida maintains a storm damage reserve and has a regulatory mechanism to recover the cost of named storms on an expedited basis.
The cost of the Duke Energy Registrants’ coverage can fluctuate from year to year reflecting claims history and conditions of the insurance and reinsurance markets.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
In the event of a loss, terms and amounts of insurance and reinsurance available might not be adequate to cover claims and other expenses incurred. Uninsured losses and other expenses, to the extent not recovered by other sources, could have a material effect on the Duke Energy Registrants’ results of operations, cash flows or financial position. Each company is responsible to the extent losses may be excluded or exceed limits of the coverage available.
Nuclear Insurance
Duke Energy Carolinas owns and operates McGuire and Oconee and operates and has a partial ownership interest in Catawba. McGuire and Catawba each have two2 reactors. Oconee has three3 reactors. The other joint owners of Catawba reimburse Duke Energy Carolinas for certain expenses associated with nuclear insurance per the Catawba joint owner agreements.
Duke Energy Progress owns and operates Robinson, Brunswick and Harris. Robinson and Harris each have one1 reactor. Brunswick has two2 reactors.
Duke Energy Florida owns Crystal River Unit 3, which permanently ceased operation in 2013 and reachedachieved a SAFSTOR condition in January 2018 after the successful transfer of all used nuclear fuel assembliesJuly 2019. On October 1, 2020, Crystal River Unit 3 changed decommissioning strategies from SAFSTOR to an on-site dry cask storage facility.DECON.
In the event of a loss, terms and amounts of insurance available might not be adequate to cover property damage and other expenses incurred. Uninsured losses and other expenses, to the extent not recovered by other sources, could have a material effect on Duke Energy Carolinas’, Duke Energy Progress’ and Duke Energy Florida’s results of operations, cash flows or financial position. Each company is responsible to the extent losses may be excluded or exceed limits of the coverage available.
Nuclear Liability Coverage
The Price-Anderson Act requires owners of nuclear reactors to provide for public nuclear liability protection per nuclear incident up to a maximum total financial protection liability. The maximum total financial protection liability, which is approximately $14.1$13.5 billion, is subject to change every five years for inflation and for the number of licensed reactors. Total nuclear liability coverage consists of a combination of private primary nuclear liability insurance coverage and a mandatory industry risk-sharing program to provide for excess nuclear liability coverage above the maximum reasonably available private primary coverage. The U.S. Congress could impose revenue-raising measures on the nuclear industry to pay claims.
Primary Liability Insurance
Duke Energy Carolinas and Duke Energy Progress have purchased the maximum reasonably available private primary nuclear liability insurance as required by law, which is $450 million per station. Duke Energy Florida has purchased $100 million primary nuclear liability insurance in compliance with the law.
Excess Liability Program
This program provides $13.6$13.1 billion of coverage per incident through the Price-Anderson Act’s mandatory industrywide excess secondary financial protection program of risk pooling. This amount is the product of potential cumulative retrospective premium assessments of $138 million times the current 9995 licensed commercial nuclear reactors in the U.S. Under this program, operating unit licensees could be assessed retrospective premiums to compensate for public nuclear liability damages in the event of a nuclear incident at any licensed facility in the U.S. Retrospective premiums may be assessed at a rate not to exceed $20.5 million per year per licensed reactor for each incident. The assessment may be subject to state premium taxes.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
Nuclear Property and Accidental Outage Coverage
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are members of NEIL,Nuclear Electric Insurance Limited (NEIL), an industry mutual insurance company, which provides property damage, nuclear accident decontamination and premature decommissioning insurance for each station for losses resulting from damage to its nuclear plants, either due to accidents or acts of terrorism. Additionally, NEIL provides accidental outage coverage for each station for losses in the event of a major accidental outage at an insured nuclear station.
Pursuant to regulations of the NRC, each company’s property damage insurance policies provide that all proceeds from such insurance be applied, first, to place the plant in a safe and stable condition after a qualifying accident and second, to decontaminate the plant before any proceeds can be used for decommissioning, plant repair or restoration.
Losses resulting from acts of terrorism are covered as common occurrences, such that if terrorist acts occur against one or more commercial nuclear power plants insured by NEIL within a 12-month period, they would be treated as one event and the owners of the plants where the act occurred would share one full limit of liability. The full limit of liability is currently $3.2 billion. NEIL sublimits the total aggregate for all of their policies for non-nuclear terrorist events to approximately $1.8 billion.
Each nuclear facility has accident property damage, nuclear accident decontamination and premature decommissioning liability insurance from NEIL with limits of $1.5 billion, except for Crystal River Unit 3. Crystal River Unit 3’s limit is $50 million and is on an actual cash value basis. All nuclear facilities except for Catawba and Crystal River Unit 3 also share an additional $1.25 billion nuclear accident insurance limit above their dedicated underlying limit. This shared additional excess limit is not subject to reinstatement in the event of a loss. Catawba has a dedicated $1.25 billion of additional nuclear accident insurance limit above its dedicated underlying limit. Catawba and Oconee also have an additional $750 million of non-nuclear accident property damage limit. All coverages are subject to sublimits and significant deductibles.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
NEIL’s Accidental Outage policy provides some coverage, such assimilar to business interruption, for losses in the event of a major accident property damage outage of a nuclear unit. Coverage is provided on a weekly limit basis after a significant waiting period deductible and at 100 percent100% of the availableapplicable weekly limits for 52 weeks and 80 percent80% of the availableapplicable weekly limits for up to the next 110 weeks. Coverage is provided until these availableapplicable weekly periods are met, where the accidental outage policy limit will not exceed $490 million for Catawba, $434 million for McGuire, Catawba and$364 million for Harris, $476$336 million for Brunswick, $462$322 million for Oconee and $392$280 million for Robinson. NEIL sublimits the accidental outage recovery up to the first 104 weeks of coverage not to exceed $328 million from non-nuclear accidental property damage. Coverage amounts decrease in the event more than one unit at a station is out of service due to a common accident. All coverages are subject to sublimits and significant deductibles.
Potential Retroactive Premium Assessments
In the event of NEIL losses, NEIL’s board of directors may assess member companies' retroactive premiums of amounts up to 10 times their annual premiums for up to six years after a loss. NEIL has never exercised this assessment. The maximum aggregate annual retrospective premium obligations for Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida are $159$140 million, $97$88 million and $1 million, respectively. Duke Energy Carolinas' maximum assessment amount includes 100 percent100% of potential obligations to NEIL for jointly owned reactors. Duke Energy Carolinas would seek reimbursement from the joint owners for their portion of these assessment amounts.
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local regulationslaws regarding air and water quality, hazardous and solid waste disposal, coal ash and other environmental matters. These regulationslaws 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 the ARO recorded as a result of various environmental regulations, discussed in Note 9, 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 in the Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
The following tables contain 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 Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
Balance at December 31, 2015 | $ | 94 |
| | $ | 10 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 54 |
| | $ | 12 |
|
Provisions/adjustments | 19 |
| | 4 |
| | 7 |
| | 2 |
| | 4 |
| | 7 |
| | 1 |
|
Cash reductions | (15 | ) | | (4 | ) | | (6 | ) | | (2 | ) | | (4 | ) | | (2 | ) | | (3 | ) |
Balance at December 31, 2016 | 98 |
| | 10 |
| | 18 |
| | 3 |
| | 14 |
| | 59 |
| | 10 |
|
Provisions/adjustments | 8 |
| | 3 |
| | 3 |
| | 2 |
| | 2 |
| | 3 |
| | (4 | ) |
Cash reductions | (25 | ) | | (3 | ) | | (6 | ) | | (2 | ) | | (4 | ) | | (15 | ) | | (1 | ) |
Balance at December 31, 2017 | 81 |
| | 10 |
| | 15 |
| | 3 |
| | 12 |
| | 47 |
| | 5 |
|
Provisions/adjustments | 26 |
| | 3 |
| | 2 |
| | 3 |
| | (2 | ) | | 21 |
| | 1 |
|
Cash reductions | (30 | ) | | (2 | ) | | (6 | ) | | (2 | ) | | (4 | ) | | (20 | ) | | (1 | ) |
Balance at December 31, 2018 | $ | 77 |
| | $ | 11 |
| | $ | 11 |
| | $ | 4 |
| | $ | 6 |
| | $ | 48 |
| | $ | 5 |
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(in millions) | December 31, 2021 | | December 31, 2020 | |
Reserves for Environmental Remediation | | | | |
Duke Energy | $ | 88 | | | $ | 75 | | |
Duke Energy Carolinas | 19 | | | 19 | | |
Progress Energy | 23 | | | 19 | | |
Duke Energy Progress | 11 | | | 6 | | |
Duke Energy Florida | 11 | | | 12 | | |
Duke Energy Ohio | 34 | | | 22 | | |
Duke Energy Indiana | 4 | | | 6 | | |
Piedmont | 9 | | | 10 | | |
As of December 31, 2016, and October 31, 2016 and 2015, Piedmont's environmental reserve was $1 million. As of December 31, 2018, and 2017, the reserve was $2 million.
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.
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(in millions) | |
Duke Energy | $ | 46 |
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Duke Energy Carolinas | 17 |
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Duke Energy Ohio | 19 |
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Piedmont | 2 |
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
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. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. The NCDEQ has historically assessed Duke Energy Carolinas and Duke Energy Progress with NOVs 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 Sutton and Dan River Steam Station. Duke Energy Carolinas and Duke Energy Progress continue to resolve violations through corrective actions, and associated penalties related to existing unresolved NOVs are not expected to be material.
LITIGATION
Duke Energy
Michael Johnson et al. v. Duke Energy Corporation et al.
On September 23, 2020, plaintiff Michael Johnson, a former Duke Energy employee and participant in the Duke Energy Retirement Savings Plan (Plan) brought suit on his own behalf and on behalf of other participants and beneficiaries similarly situated against Duke Energy Corporation, the Duke Energy Benefits Committee, and other unnamed individual defendants. The complaint, which was subsequently amended to add a current participant as a plaintiff on November 23, 2020, alleges that the defendants breached their fiduciary duties with respect to certain fees associated with the Plan in violation of the Employee Retirement Income Security Act of 1974 and seeks certification of a class of all individuals who were participants or beneficiaries of the Plan at any time on or after September 23, 2014. The defendants filed a motion to dismiss the plaintiffs’ amended complaint on December 18, 2020. On January 31, 2022, the court denied the defendants' motion to dismiss. Duke Energy will be filing its answer to the amended complaint, following which discovery will commence. Duke Energy cannot predict the outcome of this matter.
Texas Storm Uri Tort Litigation
Several Duke Energy renewables project companies, located in the Electric Reliability Council of Texas (ERCOT) market, were named in lawsuits arising out of Texas Storm Uri in mid-February 2021. Several additional suits, where Duke Energy Corporation had been named, were dismissed The current lawsuits seek recovery for property damages, personal injury and for wrongful death allegedly caused by the power outages, which the plaintiffs claim was the result of collective failures of generators, transmission and distribution operators, retail energy providers and others including ERCOT. The cases have been consolidated into a Texas state court multidistrict litigation (MDL) proceeding for discovery purposes. With the exception of a few bellwether cases which are still being decided, all the lawsuits in the MDL will be stayed until motions to dismiss are filed and considered by the court in mid-2022. The bellwether cases will include those in which the Duke Energy entities are named. Duke Energy cannot predict the outcomes of these matters.
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 seekssought 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 seekssought damages for breach of contract and indemnification for costs arising from the Coal Ash Act and the EPA CCR rule at 15 coal-fired plants in North Carolina and SouthSouth Carolina. On January 23, 2019, the court granted the parties’ joint motion for a four month stay of the proceedings, until June 3, 2019, to allow the parties to discuss potential resolution. If the case is not fully resolved at that time, litigation will resume. The trial remains scheduled for August 2020.
Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
NCDEQ State Enforcement Actions
In the first quarter of 2013, SELC sent notices of intent to sue Duke Energy Carolinas and Duke Energy Progress related to alleged CWA violations from coal ash basins at two coal-fired power plants in North Carolina. The NCDEQ filed enforcement actionshave now resolved claims against Duke Energy Carolinas and Duke Energy Progress alleging violations of water discharge permits and North Carolina groundwater standards. 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 against Duke Energy Carolinas and Duke Energy Progress related to the remaining coal-fired power plants in North Carolina, alleging violationsall of the CWAinsurers sued in this litigation and violationshave dismissed their claims against all 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.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
The court issued orders in 2016 granting Motions for Partial Summary Judgment for seven of the 14 North Carolina plants with coal ash basins named in the enforcement actions. On February 13, 2017, the court issued an order denying motions for partial summary judgment brought by both the environmental groups and Duke Energy Carolinas and Duke Energy Progress for the remaining seven plants. On March 15, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Notice of Appeal with the North Carolina Court of Appeals to challenge the trial court’s order. The parties were unable to reach an agreement at mediation in April 2017 and submitted briefs to the trial court on remaining issues to be tried. On August 1, 2018, the Court of Appeals dismissed the appeal and the matter is proceeding before the trial court. No trial date has been scheduled. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of this matter.
Federal Citizens Suits
On June 13, 2016, 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 NPDES permit provisions survived the motion to dismiss, and Duke Energy Progress filed its response on May 10, 2017. Duke Energy Progress and RRBA each filed motions for summary judgment on March 23, 2018. The court has not yet ruled on these motions.
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 at the Roxboro Plant and one claim relating to the use of nearby water bodies. Duke Energy Progress and RRBA each filed motions for summary judgment on April 17, 2018, and the court has not yet ruled on these motions.
On May 8, 2018, on motion from Duke Energy Progress, the court ordered trial in both of the above matters to be consolidated. Trial is currently scheduled to begin July 15, 2019.
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, which was granted by the court on March 30, 2018. RRBA had until April 30, 2018, to file an appeal to the Fourth Circuit but did not do so.
On August 2, 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 Roxboro Plant under the EPA CCR Rule. Duke Energy Progress filed a motion to dismiss on October 2, 2017, which was granted by the court on May 29, 2018. RRBA had until June 28, 2018, to file an appeal to the Fourth Circuit but did not do so.
On December 5, 2017, various parties filed a federal citizen suit in the U.S. District Court for the Middle District of North Carolina for alleged violations at Duke Energy Carolinas' Belews Creek under the CWA. Duke Energy Carolinas' answer to the complaint was filed on August 27, 2018. On October 10, 2018, Duke Energy Carolinas filed Motions to Dismiss for lack of standing, Motion for Judgment on the Pleadings and Motion to Stay Discovery. On January 9, 2019, the court entered an order denying Duke Energy Carolinas' motion to stay discovery. There has been no ruling on the other pending motions.
Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of these matters.
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 DHHS. Results of 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 have 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.
insurers. Duke Energy Carolinas and Duke Energy Progress have received formal demand lettersapproximately $418 million of coal ash insurance litigation proceeds from residents near settlements with insurer-defendants and the proceeds will be distributed in accordance with the terms of the CCR settlement agreement.
Duke Energy Carolinas' andCarolinas
Ruben Villano, et al. v. Duke Energy Progress' coal ash basins.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 5 others were confirmed deceased. On August 11, 2021, Duke Energy Carolinas was served with the complaint filed in Durham County Superior Court on behalf of 4 survivors, which was later amended to include all the decedents along with the survivors, except for one minor. The residents claim damageslawsuit alleges that Duke Energy Carolinas knew that the river was used for nuisancerecreational purposes and diminution in property value, among other things. The parties held three daysthat Duke Energy did not adequately warn about the dam. On September 30, 2021, Duke Energy Carolinas filed its motion to dismiss and motion for transfer of mediation discussions,venue from Durham County to Rockingham County, both of which ended at impasse.were denied on November 15, 2021. On January 6,November 15, 2021, Duke Energy Carolinas was also served with Plaintiffs Second Amended Complaint, which added the final minor plaintiff and consolidated all the actions into one lawsuit. Duke Energy Carolinas has filed its Answer and Affirmative Defenses to the Second Amended Complaint. Discovery has now commenced. Duke Energy Carolinas cannot predict the outcome of this matter.
NTE Carolinas II, LLC Litigation
In November 2017, Duke Energy Carolinas andentered into a standard FERC large generator interconnection agreement (LGIA) with NTE Carolinas II, LLC (NTE), a company that proposed to build a combined-cycle natural gas plant in Rockingham County, North Carolina. On September 6, 2019, 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 asCarolinas filed 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. Payments are being made and the remaining reserves are not material.
On August 23, 2017, a class-action suit was filedlawsuit in WakeMecklenburg County Superior Court North Carolina, against NTE for breach of contract, alleging that NTE's failure to pay benchmark payments for Duke Energy Carolinas' transmission system upgrades required under the interconnection agreement constituted a termination of the interconnection agreement. Duke Energy Carolinas andis seeking a monetary judgment against NTE because NTE failed to make multiple milestone payments. The lawsuit was moved to federal court in North Carolina. NTE filed a motion to dismiss Duke Energy Progress on behalfCarolinas’ complaint and brought counterclaims alleging anti-competitive conduct and violations of certain property owners living near coal ash impoundments at Allen, Asheville, Belews Creek, Buck, Cliffside, Lee, Marshall, Mayostate 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,federal statutes. Duke Energy Carolinas andfiled a motion to dismiss NTE's counterclaims.
On May 21, 2020, in response to a NTE petition challenging Duke Energy Progress filed a Motion to Dismiss and Motion to Strike the class designation. The parties entered into a Settlement Agreement on January 24, 2018, which resulted in the dismissalCarolinas' termination of the underlying class action on January 25, 2018.
LGIA, FERC issued a ruling that 1) FERC 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 and cannot predict the outcome of this investigation.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
On September 14, 2017, a complaint was filed againstAugust 17, 2020, the court denied both NTE’s and Duke Energy ProgressCarolinas’ motions to dismiss. In October 2021, NTE filed a Second Amended Counterclaim and Complaint, and in New Hanover County Superior Court byJanuary 2022, NTE filed a group of homeowners residing approximately 1 mile fromThird Amended Counterclaim and Complaint. Duke Energy Progress' Sutton Steam Plant. The homeowners allege that coal ash constituents have been migrating from ash impoundments at Sutton into their groundwater for decades and that in 2015,Carolinas has responded to these pleadings. On December 6, 2021, Duke Energy Progress discovered these releases of coal ash, but failedCarolinas filed an Amended Complaint. Discovery is scheduled to notify any officials or neighbors and failedend by April 2022, after which the parties will file dispositive motions for the court's consideration. The case is scheduled 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. On March 6, 2018, Plaintiffs' counsel voluntarily dismissed the action without prejudice.
be trial ready by August 1, 2022. Duke Energy Carolinas cannot predict the outcome of this matter.
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 December 31, 2018, there were 164 asserted claims for non-malignant cases with the cumulative relief sought of up to $42 million and 87 asserted claims for malignant cases with the cumulative relief sought of up to $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 Carolinas has recognized asbestos-related reserves of $630$501 million and $489$572 million at December 31, 2018,2021, and 2017,2020, respectively. These reserves are classified in Other within Other Noncurrent Liabilities and Other within Current Liabilities on the Consolidated Balance Sheets. The change in the reserves is a result of a third-party study completed in 2021 as well as settlements made throughout the year. These reserves are based upon Duke Energy Carolinas' best estimate for current and future asbestos claims through 20382041 and are recorded on an undiscounted 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 20382041 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-insurance 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 $764 million in excess of the self-insured retention. Receivables for insurance recoveries were $739$644 million and $585$704 million at December 31, 2018,2021, and 2017,2020, respectively. These amounts are classified in Other within Other Noncurrent Assets and Receivables within Current Assets on the Consolidated Balance Sheets. Any future payments up to the policy limit will be reimbursed by the third-party insurance carrier. 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.
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 for the asbestos-related injuries and damages based on adoption of the new standard is $12 million and $15 million for Duke Energy and Duke Energy Carolinas as of December 31, 2021, and December 31, 2020, respectively. 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
Spent Nuclear Fuel Matters
On October 16, 2014,June 18, 2018, Duke Energy Progress and Duke Energy Florida sued the U.S. in the U.S. Court of Federal Claims.Claims for damages incurred for the period 2014 through 2018. The lawsuit claimed the Department of Energy breached a contract in failing to accept spent nuclear fuel under the Nuclear Waste Policy Act of 1982 and asserted damages for the cost of on-site storage.storage in the amount of $100 million and $200 million for Duke Energy Progress and Duke Energy Florida, asserted damagesrespectively. The Department of Energy filed a motion for partial summary judgment relating to approximately $60 million of Duke Energy Florida’s claimed damages. A hearing on the period January 1, 2011, through December 31, 2013, of $48 million and $25 million, respectively. On November 17, 2017, the Court awardedmotion was held on February 9, 2022. Trial is scheduled for April 2022. Duke Energy Progress and Duke Energy Florida $48 million and $21 million, respectively, subject to appeal. No appeals were filed and Duke Energy Progress and Duke Energy Florida recognized the recoveries in the first quarter of 2018. Claims for all periods through 2013 have been resolved. On June 22, 2018, Duke Energy Progress and Duke Energy Florida filed a complaint for damages incurred for 2014 through first quarter 2018.
Duke Energy Progress
Gypsum Supply Agreements Matter
On June 30, 2017, CertainTeed filed a declaratory judgment action against Duke Energy Progress in the North Carolina Business Court relating to a gypsum supply agreement. In its complaint, CertainTeed sought an order from the court declaring that the minimum amount of gypsum Duke Energy Progress must provide to CertainTeed under the supply agreement was 50,000 tons per month through 2029. Trial in this matter was completed on July 16, 2018. On August 29, 2018, the court issued an order and opinion finding that Duke Energy Progress is required to supply 50,000 tons of gypsum/month, but that CertainTeed’s sole remedy for Duke Energy Progress’ long-term discontinuance under the agreement is liquidated damages. On November 14, 2018, the parties reached a settlement agreement. The amount owed under the liquidated damages provision is approximately $90 million on an undiscounted basis over 10 years. Approximately $3 million was paid in 2018. As of December 31, 2018, $9 million is recorded in Accounts payable within Current Liabilities and $63 million in Other within Other Noncurrent Liabilities on the Consolidated Balance Sheets. The liability is recorded on a discounted basis at a rate of approximately 4 percent. These costs are probable of recovery from customers and are recorded in Regulatory Assets within Other Noncurrent Assets on the Consolidated Balance Sheets.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
Duke Energy Florida
Fluor Contract Litigation
On January 29, 2019, Fluor filed a breach of contract lawsuit in the U.S. District Court for the Middle District of Florida against Duke Energy Florida related to an EPC agreement for the combined-cycle natural gas plant in Citrus County, Florida. Fluor filed an amended complaint on February, 13, 2019. Fluor’s multicount complaint seeks civil, statutory and contractual remedies related to Duke Energy Florida’s $67 million draw in early 2019, on Fluor’s letter of credit and offset of invoiced amounts. Duke Energy Florida is attempting to recover from Fluor $110 million in additional costs incurred by Duke Energy Florida. Duke Energy Florida cannot predict the outcome of this matter. See Note 4 for additional information.
Class-Action LawsuitDuke Energy Florida
On February 22, 2016, a lawsuit was filed in the U.S. District Court for the Southern District ofPower Purchase Dispute Arbitration
Duke Energy Florida, on behalf of its customers, entered into a classPPA for the purchase of firm capacity and energy from a qualifying facility under the Public Utilities Regulatory Policies Act of 1978. Duke Energy Florida and FP&L’s customersdetermined the qualifying facility did not perform in Florida. The suit allegesaccordance with the State of Florida’s NCRS are unconstitutionalPPA, and pre-empted by federal law. Plaintiffs claim they are entitled to repayment of all money paid by customers of Duke Energy Florida and FP&L asterminated the PPA. The qualifying facility counterparty filed a resultconfidential American Arbitration Association (AAA) arbitration demand, challenging the termination of the NCRS, as well as an injunction against any future charges under those statutes. PPA and seeking damages.
The constitutionalityfinal arbitration hearing occurred during the week of December 7, 2020. An interim arbitral award was issued in March 2021, upholding Duke Energy Florida's positions on all issues and awarding the NCRS has been challenged unsuccessfully in a number of prior cases on alternative grounds.company termination costs. In May 2021, the final arbitral award was issued awarding Duke Energy Florida its claimed fees 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 (Eleventh Circuit). On July 11, 2018, the Eleventh Circuit affirmed the U.S. District Court's dismissal of the lawsuit. The deadline to file a petition for cert was October 9, 2018, and no petition was filed; therefore, the dismissal of the lawsuit is final.
Westinghouse Contract Litigation
On March 28, 2014, 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 byarbitral award. On December 13, 2021, the court ofentered a final judgment confirming the amounts due to Westinghouse as a result of the termination of an EPC contract. arbitration 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 separate 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 at Gallagher. After hearing oral arguments in U.S. District Court for the Western District of Pennsylvania alleging damages under the same EPC contract 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 separateHEC's competing Motions for Summary Judgment. On September 29, 2016,Judgment, on May 4, 2021, the administrative court rejected all of HEC’s claims and issued its ruling, granting Westinghouse a $30 million termination fee claim and dismissing Duke Energy Florida's $54 million refund claim. Westinghouse's claim for termination costs continued to trial. Following a trial on the matter, the court issued an order in December 2016 denying Westinghouse’s claim for termination costs and reaffirming its earlier ruling in favor of WestinghouseDuke Energy Indiana. On June 3, 2021, HEC filed an appeal in Superior Court to seek judicial review of the order. On June 25, 2021, Duke Energy Indiana filed its response to the Petition to Review. On August 30, 2021, HEC served Duke Energy Indiana with its Brief in Support of Petition for Judicial Review. On October 29, 2021, Duke Energy Indiana and IDEM filed their response briefs. On December 13, 2021, HEC filed and served its Reply Brief.
On January 11, 2022, Duke Energy Indiana received a compliance obligation letter from the EPA notifying the company that the two basins at issue in the litigation are subject to requirements of the CCR Rule. The letter does not provide a deadline for compliance. Duke Energy Indiana is evaluating the EPA letter, its potential impacts on the $30 million termination fee. Judgmentlitigation and the extent to which this letter could apply to CCR surface impoundments at its other Indiana sites.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
Following the January 11, 2022 EPA notice of compliance letter, the parties filed a joint motion to stay the litigation for 45 days, which was entered againstapproved by the court. As a result, the oral argument scheduled for February 1, 2022, was postponed until the end of the 45-day stay. Duke Energy Florida inIndiana cannot predict the amountoutcome of approximately $34 million, which includes prejudgment interest. Westinghouse appealed the trial court's order to the Fourth Circuit and Duke Energy Florida cross-appealed.
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. Westinghouse and Duke Energy Florida executed a settlement agreement resolving this matter on April 5, 2018. The bankruptcy court approved the settlement and Duke Energy Florida paid approximately $34 million to Westinghouse in July 2018 pursuant to this agreement. At the request of the parties, the Fourth Circuit has dismissed the appeal.matter.
MGP Cost Recovery Action
On December 30, 2011, Duke Energy Florida filed a lawsuit against 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 Sixth Circuit, which affirmed the trial court's ruling on April 10, 2018. The dismissal of the lawsuit is therefore final.
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.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
The table below presents recorded reserves based on management’s best estimate of probable lossposition for legal matters, excluding asbestos-related reserves, the CertainTeed liquidated damages obligation and the exit obligation in 2017 related to the termination of an EPC contract.years presented. Reserves are classified on the Consolidated Balance Sheets in Other within Other Noncurrent Liabilities and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above. |
| | | | | | | |
| December 31, |
(in millions) | 2018 |
| | 2017 |
|
Reserves for Legal Matters | | | |
Duke Energy | $ | 65 |
| | $ | 88 |
|
Duke Energy Carolinas | 9 |
| | 30 |
|
Progress Energy | 54 |
| | 55 |
|
Duke Energy Progress | 12 |
| | 13 |
|
Duke Energy Florida | 24 |
| | 24 |
|
Piedmont | 1 |
| | 2 |
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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 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.See Note 7 for more information.
Purchase Obligations
Purchased Power
Duke Energy Progress, Duke Energy Florida and Duke Energy Ohio have ongoing purchased power contracts, including renewable energy contracts, with other utilities, wholesale marketers, co-generators and qualified facilities. These purchased power contracts generally provide for capacity and energy payments. In addition, Duke Energy Progress and Duke Energy Florida have various contracts to secure transmission rights.
The following table presents executory purchased power contracts with terms exceeding one year, excluding contracts classified as leases. | | | | | Minimum Purchase Amount at December 31, 2018 | | | | Minimum Purchase Amount at December 31, 2021 |
| Contract | | | | | | | | | | | | | | | | Contract | |
(in millions) | Expiration | | 2019 |
| | 2020 |
| | 2021 |
| | 2022 |
| | 2023 |
| | Thereafter |
| | Total |
| (in millions) | Expiration | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
Duke Energy Progress(a) | 2022-2031 | | $ | 51 |
| | $ | 52 |
| | $ | 53 |
| | $ | 30 |
| | $ | 25 |
| | $ | 215 |
| | $ | 426 |
| Duke Energy Progress(a) | 2028-2032 | | $ | 22 | | | $ | 22 | | | $ | 21 | | | $ | 22 | | | $ | 18 | | | $ | 45 | | | $ | 150 | |
Duke Energy Florida(b) | 2021-2025 | | 363 |
| | 380 |
| | 365 |
| | 363 |
| | 382 |
| | 361 |
| | 2,214 |
| Duke Energy Florida(b) | 2023-2025 | | 354 | | | 374 | | | 262 | | | 91 | | | — | | | — | | | 1,081 | |
Duke Energy Ohio(c)(d) | 2020-2022 | | 146 |
| | 117 |
| | 53 |
| | 11 |
| | — |
| | — |
| | 327 |
| Duke Energy Ohio(c)(d) | 2023 | | 53 | | | 34 | | | — | | | — | | | — | | | — | | | 87 | |
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(a) | Contracts represent 100 percent of net plant output. |
| |
(b) | Contracts represent between 81 percent and 100 percent of net plant output. |
| |
(c) | Contracts represent between 1 percent and 8 percent of net plant output. |
| |
(d) | Excludes PPA with OVEC. See Note 17 for additional information. |
(a) Contracts represent between 18% and 100% of net plant output.
(b) Contracts represent 100% of net plant output.
(c) Contracts represent 15% of net plant output.
(d) Excludes PPA with OVEC. See Note 17 for additional information.
Gas Supply and Capacity Contracts
Duke Energy Ohio and Piedmont routinely enter into long-term natural gas supply commodity and capacity commitments and other agreements that commit future cash flows to acquire services needed in their businesses. These commitments include pipeline and storage capacity contracts and natural gas supply contracts to provide service to customers. Costs arising from the natural gas supply commodity and capacity commitments, while significant, are pass-through costs to customers and are generally fully recoverable through the fuel adjustment or PGA proceduresprocedures and prudence reviews in North Carolina and South Carolina and under the Tennessee Incentive Plan in Tennessee. In the Midwest, these costs are recovered via the Gas Cost Recovery Rate in Ohio or the Gas Cost Adjustment Clause in Kentucky. The time periods for fixed payments under pipeline and storage capacity contracts are up to 1614 years. The time periods for fixed payments under natural gas supply contracts are up to sevenfive years. The time period for the natural gas supply purchase commitments is up to 1210 years.
CertainCertain storage and pipeline capacity contracts require the payment of demand charges that are based on rates approved by the FERC in order to maintain rights to access the natural gas storage or pipeline capacity on a firm basis during the contract term. The demand charges that are incurred in each period are recognized in the Consolidated Statements of Operations and Comprehensive Income as part of natural gas purchases and are included in Cost of natural gas.
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FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIES |
The following table presents future unconditional purchase obligations under natural gas supply and capacity contracts as of December 31, 2018.2021.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(in millions) | 2022 | | 2023 | | 2024 | | 2025 | 2026 | Thereafter | Total |
Duke Energy Ohio | $ | 62 | | | $ | 37 | | | $ | 25 | | | $ | 16 | | $ | 13 | | $ | 47 | | $ | 200 | |
Piedmont | 324 | | | 272 | | | 225 | | | 134 | | 122 | | 503 | | 1,580 | |
| | | | | | | | | | |
5. LEASES
|
| | | | | | | | | |
(in millions) | Duke Energy | Duke Energy Ohio | Piedmont |
2019 | $ | 314 |
| $ | 38 |
| $ | 276 |
|
2020 | 287 |
| 30 |
| 257 |
|
2021 | 255 |
| 29 |
| 226 |
|
2022 | 225 |
| 11 |
| 214 |
|
2023 | 148 |
| 4 |
| 144 |
|
Thereafter | 1,067 |
| — |
| 1,067 |
|
Total | $ | 2,296 |
| $ | 112 |
| $ | 2,184 |
|
Operating and Capital Lease Commitments
TheAs part of its operations, Duke Energy Registrants leaseleases certain aircraft, space on communication towers, industrial equipment, fleet vehicles, fuel transportation (barges and railcars), land and office buildings, railcars, vehicles and other property and equipment withspace under various terms and expiration dates. Additionally, Duke Energy Carolinas, Duke Energy Progress and Duke Energy ProgressIndiana have capitalfinance leases related to firm natural gas pipeline transportation capacity. Duke Energy Progress and Duke Energy Florida have entered into certain purchased power agreements,PPAs, which are classified as finance and operating leases.
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FINANCIAL STATEMENTS | LEASES |
Duke Energy has certain lease agreements, which include variable lease payments that are based on the usage of an asset. These variable lease payments are not included in the measurement of the ROU assets or operating lease liabilities on the Consolidated capitalizedFinancial Statements.
Certain Duke Energy lease obligationsagreements include options for renewal and early termination. The intent to renew a lease varies depending on the lease type and asset. Renewal options that are classifiedreasonably certain to be exercised are included in the lease measurements. The decision to terminate a lease early is dependent on various economic factors. No termination options have been included in any of the lease measurements.
Duke Energy Carolinas entered into a sale-leaseback arrangement in December 2019, to construct and occupy an office tower. The lease agreement was evaluated as Long-Term Debt or Other within Current Liabilitiesa sale-leaseback of real estate and it was determined that the transaction did not qualify for sale-leaseback accounting. As a result, the transaction is being accounted for as a financing. For this transaction, Duke Energy Carolinas will continue to record the real estate on the Consolidated Balance Sheets. AmortizationSheets within Property, Plant and Equipment as if it were the legal owner and will continue to recognize depreciation expense over the estimated useful life. In addition, the failed sale-leaseback obligation is reported within Long-Term Debt on the Consolidated Balance Sheets, with the monthly lease payments commencing after the construction phase being split between interest expense and principal pay down of assets recorded under capitalthe debt.
Duke Energy operates various renewable energy projects and sells the generated output to utilities, electric cooperatives, municipalities and commercial and industrial customers through long-term PPAs. In certain situations, these PPAs and the associated renewable energy projects qualify as operating leases. Rental income from these leases is includedaccounted for as Nonregulated electric and other revenues in Depreciationthe Consolidated Statements of Operations. There are no minimum lease payments as all payments are contingent based on actual electricity generated by the renewable energy projects. Contingent lease payments were $259 million, $275 million and amortization$264 million for the years ended December 31, 2021, 2020, and 2019, respectively. Renewable energy projects owned by Duke Energy and accounted for as operating leases had a cost basis of $3,339 million and $3,335 million and accumulated depreciation of $966 million and $848 million at December 31, 2021, and 2020, respectively. These assets are principally classified as nonregulated electric generation and transmission assets.
Piedmont has certain agreements with Duke Energy Carolinas for the construction and transportation of natural gas pipelines to supply its natural gas plant needs. Piedmont accounts for these pipeline lateral contracts as sales-type leases since the present value of the sum of the lease payments equals the fair value of the assets. These pipeline lateral assets owned by Piedmont had a current net investment basis of $2 million as of December 31, 2021, and 2020, and a long-term net investment basis of $203 million and $205 million as of December 31, 2021, and 2020, respectively. These assets are classified in Other, within Current Assets and Other Noncurrent Assets, respectively, on Piedmont's Consolidated Balance Sheets. Duke Energy Carolinas accounts for the contracts as finance leases. The activity for these contracts is eliminated in consolidation at Duke Energy.
The following tables present the components of lease expense.
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| Year Ended December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Operating lease expense(a) | $ | 250 | | | $ | 43 | | | $ | 155 | | | $ | 83 | | | $ | 72 | | | $ | 11 | | | $ | 18 | | | $ | 7 | |
Short-term lease expense(a) | 5 | | | — | | | 2 | | | 1 | | | 1 | | | — | | | 2 | | | — | |
Variable lease expense(a) | 41 | | | 17 | | | 22 | | | 10 | | | 12 | | | — | | | — | | | 1 | |
Finance lease expense | | | | | | | | | | | | | | | |
Amortization of leased assets(b) | 219 | | | 5 | | | 37 | | | 18 | | | 19 | | | — | | | 1 | | | — | |
Interest on lease liabilities(c) | 55 | | | 33 | | | 48 | | | 42 | | | 6 | | | — | | | — | | | — | |
Total finance lease expense | 274 | | | 38 | | | 85 | | | 60 | | | 25 | | | — | | | 1 | | | — | |
Total lease expense | $ | 570 | | | $ | 98 | | | $ | 264 | | | $ | 154 | | | $ | 110 | | | $ | 11 | | | $ | 21 | | | $ | 8 | |
(a) Included in Operations, maintenance and other or, for barges and railcars, Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.
The following tables present rental expense for operating leases. These amounts are included(b) Included in Operation,Depreciation and amortization on the Consolidated Statements of Operations.
(c) Included in Interest Expense on the Consolidated Statements of Operations.
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FINANCIAL STATEMENTS | LEASES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Operating lease expense(a) | $ | 283 | | | $ | 53 | | | $ | 162 | | | $ | 72 | | | $ | 90 | | | $ | 11 | | | $ | 19 | | | $ | 7 | |
Short-term lease expense(a) | 4 | | | — | | | 2 | | | 1 | | | 1 | | | — | | | 1 | | | — | |
Variable lease expense(a) | 30 | | | 13 | | | 13 | | | 5 | | | 8 | | | — | | | 1 | | | 1 | |
Finance lease expense | | | | | | | | | | | | | | | |
Amortization of leased assets(b) | 119 | | | 8 | | | 24 | | | 6 | | | 18 | | | — | | | 1 | | | — | |
Interest on lease liabilities(c) | 61 | | | 30 | | | 44 | | | 37 | | | 7 | | | — | | | — | | | — | |
Total finance lease expense | 180 | | | 38 | | | 68 | | | 43 | | | 25 | | | — | | | 1 | | | — | |
Total lease expense | $ | 497 | | | $ | 104 | | | $ | 245 | | | $ | 121 | | | $ | 124 | | | $ | 11 | | | $ | 22 | | | $ | 8 | |
(a) Included in Operations, maintenance and other
or, for barges and
railcars, Fuel used in electric generation and purchased power on the Consolidated Statements of Operations.
|
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
|
Duke Energy | $ | 268 |
| | $ | 241 |
| | $ | 242 |
|
Duke Energy Carolinas | 49 |
| | 44 |
| | 45 |
|
Progress Energy | 143 |
| | 130 |
| | 140 |
|
Duke Energy Progress | 75 |
| | 75 |
| | 68 |
|
Duke Energy Florida | 68 |
| | 55 |
| | 72 |
|
Duke Energy Ohio | 13 |
| | 15 |
| | 16 |
|
Duke Energy Indiana | 21 |
| | 23 |
| | 23 |
|
|
| | | | | | | | | | | | | | |
| Years Ended December 31, | Two Months Ended December 31, | | Year Ended October 31, |
(in millions) | 2018 | | 2017 | 2016 | | 2016 |
Piedmont | $ | 11 |
| | $ | 7 |
| $ | 1 |
| | $ | 5 |
|
(b) Included in Depreciation and amortization on the Consolidated Statements of Operations. (c) Included in Interest Expense on the Consolidated Statements of Operations.
The following table presents future minimumoperating lease maturities and a reconciliation of the undiscounted cash flows to operating lease liabilities.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
2022 | $ | 225 | | | $ | 24 | | | $ | 118 | | | $ | 63 | | | $ | 55 | | | $ | 2 | | | $ | 6 | | | $ | 5 | |
2023 | 212 | | | 21 | | | 118 | | | 64 | | | 54 | | | 2 | | | 6 | | | 5 | |
2024 | 185 | | | 14 | | | 110 | | | 56 | | | 54 | | | 2 | | | 4 | | | 5 | |
2025 | 156 | | | 10 | | | 96 | | | 42 | | | 54 | | | 2 | | | 4 | | | 5 | |
2026 | 136 | | | 10 | | | 92 | | | 38 | | | 54 | | | 2 | | | 4 | | | — | |
Thereafter | 594 | | | 42 | | | 290 | | | 220 | | | 70 | | | 16 | | | 50 | | | — | |
Total operating lease payments | 1,508 | | | 121 | | | 824 | | | 483 | | | 341 | | | 26 | | | 74 | | | 20 | |
Less: present value discount | (247) | | | (21) | | | (124) | | | (83) | | | (41) | | | (7) | | | (20) | | | (1) | |
Total operating lease liabilities(a) | $ | 1,261 | | | $ | 100 | | | $ | 700 | | | $ | 400 | | | $ | 300 | | | $ | 19 | | | $ | 54 | | | $ | 19 | |
(a) Certain operating lease payments under operating leases, which at inception hadinclude renewal options that are reasonably certain to be exercised.
The following table presents finance lease maturities and a
non-cancelable termreconciliation of
more than one year.the undiscounted cash flows to finance lease liabilities. | | | December 31, 2018 | | December 31, 2021 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | | Duke | | Duke | | Duke | | | Duke | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | | Duke | | Energy | | Progress | | Energy | | Energy | | | Energy | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| Piedmont |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | | Indiana | |
2019 | $ | 239 |
| | $ | 33 |
| | $ | 97 |
| | $ | 49 |
| | $ | 48 |
| | $ | 2 |
| | $ | 6 |
| $ | 5 |
| |
2020 | 219 |
| | 29 |
| | 90 |
| | 46 |
| | 44 |
| | 2 |
| | 5 |
| 5 |
| |
2021 | 186 |
| | 19 |
| | 79 |
| | 37 |
| | 42 |
| | 2 |
| | 4 |
| 5 |
| |
2022 | 170 |
| | 19 |
| | 76 |
| | 34 |
| | 42 |
| | 2 |
| | 4 |
| 5 |
| 2022 | $ | 201 | | | $ | 38 | | | $ | 111 | | | $ | 86 | | | $ | 25 | | | | $ | 1 | | |
2023 | 160 |
| | 17 |
| | 77 |
| | 35 |
| | 42 |
| | 2 |
| | 5 |
| 6 |
| 2023 | 198 | | | 38 | | | 103 | | | 78 | | | 25 | | | | 1 | | |
2024 | | 2024 | 143 | | | 38 | | | 88 | | | 79 | | | 9 | | | | 1 | | |
2025 | | 2025 | 76 | | | 38 | | | 85 | | | 80 | | | 5 | | | | 1 | | |
2026 | | 2026 | 77 | | | 38 | | | 86 | | | 81 | | | 5 | | | | 1 | | |
Thereafter | 1,017 |
| | 68 |
| | 455 |
| | 314 |
| | 141 |
| | 23 |
| | 66 |
| 11 |
| Thereafter | 658 | | | 464 | | | 637 | | | 636 | | | 1 | | | | 24 | | |
Total | $ | 1,991 |
| | $ | 185 |
| | $ | 874 |
| | $ | 515 |
| | $ | 359 |
| | $ | 33 |
| | $ | 90 |
| $ | 37 |
| |
Total finance lease payments | | Total finance lease payments | 1,353 | | | 654 | | | 1,110 | | | 1,040 | | | 70 | | | | 29 | | |
Less: amounts representing interest | | Less: amounts representing interest | (438) | | | (365) | | | (420) | | | (411) | | | (9) | | | | (19) | | |
Total finance lease liabilities | | Total finance lease liabilities | $ | 915 | | | $ | 289 | | | $ | 690 | | | $ | 629 | | | $ | 61 | | | | $ | 10 | | |
|
| | | | |
FINANCIAL STATEMENTS | COMMITMENTS AND CONTINGENCIESLEASES |
The following table presents future minimumtables contain additional information related to leases.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Classification | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Assets | | | | | | | | | | | | | | | | |
Operating | Operating lease ROU assets, net | $ | 1,266 | | | $ | 92 | | | $ | 691 | | | $ | 389 | | | $ | 302 | | | $ | 19 | | | $ | 53 | | | $ | 16 | |
Finance | Net property, plant and equipment | 950 | | | 302 | | | 729 | | | 627 | | | 102 | | | — | | | 7 | | | — | |
Total lease assets | | $ | 2,216 | | | $ | 394 | | | $ | 1,420 | | | $ | 1,016 | | | $ | 404 | | | $ | 19 | | | $ | 60 | | | $ | 16 | |
Liabilities | | | | | | | | | | | | | | | | |
Current | | | | | | | | | | | | | | | | |
Operating | Other current liabilities | $ | 187 | | | $ | 22 | | | $ | 94 | | | $ | 50 | | | $ | 44 | | | $ | 1 | | | $ | 4 | | | $ | 5 | |
Finance | Current maturities of long-term debt | 151 | | | 6 | | | 61 | | | 41 | | | 20 | | | — | | | — | | | — | |
Noncurrent | | | | | | | | | | | | | | | | |
Operating | Operating lease liabilities | 1,074 | | | 78 | | | 606 | | | 350 | | | 256 | | | 18 | | | 50 | | | 14 | |
Finance | Long-Term Debt | 764 | | | 283 | | | 629 | | | 588 | | | 41 | | | — | | | 10 | | | — | |
Total lease liabilities | | $ | 2,176 | | | $ | 389 | | | $ | 1,390 | | | $ | 1,029 | | | $ | 361 | | | $ | 19 | | | $ | 64 | | | $ | 19 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2020 |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Classification | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Assets | | | | | | | | | | | | | | | | |
Operating | Operating lease ROU assets, net | $ | 1,524 | | | $ | 110 | | | $ | 690 | | | $ | 346 | | | $ | 344 | | | $ | 20 | | | $ | 55 | | | $ | 20 | |
Finance | Net property, plant and equipment | 797 | | | 312 | | | 416 | | | 297 | | | 119 | | | — | | | 7 | | | — | |
Total lease assets | | $ | 2,321 | | | $ | 422 | | | $ | 1,106 | | | $ | 643 | | | $ | 463 | | | $ | 20 | | | $ | 62 | | | $ | 20 | |
Liabilities | | | | | | | | | | | | | | | | |
Current | | | | | | | | | | | | | | | | |
Operating | Other current liabilities | $ | 177 | | | $ | 20 | | | $ | 73 | | | $ | 31 | | | $ | 42 | | | $ | 1 | | | $ | 3 | | | $ | 4 | |
Finance | Current maturities of long-term debt | 129 | | | 5 | | | 26 | | | 7 | | | 19 | | | — | | | — | | | — | |
Noncurrent | | | | | | | | | | | | | | | | |
Operating | Operating lease liabilities | 1,340 | | | 97 | | | 623 | | | 323 | | | 300 | | | 20 | | | 53 | | | 19 | |
Finance | Long-Term Debt | 716 | | | 289 | | | 351 | | | 289 | | | 62 | | | — | | | 10 | | | — | |
Total lease liabilities | | $ | 2,362 | | | $ | 411 | | | $ | 1,073 | | | $ | 650 | | | $ | 423 | | | $ | 21 | | | $ | 66 | | | $ | 23 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Cash paid for amounts included in the measurement of lease liabilities(a) | | | | | | | | | | | | | | | |
Operating cash flows from operating leases | $ | 245 | | | $ | 25 | | | $ | 117 | | | $ | 62 | | | $ | 55 | | | $ | 2 | | | $ | 6 | | | $ | 5 | |
Operating cash flows from finance leases | 55 | | | 33 | | | 48 | | | 42 | | | 6 | | | — | | | — | | | — | |
Financing cash flows from finance leases | 219 | | | 5 | | | 37 | | | 18 | | | 19 | | | — | | | 1 | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Lease assets obtained in exchange for new lease liabilities (non-cash) | | | | | | | | | | | | | | | |
Operating(b) | $ | 182 | | | $ | 4 | | | $ | 99 | | | $ | 99 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Finance | 322 | | | — | | | 322 | | | 322 | | | — | | | — | | | — | | | — | |
(a) No amounts were classified as investing cash flows from operating leases for the year ended December 31, 2021.
(b) Does not include ROU assets recorded as a result of the adoption of the new lease payments under capital leases.standard.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
2019 | $ | 170 |
| | $ | 20 |
| | $ | 45 |
| | $ | 20 |
| | $ | 25 |
| | $ | 2 |
| | $ | 1 |
|
2020 | 174 |
| | 20 |
| | 46 |
| | 21 |
| | 25 |
| | — |
| | 1 |
|
2021 | 177 |
| | 15 |
| | 45 |
| | 20 |
| | 25 |
| | — |
| | 1 |
|
2022 | 165 |
| | 15 |
| | 45 |
| | 21 |
| | 24 |
| | — |
| | 1 |
|
2023 | 165 |
| | 15 |
| | 45 |
| | 21 |
| | 24 |
| | — |
| | 1 |
|
Thereafter | 577 |
| | 204 |
| | 230 |
| | 209 |
| | 21 |
| | — |
| | 27 |
|
Minimum annual payments | 1,428 |
| | 289 |
| | 456 |
| | 312 |
| | 144 |
| | 2 |
| | 32 |
|
Less: amount representing interest | (487 | ) | | (180 | ) | | (205 | ) | | (175 | ) | | (30 | ) | | — |
| | (22 | ) |
Total | $ | 941 |
| | $ | 109 |
| | $ | 251 |
| | $ | 137 |
| | $ | 114 |
| | $ | 2 |
| | $ | 10 |
|
| | | | | |
FINANCIAL STATEMENTS | LEASES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Cash paid for amounts included in the measurement of lease liabilities(a) | | | | | | | | | | | | | | | |
Operating cash flows from operating leases | $ | 271 | | | $ | 31 | | | $ | 124 | | | $ | 52 | | | $ | 72 | | | $ | 2 | | | $ | 6 | | | $ | 5 | |
Operating cash flows from finance leases | 61 | | | 30 | | | 44 | | | 37 | | | 7 | | | — | | | — | | | — | |
Financing cash flows from finance leases | 119 | | | 8 | | | 24 | | | 6 | | | 18 | | | — | | | 1 | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Lease assets obtained in exchange for new lease liabilities (non-cash) | | | | | | | | | | | | | | | |
Operating(b) | $ | 116 | | | $ | 17 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | |
Finance | 125 | | | 125 | | | — | | | — | | | — | | | — | | | — | | | — | |
(a) No amounts were classified as investing cash flows from operating leases for the year ended December 31, 2020.
(b) Does not include ROU assets recorded as a result of the adoption of the new lease standard.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Weighted average remaining lease term (years) | | | | | | | | | | | | | | | |
Operating leases | 9 | | 9 | | 8 | | 10 | | 7 | | 16 | | 16 | | 4 |
Finance leases | 10 | | 18 | | 13 | | 13 | | 11 | | — | | | 24 | | — | |
Weighted average discount rate(a) | | | | | | | | | | | | | | | |
Operating leases | 3.6 | % | | 3.5 | % | | 3.6 | % | | 3.4 | % | | 3.8 | % | | 4.2 | % | | 4.1 | % | | 3.6 | % |
Finance leases | 7.3 | % | | 11.6 | % | | 9.0 | % | | 9.0 | % | | 8.2 | % | | — | % | | 11.9 | % | | — | % |
(a) The discount rate is calculated using the rate implicit in a lease if it is readily determinable. Generally, the rate used by the lessor is not provided to Duke Energy and in these cases the incremental borrowing rate is used. Duke Energy will typically use its fully collateralized incremental borrowing rate as of the commencement date to calculate and record the lease. The incremental borrowing rate is influenced by the lessee’s credit rating and lease term and as such may differ for individual leases, embedded leases or portfolios of leased assets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
| Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Weighted average remaining lease term (years) | | | | | | | | | | | | | | | |
Operating leases | 10 | | 9 | | 10 | | 12 | | 8 | | 17 | | 18 | | 5 |
Finance leases | 13 | | 19 | | 15 | | 17 | | 11 | | — | | | 25 | | — | |
Weighted average discount rate(a) | | | | | | | | | | | | | | | |
Operating leases | 3.8 | % | | 3.4 | % | | 3.8 | % | | 3.9 | % | | 3.8 | % | | 4.2 | % | | 4.2 | % | | 3.6 | % |
Finance leases | 8.4 | % | | 11.6 | % | | 11.9 | % | | 12.4 | % | | 8.2 | % | | — | % | | 11.9 | % | | — | % |
(a) The discount rate is calculated using the rate implicit in a lease if it is readily determinable. Generally, the rate used by the lessor is not provided to Duke Energy and in these cases the incremental borrowing rate is used. Duke Energy will typically use its fully collateralized incremental borrowing rate as of the commencement date to calculate and record the lease. The incremental borrowing rate is influenced by the lessee’s credit rating and lease term and as such may differ for individual leases, embedded leases or portfolios of leased assets.
| | | | | |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
6. DEBT AND CREDIT FACILITIES
Summary of Debt and Related Terms
The following tables summarize outstanding debt. | | | December 31, 2018 | | December 31, 2021 |
| Weighted |
| | | | Weighted | |
| Average |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | Average | | Duke | | Duke | |
| Interest |
| | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | | Interest | | Duke | Energy | Progress | Energy | |
(in millions) | Rate |
| | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| (in millions) | Rate | | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Unsecured debt, maturing 2019-2078 | 4.26 | % | | $ | 20,955 |
| $ | 1,150 |
| $ | 3,800 |
| $ | 50 |
| $ | 350 |
| $ | 1,000 |
| $ | 408 |
| $ | 2,150 |
| |
Secured debt, maturing 2020-2037 | 3.69 | % | | 4,297 |
| 450 |
| 1,703 |
| 300 |
| 1,403 |
| — |
| — |
| — |
| |
First mortgage bonds, maturing 2019-2048(a) | 4.32 | % | | 25,628 |
| 8,759 |
| 13,100 |
| 7,574 |
| 5,526 |
| 1,099 |
| 2,670 |
| — |
| |
Capital leases, maturing 2019-2051(b) | 5.06 | % | | 941 |
| 109 |
| 251 |
| 137 |
| 114 |
| 2 |
| 10 |
| — |
| |
Tax-exempt bonds, maturing 2019-2041(c) | 3.40 | % | | 941 |
| 243 |
| 48 |
| 48 |
| — |
| 77 |
| 572 |
| — |
| |
Unsecured debt, maturing 2022-2082 | | Unsecured debt, maturing 2022-2082 | 3.71 | % | | $ | 24,564 | | $ | 1,150 | | $ | 2,250 | | $ | — | | $ | 150 | | $ | 1,330 | | $ | 700 | | $ | 2,990 | |
Secured debt, maturing 2022-2052 | | Secured debt, maturing 2022-2052 | 2.50 | % | | 5,584 | | 1,094 | | 2,397 | | 1,120 | | 1,278 | | — | | — | | — | |
First mortgage bonds, maturing 2022-2051(a) | | First mortgage bonds, maturing 2022-2051(a) | 3.87 | % | | 31,026 | | 10,507 | | 15,450 | | 8,375 | | 7,075 | | 1,850 | | 3,219 | | — | |
Finance leases, maturing 2022-2051(b) | | Finance leases, maturing 2022-2051(b) | 5.81 | % | | 915 | | 289 | | 690 | | 629 | | 61 | | — | | 10 | | — | |
| Tax-exempt bonds, maturing 2027-2041(c) | | Tax-exempt bonds, maturing 2027-2041(c) | 0.65 | % | | 360 | | — | | 48 | | 48 | | — | | 27 | | 285 | | — | |
Notes payable and commercial paper(d) | 2.73 | % | | 4,035 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| Notes payable and commercial paper(d) | 0.35 | % | | 3,929 | | — | | — | | — | | — | | —�� | | — | | — | |
Money pool/intercompany borrowings | | | — |
| 739 |
| 1,385 |
| 444 |
| 108 |
| 299 |
| 317 |
| 198 |
| Money pool/intercompany borrowings | | | — | | 526 | | 2,959 | | 322 | | 199 | | 128 | | 150 | | 518 | |
Fair value hedge carrying value adjustment | | | 5 |
| 5 |
| — |
| — |
| — |
| — |
| — |
| — |
| Fair value hedge carrying value adjustment | | | 4 | | 4 | | — | | — | | — | | — | | — | | — | |
Unamortized debt discount and premium, net(e) | | | 1,434 |
| (23 | ) | (29 | ) | (15 | ) | (11 | ) | (31 | ) | (8 | ) | (1 | ) | Unamortized debt discount and premium, net(e) | | | 1,119 | | (21) | | (34) | | (19) | | (14) | | (27) | | (18) | | (6) | |
Unamortized debt issuance costs(f) | | | (297 | ) | (54 | ) | (112 | ) | (40 | ) | (61 | ) | (7 | ) | (20 | ) | (11 | ) | Unamortized debt issuance costs(f) | | (362) | | (67) | | (128) | | (54) | | (68) | | (13) | | (23) | | (16) | |
Total debt | 4.13 | % | | $ | 57,939 |
| $ | 11,378 |
| $ | 20,146 |
| $ | 8,498 |
| $ | 7,429 |
| $ | 2,439 |
| $ | 3,949 |
| $ | 2,336 |
| Total debt | 3.50 | % | | $ | 67,139 | | $ | 13,482 | | $ | 23,632 | | $ | 10,421 | | $ | 8,681 | | $ | 3,295 | | $ | 4,323 | | $ | 3,486 | |
Short-term notes payable and commercial paper | | | (3,410 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| Short-term notes payable and commercial paper | | | (3,304) | | — | | — | | — | | — | | — | | — | | — | |
Short-term money pool/intercompany borrowings | | | — |
| (439 | ) | (1,235 | ) | (294 | ) | (108 | ) | (274 | ) | (167 | ) | (198 | ) | Short-term money pool/intercompany borrowings | | — | | (226) | | (2,809) | | (172) | | (199) | | (103) | | — | | (518) | |
Current maturities of long-term debt(g) | | | (3,406 | ) | (6 | ) | (1,672 | ) | (603 | ) | (270 | ) | (551 | ) | (63 | ) | (350 | ) | Current maturities of long-term debt(g) | | | (3,387) | | (362) | | (1,082) | | (556) | | (76) | | — | | (84) | | — | |
Total long-term debt(g) |
| | $ | 51,123 |
| $ | 10,933 |
| $ | 17,239 |
| $ | 7,601 |
| $ | 7,051 |
| $ | 1,614 |
| $ | 3,719 |
| $ | 1,788 |
| Total long-term debt(g) | | $ | 60,448 | | $ | 12,894 | | $ | 19,741 | | $ | 9,693 | | $ | 8,406 | | $ | 3,192 | | $ | 4,239 | | $ | 2,968 | |
(a)Substantially all electric utility property is mortgaged under mortgage bond indentures.
(b)Duke Energy includes $256 million of finance lease purchase accounting adjustments related to Duke Energy Florida related to PPAs that are not accounted for as finance leases in their respective financial statements because of grandfathering provisions in GAAP.
(c)Substantially all tax-exempt bonds are secured by first mortgage bonds, letters of credit or the Master Credit Facility.
(d)Includes $625 million classified as Long-Term Debt on the Consolidated Balance Sheets due to the existence of long-term credit facilities that backstop these commercial paper balances, along with Duke Energy’s ability and intent to refinance these balances on a long-term basis. The weighted average days to maturity for Duke Energy's commercial paper program was 15 days.
(e)Duke Energy includes $1,121 million and $100 million in purchase accounting adjustments related to Progress Energy and Piedmont, respectively.
(f)Duke Energy includes $29 million in purchase accounting adjustments primarily related to the merger with Progress Energy.
(g)Refer to Note 17 for additional information on amounts from consolidated VIEs.
|
| | | | |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Weighted | | | | | | | | | |
| Average | | | Duke | | Duke | Duke | Duke | Duke | |
| Interest | | Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
(in millions) | Rate | | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Unsecured debt, maturing 2021-2078 | 3.71 | % | | $ | 23,669 | | $ | 1,150 | | $ | 3,150 | | $ | 700 | | $ | 350 | | $ | 1,180 | | $ | 403 | | $ | 2,800 | |
Secured debt, maturing 2021-2052 | 2.67 | % | | 4,270 | | 543 | | 1,584 | | 252 | | 1,332 | | — | | — | | — | |
First mortgage bonds, maturing 2021-2050(a) | 4.00 | % | | 29,177 | | 10,008 | | 14,100 | | 7,875 | | 6,225 | | 1,850 | | 3,219 | | — | |
Finance leases, maturing 2022-2051(b) | 6.96 | % | | 845 | | 294 | | 377 | | 296 | | 81 | | — | | 10 | | — | |
| | | | | | | | | | |
Tax-exempt bonds, maturing 2027-2041(c) | 0.75 | % | | 477 | | — | | 48 | | 48 | | — | | 77 | | 352 | | — | |
Notes payable and commercial paper(d) | 0.51 | % | | 3,407 | | — | | — | | — | | — | | — | | — | | — | |
Money pool/intercompany borrowings | | | — | | 806 | | 3,119 | | 445 | | 196 | | 194 | | 281 | | 530 | |
Fair value hedge carrying value adjustment | | | 4 | | 4 | | — | | — | | — | | — | | — | | — | |
Unamortized debt discount and premium, net(e) | | | 1,217 | | (20) | | (31) | | (19) | | (11) | | (29) | | (18) | | (5) | |
Unamortized debt issuance costs(f) | | | (330) | | (62) | | (113) | | (44) | | (62) | | (14) | | (25) | | (15) | |
Total debt | 3.62 | % | | $ | 62,736 | | $ | 12,723 | | $ | 22,234 | | $ | 9,553 | | $ | 8,111 | | $ | 3,258 | | $ | 4,222 | | $ | 3,310 | |
Short-term notes payable and commercial paper | | | (2,873) | | — | | — | | — | | — | | — | | — | | — | |
Short-term money pool/intercompany borrowings | | | — | | (506) | | (2,969) | | (295) | | (196) | | (169) | | (131) | | (530) | |
Current maturities of long-term debt(g) | | | (4,238) | | (506) | | (1,426) | | (603) | | (823) | | (50) | | (70) | | (160) | |
Total long-term debt(g) | | | $ | 55,625 | | $ | 11,711 | | $ | 17,839 | | $ | 8,655 | | $ | 7,092 | | $ | 3,039 | | $ | 4,021 | | $ | 2,620 | |
(a) Substantially all electric utility property is mortgaged under mortgage bond indentures.
| |
(a) | Substantially all electric utility property is mortgaged under mortgage bond indentures. |
| |
(b) | Duke Energy includes $63 million and $531 million of capital lease purchase accounting adjustments related to Duke Energy Progress and Duke Energy Florida, respectively, related to power purchase agreements that are not accounted for as capital leases in their respective financial statements because of grandfathering provisions in GAAP. |
| |
(c) | Substantially all tax-exempt bonds are secured by first mortgage bonds, letters of credit or the Master Credit Facility. |
| |
(d) | Includes $625 million that was classified as Long-Term Debt on the Consolidated Balance Sheets due to the existence of long-term credit facilities that backstop these commercial paper balances, along with Duke Energy’s ability and intent to refinance these balances on a long-term basis. The weighted average days to maturity for Duke Energy's commercial paper program was 16 days. |
| |
(e) | Duke Energy includes $1,380 million and $156 million in purchase accounting adjustments related to Progress Energy and Piedmont, respectively. |
| |
(f) | Duke Energy includes $41 million in purchase accounting adjustments primarily related to the merger with Progress Energy. |
| |
(g) | (b) Duke Energy includes $24 million and $341 million of finance lease purchase accounting adjustments related to Duke Energy Progress and Duke Energy Florida, respectively, related to PPAs that are not accounted for as finance leases in their respective financial statements because of grandfathering provisions in GAAP. (c) Substantially all tax-exempt bonds are secured by first mortgage bonds, letters of credit or the Master Credit Facility. (d) Includes $625 million that was classified as Long-Term Debt on the Consolidated Balance Sheets due to the existence of long-term credit facilities that backstop these commercial paper balances, along with Duke Energy’s ability and intent to refinance these balances on a long-term basis. The weighted average days to maturity for Duke Energy's commercial paper programs was 23 days. (e) Duke Energy includes $1,196 million and $117 million in purchase accounting adjustments related to Progress Energy and Piedmont, respectively. (f) Duke Energy includes $33 million in purchase accounting adjustments primarily related to the merger with Progress Energy. (g) Refer to Note 17 for additional information on amounts from consolidated VIEs. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| Weighted |
| | | | | | | | | |
| Average |
| | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Interest |
| | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Rate |
| | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Unsecured debt, maturing 2018-2073 | 4.17 | % | | $ | 20,409 |
| $ | 1,150 |
| $ | 3,950 |
| $ | — |
| $ | 550 |
| $ | 900 |
| $ | 411 |
| $ | 2,050 |
|
Secured debt, maturing 2018-2037 | 3.15 | % | | 4,458 |
| 450 |
| 1,757 |
| 300 |
| 1,457 |
| — |
| — |
| — |
|
First mortgage bonds, maturing 2018-2047(a) | 4.51 | % | | 23,529 |
| 7,959 |
| 11,801 |
| 6,776 |
| 5,025 |
| 1,100 |
| 2,669 |
| — |
|
Capital leases, maturing 2018-2051(b) | 4.55 | % | | 1,000 |
| 61 |
| 269 |
| 139 |
| 129 |
| 5 |
| 11 |
| — |
|
Tax-exempt bonds, maturing 2019-2041(c) | 3.23 | % | | 941 |
| 243 |
| 48 |
| 48 |
| — |
| 77 |
| 572 |
| — |
|
Notes payable and commercial paper(d) | 1.57 | % | | 2,788 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Money pool/intercompany borrowings | | | — |
| 404 |
| 955 |
| 390 |
| — |
| 54 |
| 311 |
| 364 |
|
Fair value hedge carrying value adjustment | | | 6 |
| 6 |
| — |
| — |
| — |
| — |
| — |
| — |
|
Unamortized debt discount and premium, net(e) | | | 1,582 |
| (19 | ) | (30 | ) | (16 | ) | (10 | ) | (33 | ) | (9 | ) | (1 | ) |
Unamortized debt issuance costs(f) | | | (271 | ) | (47 | ) | (108 | ) | (40 | ) | (56 | ) | (7 | ) | (21 | ) | (12 | ) |
Total debt | 4.09 | % | | $ | 54,442 |
| $ | 10,207 |
| $ | 18,642 |
| $ | 7,597 |
| $ | 7,095 |
| $ | 2,096 |
| $ | 3,944 |
| $ | 2,401 |
|
Short-term notes payable and commercial paper | | | (2,163 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Short-term money pool/intercompany borrowings | | | — |
| (104 | ) | (805 | ) | (240 | ) | — |
| (29 | ) | (161 | ) | (364 | ) |
Current maturities of long-term debt(g) | | | (3,244 | ) | (1,205 | ) | (771 | ) | (3 | ) | (768 | ) | (3 | ) | (3 | ) | (250 | ) |
Total long-term debt(g) |
| | $ | 49,035 |
| $ | 8,898 |
| $ | 17,066 |
| $ | 7,354 |
| $ | 6,327 |
| $ | 2,064 |
| $ | 3,780 |
| $ | 1,787 |
|
| |
(a) | Substantially all electric utility property is mortgaged under mortgage bond indentures. |
| |
(b) | Duke Energy includes $81 million and $603 million of capital lease purchase accounting adjustments related to Duke Energy Progress and Duke Energy Florida, respectively, related to power purchase agreements that are not accounted for as capital leases in their respective financial statements because of grandfathering provisions in GAAP. |
| |
(c) | Substantially all tax-exempt bonds are secured by first mortgage bonds, letters of credit or the Master Credit Facility. |
| |
(d) | Includes $625 million that was classified as Long-Term Debt on the Consolidated Balance Sheets due to the existence of long-term credit facilities that backstop these commercial paper balances, along with Duke Energy’s ability and intent to refinance these balances on a long-term basis. The weighted average days to maturity for Duke Energy's commercial paper programs was 14 days. |
| |
(e) | Duke Energy includes $1,509 million and $176 million purchase accounting adjustments related to the mergers with Progress Energy and Piedmont, respectively. |
| |
(f) | Duke Energy includes $47 million in purchase accounting adjustments primarily related to the merger with Progress Energy. |
| |
(g) | Refer to Note 17 for additional information on amounts from consolidated VIEs. |
|
| |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
Current Maturities of Long-Term Debt
The following table shows the significant components of Current maturities of Long-Term Debt on the 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 | | December 31, 2021 |
Unsecured Debt(a) | | | | | |
Duke Energy (Parent) | March 2022 | | 3.227 | % | | 300 | |
Duke Energy (Parent)(b) | March 2022 | | 0.851 | % | | 300 | |
Progress Energy | April 2022 | | 3.150 | % | | 450 | |
Duke Energy (Parent) | August 2022 | | 3.050 | % | | 500 | |
Duke Energy (Parent) | August 2022 | | 2.400 | % | | 500 | |
| | | | | |
| | | | | |
| | | | | |
First Mortgage Bonds | | | | | |
Duke Energy Indiana | January 2022 | | 8.850 | % | | 53 | |
Duke Energy Carolinas | May 2022 | | 3.350 | % | | 350 | |
Duke Energy Progress | May 2022 | | 2.800 | % | | 500 | |
Other(c) | | | | | 434 | |
Current maturities of long-term debt | | | | | $ | 3,387 | |
(a) In December 2021, Duke Energy Progress early retired $700 million of unsecured debt with an original maturity date of February 2022.
(b) Debt has a floating interest rate.
(c) Includes finance lease obligations, amortizing debt and small bullet maturities.
|
| | | | | | | | |
(in millions) | Maturity Date | | Interest Rate |
| | December 31, 2018 |
|
Unsecured Debt | | | | | |
Progress Energy | March 2019 | | 7.050 | % | | $ | 450 |
|
Duke Energy (Parent) | September 2019 | | 5.050 | % | | 500 |
|
Piedmont | September 2019 | | 3.155 | % | (b) | 350 |
|
Duke Energy Kentucky | October 2019 | | 4.65 | % | | 100 |
|
Progress Energy | December 2019 | | 4.875 | % | | 350 |
|
First Mortgage Bonds | | | | | |
Duke Energy Progress | January 2019 | | 5.300 | % | | 600 |
|
Duke Energy Ohio | April 2019 | | 5.450 | % | | 450 |
|
Other(a) | | | | | 606 |
|
Current maturities of long-term debt | | | | | $ | 3,406 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Includes capital lease obligations, amortizing debt and small bullet maturities.DEBT AND CREDIT FACILITIES |
| |
(b) | Debt has a floating interest rate. |
Maturities and Call Options
The following table shows the annual maturities of long-term debt for the next five years and thereafter. Amounts presented exclude short-term notes payable, and commercial paper and money pool borrowings and debt issuance costs for the Subsidiary Registrants. | | | December 31, 2018 | | December 31, 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(a) |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
| (in millions) | Energy(a) | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
2019 | $ | 3,408 |
| | $ | 6 |
| | $ | 1,674 |
| | $ | 603 |
| | $ | 270 |
| | 552 |
| | $ | 63 |
| | $ | 350 |
| |
2020 | 3,765 |
| | 907 |
| | 926 |
| | 354 |
| | 572 |
| | — |
| | 503 |
| | — |
| |
2021 | 4,803 |
| | 503 |
| | 2,004 |
| | 904 |
| | 600 |
| | 50 |
| | 70 |
| | 160 |
| |
2022 | 2,745 |
| | 353 |
| | 1,032 |
| | 505 |
| | 77 |
| | — |
| | 94 |
| | — |
| 2022 | $ | 3,387 | | | $ | 362 | | | $ | 1,082 | | | $ | 556 | | | $ | 76 | | | $ | — | | | $ | 84 | | | $ | — | |
2023 | 3,375 |
| | 1,303 |
| | 535 |
| | 456 |
| | 79 |
| | 350 |
| | 153 |
| | 45 |
| 2023 | 4,725 | | | 1,018 | | | 1,046 | | | 719 | | | 327 | | | 475 | | | 303 | | | 45 | |
2024 | | 2024 | 1,917 | | | 19 | | | 138 | | | 72 | | | 66 | | | — | | | 4 | | | 40 | |
2025 | | 2025 | 3,078 | | | 496 | | | 639 | | | 575 | | | 64 | | | 245 | | | 4 | | | 205 | |
2026 | | 2026 | 3,125 | | | 921 | | | 310 | | | 229 | | | 81 | | | 70 | | | 154 | | | 40 | |
Thereafter | 35,288 |
| | 7,940 |
| | 12,880 |
| | 5,437 |
| | 5,793 |
| | 1,251 |
| | 2,925 |
| | 1,595 |
| Thereafter | 46,844 | | | 10,528 | | | 17,766 | | | 8,168 | | | 7,949 | | | 2,442 | | | 3,814 | | | 2,660 | |
Total long-term debt, including current maturities | $ | 53,384 |
|
| $ | 11,012 |
|
| $ | 19,051 |
|
| $ | 8,259 |
|
| $ | 7,391 |
|
| $ | 2,203 |
|
| $ | 3,808 |
| | $ | 2,150 |
| Total long-term debt, including current maturities | $ | 63,076 | | | $ | 13,344 | | | $ | 20,981 | | | $ | 10,319 | | | $ | 8,563 | | | $ | 3,232 | | | $ | 4,363 | | | $ | 2,990 | |
| |
(a) | Excludes $1,578 million in purchase accounting adjustments related to the Progress Energy merger and the Piedmont acquisition. |
(a) Excludes $1,250 million in purchase accounting adjustments related to the Progress Energy merger and the Piedmont acquisition.
The Duke Energy Registrants have the ability under certain debt facilities to call and repay the obligation prior to its scheduled maturity. Therefore, the actual timing of future cash repayments could be materially different than as presented above.
|
| |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
Short-Term Obligations Classified as Long-Term Debt
Tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder and certain commercial paper issuances and money pool borrowings are classified as Long-Term Debt on the Consolidated Balance Sheets. These tax-exempt bonds, commercial paper issuances and money pool borrowings, which are short-term obligations by nature, are classified as long termlong-term due to Duke Energy’s intent and ability to utilize such borrowings as long-term financing. As Duke Energy’s Master Credit Facility and other bilateral letter of credit agreements have non-cancelable terms in excess of one year as of the balance sheet date, Duke Energy has the ability to refinance these short-term obligations on a long-term basis. The following tables show short-term obligations classified as long-term debt. |
| | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Progress |
| | Ohio |
| | Indiana |
|
Tax-exempt bonds | $ | 312 |
| | $ | — |
| | $ | — |
| | $ | 27 |
| | $ | 285 |
|
Commercial paper(a) | 625 |
| | 300 |
| | 150 |
| | 25 |
| | 150 |
|
Total | $ | 937 |
|
| $ | 300 |
| | $ | 150 |
|
| $ | 52 |
|
| $ | 435 |
|
| | | December 31, 2017 | | December 31, 2021 |
| | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | Duke | | Duke | | Duke | | Duke |
| Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Duke | | Energy | | Energy | | Energy | | Energy |
(in millions) | Energy |
| | Carolinas |
| | Progress |
| | Ohio |
| | Indiana |
| (in millions) | Energy | | Carolinas | | Progress | | Ohio | | Indiana |
Tax-exempt bonds | $ | 312 |
| | $ | — |
| | $ | — |
| | $ | 27 |
| | $ | 285 |
| Tax-exempt bonds | $ | 312 | | | $ | — | | | $ | — | | | $ | 27 | | | $ | 285 | |
Commercial paper(a) | 625 |
| | 300 |
| | 150 |
| | 25 |
| | 150 |
| Commercial paper(a) | 625 | | | 300 | | | 150 | | | 25 | | | 150 | |
| Total | $ | 937 |
|
| $ | 300 |
|
| $ | 150 |
| | $ | 52 |
|
| $ | 435 |
| Total | $ | 937 | | | $ | 300 | | | $ | 150 | | | $ | 52 | | | $ | 435 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | Duke | | Duke | | Duke | | Duke |
| Duke | | Energy | | Energy | | Energy | | Energy |
(in millions) | Energy | | Carolinas | | Progress | | Ohio | | Indiana |
Tax-exempt bonds | $ | 312 | | | $ | — | | | $ | — | | | $ | 27 | | | $ | 285 | |
Commercial paper(a) | 625 | | | 300 | | | 150 | | | 25 | | | 150 | |
| | | | | | | | | |
Total | $ | 937 | | | $ | 300 | | | $ | 150 | | | $ | 52 | | | $ | 435 | |
| |
(a) | (a) Progress Energy amounts are equal to Duke Energy Progress amounts. |
|
| | | | |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
Summary of Significant Debt Issuances
In January 2019, Duke Energy OhioThe following tables summarize significant debt issuances (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended December 31, 2021 |
| | | | | | | Duke | | Duke | | Duke | | Duke | | | | | | |
| Maturity | | Interest | | Duke | | Energy | | Energy | | Energy | | Energy | | | | | | |
Issuance Date | Date | | Rate | | Energy | | (Parent) | | Carolinas | | Progress | | Florida | | | | | | Piedmont |
Unsecured Debt | | | | | | | | | | | | | | | | | | | |
March 2021a) | March 2031 | | 2.500 | % | | $ | 350 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | $ | 350 | |
June 2021(b)(c) | June 2023 | | 0.299 | % | | 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 | | | | | | | | | | | | | |
Secured Debt | | | | | | | | | | | | | | | | | | | |
November 2021(e) | July 2031 | | 1.679 | % | | 100 | | | — | | | 100 | | | — | | | — | | | | | | | — | |
November 2021(e) | July 2041 | | 2.617 | % | | 137 | | | — | | | 137 | | | — | | | — | | | | | | | — | |
November 2021(e) | July 2028 | | 1.295 | % | | 221 | | | — | | | — | | | 221 | | | — | | | | | | | — | |
November 2021(e) | July 2037 | | 2.387 | % | | 352 | | | — | | | — | | | 352 | | | — | | | | | | | — | |
November 2021(e) | July 2041 | | 2.799 | % | | 197 | | | — | | | — | | | 197 | | | — | | | | | | | — | |
First Mortgage Bonds | | | | | | | | | | | | | | | | | | |
April 2021(f) | April 2031 | | 2.550 | % | | 550 | | | — | | | 550 | | | — | | | — | | | | | | | — | |
April 2021(f) | April 2051 | | 3.450 | % | | 450 | | | — | | | 450 | | | — | | | — | | | | | | | — | |
August 2021(g) | August 2031 | | 2.000 | % | | 650 | | | — | | | — | | | 650 | | | — | | | | | | | — | |
August 2021(g) | August 2051 | | 2.900 | % |
| 450 | | | — | | | — | | | 450 | | | — | | | | | | | — | |
December 2021(h) | December 2031 | | 2.400 | % | | 650 | | | — | | | — | | | — | | | 650 | | | | | | | — | |
December 2021(h) | December 2051 | | 3.000 | % | | 500 | | | — | | | — | | | — | | | 500 | | | | | | | — | |
| | | | | | | | | | | | | | | | | | | |
Total issuances | | | | | $ | 8,107 | | | $ | 3,500 | | | $ | 1,237 | | | $ | 1,870 | | | $ | 1,150 | | | | | | | $ | 350 | |
(a)Debt issued $800to repay at maturity $160 million of first mortgage bonds. The issuance was split between a $400 million, 10-year tranche at 3.65 percent and a $400 million, 30-year tranche at 4.30 percent. The net proceeds will be used to refinance $450 million of Duke Energy Ohio bonds maturing in April 2019, tosenior unsecured notes due June 2021, pay down short-term debt and for general corporate purposes.
(b)Debt has a floating interest rate.
(c)Debt issued to repay $1.75 billion of Duke Energy (Parent) 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 following tables summarize significantinterest rate resets every five years.
(e)Debt issued to finance the North Carolina portion of storm restoration expenditures related to Hurricane Florence, Hurricane Michael, Hurricane Dorian and Winter Storm Diego.
(f)Debt issued to repay at maturity $500 million first mortgage bonds due June 2021, pay down short-term debt issuances (in millions).and for general company purposes. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended December 31, 2018 |
| | | | | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| Maturity | | Interest |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
Issuance Date | Date | | Rate |
| | Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
|
Unsecured Debt | | | | | | | | | | | | | |
March 2018(a) | April 2025 | | 3.950 | % | | $ | 250 |
| | $ | 250 |
| | $ | — |
| | $ | — |
| | $ | — |
|
May 2018(b) | May 2021 | | 3.114 | % | | 500 |
| | 500 |
| | — |
| | — |
| | — |
|
September 2018(c) | September 2078 | | 5.625 | % | | 500 |
| | 500 |
| | — |
| | — |
| | — |
|
First Mortgage Bonds | | |
| |
|
| | | | | | | |
|
March 2018(d) | March 2023 | | 3.050 | % | | 500 |
| | — |
| | 500 |
| | — |
| | — |
|
March 2018(d) | March 2048 | | 3.950 | % | | 500 |
| | — |
| | 500 |
| | — |
| | — |
|
June 2018(e) | July 2028 | | 3.800 | % | | 600 |
| | — |
| | — |
| | — |
| | 600 |
|
June 2018(e) | July 2048 | | 4.200 | % |
| 400 |
| | — |
| | — |
| | — |
| | 400 |
|
August 2018(f) | September 2023 | | 3.375 | % | | 300 |
| | — |
| | — |
| | 300 |
| | — |
|
August 2018(f) | September 2028 | | 3.700 | % | | 500 |
| | — |
| | — |
| | 500 |
| | — |
|
November 2018(g) | May 2022 | | 3.350 | % | | 350 |
| | — |
| | 350 |
| | — |
| | — |
|
November 2018(g) | November 2028 | | 3.950 | % | | 650 |
| | — |
| | 650 |
| | — |
| | — |
|
Total issuances | | | | | $ | 5,050 |
| | $ | 1,250 |
|
| $ | 2,000 |
| | $ | 800 |
| | $ | 1,000 |
|
(g)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. | |
(a) | Debt issued to pay down short-term debt. |
| |
(b) | Debt issued to pay down short-term debt. Debt issuance has a floating debt rate. |
| |
(c) | Callable after September 2023 at par. Junior subordinated hybrid debt issued to pay down short-term debt and for general corporate |
purposes.
| |
(d) | Debt issued to repay at maturity a $300 million first mortgage bond due April 2018, pay down intercompany short-term debt and for general corporate purposes.
|
| |
(e) | Debt issued to repay a portion of intercompany short-term debt under the money pool borrowing arrangement and for general corporate purposes. |
| |
(f) | Debt issued to repay short-term debt and for general corporate purposes. |
| |
(g) | Debt issued to fund eligible green energy projects, including zero-carbon solar and energy storage, in the Carolinas. |
(h)Proceeds will be used to finance or refinance, in whole or in part, existing or new eligible projects under the sustainable financing framework.
|
| | | | |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended December 31, 2020 |
| | | | | | | Duke | | Duke | | Duke | | Duke | | Duke | | Duke | | |
| Maturity | | Interest | | Duke | | Energy | | Energy | | Energy | | Energy | | Energy | | Energy | | |
Issuance Date | Date | | Rate | | Energy | | (Parent) | | Carolinas | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Unsecured Debt | | | | | | | | | | | | | | | | | | | |
May 2020(a) | June 2030 | | 2.450 | % | | $ | 500 | | | $ | 500 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
May 2020(b) | June 2050 | | 3.350 | % | | 400 | | | — | | | — | | | — | | | — | | | — | | | — | | | 400 | |
August 2020(c)(d) | February 2022 | | 0.400 | % | | 700 | | | — | | | — | | | 700 | | | — | | | — | | | — | | | — | |
September 2020(e) | September 2025 | | 0.900 | % | | 650 | | | 650 | | | — | | | — | | | — | | | — | | | — | | | — | |
September 2020(e) | June 2030 | | 2.450 | % | | 350 | | | 350 | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
First Mortgage Bonds | | | | | | | | | | | | | | | | | | |
January 2020(f) | February 2030 | | 2.450 | % | | 500 | | | — | | | 500 | | | — | | | — | | | — | | | — | | | — | |
January 2020(f) | August 2049 | | 3.200 | % | | 400 | | | — | | | 400 | | | — | | | — | | | — | | | — | | | — | |
March 2020(g) | April 2050 | | 2.750 | % | | 550 | | | — | | | — | | | — | | | — | | | — | | | 550 | | | — | |
May 2020(b) | June 2030 | | 2.125 | % | | 400 | | | — | | | — | | | — | | | — | | | 400 | | | — | | | — | |
June 2020(b) | June 2030 | | 1.750 | % | | 500 | | | — | | | — | | | — | | | 500 | | | — | | | — | | | — | |
August 2020(h) | August 2050 | | 2.500 | % | | 600 | | | — | | | — | | | 600 | | | — | | | — | | | — | | | — | |
Total issuances | | | | | $ | 5,550 | | | $ | 1,500 | | | $ | 900 | | | $ | 1,300 | | | $ | 500 | | | $ | 400 | | | $ | 550 | | | $ | 400 | |
(a)Debt issued to repay $500 million borrowing made under Duke Energy (Parent) revolving credit facility in March 2020, and for general corporate purposes.
(b)Debt issued to repay short-term debt and for general corporate purposes. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Year Ended December 31, 2017 |
| | | | | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| Maturity | | Interest |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
Issuance Date | Date | | Rate |
| | Energy |
| | (Parent) |
| | Carolinas |
| | 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 |
| | — |
| | — |
| | — |
| | — |
|
December 2017(d) | December 2019 | (k) | 2.100 | % | | 400 |
| | — |
| | — |
| | — |
| | 400 |
| | — |
|
Secured Debt | | | | |
|
| | | | | | | | | |
|
|
February 2017(e) | June 2034 | | 4.120 | % | | 587 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
August 2017(f) | December 2036 | | 4.110 | % | | 233 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
First Mortgage Bonds | | | | | | | | | | | | | | |
|
|
January 2017(g) | January 2020 | | 1.850 | % | | 250 |
| | — |
| | — |
| | — |
| | 250 |
| | — |
|
January 2017(g) | January 2027 | | 3.200 | % | | 650 |
| | — |
| | — |
| | — |
| | 650 |
| | — |
|
March 2017(h) | June 2046 | | 3.700 | % | | 100 |
| | — |
| | — |
| | — |
| | — |
| | 100 |
|
September 2017(i) | September 2020 | | 1.500 | % | (l) | 300 |
| | — |
| | — |
| | 300 |
| | — |
| | — |
|
September 2017(i) | September 2047 | | 3.600 | % | | 500 |
| | — |
| | — |
| | 500 |
| | — |
| | — |
|
November 2017(j) | December 2047 | | 3.700 | % | | 550 |
| | — |
| | 550 |
| | — |
| | — |
| | — |
|
Total issuances | | | | | $ | 6,070 |
| | $ | 2,500 |
|
| $ | 550 |
| | $ | 800 |
|
| $ | 1,300 |
|
| $ | 100 |
|
(c)Debt issued to repay $700 million term loan due December 2020. | |
(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) | Debt issued to fund storm restoration costs related to Hurricane Irma and for general corporate purposes. |
| |
(e) | Portfolio financing of four Texas and Oklahoma wind facilities. Duke Energy pledged substantially all of the assets of these wind facilities and is nonrecourse to Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures. |
| |
(f) | Portfolio financing of eight solar facilities located in California, Colorado and New Mexico. Duke Energy pledged substantially all of the assets of these solar facilities and is nonrecourse to Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures. |
| |
(g) | 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. |
| |
(h) | Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance and for general corporate purposes. |
| |
(i) | Debt issued to repay at maturity a $200 million aggregate principal amount of bonds at maturity, pay down intercompany short-term debt and for general corporate purposes, including capital expenditures. |
| |
(j) | Debt issued to refinance $400 million aggregate principal amount of bonds due January 2018, pay down intercompany short-term debt and for general corporate purposes. |
| |
(k) | Principal balance will be repaid in equal quarterly installments beginning in March 2018. |
| |
(l) | Debt issuance has a floating interest rate. |
Available(d)Debt issuance has a floating interest rate.
(e)Debt issued to repay a portion of outstanding commercial paper, to repay a portion of Duke Energy (Parent)'s outstanding $1.7 billion term loan due March 2021 and for general corporate purposes.
(f)Debt issued to repay at maturity $450 million first mortgage bonds due June 2020 and for general corporate purposes.
(g)Debt issued to repay at maturity $500 million first mortgage bonds due July 2020 and to pay down short-term debt.
(h)Debt issued to repay at maturity $300 million first mortgage bonds due September 2020 and for general corporate purposes.
AVAILABLE CREDIT FACILITIES
Master Credit FacilitiesFacility
In January 2018,March 2021, Duke Energy extended the termination date of substantially all ofamended its existing $8 billion Master Credit Facility capacity from March 16, 2022,to extend the termination date to March 16, 2023. In May 2018, Duke Energy completed the extension process with 100 percent of all commitments to the Master Credit Facility extending to March 16, 2023.2026. The Duke Energy Registrants, excluding Progress Energy, (Parent), have borrowing capacity under the Master Credit Facility up to a specified sublimitssublimit 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.
|
| |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
The table below includes the current borrowing sublimits and available capacity under these credit facilities.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | | | $ | 1,225 | | | $ | 1,150 | | | $ | 900 | | | $ | 775 | | | $ | 600 | | | $ | 700 | |
Reduction to backstop issuances | | | | | | | | | | | | | | | |
Commercial paper(b) | (2,863) | | | (1,128) | | | (506) | | | (307) | | | (181) | | | (119) | | | (150) | | | (472) | |
Outstanding letters of credit | (38) | | | (25) | | | (4) | | | (2) | | | (7) | | | — | | | — | | | — | |
Tax-exempt bonds | (81) | | | — | | | — | | | — | | | — | | | — | | | (81) | | | — | |
| | | | | | | | | | | | | | | |
Available capacity | $ | 5,018 | | | $ | 1,497 | | | $ | 715 | | | $ | 841 | | | $ | 712 | | | $ | 656 | | | $ | 369 | | | $ | 228 | |
(a) Represents the sublimit of each borrower.
(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 in the Consolidated Balance Sheets.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | 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 |
| | $ | 1,750 |
| | $ | 1,400 |
| | $ | 650 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
|
Reduction to backstop issuances | | | | | | | | | | | | | | | |
Commercial paper(b) | (3,022 | ) | | (917 | ) | | (739 | ) | | (444 | ) | | (108 | ) | | (299 | ) | | (317 | ) | | (198 | ) |
Outstanding letters of credit | (53 | ) | | (45 | ) | | (4 | ) | | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) |
Tax-exempt bonds | (81 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (81 | ) | | — |
|
Coal ash set-aside | (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| | — |
|
Available capacity | $ | 4,344 |
|
| $ | 1,688 |
|
| $ | 757 |
|
| $ | 704 |
|
| $ | 542 |
|
| $ | 151 |
|
| $ | 202 |
| | $ | 300 |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Represents the sublimit of each borrower.DEBT AND CREDIT FACILITIES |
| |
(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 in the Consolidated Balance Sheets. |
Three-Year Revolving Credit Facility
Duke Energy (Parent) has a $1.0$1 billion revolving credit facility. In March 2021, Duke Energy extended the termination date of the facility through June 2020.from May 2022 to May 2024. Borrowings under this facility will be used for general corporate purposes. As of December 31, 2018,2021, $500 million has been drawn under the Three Year Revolver.this facility. This balance is classified as Long-term debt on Duke Energy's Consolidated Balance Sheets. Any undrawn commitments can be drawn, and borrowings can be prepaid, at any time throughout the term of the facility. During the first quarter of 2020, an additional $500 million was drawn under this facility to manage liquidity impacts from COVID-19. The additional $500 million was paid down during the second quarter of 2020. The terms and conditions of the Three Year Revolverfacility are generally consistent with those governing Duke Energy's Master Credit Facility.
Duke Energy ProgressOhio Term Loan Facility
In December 2018,October 2021, Duke Energy ProgressOhio entered into a two-year term loan facility with commitments totaling $700$100 million. Borrowings under the facility will be used to pay storm-related costs, pay down commercial papershort-term debt and to partially finance an upcoming bond maturity. Asfor general corporate purposes. The term loan was fully drawn at the time of December 31, 2018, $50 million has been drawn under the term loan.closing in October. The balance is classified as Long-term debtLong-Term Debt on Duke Energy Progress'Ohio’s Consolidated Balance Sheets. In January and February 2019, the remaining $650 million was drawn under the term loan.
PiedmontDuke Energy Indiana Term Loan Facility
In September 2018, Piedmont executed an amendment to its existing senior unsecuredOctober 2021, Duke Energy Indiana entered into a two-year term loan facility. The amendment increasedfacility with commitments from $250 million to $350 million and extended the maturity date to September 2019.totaling $300 million. Borrowings under the facility will be used to pay down short-term debt and for general corporate purposes. AsThe term loan was fully drawn at the time of December 31, 2018, the entire $350 million has been drawn under the Piedmont Term Loan. Thisclosing in October. The balance is classified as Current maturities of long-term debtLong-Term Debt on Piedmont'sDuke Energy Indiana’s Consolidated Balance Sheets. The terms and conditions of the Piedmont
Duke Energy Kentucky Term Loan are generally consistentFacility
In October 2021, Duke Energy Kentucky entered into a two-year term loan facility with those governingcommitments totaling $50 million. Borrowings under the facility will be used to pay down short-term debt and for general corporate purposes. The term loan was fully drawn at the time of closing in October. The balance is classified as Long-Term Debt on Duke Energy's Master Credit Facility.Energy Ohio’s Consolidated Balance Sheets.
Other Debt Matters
In September 2016,2019, Duke Energy filed a Form S-3 with the SEC. Under this Form S-3, which is uncapped, the Duke Energy Registrants, excluding Progress Energy, may issue debt and other securities, including preferred stock, in the future at amounts, prices and with terms to be determined at the time of future offerings. The registration statement was filed to replace a similar prior filing upon expiration of its three-year term and also allows for the issuance of common and preferred stock by Duke Energy.
Duke Energy has an effective Form S-3 with the SEC to sell up to $3 billion of variable denomination floating-rate demand notes, called PremierNotes. The Form S-3 states that no more than $1.5 billion of the notes will be outstanding at any particular time. The notes are offered on a continuous basis and bear interest at a floating rate per annum determined by the Duke Energy PremierNotes Committee, or its designee, on a weekly basis. The interest rate payable on notes held by an investor may vary based on the principal amount of the investment. The notes have no stated maturity date, are non-transferable and may be redeemed in whole or in part by Duke Energy or at the investor’s option at any time. The balance as of December 31, 2018,2021, and 20172020, was $1,010$1,066 million and $986$1,168 million, respectively. The notes are short-term debt obligations of Duke Energy and are reflected as Notes payable and commercial paper on Duke Energy’s Consolidated Balance Sheets.
In January 2017, Duke Energy amended its Form S-3 to add Piedmont as a registrantMoney Pool 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.
Money PoolIntercompany Credit Agreements
The Subsidiary Registrants, excluding Progress Energy, (Parent), are eligible to receive support for their short-term borrowing needs through participation with Duke Energy and certain of its subsidiaries in a money pool arrangement. Under this arrangement, those companies with short-term funds may provide short-term loans to affiliates participating in this arrangement. The money pool is structured such that the Subsidiary Registrants, excluding Progress Energy, (Parent), separately manage their cash needs and working capital requirements. Accordingly, there is no net settlement of receivables and payables between money pool participants. Duke Energy (Parent), may loan funds to its participating subsidiaries, but may not borrow funds through the money pool. Accordingly, as the money pool activity is between Duke Energy and its wholly owned subsidiaries, all money pool balances are eliminated within Duke Energy’s Consolidated Balance Sheets.
|
| |
FINANCIAL STATEMENTS | DEBT AND CREDIT FACILITIES |
Money pool receivable balances are reflected within Notes receivable from affiliated companies on the Subsidiary Registrants’ Consolidated Balance Sheets. Money pool payable balances are reflected within either Notes payable to affiliated companies or Long-Term Debt Payable to Affiliated Companies on the Subsidiary Registrants’ Consolidated Balance Sheets.
Progress Energy has a revolving credit agreement with Duke Energy (Parent) which allows up to $2.5 billion in intercompany borrowings. The balance is reflected within Notes payable to affiliated companies on the Progress Energy Consolidated Balance Sheets.
Restrictive Debt Covenants
The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. Duke Energy's Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio not to exceed 65 percent65% for each borrower, excluding Piedmont, and 70 percent70% for Piedmont. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of December 31, 2018,2021, 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.
Other Loans
As of December 31, 2018,2021, and 2017,2020, Duke Energy had loans outstanding of $741$819 million, including $37$34 million at Duke Energy Progress and $701$817 million, including $38$35 million at Duke Energy Progress, respectively, against the cash surrender value of life insurance policies it owns on the lives of its executives. The amounts outstanding were carried as a reduction of the related cash surrender value that is included in Other within Other Noncurrent Assets on the Consolidated Balance Sheets.
| | | | | |
FINANCIAL STATEMENTS | GUARANTEES AND INDEMNIFICATIONS |
7. GUARANTEES AND INDEMNIFICATIONS
Duke Energy and Progress Energy havehas various financial and performance guarantees and indemnifications with non-consolidated entities, which are issued in the normal course of business. As discussed below, these contracts include performance guarantees, standby letters of credit, debt guarantees surety bonds and indemnifications. Duke Energy and Progress Energy enterenters into these arrangements to facilitate commercial transactions with third parties by enhancing the value of the transaction to the third party. At December 31, 2018,2021, Duke Energy and Progress Energy dodoes not believe conditions are likely for significant performance under these guarantees. To the extent liabilities are incurred as a result of the activities covered by the guarantees, such liabilities are included on the accompanying Consolidated Balance Sheets.
On January 2, 2007, Duke Energy completed the spin-off of its previously wholly owned natural gas businesses to shareholders. Guarantees issued by Duke Energy or its affiliates, or assigned to Duke Energy prior to the spin-off, remained with Duke Energy subsequent to the spin-off. Guarantees issued by Spectra Energy Capital, LLC (Spectra Capital) or its affiliates prior to the spin-off remained with Spectra Capital subsequent to the spin-off, except for guarantees that were later assigned to Duke Energy. Duke Energy has indemnified Spectra Capital against any losses incurred under certain of the guarantee obligations that remain with Spectra Capital. At December 31, 2018,2021, the maximum potential amount of future payments associated with these guarantees was $205were $48 million, the majority of which expiresexpire by 2028.
Duke Energy has issued performance guarantees to customers and other third parties that guarantee the payment and performance of other parties, including certain non-wholly owned entities, as well as guarantees of debt of certain non-consolidated entities and less than wholly owned consolidated entities. If such entities were to default on payments or performance, Duke Energy would be required under the guarantees to make payments on the obligations of the less than wholly owned entity. The maximum potential amount of future payments required under these guarantees as of December 31, 2018, was $296 million. Of this amount, $11 million relates to guarantees issued on behalf of less than wholly owned consolidated entities, with the remainder related to guarantees issued on behalf of third parties and unconsolidated affiliates of Duke Energy. Of the guarantees noted above, $248 million of the guarantees expire between 2019 and 2030, with the remaining performance guarantees having no contractual expiration.
In October 2017, ACP executed a $3.4 billion revolving credit facility with a stated maturity date of October 2021. Duke Energy entered into a guarantee agreement to support its share of the ACP revolving credit facility. In July 2020, ACP reduced the size of the credit facility to $1.9 billion. Duke Energy's maximum exposure to loss under the terms of the guarantee is $677was $860 million as of December 31, 2018.2020. This amount represents 47 percentrepresented 47% of the outstanding borrowings under the credit facility.
facility and was recognized within Other Current Liabilities on the Consolidated Balance Sheets at December 31, 2020, of which $95 million was previously recognized due the adoption of new guidance for credit losses effective January 1, 2020. In February 2021, Duke Energy guaranteedpaid approximately $855 million to fund ACP's outstanding debt, issued byrelieving Duke Energy Carolinas of $650 millionits guarantee. See Notes 3 and 12 for more information.
In addition to the Spectra Capital and ACP revolving credit facility guarantees above, Duke Energy has issued performance guarantees to customers and other third parties that guarantee the payment and performance of other parties, including certain non-wholly owned entities, as well as guarantees of debt of certain non-consolidated entities. If such entities were to default on payments or performance, Duke Energy would be required under the guarantees to make payments on the obligations of these entities. The maximum potential amount of future payments required under these guarantees as of December 31, 2018,2021, was $53 million of which all expire between 2022 and 2017.
2030, with the remaining performance guarantees having no contractual expiration. Additionally, certain guarantees have uncapped maximum potential payments; however, Duke Energy has guaranteed certain issuersdoes not believe these guarantees will have a material effect on its results of surety bonds, obligating itself to make payment upon the failure of a wholly owned and former non-wholly owned entity to honor its obligations to a third party. Under these arrangements, Duke Energy has payment obligations that are triggered by a draw by the third partyoperations, cash flows or customer due to the failure of the wholly owned or former non-wholly owned entity to perform according to the terms of its underlying contract. At December 31, 2018, Duke Energy had guaranteed $63 million of outstanding surety bonds, most of which have no set expiration.financial position.
Duke Energy uses bank-issued standby letters of credit to secure the performance of wholly owned and non-wholly owned entities to a third party or customer. Under these arrangements, Duke Energy has payment obligations to the issuing bank that are triggered by a draw by the third party or customer due to the failure of the wholly owned or non-wholly owned entity to perform according to the terms of its underlying contract. At December 31, 2018,2021, Duke Energy had issued a total of $454$586 million in letters of credit, which expire between 20192022 and 2022.2023. The unused amount under these letters of credit was $60$54 million.
Duke Energy recognized $23$3 million and $21$11 million as of December 31, 2018,2021, and 2017,2020, respectively, primarily in Other within Other Noncurrent Liabilities on the Consolidated Balance Sheets, for the guarantees discussed above. As current estimates change, additional losses related to guarantees and indemnifications to third parties, which could be material, may be recorded by the Duke Energy Registrants in the future.
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| |
FINANCIAL STATEMENTS | JOINT OWNERSHIP OF GENERATING AND TRANSMISSION FACILITIES |
8. JOINT OWNERSHIP OF GENERATING AND TRANSMISSION FACILITIES
The Duke Energy Registrants maintain ownership interests in certain jointly owned generating and transmission facilities. The Duke Energy Registrants are entitled to a share of the generating capacity and output of each unit equal to their respective ownership interests. The Duke Energy Registrants pay their ownership share of additional construction costs, fuel inventory purchases and operating expenses. The Duke Energy Registrants share of revenues and operating costs of the jointly owned facilities is included within the corresponding line in the Consolidated Statements of Operations. Each participant in the jointly owned facilities must provide its own financing.
The following table presents the Duke Energy Registrants' interest of jointly owned plant or facilities and amounts included on the Consolidated Balance Sheets. All facilities are operated by the Duke Energy Registrants and are included in the Electric Utilities and Infrastructure segment.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | | | | | Construction |
| Ownership | | Property, Plant | | Accumulated | | Work in |
(in millions except for ownership interest) | Interest | | and Equipment | | Depreciation | | Progress |
Duke Energy Carolinas | | | | | | | |
Catawba (units 1 and 2)(a) | 19.25 | % | | $ | 1,044 | | | $ | 525 | | | $ | 20 | |
W.S. Lee CC(b) | 87.27 | % | | 632 | | | 67 | | | 3 | |
Duke Energy Indiana | | | | | | | |
Gibson (unit 5)(c) | 50.05 | % | | 440 | | | 221 | | | 3 | |
Vermillion(d) | 62.50 | % | | 175 | | | 108 | | | 5 | |
Transmission and local facilities(c) | Various | | 6,164 | | | 1,477 | | | 190 | |
(a) Jointly owned with North Carolina Municipal Power Agency Number 1, NCEMC and PMPA.
(b) Jointly owned with NCEMC.
(c) Jointly owned with WVPA and IMPA.
(d) Jointly owned with WVPA.
|
| | | | | | | | | | | | | | |
| December 31, 2018 |
| | | | | | | Construction |
|
| Ownership |
| | Property, Plant |
| | Accumulated |
| | Work in |
|
(in millions except for ownership interest) | Interest |
| | and Equipment |
| | Depreciation |
| | Progress |
|
Duke Energy Carolinas | |
| | | | | | |
Catawba (units 1 and 2)(a) | 19.25 | % | | $ | 989 |
| | $ | 483 |
| | $ | 17 |
|
W.S. Lee CC(b) | 86.67 | % | | 593 |
| | 12 |
| | 4 |
|
Duke Energy Indiana | |
| | |
| | |
| | |
|
Gibson (unit 5)(c) | 50.05 | % | | 390 |
| | 173 |
| | 3 |
|
Vermillion(d) | 62.50 | % | | 168 |
| | 135 |
| | — |
|
Transmission and local facilities(c) | Various |
| | 5,037 |
| | 1,769 |
| | — |
|
| | | | | |
(a)FINANCIAL STATEMENTS | Jointly owned with North Carolina Municipal Power Agency Number 1, NCEMC and PMPA.ASSET RETIREMENT OBLIGATIONS |
| |
(b) | Jointly owned with NCEMC. |
| |
(c) | Jointly owned with WVPA and Indiana Municipal Power Agency. |
| |
(d) | Jointly owned with WVPA. |
Effective June 30, 2018, Duke Energy Ohio, Ohio Power Company, and The Dayton Power and Light Company, completed an asset exchange that reallocated their ownership interest in certain jointly owned transmission facilities. This transaction was approved by FERC and PUCO. The transaction eliminated the joint owner relationships for these assets. Assets were exchanged at net book value and the net increase in Duke Energy Ohio's assets are shown within Capital expenditures in Duke Energy Ohio's Consolidated Statements of Cash Flows.
9. ASSET RETIREMENT OBLIGATIONS
Duke Energy records an ARO when it has a legal obligation to incur retirement costs associated with the retirement of a long-lived asset and the obligation can be reasonably estimated. Certain assets of the Duke Energy Registrants have an indeterminate life, such as transmission and distribution facilities, and thus the fair value of the retirement obligation is not reasonably estimable. A liability for these AROs will be recorded when a fair value is determinable.
The Duke Energy Registrants’ regulated operations accrue costs of removal for property that does not have an associated legal retirement obligation based on regulatory orders from state commissions. These costs of removal are recorded as a regulatory liability in accordance with regulatory accounting treatment. The Duke Energy Registrants do not accrue the estimated cost of removal for any nonregulated assets. See Note 43 for the estimated cost of removal for assets without an associated legal retirement obligation, which are included in Regulatory liabilities on the Consolidated Balance Sheets.
The following table presents the AROs recorded on the Consolidated Balance Sheets. | | | December 31, 2018 | | December 31, 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 |
Decommissioning of nuclear power facilities(a) | $ | 5,696 |
| | $ | 2,335 |
| | $ | 3,209 |
| | $ | 2,679 |
| | $ | 530 |
| | $ | — |
| | $ | — |
| | $ | — |
| Decommissioning of nuclear power facilities(a) | $ | 7,046 | | | $ | 2,847 | | | $ | 4,156 | | | $ | 3,792 | | | $ | 364 | | | $ | — | | | $ | — | | | $ | — | |
Closure of ash impoundments | 4,446 |
| | 1,568 |
| | 2,123 |
| | 2,103 |
| | 20 |
| | 52 |
| | 702 |
| | — |
| Closure of ash impoundments | 5,293 | | | 2,390 | | | 1,872 | | | 1,839 | | | 33 | | | 82 | | | 949 | | | — | |
Other(b) | 325 |
| | 46 |
| | 79 |
| | 38 |
| | 41 |
| | 41 |
| | 20 |
| | 19 |
| |
Other | | Other | 437 | | | 64 | | | 84 | | | 44 | | | 40 | | | 54 | | | 38 | | | 22 | |
Total asset retirement obligation | $ | 10,467 |
| | $ | 3,949 |
| | $ | 5,411 |
| | $ | 4,820 |
| | $ | 591 |
| | $ | 93 |
| | $ | 722 |
|
| $ | 19 |
| Total asset retirement obligation | $ | 12,776 | | | $ | 5,301 | | | $ | 6,112 | | | $ | 5,675 | | | $ | 437 | | | $ | 136 | | | $ | 987 | | | $ | 22 | |
Less: current portion | 919 |
| | 290 |
| | 514 |
| | 509 |
| | 5 |
| | 6 |
| | 109 |
| | — |
| |
Less: Current portion | | Less: Current portion | 647 | | | 249 | | | 275 | | | 274 | | | 1 | | | 13 | | | 110 | | | — | |
Total noncurrent asset retirement obligation | $ | 9,548 |
| | $ | 3,659 |
| | $ | 4,897 |
| | $ | 4,311 |
| | $ | 586 |
| | $ | 87 |
| | $ | 613 |
|
| $ | 19 |
| Total noncurrent asset retirement obligation | $ | 12,129 | | | $ | 5,052 | | | $ | 5,837 | | | $ | 5,401 | | | $ | 436 | | | $ | 123 | | | $ | 877 | | | $ | 22 | |
| |
(a) | (a) Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy. |
| |
(b) | Primarily includes obligations related to asbestos removal. Duke Energy Ohio and Piedmont also include AROs related to the retirement of natural gas mains and services. Duke Energy includes AROs related to the removal of renewable energy generation assets. |
|
| |
FINANCIAL STATEMENTS | ASSET RETIREMENT OBLIGATIONS |
Nuclear Decommissioning Liability
AROs related to nuclear decommissioning are based on site-specific cost studies. The NCUC, PSCSC and FPSC require updated cost estimates for decommissioning nuclear plants every five years.
The following table summarizes information about the most recent site-specific nuclear decommissioning cost studies. Decommissioning costs are stated in 2018 or 2019 dollars, for Duke Energy Carolinas, 2017 dollars for Duke Energy Florida and 2014 dollars for Duke Energy Progress,depending on the year of the cost study, and include costs to decommission plant components not subject to radioactive contamination. | | | Annual Funding |
| | Decommissioning |
| | | Annual Funding | | Decommissioning | |
(in millions) | Requirement(a) |
| | Costs(a) |
| | Year of Cost Study | (in millions) | Requirement(a) | | Costs(a) | | Year of Cost Study |
Duke Energy | $ | 24 |
| | $ | 8,737 |
|
| 2014 and 2018 | Duke Energy | $ | 15 | | | $ | 9,105 | | | 2018 or 2019 |
Duke Energy Carolinas(b)(c) | — |
| | 4,291 |
|
| 2018 | Duke Energy Carolinas(b)(c) | — | | | 4,365 | | | 2018 |
Duke Energy Progress | 24 |
| | 3,550 |
|
| 2014 | |
Duke Energy Florida(d) | — |
| | 896 |
|
| 2018 | |
Duke Energy Progress(d) | | Duke Energy Progress(d) | 15 | | | 4,181 | | | 2019 |
Duke Energy Florida(e) | | Duke Energy Florida(e) | — | | | 559 | | | N/A |
| |
(a) | Amounts for Progress Energy equal the sum of Duke Energy Progress and Duke Energy Florida. |
| |
(b) | Decommissioning cost for Duke Energy Carolinas reflects its ownership interest in jointly owned reactors. Other joint owners are responsible for decommissioning costs related to their interest in the reactors. |
| |
(c) | Duke Energy Carolinas' site-specific nuclear decommissioning cost study completed in 2018 is expected to be filed with the NCUC and PSCSC by the second quarter 2019. Duke Energy Carolinas will also complete a new funding study, which will be completed and filed with the NCUC and PSCSC in 2019. |
| |
(d) | Duke Energy Florida's site-specific nuclear decommissioning cost study and a new funding study were completed and filed with the FPSC in 2018. |
(a) Amount represents annual funding requirement for the current fiscal year. Amounts for Progress Energy equal the sum of Duke Energy Progress and Duke Energy Florida.
(b) Decommissioning costs for Duke Energy Carolinas reflects its ownership interest in jointly owned reactors. Other joint owners are responsible for decommissioning costs related to their interest in the reactors.
(c) Duke Energy Carolinas' site-specific nuclear decommissioning cost study completed in 2018 was filed with the NCUC and PSCSC in 2019. A new funding study was also completed and filed with the NCUC and PSCSC in 2019.
(d) Duke Energy Progress' site-specific nuclear decommissioning cost study completed in 2019 was filed with the NCUC and PSCSC in March 2020. Duke Energy Progress also completed a funding study, which was filed with the NCUC and PSCSC in July 2020. In October 2021, Duke Energy Progress filed the 2019 nuclear decommissioning cost study with the FERC, as well as a revised rate schedule for decommissioning expense to be collected from wholesale customers. The FERC accepted the filing, as filed on December 9, 2021.
(e) During 2019, Duke Energy Florida reached an agreement to transfer decommissioning work for Crystal River Unit 3 to a third party and decommissioning costs are based on the agreement with this third party rather than a cost study. Regulatory approval was received from the NRC and the FPSC in April 2020 and August 2020, respectively.
Nuclear Decommissioning Trust Funds
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida each maintain NDTFs that are intended to pay for the decommissioning costs of their respective nuclear power plants. The NDTF investments are managed and invested in accordance with applicable requirements of various regulatory bodies including the NRC, FERC, NCUC, PSCSC, FPSC and the IRS.
Use of the NDTF investments is restricted to nuclear decommissioning activities including license termination, spent fuel and site restoration. The license termination and spent fuel obligations relate to contaminated decommissioning and are recorded as AROs. The site restoration obligation relates to non-contaminated decommissioning and is recorded to cost of removal within Regulatory liabilities on the Consolidated Balance Sheets.
| | | | | |
FINANCIAL STATEMENTS | ASSET RETIREMENT OBLIGATIONS |
The following table presents the fair value of NDTF assets legally restricted for purposes of settling AROs associated with nuclear decommissioning. Duke Energy Florida
is actively decommissioningentered into an agreement with a third party to decommission Crystal River Unit 3 and was granted an exemption from the NRC, which allows for use of the NDTF for all aspects of nuclear decommissioning. The entire balance of Duke Energy Florida's NDTF may be applied toward license termination, spent fuel and site restoration costs incurred to decommission Crystal River Unit 3 and is excluded from the table below. See Note 16 for additional information related to the fair value of the Duke Energy Registrants' NDTFs.
| | | December 31, | | December 31, |
(in millions) | 2018 | | 2017 | (in millions) | 2021 | | 2020 |
Duke Energy | $ | 5,579 |
| | $ | 5,864 |
| Duke Energy | $ | 8,933 | | | $ | 7,726 | |
Duke Energy Carolinas | 3,133 |
| | 3,321 |
| Duke Energy Carolinas | 5,068 | | | 4,381 | |
Duke Energy Progress | 2,446 |
| | 2,543 |
| Duke Energy Progress | 3,865 | | | 3,345 | |
Nuclear Operating Licenses
OperatingAs described in Note 3, Duke Energy Carolinas and Duke Energy Progress intend to seek renewal of operating licenses and 20-year license extensions for all of their nuclear units are potentially subject to extension.stations. The following table includes the current expiration of nuclear operating licenses. | | | | | |
Unit | Year of Expiration |
Duke Energy Carolinas | |
Catawba Units 1 and 2 | 2043 |
| |
Unit | Year of Expiration |
Duke Energy Carolinas | |
Catawba Units 1 and 2 | 2043 |
McGuire Unit 1 | 2041 |
McGuire Unit 2 | 2043 |
Oconee Units 1 and 2 | 2033 |
Oconee Unit 3 | 2034 |
Duke Energy Progress | |
Brunswick Unit 1 | 2036 |
Brunswick Unit 2 | 2034 |
Harris | 2046 |
Robinson | 2030 |
|
| |
FINANCIAL STATEMENTSOconee Unit 3 | ASSET RETIREMENT OBLIGATIONS2034 |
Duke Energy Progress | |
Brunswick Unit 1 | 2036 |
Brunswick Unit 2 | 2034 |
Harris | 2046 |
Robinson | 2030 |
| |
| |
The NRC has acknowledged permanent cessation of operation and permanent removal of fuel from the reactor vessel at Crystal River Unit 3. Therefore, the license no longer authorizes operation of the reactor. In January 2018,During 2019, Duke Energy Florida entered into an agreement for the accelerated decommissioning of Crystal River Unit 3. Regulatory approval was received from the NRC and the FPSC in April 2020 and August 2020, respectively. See Note 3 reached a SAFSTOR status.for more information.
Closure of Ash Impoundments
The Duke Energy Registrants are subject to state and federal regulations covering the closure of coal ash impoundments, including the EPA CCR rule and the Coal Ash Act, and other agreements. AROs recorded on the Duke Energy Registrants' Consolidated Balance Sheets include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of these regulations and agreements.
The ARO amount recorded on the Consolidated Balance Sheets is based upon estimated closure costs for impacted ash impoundments. The amount recorded represents the discounted cash flows for estimated closure costs based upon either specific closure plans or the probability weightings of the potential closure methods as evaluated on a site-by-site basis.plans. Actual costs to be incurred will be dependent upon factors that vary from site to site. The most significant factors are the method and time frame of closure at the individual sites. Closure methods considered include removing the water from ash basins, consolidating material as necessary and capping the ash with a synthetic barrier, excavating and relocating the ash to a lined structural fill or lined landfill or recycling the ash for concrete or some other beneficial use. The ultimate method and timetable for closure will be in compliance with standards set by federal and state regulations and other agreements. The ARO amount will be adjusted as additional information is gained through the closure and post-closure process, including acceptance and approval of compliance approaches, which may change management assumptions, and may result in a material change to the balance. See ARO Liability Rollforward section below for information on revisions made to the coal ash liability during 20182021 and 2017.2020.
Asset retirement costs associated with the AROs for operating plants and retired plants are included in Net property, plant and equipment and Regulatory assets, respectively, on the Consolidated Balance Sheets. See Note 43 for additional information on Regulatory assets related to AROs.AROs and Note 4 for additional information on commitments and contingencies.
Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations. See Note 43 for additional information on recovery of coal ash costs.
| | | | | |
FINANCIAL STATEMENTS | ASSET RETIREMENT OBLIGATIONS |
ARO Liability Rollforward
The following tables present changes in the liability associated with AROs.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 | $ | 13,318 | | | $ | 5,734 | | | $ | 6,471 | | | $ | 5,893 | | | $ | 578 | | | $ | 80 | | | $ | 832 | | | $ | 17 | |
| | | | | | | | | | | | | | | |
Accretion expense(a) | 542 | | | 258 | | | 246 | | | 225 | | | 21 | | | 4 | | | 33 | | | 1 | |
Liabilities settled(b) | (724) | | | (198) | | | (451) | | | (358) | | | (93) | | | (2) | | | (74) | | | — | |
Liabilities incurred in the current year | 22 | | | — | | | 5 | | | — | | | 5 | | | — | | | — | | | — | |
Revisions in estimates of cash flows(c) | (154) | | | (444) | | | (122) | | | (125) | | | 3 | | | 29 | | | 385 | | | 2 | |
Balance at December 31, 2020 | 13,004 | | | 5,350 | | | 6,149 | | | 5,635 | | | 514 | | | 111 | | | 1,176 | | | 20 | |
| | | | | | | | | | | | | | | |
Accretion expense(a) | 512 | | | 242 | | | 229 | | | 212 | | | 17 | | | 4 | | | 35 | | | 1 | |
Liabilities settled(b) | (613) | | | (210) | | | (324) | | | (214) | | | (110) | | | (3) | | | (77) | | | — | |
Liabilities incurred in the current year | 32 | | | 8 | | | 6 | | | — | | | 6 | | | — | | | — | | | — | |
Revisions in estimates of cash flows(c) | (159) | | | (89) | | | 52 | | | 42 | | | 10 | | | 24 | | | (147) | | | 1 | |
Balance at December 31, 2021 | $ | 12,776 | | | $ | 5,301 | | | $ | 6,112 | | | $ | 5,675 | | | $ | 437 | | | $ | 136 | | | $ | 987 | | | $ | 22 | |
(a) Substantially all accretion expense for the years ended December 31, 2021, and 2020, relates to Duke Energy’s regulated operations and has been deferred in accordance with regulatory accounting treatment.
(b) Amounts primarily relate to ash impoundment closures and nuclear decommissioning.
(c) Primarily relates to decreases due to revised basin closure cost estimates, partially offset by increases related to new closure plan approvals, post closure maintenance and beneficiation costs. Duke Energy Indiana estimates also include the impacts of closure estimates for certain ash impoundments due to the impact of Hoosier Environmental Council’s petition filed with the court challenging the Indiana Department of Environmental Management’s partial approval of Duke Energy Indiana’s ash pond closure plan. See Note 4 for more information on Hoosier Environmental Council's petition. The amounts recorded represent the discounted cash flows for estimated closure costs based upon the probability weightings of the potential closure methods as evaluated on a site-by-site basis.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 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 | $ | 10,611 |
| | $ | 3,895 |
| | $ | 5,475 |
| | $ | 4,697 |
| | $ | 778 |
| | $ | 77 |
| | $ | 866 |
| | $ | 14 |
|
Accretion expense(a) | 435 |
| | 184 |
| | 228 |
| | 195 |
| | 33 |
| | 3 |
| | 32 |
| | 1 |
|
Liabilities settled(b) | (619 | ) | | (282 | ) | | (270 | ) | | (204 | ) | | (65 | ) | | (7 | ) | | (49 | ) | | (8 | ) |
Liabilities incurred in the current year(c) | 51 |
| | 5 |
| | — |
| | — |
| | — |
| | 7 |
| | 29 |
| | 8 |
|
Revisions in estimates of cash flows | (303 | ) | | (192 | ) | | (19 | ) | | (15 | ) | | (4 | ) | | 4 |
| | (97 | ) | | — |
|
Balance at December 31, 2017 | 10,175 |
|
| 3,610 |
|
| 5,414 |
|
| 4,673 |
|
| 742 |
|
| 84 |
|
| 781 |
| | 15 |
|
Accretion expense(a) | 427 |
| | 179 |
| | 225 |
| | 196 |
| | 29 |
| | 4 |
| | 29 |
| | 1 |
|
Liabilities settled(b) | (638 | ) | | (281 | ) | | (272 | ) | | (227 | ) | | (45 | ) | | (5 | ) | | (79 | ) | | — |
|
Liabilities incurred in the current year(c) | 39 |
| | 8 |
| | 5 |
| | — |
| | 5 |
| | — |
| | 25 |
| | — |
|
Revisions in estimates of cash flows(d) | 464 |
| | 433 |
| | 39 |
| | 178 |
| | (140 | ) | | 10 |
| | (34 | ) | | 3 |
|
Balance at December 31, 2018 | $ | 10,467 |
|
| $ | 3,949 |
|
| $ | 5,411 |
|
| $ | 4,820 |
|
| $ | 591 |
|
| $ | 93 |
|
| $ | 722 |
| | $ | 19 |
|
| |
(a) | Substantially all accretion expense for the years ended December 31, 2018, and 2017 relates to Duke Energy’s regulated operations and has been deferred in accordance with regulatory accounting treatment. |
| |
(b) | Amounts primarily relate to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3. |
| |
(c) | Amounts primarily relate to AROs recorded as a result of state agency closure requirements at Duke Energy Indiana. |
| |
(d) | Amounts primarily relate to increases in groundwater monitoring estimates for closure of ash impoundments and an increase for nuclear decommissioning costs at Duke Energy Carolinas' nuclear sites compared to original estimates, partially offset by a reduction for nuclear decommissioning at Crystal River Unit 3 compared to original estimates and modifications to the timing of expected cash flows for coal ash AROs. |
|
| | | | |
FINANCIAL STATEMENTS | PROPERTY, PLANT AND EQUIPMENT |
10. PROPERTY, PLANT AND EQUIPMENT
The following tables summarize the property, plant and equipment for Duke Energy and its subsidiary registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| Estimated | | | | | | | | | | | | | | | | |
| Useful | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Life | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | (Years) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
Land | | | $ | 2,072 |
| | $ | 472 |
| | $ | 868 |
| | $ | 445 |
| | $ | 423 |
| | $ | 136 |
| | $ | 116 |
| | $ | 448 |
|
Plant – Regulated | | | | | | | | | | | | | | | | | |
Electric generation, distribution and transmission | 15-100 | | 100,706 |
| | 38,468 |
| | 42,760 |
| | 26,147 |
| | 16,613 |
| | 5,182 |
| | 14,292 |
| | — |
|
Natural gas transmission and distribution | 12-80 | | 8,808 |
| | — |
| | — |
| | — |
| | — |
| | 2,719 |
| | — |
| | 6,089 |
|
Other buildings and improvements | 24-90 | | 1,966 |
| | 681 |
| | 636 |
| | 295 |
| | 341 |
| | 270 |
| | 253 |
| | 126 |
|
Plant – Nonregulated | | | | | | | | | | | | | | | | | |
Electric generation, distribution and transmission | 5-30 | | 4,410 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Other buildings and improvements | 25-35 | | 494 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Nuclear fuel |
| | 3,460 |
| | 1,898 |
| | 1,562 |
| | 1,562 |
| | — |
| | — |
| | — |
| | — |
|
Equipment | 3-55 | | 2,141 |
| | 467 |
| | 565 |
| | 399 |
| | 166 |
| | 384 |
| | 178 |
| | 141 |
|
Construction in process |
| | 5,726 |
| | 1,678 |
| | 2,515 |
| | 1,659 |
| | 856 |
| | 412 |
| | 325 |
| | 382 |
|
Other | 3-40 | | 4,675 |
| | 1,077 |
| | 1,354 |
| | 952 |
| | 393 |
| | 257 |
| | 279 |
| | 300 |
|
Total property, plant and equipment(a)(d) | | | 134,458 |
| | 44,741 |
| | 50,260 |
| | 31,459 |
| | 18,792 |
| | 9,360 |
| | 15,443 |
| | 7,486 |
|
Total accumulated depreciation – regulated(b)(c)(d) | | | (41,079 | ) | | (15,496 | ) | | (16,398 | ) | | (11,423 | ) | | (4,968 | ) | | (2,717 | ) | | (4,914 | ) | | (1,575 | ) |
Total accumulated depreciation – nonregulated(c)(d) | | | (2,047 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Generation facilities to be retired, net | | | 362 |
| | — |
| | 362 |
| | 362 |
| | — |
| | — |
| | — |
| | — |
|
Total net property, plant and equipment | | | $ | 91,694 |
|
| $ | 29,245 |
|
| $ | 34,224 |
|
| $ | 20,398 |
|
| $ | 13,824 |
|
| $ | 6,643 |
| | $ | 10,529 |
| | $ | 5,911 |
|
| |
(a) | Includes capitalized leases of $1,237 million, $135 million, $257 million, $137 million, $120 million, $73 million and $35 million at Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana, respectively, primarily within Plant – Regulated. The Progress Energy, Duke Energy Progress and Duke Energy Florida amounts are net of $131 million, $14 million and $117 million, respectively, of accumulated amortization of capitalized leases. |
| |
(b) | Includes $1,947 million, $1,087 million, $860 million and $860 million of accumulated amortization of nuclear fuel at Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively. |
| |
(c) | Includes accumulated amortization of capitalized leases of $61 million, $12 million, $20 million and $10 million at Duke Energy, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana, respectively. |
| |
(d) | Includes gross property, plant and equipment cost of consolidated VIEs of $4,007 million and accumulated depreciation of consolidated VIEs of $698 million at Duke Energy. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Average | | | | | | | | | | | | | | | | |
| Remaining | | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Useful Life | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | (Years) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Land | | | $ | 2,162 | | | $ | 543 | | | $ | 957 | | | $ | 482 | | | $ | 475 | | | $ | 219 | | | $ | 122 | | | $ | 279 | |
Plant – Regulated | | | | | | | | | | | | | | | | | |
Electric generation, distribution and transmission | 40 | | 120,855 | | | 44,910 | | | 53,447 | | | 32,417 | | | 21,030 | | | 6,573 | | | 15,925 | | | — | |
Natural gas transmission and distribution | 54 | | 12,079 | | | — | | | — | | | — | | | — | | | 3,347 | | | — | | | 8,732 | |
Other buildings and improvements | 37 | | 1,921 | | | 550 | | | 514 | | | 228 | | | 286 | | | 381 | | | 321 | | | 155 | |
Plant – Nonregulated | | | | | | | | | | | | | | | | | |
Electric generation, distribution and transmission | 28 | | 7,104 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Other buildings and improvements | 11 | | 401 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Nuclear fuel | | | 3,181 | | | 1,856 | | | 1,325 | | | 1,325 | | | — | | | — | | | — | | | — | |
Equipment | 13 | | 2,659 | | | 614 | | | 791 | | | 497 | | | 294 | | | 403 | | | 262 | | | 122 | |
Construction in process | | | 6,168 | | | 2,078 | | | 2,297 | | | 954 | | | 1,343 | | | 515 | | | 460 | | | 262 | |
Other | 14 | | 5,289 | | | 1,323 | | | 1,563 | | | 1,115 | | | 437 | | | 287 | | | 253 | | | 368 | |
Total property, plant and equipment(a)(e) | | | 161,819 | | | 51,874 | | | 60,894 | | | 37,018 | | | 23,865 | | | 11,725 | | | 17,343 | | | 9,918 | |
Total accumulated depreciation – regulated(b)(c) | | | (47,611) | | | (17,854) | | | (19,214) | | | (13,387) | | | (5,819) | | | (3,106) | | | (5,583) | | | (1,899) | |
Total accumulated depreciation – nonregulated(d)(e) | | | (2,944) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Facilities to be retired, net | | | 144 | | | 102 | | | 26 | | | 26 | | | — | | | 6 | | | — | | | 11 | |
Total net property, plant and equipment | | | $ | 111,408 | | | $ | 34,122 | | | $ | 41,706 | | | $ | 23,657 | | | $ | 18,046 | | | $ | 8,625 | | | $ | 11,760 | | | $ | 8,030 | |
(a) Includes finance leases of $958 million, $335 million, $729 million, $627 million, $102 million and $10 million at Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana, respectively, primarily within Plant – Regulated. The Progress Energy, Duke Energy Progress and Duke Energy Florida amounts are net of $178 million, $45 million and $133 million, respectively, of accumulated amortization of finance leases.
(b) Includes $1,799 million, $1,064 million, $735 million and $735 million of accumulated amortization of nuclear fuel at Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively.
(c) Includes accumulated amortization of finance leases of $9 million, $33 million and $3 million at Duke Energy, Duke Energy Carolinas and Duke Energy Indiana, respectively.
(d) Includes accumulated amortization of finance leases of ($1 million) at Duke Energy. |
| |
FINANCIAL STATEMENTS | PROPERTY, PLANT AND EQUIPMENT |
(e) Includes gross property, plant and equipment cost of consolidated VIEs of $7,339 million and accumulated depreciation of consolidated VIEs of $1,474 million at Duke Energy.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| Estimated | | | | | | | | | | | | | | | | |
| Useful | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Life | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | (Years) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
Land | | | $ | 1,559 |
| | $ | 467 |
| | $ | 767 |
| | $ | 424 |
| | $ | 343 |
| | $ | 134 |
| | $ | 111 |
| | $ | 41 |
|
Plant – Regulated | | | | | | | | | | | | | | | | | |
Electric generation, distribution and transmission | 8-100 | | 93,687 |
| | 35,657 |
| | 39,419 |
| | 24,502 |
| | 14,917 |
| | 4,870 |
| | 13,741 |
| | — |
|
Natural gas transmission and distribution | 12-80 | | 8,292 |
| | — |
| | — |
| | — |
| | — |
| | 2,559 |
| | — |
| | 5,733 |
|
Other buildings and improvements | 15-100 | | 1,936 |
| | 647 |
| | 652 |
| | 316 |
| | 336 |
| | 243 |
| | 240 |
| | 154 |
|
Plant – Nonregulated | | | | | | | | | | | | | | | | | |
Electric generation, distribution and transmission(a) | 5-30 | | 4,273 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Other buildings and improvements | 25-35 | | 465 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Nuclear fuel | | | 3,680 |
| | 2,120 |
| | 1,560 |
| | 1,560 |
| | — |
| | — |
| | — |
| | — |
|
Equipment | 3-55 | | 2,122 |
| | 402 |
| | 555 |
| | 416 |
| | 139 |
| | 348 |
| | 169 |
| | 266 |
|
Construction in process | | | 6,995 |
| | 2,614 |
| | 3,059 |
| | 1,434 |
| | 1,625 |
| | 350 |
| | 416 |
| | 231 |
|
Other | 3-40 | | 4,498 |
| | 1,032 |
| | 1,311 |
| | 931 |
| | 370 |
| | 228 |
| | 271 |
| | 300 |
|
Total property, plant and equipment(b)(e) | | | 127,507 |
| | 42,939 |
| | 47,323 |
| | 29,583 |
| | 17,730 |
| | 8,732 |
| | 14,948 |
| | 6,725 |
|
Total accumulated depreciation – regulated(c)(d)(e) | | | (39,742 | ) | | (15,063 | ) | | (15,857 | ) | | (10,903 | ) | | (4,947 | ) | | (2,691 | ) | | (4,662 | ) | | (1,479 | ) |
Total accumulated depreciation – nonregulated(d)(e) | | | (1,795 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Generation facilities to be retired, net | | | 421 |
| | — |
| | 421 |
| | 421 |
| | — |
| | — |
| | — |
| | — |
|
Total net property, plant and equipment | | | $ | 86,391 |
| | $ | 27,876 |
| | $ | 31,887 |
| | $ | 19,101 |
| | $ | 12,783 |
| | $ | 6,041 |
| | $ | 10,286 |
| | $ | 5,246 |
|
| |
(a) | Includes a pretax impairment charge of $58 million on a wholly owned non-contracted wind project. See discussion below. |
| |
(b) | Includes capitalized leases of $1,294 million, $81 million, $272 million, $139 million, $133 million, $80 million and $35 million at Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio and Duke Energy Indiana, respectively, primarily within Plant – Regulated. The Progress Energy, Duke Energy Progress and Duke Energy Florida amounts are net of $114 million, $11 million and $103 million, respectively, of accumulated amortization of capitalized leases. |
| |
(c) | Includes $2,113 million, $1,283 million, $831 million and $831 million of accumulated amortization of nuclear fuel at Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively. |
| |
(d) | Includes accumulated amortization of capitalized leases of $57 million, $11 million, $21 million and $9 million at Duke Energy, Duke Energy Carolinas, Duke Energy Ohio and Duke Energy Indiana, respectively. |
| |
(e) | Includes gross property, plant and equipment cost of consolidated VIEs of $3,941 million and accumulated depreciation of consolidated VIEs of $598 million at Duke Energy. |
Duke 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. During the year12 months ended December 31, 2017,2021, Duke Energy recorded a pretax impairment charge to earnings of $69$192 million on a wholly owned non-contracted wind project. The impairment was recorded within Impairment charges on Duke Energy’sthe Consolidated Statements of Operations. $58Operations, which includes $133 million within Impairment of assets and other charges, $42 million within Operations, maintenance and other and $17 million within Depreciation and amortization.
In 2021, Duke Energy continued 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 December 31, 2021, because the carrying value of approximately $200 million continues to approximate the aggregate estimated future undiscounted cash flows. A continued decline in energy market pricing or other factors unfavorably impacting the economics would likely result in a future impairment. Duke Energy retained 51% ownership interest in these facilities following the 2019 transaction to sell a minority interest in certain renewable assets. See Note 1 for further information.
| | | | | |
FINANCIAL STATEMENTS | PROPERTY, PLANT AND EQUIPMENT |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Average | | | | | | | | | | | | | | | | |
| Remaining | | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Useful Life | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | (Years) | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Land | | | $ | 2,046 | | | $ | 536 | | | $ | 908 | | | $ | 463 | | | $ | 445 | | | $ | 171 | | | $ | 118 | | | $ | 279 | |
Plant – Regulated | | | | | | | | | | | | | | | | | |
Electric generation, distribution and transmission | 39 | | 117,107 | | | 44,059 | | | 50,785 | | | 31,375 | | | 19,410 | | | 6,255 | | | 16,008 | | | — | |
Natural gas transmission and distribution | 54 | | 10,799 | | | — | | | — | | | — | | | — | | | 3,136 | | | — | | | 7,663 | |
Other buildings and improvements | 36 | | 2,038 | | | 740 | | | 459 | | | 197 | | | 262 | | | 374 | | | 300 | | | 165 | |
Plant – Nonregulated | | | | | | | | | | | | | | | | | |
Electric generation, distribution and transmission | 27 | | 5,444 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Other buildings and improvements | 10 | | 519 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Nuclear fuel | | | 3,284 | | | 1,837 | | | 1,447 | | | 1,447 | | | — | | | — | | | — | | | — | |
Equipment | 15 | | 2,608 | | | 620 | | | 759 | | | 498 | | | 261 | | | 385 | | | 238 | | | 122 | |
Construction in process | | | 6,645 | | | 1,645 | | | 2,013 | | | 709 | | | 1,304 | | | 407 | | | 409 | | | 581 | |
Other | 14 | | 5,090 | | | 1,203 | | | 1,521 | | | 1,070 | | | 441 | | | 294 | | | 309 | | | 324 | |
Total property, plant and equipment(a)(e) | | | 155,580 | | | 50,640 | | | 57,892 | | | 35,759 | | | 22,123 | | | 11,022 | | | 17,382 | | | 9,134 | |
Total accumulated depreciation – regulated(b)(c) | | | (46,216) | | | (17,453) | | | (18,368) | | | (12,801) | | | (5,560) | | | (3,013) | | | (5,661) | | | (1,749) | |
Total accumulated depreciation – nonregulated(d)(e) | | | (2,611) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Facilities to be retired, net | | | 29 | | | — | | | 29 | | | 29 | | | — | | | — | | | — | | | — | |
Total net property, plant and equipment | | | $ | 106,782 | | | $ | 33,187 | | | $ | 39,553 | | | $ | 22,987 | | | $ | 16,563 | | | $ | 8,009 | | | $ | 11,721 | | | $ | 7,385 | |
(a) Includes finance leases of $832 million, $335 million, $416 million, $297 million, $119 million, and $10 million at Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana, respectively, primarily within Plant – Regulated. The Progress Energy, Duke Energy Progress and Duke Energy Florida amounts are net of $141 million, $24 million and $117 million, respectively, of accumulated amortization of finance leases.
(b) Includes $1,832 million, $1,010 million, $822 million and $822 million of the impairment related toaccumulated amortization of nuclear fuel at Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively.
(c) Includes accumulated amortization of finance leases of $12 million, $23 million, and $3 million at Duke Energy, Duke Energy Carolinas and Duke Energy Indiana, respectively.
(d) Includes accumulated amortization of finance leases of $23 million at Duke Energy.
(e) Includes gross property, plant and equipment cost of consolidated VIEs of $6,394 million and $11accumulated depreciation of consolidated VIEs of $1,242 million of the impairment related to a net intangible asset; see Note 11 for additional information. 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 continued 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.at Duke Energy.
|
| |
FINANCIAL STATEMENTS | PROPERTY, PLANT AND EQUIPMENT |
The following tables presenttable presents capitalized interest, which includes the debt component of AFUDC.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Duke Energy | $ | 72 | | | $ | 112 | | | $ | 159 | |
Duke Energy Carolinas | 29 | | | 28 | | | 30 | |
Progress Energy | 20 | | | 17 | | | 31 | |
Duke Energy Progress | 14 | | | 12 | | | 28 | |
Duke Energy Florida | 6 | | | 5 | | | 3 | |
Duke Energy Ohio | 20 | | | 26 | | | 22 | |
Duke Energy Indiana(a) | (17) | | | 10 | | | 26 | |
Piedmont | 9 | | | 8 | | | 26 | |
(a) Duke Energy Indiana is primarily compromised of ($24 million) of PISCC amortization, which is partially offset by $7 million of the debt component of AFUDC.
|
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
|
Duke Energy | $ | 161 |
| | $ | 128 |
| | $ | 100 |
|
Duke Energy Carolinas | 35 |
| | 45 |
| | 38 |
|
Progress Energy | 51 |
| | 45 |
| | 31 |
|
Duke Energy Progress | 26 |
| | 21 |
| | 17 |
|
Duke Energy Florida | 25 |
| | 24 |
| | 14 |
|
Duke Energy Ohio | 17 |
| | 10 |
| | 8 |
|
Duke Energy Indiana | 27 |
| | 9 |
| | 7 |
|
|
| | | | | | | | | | | | | | | |
| Years Ended December 31, | | Two Months Ended December 31, | | Year Ended October 31, |
(in millions) | 2018 | | 2017 | | 2016 | | 2016 |
Piedmont | $ | 17 |
| | $ | 12 |
| | $ | 2 |
| | $ | 12 |
|
Operating Leases
Duke Energy's Commercial Renewables segment operates various renewable energy projects and sells the generated output to utilities, electric cooperatives, municipalities and commercial and industrial customers through long-term contracts. In certain situations, these long-term contracts and the associated renewable energy projects qualify as operating leases. Rental income from these leases is accounted for as Operating Revenues in the Consolidated Statements of Operations. There are no minimum lease payments as all payments are contingent based on actual electricity generated by the renewable energy projects. Contingent lease payments were $268 million, $262 million, and $216 million for the years ended December 31, 2018, 2017 and 2016. As of December 31, 2018, renewable energy projects owned by Duke Energy and accounted for as operating leases had a cost basis of $3,358 million and accumulated depreciation of $602 million. These assets are principally classified as nonregulated electric generation and transmission assets.
| | | | | |
FINANCIAL STATEMENTS | GOODWILL AND INTANGIBLE ASSETS |
11. GOODWILL AND INTANGIBLE ASSETS
GoodwillGOODWILL
Duke Energy
The following table presents goodwill by reportable segment for Duke Energy included on Duke Energy's Consolidated Balance Sheets at December 31, 2018,2021, and 2017.2020.
| | | | | | | | | | | | | | | | | | | | | | | |
| Electric Utilities | | Gas Utilities | | Commercial | | |
(in millions) | and Infrastructure | | and Infrastructure | | Renewables | | Total |
Goodwill Balance at December 31, 2020 | $ | 17,379 | | | $ | 1,924 | | | $ | 122 | | | $ | 19,425 | |
Accumulated impairment charges | — | | | — | | | (122) | | | (122) | |
Goodwill balance at December 31, 2020, adjusted for accumulated impairment charges | $ | 17,379 | | | $ | 1,924 | | | $ | — | | | $ | 19,303 | |
| | | | | | | |
Goodwill Balance at December 31, 2021 | $ | 17,379 | | | $ | 1,924 | | | $ | 122 | | | $ | 19,425 | |
Accumulated impairment charges | — | | | — | | | (122) | | | (122) | |
Goodwill balance at December 31, 2021, 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, 2017 | $ | 17,379 |
| | $ | 1,924 |
| | $ | 122 |
| | $ | 19,425 |
|
Accumulated impairment charges(a) | — |
| | — |
| | (29 | ) | | (29 | ) |
Goodwill balance at December 31, 2017, adjusted for accumulated impairment charges | $ | 17,379 |
| | $ | 1,924 |
| | $ | 93 |
| | $ | 19,396 |
|
| | | | | | | |
Goodwill Balance at December 31, 2018 | $ | 17,379 |
| | $ | 1,924 |
| | $ | 122 |
| | $ | 19,425 |
|
Accumulated impairment charges(a) | $ | — |
| | $ | — |
| | $ | (122 | ) | | $ | (122 | ) |
Goodwill balance at December 31, 2018, adjusted for accumulated impairment charges | $ | 17,379 |
| | $ | 1,924 |
| | $ | — |
| | $ | 19,303 |
|
| |
(a) | Duke Energy evaluated the recoverability of goodwill during 2017 and recorded impairment charges of $29 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. See "Goodwill Impairment Testing" below for the results of the 2018 goodwill impairment test. |
Duke Energy Ohio
Duke Energy Ohio's Goodwill balance of $920$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 Consolidated Balance Sheets at December 31, 2018,2021, and 2017.2020.
Progress Energy
Progress Energy's Goodwill is included in the Electric Utilities and Infrastructure segment and there are no accumulated impairment charges.
|
| |
FINANCIAL STATEMENTS | GOODWILL AND INTANGIBLE ASSETS |
Piedmont
Piedmont's Goodwill is included in the Gas Utilities and Infrastructure segment and there are no accumulated impairment charges.
Goodwill 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.
In the third quarter of 2018, based on the results of the annual quantitative goodwill impairment test, management determined that As the fair value
of the Commercial Renewables reporting unit was below its respective carrying value, including goodwill. Determination of the Commercial Renewables reporting unit fair value was based on an income approach, which estimates the fair value based on discounted future cash flows. The fair value of the Commercial Renewables reporting unit is impacted by several factors, including forecasted tax credit utilization, the cost of capital, current and forecasted solar and wind volumes, and legislative developments. Certain assumptions used in determining the fair value of the reporting unit in the 2018 impairment test changed from those used in the 2017 annual impairment test including the cost of capital as a result of rising interest rates and the timing of tax credit utilization due to tax reform and IRS clarification on bonus depreciation in August 2018. Based on the quantitative impairment test, the estimated fair value of the Commercial Renewables reporting unit was below its carrying value by an immaterial amount but still more than the goodwill balance assigned to the reporting unit. As such, the entire remaining goodwill balance of approximately $93 million was impaired during the third quarter of 2018.
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.analysis, no goodwill impairment charges were recorded in 2021.
Intangible AssetsINTANGIBLE ASSETS
The following tables show the carrying amount and accumulated amortization of intangible assets included in Other within Other Noncurrent Assets on the Consolidated Balance Sheets of the Duke Energy Registrants at December 31, 2018,2021, and 2017.2020. | | | December 31, 2018 | | December 31, 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 |
Emission allowances | $ | 18 |
| | $ | — |
| | $ | 5 |
| | $ | 2 |
| | $ | 3 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| Emission allowances | $ | 8 | | | $ | — | | | $ | 5 | | | $ | 2 | | | $ | 3 | | | $ | — | | | $ | 2 | | | $ | — | |
Renewable energy certificates | 168 |
| | 46 |
| | 120 |
| | 120 |
| | — |
| | 2 |
| | — |
| | — |
| Renewable energy certificates | 204 | | | 73 | | | 131 | | | 131 | | | — | | | — | | | — | | | — | |
Natural gas, coal and power contracts | 24 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 24 |
| | — |
| Natural gas, coal and power contracts | 24 | | | — | | | — | | | — | | | — | | | — | | | 24 | | | — | |
Renewable operating and development projects | 84 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Renewable operating and development projects | 106 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Other | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3 |
| Other | 28 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total gross carrying amounts | 300 |
| | 46 |
| | 125 |
| | 122 |
| | 3 |
| | 2 |
| | 36 |
| | 3 |
| Total gross carrying amounts | 370 | | | 73 | | | 136 | | | 133 | | | 3 | | | — | | | 26 | | | — | |
Accumulated amortization – natural gas, coal and power contracts | (20 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (20 | ) | | — |
| Accumulated amortization – natural gas, coal and power contracts | (24) | | | — | | | — | | | — | | | — | | | — | | | (24) | | | — | |
Accumulated amortization – renewable operating and development projects | (29 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Accumulated amortization – renewable operating and development projects | (38) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Accumulated amortization – other | (5 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) | Accumulated amortization – other | (4) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total accumulated amortization | (54 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (20 | ) | | (3 | ) | Total accumulated amortization | (66) | | | — | | | — | | | — | | | — | | | — | | | (24) | | | — | |
Total intangible assets, net | $ | 246 |
|
| $ | 46 |
|
| $ | 125 |
|
| $ | 122 |
|
| $ | 3 |
|
| $ | 2 |
|
| $ | 16 |
| | $ | — |
| Total intangible assets, net | $ | 304 | | | $ | 73 | | | $ | 136 | | | $ | 133 | | | $ | 3 | | | $ | — | | | $ | 2 | | | $ | — | |
|
| | | | |
FINANCIAL STATEMENTS | GOODWILL AND INTANGIBLE 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 |
Emission allowances | $ | 8 | | | $ | — | | | $ | 5 | | | $ | 2 | | | $ | 3 | | | $ | — | | | $ | 2 | | | $ | — | |
Renewable energy certificates | 196 | | | 65 | | | 130 | | | 130 | | | — | | | 1 | | | — | | | — | |
Natural gas, coal and power contracts | 24 | | | — | | | — | | | — | | | — | | | — | | | 24 | | | — | |
Renewable operating and development projects | 107 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Other | 20 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total gross carrying amounts | 355 | | | 65 | | | 135 | | | 132 | | | 3 | | | 1 | | | 26 | | | — | |
Accumulated amortization – natural gas, coal and power contracts | (23) | | | — | | | — | | | — | | | — | | | — | | | (23) | | | — | |
Accumulated amortization – renewable operating and development projects | (34) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Accumulated amortization – other | (3) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Total accumulated amortization | (60) | | | — | | | — | | | — | | | — | | | — | | | (23) | | | — | |
Total intangible assets, net | $ | 295 | | | $ | 65 | | | $ | 135 | | | $ | 132 | | | $ | 3 | | | $ | 1 | | | $ | 3 | | | $ | — | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 | | |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Emission allowances | $ | 19 |
| | $ | 1 |
| | $ | 5 |
| | $ | 2 |
| | $ | 3 |
| | $ | — |
| | $ | 13 |
| | $ | — |
|
Renewable energy certificates | 148 |
| | 38 |
| | 107 |
| | 107 |
| | — |
| | 3 |
| | — |
| | — |
|
Natural gas, coal and power contracts | 24 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 24 |
| | — |
|
Renewable operating and development projects | 79 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Other | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 3 |
|
Total gross carrying amounts | 276 |
| | 39 |
| | 112 |
| | 109 |
| | 3 |
| | 3 |
| | 37 |
| | 3 |
|
Accumulated amortization – natural gas, coal and power contracts | (19 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (19 | ) | | — |
|
Accumulated amortization – renewable operating and development projects | (22 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Accumulated amortization – other | (5 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) |
Total accumulated amortization | (46 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (19 | ) | | (3 | ) |
Total intangible assets, net | $ | 230 |
|
| $ | 39 |
|
| $ | 112 |
|
| $ | 109 |
|
| $ | 3 |
|
| $ | 3 |
|
| $ | 18 |
| | $ | — |
|
During the year ended December 31, 2017, Duke Energy recorded a pretax impairment charge of $69 million on a wholly owned non-contracted wind project. The impairment was recorded within Impairment charges on Duke Energy’s Consolidated Statements of Operations. $58 million of the impairment related to property, plant and equipment and $11 million of the impairment related to a net intangible asset that was recorded in 2007 when the project was acquired. Prior to the impairment, the gross amount of the intangible asset was $18 million and the accumulated amortization was $7 million. The intangible asset was fully impaired. See Note 10 for additional information.
Amortization Expense
Amortization expense amounts for natural gas, coal and power contracts, renewable operating projects and other intangible assets are immaterial for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, and are expected to be immaterial for the next five years as of December 31, 2018.2021.
12. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
EQUITY METHOD INVESTMENTS
Investments in affiliates that are not controlled by Duke Energy, but over which it has significant influence, are accounted for using the equity method.
The following table presents Duke Energy’s investments in unconsolidated affiliates accounted for under the equity method, as well as the respective equity in earnings, by segment.segment, for periods presented in this filing. | | | | | | | | | | | | | | | | Years Ended December 31, |
| Years Ended December 31, | | 2021 | | 2020 | | | 2019 |
| 2018 | | 2017 | | 2016 | | | Equity in | | | Equity in | | | Equity in |
| | | Equity in |
| | | | Equity in |
| | | Equity in |
| | earnings | | earnings | | | earnings |
(in millions) | Investments |
| | earnings |
| | Investments |
| | earnings |
| | Investments |
| earnings |
| (in millions) | Investments | | (losses) | | Investments | | (losses) | | | (losses) |
Electric Utilities and Infrastructure | $ | 97 |
| | $ | 6 |
| | $ | 89 |
| | $ | 5 |
| | $ | 93 |
| $ | 5 |
| Electric Utilities and Infrastructure | $ | 104 | | | $ | 7 | | | $ | 105 | | | $ | (1) | | | | $ | 9 | |
Gas Utilities and Infrastructure | 1,003 |
| | 27 |
| | 763 |
| | 62 |
| | 566 |
| 19 |
| Gas Utilities and Infrastructure | 231 | | | 8 | | | 215 | | | (2,017) | | | | 114 | |
Commercial Renewables | 201 |
| | (1 | ) | | 190 |
| | (5 | ) | | 185 |
| (82 | ) | Commercial Renewables | 513 | | | (34) | | | 534 | | | — | | | | (4) | |
Other | 108 |
| | 51 |
| | 133 |
| | 57 |
| | 81 |
| 43 |
| Other | 122 | | | 47 | | | 107 | | | 13 | | | | 43 | |
Total | $ | 1,409 |
|
| $ | 83 |
|
| $ | 1,175 |
|
| $ | 119 |
|
| $ | 925 |
| $ | (15 | ) | Total | $ | 970 | | | $ | 28 | | | $ | 961 | | | $ | (2,005) | | | | $ | 162 | |
During the years ended December 31, 2018, 20172021, 2020 and 2016,2019, Duke Energy received distributions from equity investments of $108$80 million, $13$37 million and $31$55 million, respectively, which are included in Other assets within Cash Flows from Operating Activities on the Consolidated Statements of Cash Flows. During the years ended December 31, 2018,2021, 2020 and 2017,2019, Duke Energy received distributions from equity investments of $137$44 million, $133 million and $281$11 million, respectively, which are included in Return of investment capital within Cash Flows from Investing Activities on the Consolidated Statements of Cash Flows.
During the years ended December 31, 2018,2021, 2020 and 2017, and the two months ended December 31, 2016, and the year ended October 31, 2016,2019, Piedmont received distributions from equity investments of $1$8 million, $4 million, $1$2 million and $26$1 million, respectively, which are included in Other assets within Cash Flows from Operating Activities and $3$2 million, $2 million $1 million and $18$4 million, respectively, which are included within Cash Flows from Investing Activities on the Consolidated Statements of Cash Flows.
Significant investments in affiliates accounted for under the equity method are discussed below.
|
| |
FINANCIAL STATEMENTS | INVESTMENTS IN UNCONSOLIDATED AFFILIATES |
Electric Utilities and Infrastructure
Duke Energy owns a 50 percent interest50% interests in both DATC and in Pioneer, which build, own and operate electric transmission facilities in North America.
| | | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN UNCONSOLIDATED AFFILIATES |
Gas Utilities and Infrastructure
The table below outlines Pipeline Investments
Piedmont owns a 21.49% investment in Cardinal, an intrastate pipeline located in North Carolina.
Duke
Energy's ownership interestsEnergy owns a 7.5% interest in
Sabal Trail, a 517-mile interstate natural gas pipeline,
companies andwhich provides natural gas
storage facilities. |
| | | | | | | | | | |
| | | Investment Amount (in millions) |
| Ownership | | December 31, | | December 31, |
Entity Name | Interest | | 2018 | | 2017 |
Pipeline Investments | | | | | |
Atlantic Coast Pipeline, LLC(a) | 47 | % | | $ | 797 |
| | $ | 397 |
|
Sabal Trail Transmission, LLC | 7.5 | % | | 112 |
| (d) | 219 |
|
Constitution Pipeline, LLC(a) | 24 | % | | 25 |
| | 81 |
|
Cardinal Pipeline Company, LLC(b) | 21.49 | % | | 10 |
| | 11 |
|
Storage Facilities | | | | | |
Pine Needle LNG Company, LLC(b) | 45 | % | | 13 |
| | 13 |
|
Hardy Storage Company, LLC(b) | 50 | % | | 46 |
| | 42 |
|
Total Investments(c) | | | $ | 1,003 |
| | $ | 763 |
|
| |
(a) | During the year ended December 31, 2017, Piedmont transferred its share of ownership interest in ACP and Constitution to a wholly owned subsidiary of Duke Energy at book value. |
| |
(b) | Piedmont owns the Cardinal, Pine Needle and Hardy Storage investments. |
| |
(c) | Duke Energy includes purchase accounting adjustments related to Piedmont. |
| |
(d) | Sabal Trail returned capital of $112 million during the year ended December 31, 2018. |
In October 2017, Duke Energy entered into a guarantee agreement to support its share of the ACP revolving credit facility. See Note 7 for additional information. As a result of the financing, ACP returned capital of $265 million to Duke Energy.
Piedmont sold its 15 percent membership interest in SouthStar on October 3, 2016, for $160 million resulting in an after tax gain of $81 million during the year ended October 31, 2016. Piedmont's Equity in Earnings in SouthStar was $19 million for the year ended October 31, 2016.
During the fourth quarter of 2018, ACP received several adverse court rulings as described in Note 4. As a result, Duke Energy evaluated this investment for impairmentFlorida and determined that fair value approximated carrying valueFlorida Power and therefore no impairment was necessary.
For regulatory matters and other information on the ACP, Sabal Trail and Constitution investments, see Notes 4 and 17.
Commercial RenewablesLight.
Duke Energy has a 50 percent interest in DS Cornerstone, LLC, which owns wind farm projects in the U.S.
Impairmentrecorded OTTIs of Equity Method Investments
During the year ended December 31, 2018, Duke Energy recorded an OTTI of the Constitution investment of $55$25 million within Equity in earnings of unconsolidated affiliates on Duke Energy's 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 recent actions taken by the courts and regulators to uphold the NYSDEC's denial of the certification and uncertainty associated with the remaining legal and regulatory challenges. For additional information on the Constitution investment, see Note 4.
During the year ended December 31, 2016, Duke Energy recorded an OTTI of certain wind project investments. The $71 million pretax impairment was recorded within Equity in earnings (losses) of unconsolidated affiliates on Duke Energy's Consolidated Statements of Operations. The other-than-temporary decline in value of these investments was primarily attributable to a sustained decline in market pricing where the wind investments are located, projected net lossesOperations for the projects and a reductionyear ended December 31, 2019, to completely impair its 24% ownership interest in the projected cash distribution to the class of investment owned by Duke Energy.
OtherConstitution.
Duke Energy owns a 17.5 percent47% interest in the ACP pipeline. In 2020, Duke Energy determined it would no longer continue its investment in the construction of the ACP pipeline. See Notes 3 and 7 for further information.
Storage Facilities
Piedmont owns a 45% interest in Pine Needle, an interstate LNG storage facility located in North Carolina, and a 50% interest in Hardy Storage, an underground interstate natural gas storage facility located in West Virginia.
Renewable Natural Gas Investments
Duke Energy owns a 29.68% investment in SustainRNG, a developer of renewable natural gas projects, and a 70% interest in Sustain T&W, SustainRNG's renewable natural gas project located in Georgia.
Commercial Renewables
DS Cornerstone, LLC, which owns wind farm projects in the U.S. was part of a sale of minority interest in a certain portion of renewable assets in 2019. See Note 1 for more information on the sale. Prior to the sale, Duke Energy had a 50% interest in DS Cornerstone, LLC. Subsequent to the sale, Duke Energy has a 26% interest in the investment.
In 2020, Duke Energy completed its acquisition of 70 distributed fuel cell projects from Bloom Energy Corporation, which approximates 43 MW of capacity serving commercial and industrial customers across the U.S. Duke Energy is not the primary beneficiary of the distributed fuel cell portfolio and does not consolidate these assets.
Other
Duke Energy has a 17.5% indirect economic ownership interest and a 25% board representation and voting rights interest in NMC, which owns and operates a methanol and MTBE business in Jubail, Saudi Arabia.
Significant Subsidiaries
For the year ended December 31, 2020, Duke Energy's economic ownership interest decreased from 25investment in ACP met the requirements of S-X Rule 4-08(g) to 17.5 percent withprovide summarized financial information. The following table provides summary information for ACP as required under S-X Rule 1-02(bb) for the successful startupperiod of NMC's polyacetal production facilitysignificance and comparative prior year periods in 2017. Duke Energy retains 25 percentEnergy's consolidated balance sheets and consolidated statements of operations. For the board representation and voting rights of NMC.year ended December 31, 2021, there were no investments that met the significance requirements.
| | | | | | | | | | | | | | | |
(in millions) | | | | | December 31, 2020 |
| | | | | |
Current assets | | | | | $ | 43 | |
Noncurrent assets | | | | | 93 | |
Current liabilities | | | | | 1,965 | |
Noncurrent liabilities | | | | | 167 | |
| | | | | |
Membership interests | | | | | (1,996) | |
| | | | | |
| | | Years Ended December 31, |
| | | 2020 | | 2019 |
Net revenues | | | $ | — | | | $ | — | |
Operating loss | | | (4,612) | | | (5) | |
| | | | | |
Net (loss) income | | | (4,512) | | | 246 | |
| | | | | |
Net (loss) income attributable to Duke Energy | | | $ | (2,121) | | | $ | 116 | |
| | | | | |
|
| | | | |
FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
13. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in accordance with the applicable state and federal commission regulations. Refer to the 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 in the Consolidated Statements of Operations and Comprehensive Income are presented in the following table. | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Duke Energy Carolinas | | | | | | Duke Energy Carolinas | | | | | |
Corporate governance and shared service expenses(a) | $ | 985 |
| | $ | 858 |
| | $ | 831 |
| Corporate governance and shared service expenses(a) | $ | 894 | | | $ | 753 | | | $ | 841 | |
Indemnification coverages(b) | 22 |
| | 23 |
| | 22 |
| Indemnification coverages(b) | 24 | | | 20 | | | 20 | |
JDA revenue(c) | 84 |
| | 49 |
| | 38 |
| |
Joint Dispatch Agreement (JDA) revenue(c) | | Joint Dispatch Agreement (JDA) revenue(c) | 41 | | | 25 | | | 60 | |
JDA expense(c) | 207 |
| | 145 |
| | 156 |
| JDA expense(c) | 207 | | | 114 | | | 186 | |
Intercompany natural gas purchases(d) | 15 |
| | 9 |
| | 2 |
| Intercompany natural gas purchases(d) | 11 | | | 15 | | | 15 | |
Progress Energy | | | | | | Progress Energy | | |
Corporate governance and shared service expenses(a) | $ | 906 |
| | $ | 736 |
| | $ | 710 |
| Corporate governance and shared service expenses(a) | $ | 856 | | | $ | 715 | | | $ | 778 | |
Indemnification coverages(b) | 34 |
| | 38 |
| | 35 |
| Indemnification coverages(b) | 41 | | | 36 | | | 37 | |
JDA revenue(c) | 207 |
| | 145 |
| | 156 |
| JDA revenue(c) | 207 | | | 114 | | | 186 | |
JDA expense(c) | 84 |
| | 49 |
| | 38 |
| JDA expense(c) | 41 | | | 25 | | | 60 | |
Intercompany natural gas purchases(d) | 78 |
| | 77 |
| | 19 |
| Intercompany natural gas purchases(d) | 75 | | | 75 | | | 76 | |
Duke Energy Progress | | | | | | Duke Energy Progress | | |
Corporate governance and shared service expenses(a) | $ | 577 |
| | $ | 438 |
| | $ | 397 |
| Corporate governance and shared service expenses(a) | $ | 504 | | | $ | 420 | | | $ | 462 | |
Indemnification coverages(b) | 13 |
| | 15 |
| | 14 |
| Indemnification coverages(b) | 19 | | | 17 | | | 15 | |
JDA revenue(c) | 207 |
| | 145 |
| | 156 |
| JDA revenue(c) | 207 | | | 114 | | | 186 | |
JDA expense(c) | 84 |
| | 49 |
| | 38 |
| JDA expense(c) | 41 | | | 25 | | | 60 | |
Intercompany natural gas purchases(d) | 78 |
| | 77 |
| | 19 |
| Intercompany natural gas purchases(d) | 75 | | | 75 | | | 76 | |
Duke Energy Florida | | | | | | Duke Energy Florida | | |
Corporate governance and shared service expenses(a) | $ | 329 |
| | $ | 298 |
| | $ | 313 |
| Corporate governance and shared service expenses(a) | $ | 352 | | | $ | 295 | | | $ | 316 | |
Indemnification coverages(b) | 21 |
| | 23 |
| | 21 |
| Indemnification coverages(b) | 22 | | | 19 | | | 22 | |
Duke Energy Ohio | | | | | | Duke Energy Ohio | | |
Corporate governance and shared service expenses(a) | $ | 374 |
| | $ | 363 |
| | $ | 356 |
| Corporate governance and shared service expenses(a) | $ | 329 | | | $ | 326 | | | $ | 354 | |
Indemnification coverages(b) | 5 |
| | 5 |
| | 5 |
| Indemnification coverages(b) | 4 | | | 4 | | | 4 | |
Duke Energy Indiana | | | | | | Duke Energy Indiana | | |
Corporate governance and shared service expenses(a) | $ | 405 |
| | $ | 370 |
| | $ | 366 |
| Corporate governance and shared service expenses(a) | $ | 409 | | | $ | 401 | | | $ | 412 | |
Indemnification coverages(b) | 7 |
| | 8 |
| | 8 |
| Indemnification coverages(b) | 8 | | | 8 | | | 7 | |
Piedmont | | | | | | Piedmont | |
Corporate governance and shared service expenses(a) | $ | 170 |
| | $ | 50 |
| | | Corporate governance and shared service expenses(a) | $ | 139 | | | $ | 140 | | | $ | 138 | |
Indemnification coverages(b)
| 2 |
| | 2 |
| | | Indemnification coverages(b) | 3 | | | 3 | | | 3 | |
Intercompany natural gas sales(d)
| 93 |
| | 86 |
| | | Intercompany natural gas sales(d) | 86 | | | 90 | | | 91 | |
Natural gas storage and transportation costs(e) | 25 |
| | 25 |
| | | Natural gas storage and transportation costs(e) | 22 | | | 23 | | | 23 | |
| |
(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 on the 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 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 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 Consolidated Statements of Operations and Comprehensive Income. These intercompany revenues and expenses are eliminated in consolidation. For the two months ended December 31, 2016, and for sales made subsequent to the acquisition for the year ended October 31, 2016, Piedmont recorded $14 million and $7 million, respectively, of natural gas sales with Duke Energy. For sales made prior to the acquisition for the year ended October 31, 2016, Piedmont recorded $74 million of natural gas sales with Duke Energy. |
(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 on the 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 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 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 Consolidated Statements of Operations and Comprehensive Income. These intercompany revenues and expenses are eliminated in consolidation.
(e)Piedmont has related party transactions as a customer of its equity method investments in Pine Needle, Hardy Storage, and Cardinal natural gas storage and transportation facilities. These expenses are included in Cost of natural gas on Piedmont's Consolidated Statements of Operations and Comprehensive Income.
|
| | | | |
FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
| |
(e) | Piedmont has related party transactions as a customer of its equity method investments in Pine Needle, Hardy Storage, and Cardinal natural gas storage and transportation facilities. These expenses are included in Cost of natural gas on Piedmont's Consolidated Statements of Operations and Comprehensive Income. For the two months ended December 31, 2016, and for the year ended October 31, 2016, Piedmont recorded $6 million and $29 million, respectively, of natural gas storage and transportation costs. |
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 and their proportionate share of certain charged expenses. See Note 6 for more information regarding money pool. These transactions of the Subsidiary Registrants are incurred in the ordinary course of business and are eliminated in consolidation.
As discussed in Note 17, 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 do include a subordinated note from CRC for a portion of the purchase price.
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 |
December 31, 2021 | | | | | | | |
Intercompany income tax receivable | $ | — | | $ | — | | $ | — | | $ | 40 | | $ | 19 | | $ | — | | $ | — | |
Intercompany income tax payable | 62 | | — | | 84 | | — | | — | | 10 | | 27 | |
| | | | | | | |
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 |
|
December 31, 2018 | | | | | | | |
Intercompany income tax receivable | $ | 52 |
| $ | 47 |
| $ | 29 |
| $ | — |
| $ | — |
| $ | 8 |
| $ | — |
|
Intercompany income tax payable | — |
| — |
| — |
| 16 |
| 3 |
| — |
| 45 |
|
| | | | | | | |
December 31, 2017 | | | | | | | |
Intercompany income tax receivable | $ | — |
| $ | 168 |
| $ | — |
| $ | 44 |
| $ | 22 |
| $ | — |
| $ | 7 |
|
Intercompany income tax payable | 44 |
| — |
| 21 |
| — |
| — |
| 35 |
| — |
|
14. 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 Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the 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.
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 AOCI for the years ended December 31, 2018, 20172021, 2020 and 20162019, 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 or contracts that do not qualify for hedge accounting.
|
| |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
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 on the Duke Energy Registrant's Consolidated Statements of Operations and Comprehensive Income.
In August 2016, 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. Losses on the swaps of $190 million are included within Interest Expense on the Consolidated Statements of Operations for the year ended December 31, 2016. See Note 2 for additional information related to the Piedmont acquisition.
| | | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
The following tables show notional amounts of outstanding derivatives related to interest rate risk.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
|
Cash flow hedges | $ | 923 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Undesignated contracts | 1,721 |
| | 300 |
| | 1,200 |
| | 650 |
| | 550 |
| | 27 |
|
Total notional amount(a) | $ | 2,644 |
| | $ | 300 |
| | $ | 1,200 |
| | $ | 650 |
| | $ | 550 |
| | $ | 27 |
|
| | | December 31, 2017 | | December 31, 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 | | Indiana | | Ohio |
Cash flow hedges(a) | $ | 660 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| |
Cash flow hedges | | Cash flow hedges | $ | 2,415 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Undesignated contracts | 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
| Undesignated contracts | 1,177 | | | 350 | | | 500 | | | 500 | | | 300 | | | 27 | |
Total notional amount | $ | 1,587 |
| | $ | 400 |
| | $ | 500 |
| | $ | 250 |
| | $ | 250 |
| | $ | 27 |
| |
Total notional amount(a) | | Total notional amount(a) | $ | 3,592 | | | $ | 350 | | | $ | 500 | | | $ | 500 | | | $ | 300 | | | $ | 27 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | Duke | | | | Duke | | | | Duke |
| Duke | | Energy | | Progress | | Energy | | | | Energy |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | | | 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 $422 million in cash flow hedges and $194 million in undesignated contracts as of December 31, 2018, and $660 million in cash flow hedges as of December 31, 2017. |
(a) Duke Energy includes amounts related to consolidated VIEs of $665 million in cash flow hedges as of December 31, 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 income (loss) for the year ended December 31, 2021, 2020 and 2019, 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 basedformula-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 cost volatility for customers.
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. |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Electricity (gigawatt-hours) | 15,286 |
| | — |
| | — |
| | — |
| | — |
| | 1,786 |
| | 13,500 |
| | — |
|
Natural gas (millions of dekatherms) | 739 |
| | 121 |
| | 169 |
| | 166 |
| | 3 |
| | — |
| | 1 |
| | 448 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
|
Electricity (gigawatt-hours) | 34 |
| | — |
| | — |
| | — |
| | — |
| | 34 |
| | — |
|
Natural gas (millions of dekatherms) | 770 |
| | 105 |
| | 183 |
| | 133 |
| | 50 |
| | 2 |
| | 480 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | | | Energy | | Energy | | |
| Energy | | Carolinas | | Energy | | Progress | | | | Ohio | | Indiana | | Piedmont |
Electricity (GWh)(a) | 22,344 | | | — | | | — | | | — | | | | | 1,681 | | | 10,688 | | | — | |
Natural gas (millions of Dth) | 823 | | | 264 | | | 215 | | | 215 | | | | | — | | | 8 | | | 336 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 Dth) | 678 | | | 145 | | | 158 | | | 158 | | | | | — | | | 2 | | | 373 | |
(a) Duke Energy includes 9,975 GWh and 22,048 GWh related to cash flow hedges as of December 31, 2021, and 2020, respectively.
|
| | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED IN THE 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 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 | | December 31, 2018 |
| | | | 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 | | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
Noncurrent | | 4 |
| | 1 |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
|
Total Derivative Assets – Commodity Contracts | | $ | 39 |
| | $ | 3 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Noncurrent | | 3 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Noncurrent | | 12 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total Derivative Assets – Interest Rate Contracts | | $ | 18 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
| | $ | — |
|
Total Derivative Assets | | $ | 57 |
| | $ | 3 |
| | $ | 4 |
| | $ | 4 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
| | Derivative Liabilities | | December 31, 2018 | |
Derivative Assets | | Derivative Assets | | December 31, 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 | | $ | 33 |
| | $ | 14 |
| | $ | 10 |
| | $ | 5 |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 8 |
| Current | | $ | 199 | | | $ | 99 | | | $ | 72 | | | $ | 72 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Noncurrent | | 158 |
| | 10 |
| | 15 |
| | 6 |
| | — |
| | — |
| | — |
| | 133 |
| Noncurrent | | 113 | | | 63 | | | 50 | | | 50 | | | — | | | — | | | — | | | — | |
Total Derivative Liabilities – Commodity Contracts | | $ | 191 |
| | $ | 24 |
| | $ | 25 |
| | $ | 11 |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 141 |
| |
Total Derivative Assets – Commodity Contracts | | Total Derivative Assets – Commodity Contracts | | $ | 312 | | | $ | 162 | | | $ | 122 | | | $ | 122 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | | Interest Rate Contracts | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | | Designated as Hedging Instruments | |
Current | | $ | 12 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| Current | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Noncurrent | | 3 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | Not Designated as Hedging Instruments | |
Current | | 23 |
| | 9 |
| | 13 |
| | 11 |
| | 2 |
| | 1 |
| | — |
| | — |
| Current | | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 10 |
| | — |
| | 6 |
| | 5 |
| | 1 |
| | 4 |
| | — |
| | — |
| |
Total Derivative Liabilities – Interest Rate Contracts | | $ | 51 |
| | $ | 9 |
| | $ | 19 |
| | $ | 16 |
| | $ | 3 |
| | $ | 5 |
| | $ | — |
| | $ | — |
| |
Total Derivative Liabilities | | $ | 242 |
| | $ | 33 |
| | $ | 44 |
| | $ | 27 |
| | $ | 9 |
| | $ | 5 |
| | $ | — |
| | $ | 141 |
| |
| Total Derivative Assets – Interest Rate Contracts | | Total Derivative Assets – Interest Rate Contracts | | $ | 8 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Total Derivative Assets | | Total Derivative Assets | | $ | 320 | | | $ | 162 | | | $ | 124 | | | $ | 124 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | December 31, 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 | | $ | 27 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 117 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 72 | | | $ | 18 | | | $ | 19 | | | $ | 5 | | | $ | 14 | | | $ | — | | | $ | 13 | | | $ | 21 | |
Noncurrent | | 132 | | | 9 | | | 5 | | | 5 | | | — | | | — | | | — | | | 118 | |
Total Derivative Liabilities – Commodity Contracts | | $ | 348 | | | $ | 27 | | | $ | 24 | | | $ | 10 | | | $ | 14 | | | $ | — | | | $ | 13 | | | $ | 139 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 75 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 21 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 10 | | | 8 | | | — | | | — | | | — | | | 1 | | | — | | | — | |
Noncurrent | | 18 | | | — | | | — | | | — | | | — | | | 4 | | | 14 | | | — | |
Total Derivative Liabilities – Interest Rate Contracts | | $ | 124 | | | $ | 8 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | | | $ | 14 | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Derivative Liabilities | | $ | 472 | | | $ | 35 | | | $ | 24 | | | $ | 10 | | | $ | 14 | | | $ | 5 | | | $ | 27 | | | $ | 139 | |
|
| | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 |
Commodity Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 14 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 70 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 30 | | | $ | 13 | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 15 | |
Noncurrent | | 137 | | | 3 | | | 27 | | | 12 | | | — | | | — | | | — | | | 107 | |
Total Derivative Liabilities – Commodity Contracts | | $ | 251 | | | $ | 16 | | | $ | 29 | | | $ | 14 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 122 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 15 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 48 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 5 | | | 4 | | | — | | | — | | | — | | | 1 | | | — | | | — | |
Noncurrent | | 5 | | | — | | | — | | | — | | | — | | | 5 | | | — | | | — | |
Total Derivative Liabilities – Interest Rate Contracts | | $ | 73 | | | $ | 4 | | | $ | — | | | $ | — | | | $ | — | | | $ | 6 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Derivative Liabilities | | $ | 324 | | | $ | 20 | | | $ | 29 | | | $ | 14 | | | $ | — | | | $ | 6 | | | $ | 1 | | | $ | 122 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Assets | | December 31, 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 | | $ | 34 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
Noncurrent | | 1 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
|
Total Derivative Assets – Commodity Contracts | | $ | 35 |
| | $ | 2 |
| | $ | 3 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
|
| $ | 2 |
|
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Noncurrent | | 15 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total Derivative Assets – Interest Rate Contracts | | $ | 16 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Total Derivative Assets | | $ | 51 |
| | $ | 2 |
| | $ | 3 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
183
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | December 31, 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 | | $ | 36 |
| | $ | 6 |
| | $ | 18 |
| | $ | 8 |
| | $ | 10 |
| | $ | — |
| | $ | — |
| | $ | 11 |
|
Noncurrent | | 146 |
| | 4 |
| | 10 |
| | 4 |
| | — |
| | — |
| | — |
| | 131 |
|
Total Derivative Liabilities – Commodity Contracts | | $ | 182 |
| | $ | 10 |
| | $ | 28 |
| | $ | 12 |
| | $ | 10 |
| | $ | — |
| | $ | — |
| | $ | 142 |
|
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 29 |
| | $ | 25 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Noncurrent | | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
|
Noncurrent | | 12 |
| | — |
| | 7 |
| | 6 |
| | 2 |
| | 4 |
| | — |
| | — |
|
Total Derivative Liabilities – Interest Rate Contracts | | $ | 48 |
| | $ | 25 |
| | $ | 8 |
| | $ | 6 |
| | $ | 2 |
| | $ | 5 |
| | $ | — |
| | $ | — |
|
Total Derivative Liabilities | | $ | 230 |
| | $ | 35 |
| | $ | 36 |
| | $ | 18 |
| | $ | 12 |
| | $ | 5 |
| | $ | — |
| | $ | 142 |
|
|
| | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The gross 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. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Assets | | December 31, 2018 | | |
| | | | 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 | | $ | 38 |
| | $ | 2 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | 6 |
| | $ | 23 |
| | $ | 3 |
|
Gross amounts offset | | (3 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Current Assets: Other | | $ | 35 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 6 |
|
| $ | 23 |
| | $ | 3 |
|
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 19 |
| | $ | 1 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Gross amounts offset | | (3 | ) | | (1 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Other Noncurrent Assets: Other | | $ | 16 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | Derivative Liabilities | | December 31, 2018 | | | |
Derivative Assets | | Derivative Assets | | December 31, 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 |
Current | | | | | | | | | | | | | | | | | Current | |
Gross amounts recognized | | $ | 68 |
| | $ | 23 |
| | $ | 23 |
| | $ | 16 |
| | $ | 8 |
| | $ | 1 |
| | $ | — |
| | $ | 8 |
| Gross amounts recognized | | $ | 204 | | | $ | 99 | | | $ | 74 | | | $ | 74 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Gross amounts offset | | (4 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| Gross amounts offset | | (25) | | | (16) | | | (9) | | | (9) | | | — | | | — | | | — | | | — | |
Net amounts presented in Current Liabilities: Other | | $ | 64 |
| | $ | 21 |
| | $ | 21 |
| | $ | 14 |
| | $ | 8 |
| | $ | 1 |
| | $ | — |
| | $ | 8 |
| |
Net amounts presented in Current Assets: Other | | Net amounts presented in Current Assets: Other | | $ | 179 | | | $ | 83 | | | $ | 65 | | | $ | 65 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Noncurrent | | | | | | | | | | | | | | | | | Noncurrent | |
Gross amounts recognized | | $ | 174 |
| | $ | 10 |
| | $ | 21 |
| | $ | 11 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 133 |
| Gross amounts recognized | | $ | 116 | | | $ | 63 | | | $ | 50 | | | $ | 50 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Gross amounts offset | | (3 | ) | | (1 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| Gross amounts offset | | (23) | | | (15) | | | (8) | | | (8) | | | — | | | — | | | — | | | — | |
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 171 |
| | $ | 9 |
| | $ | 19 |
| | $ | 9 |
| | $ | 1 |
| | $ | 4 |
| | $ | — |
| | $ | 133 |
| |
Net amounts presented in Other Noncurrent Assets: Other | | Net amounts presented in Other Noncurrent Assets: Other | | $ | 93 | | | $ | 48 | | | $ | 42 | | | $ | 42 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | December 31, 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 | | $ | 184 | | | $ | 26 | | | $ | 19 | | | $ | 5 | | | $ | 14 | | | $ | 1 | | | $ | 13 | | | $ | 21 | |
Gross amounts offset | | (11) | | | (6) | | | (5) | | | (5) | | | — | | | — | | | — | | | — | |
Net amounts presented in Current Liabilities: Other | | $ | 173 | | | $ | 20 | | | $ | 14 | | | $ | — | | | $ | 14 | | | $ | 1 | | | $ | 13 | | | $ | 21 | |
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 288 | | | $ | 9 | | | $ | 5 | | | $ | 5 | | | $ | — | | | $ | 4 | | | $ | 14 | | | $ | 118 | |
Gross amounts offset | | (12) | | | (8) | | | (5) | | | (5) | | | — | | | — | | | — | | | — | |
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 276 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 14 | | | $ | 118 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
|
| | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Assets | | December 31, 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 | | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Current Assets: Other | | $ | 35 |
| | $ | 2 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 27 |
| | $ | 2 |
|
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 16 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Gross amounts offset | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Other Noncurrent Assets: Other | | $ | 16 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | December 31, 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 | | $ | 66 |
| | $ | 31 |
| | $ | 19 |
| | $ | 8 |
| | $ | 10 |
| | $ | 1 |
| | $ | — |
| | $ | 11 |
|
Gross amounts offset | | (3 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Current Liabilities: Other | | $ | 63 |
| | $ | 29 |
| | $ | 17 |
| | $ | 6 |
| | $ | 10 |
| | $ | 1 |
| | $ | — |
| | $ | 11 |
|
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 164 |
| | $ | 4 |
| | $ | 17 |
| | $ | 10 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
| | $ | 131 |
|
Gross amounts offset | | (1 | ) | | — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 163 |
| | $ | 4 |
| | $ | 16 |
| | $ | 9 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
| | $ | 131 |
|
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. |
| | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | 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 | $ | 44 |
| | $ | 19 |
| | $ | 25 |
| | $ | 25 |
| | $ | — |
|
Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
|
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 44 |
| | 19 |
| | 25 |
| | 25 |
| | — |
|
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 59 |
| | $ | 35 |
| | $ | 25 |
| | $ | 15 |
| | $ | 10 |
|
Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
|
Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 59 |
| | 35 |
| | 25 |
| | 15 |
| | 10 |
|
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 | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
15. INVESTMENTS IN DEBT AND EQUITY SECURITIES
Duke Energy'sEnergy’s investments in debt and equity securities are primarily comprised of investments held in (i) the 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 OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as AFS and investments in equity securities as 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 thoughthrough 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'sEnergy’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 the majority of investments in debt and equity securities as long term, unless otherwise noted.
Investment Trusts
The investments within the NDTF and the 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 securities within the Investment Trusts are considered OTTIs and are recognized immediately and deferred to regulatory 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 December 31, 2018,2021, and 2017.2020.
Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Consolidated Balance Sheets.
| | | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | | December 31, 2017 |
| Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| Unrealized |
| | Unrealized |
| | | | Unrealized |
| | Unrealized |
| | |
| Holding |
| | Holding |
| | Estimated |
| | Holding |
| | Holding |
| | Estimated |
|
(in millions) | Gains |
| | Losses |
| | Fair Value |
| | Gains |
| | Losses |
| | Fair Value |
|
NDTF | | | | | | | | | |
| | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 88 |
| | $ | — |
| | $ | — |
| | $ | 115 |
|
Equity securities | 2,402 |
| | 95 |
| | 4,475 |
| | 2,805 |
| | 27 |
| | 4,914 |
|
Corporate debt securities | 4 |
| | 13 |
| | 566 |
| | 17 |
| | 2 |
| | 570 |
|
Municipal bonds | 1 |
| | 4 |
| | 353 |
| | 4 |
| | 3 |
| | 344 |
|
U.S. government bonds | 14 |
| | 12 |
| | 1,076 |
| | 11 |
| | 7 |
| | 1,027 |
|
Other debt securities | — |
| | 2 |
| | 148 |
| | — |
| | 1 |
| | 118 |
|
Total NDTF Investments | $ | 2,421 |
| | $ | 126 |
| | $ | 6,706 |
| | $ | 2,837 |
| | $ | 40 |
| | $ | 7,088 |
|
Other Investments | |
| | |
| | |
| | |
| | |
| | |
|
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 22 |
| | $ | — |
| | $ | — |
| | $ | 15 |
|
Equity securities | 36 |
| | 1 |
| | 99 |
| | 59 |
| | — |
| | 123 |
|
Corporate debt securities | — |
| | 2 |
| | 60 |
| | 1 |
| | — |
| | 57 |
|
Municipal bonds | — |
| | 1 |
| | 85 |
| | 2 |
| | 1 |
| | 83 |
|
U.S. government bonds | 1 |
| | — |
| | 45 |
| | — |
| | — |
| | 41 |
|
Other debt securities | — |
| | 1 |
| | 58 |
| | — |
| | 1 |
| | 44 |
|
Total Other Investments | $ | 37 |
| | $ | 5 |
| | $ | 369 |
| | $ | 62 |
| | $ | 2 |
| | $ | 363 |
|
Total Investments | $ | 2,458 |
| | $ | 131 |
| | $ | 7,075 |
| | $ | 2,899 |
| | $ | 42 |
| | $ | 7,451 |
|
|
| |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
The table below summarizes the maturity date for debt securities. |
| | | |
(in millions) | December 31, 2018 |
|
Due in one year or less | $ | 98 |
|
Due after one through five years | 501 |
|
Due after five through 10 years | 570 |
|
Due after 10 years | 1,222 |
|
Total | $ | 2,391 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 160 | | | $ | — | | | $ | — | | | $ | 177 | |
Equity securities | 4,905 | | | 43 | | | 7,350 | | | 4,138 | | | 54 | | | 6,235 | |
Corporate debt securities | 39 | | | 6 | | | 829 | | | 76 | | | 1 | | | 806 | |
Municipal bonds | 14 | | | 1 | | | 314 | | | 22 | | | — | | | 370 | |
U.S. government bonds | 31 | | | 12 | | | 1,568 | | | 51 | | | — | | | 1,361 | |
Other debt securities | 3 | | | 1 | | | 180 | | | 8 | | | — | | | 180 | |
Total NDTF Investments | $ | 4,992 | | | $ | 63 | | | $ | 10,401 | | | $ | 4,295 | | | $ | 55 | | | $ | 9,129 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 36 | | | $ | — | | | $ | — | | | $ | 127 | |
Equity securities | 36 | | | — | | | 156 | | | 79 | | | — | | | 146 | |
Corporate debt securities | 2 | | | 1 | | | 119 | | | 8 | | | — | | | 110 | |
Municipal bonds | 3 | | | 1 | | | 80 | | | 5 | | | — | | | 86 | |
U.S. government bonds | — | | | — | | | 56 | | | — | | | — | | | 42 | |
Other debt securities | — | | | 1 | | | 45 | | | — | | | — | | | 47 | |
Total Other Investments | $ | 41 | | | $ | 3 | | | $ | 492 | | | $ | 92 | | | $ | — | | | $ | 558 | |
Total Investments | $ | 5,033 | | | $ | 66 | | | $ | 10,893 | | | $ | 4,387 | | | $ | 55 | | | $ | 9,687 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the year ended December 31, 2018, and from sales of AFS securities for the years ended December 31, 2017,2021, 2020 and 2016,2019, were as follows.
|
| | | |
| Year Ended December 31, |
(in millions) | 2018 |
|
FV-NI: | |
Realized gains | $ | 168 |
|
Realized losses | 126 |
|
AFS: | |
Realized gains | 22 |
|
Realized losses | 51 |
|
| | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | FV-NI: | |
Realized gains | $ | 202 |
| | $ | 246 |
| Realized gains | $ | 724 | | | $ | 366 | | | $ | 172 | |
Realized losses | 160 |
| | 187 |
| Realized losses | 141 | | | 174 | | | 151 | |
AFS: | | AFS: | |
Realized gains | | Realized gains | 56 | | | 96 | | | 94 | |
Realized losses | | Realized losses | 54 | | | 51 | | | 67 | |
DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | | December 31, 2017 |
| Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| Unrealized |
| | Unrealized |
| | | | Unrealized |
| | Unrealized |
| | |
| Holding |
| | Holding |
| | Estimated |
| | Holding |
| | Holding |
| | Estimated |
|
(in millions) | Gains |
| | Losses |
| | Fair Value |
| | Gains |
| | Losses |
| | Fair Value |
|
NDTF | | | | | | | | | | | |
|
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 29 |
| | $ | — |
| | $ | — |
| | $ | 32 |
|
Equity securities | 1,309 |
| | 54 |
| | 2,484 |
| | 1,531 |
| | 12 |
| | 2,692 |
|
Corporate debt securities | 2 |
| | 9 |
| | 341 |
| | 9 |
| | 2 |
| | 359 |
|
Municipal bonds | — |
| | 1 |
| | 81 |
| | — |
| | 1 |
| | 60 |
|
U.S. government bonds | 5 |
| | 8 |
| | 475 |
| | 3 |
| | 4 |
| | 503 |
|
Other debt securities | — |
| | 2 |
| | 143 |
| | — |
| | 1 |
| | 112 |
|
Total NDTF Investments | $ | 1,316 |
| | $ | 74 |
| | $ | 3,553 |
| | $ | 1,543 |
| | $ | 20 |
| | $ | 3,758 |
|
The table below summarizes the maturity date for debt securities. |
| | | |
(in millions) | December 31, 2018 |
|
Due in one year or less | $ | 6 |
|
Due after one through five years | 142 |
|
Due after five through 10 years | 303 |
|
Due after 10 years | 589 |
|
Total | $ | 1,040 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 53 | | | $ | — | | | $ | — | | | $ | 30 | |
Equity securities | 2,887 | | | 19 | | | 4,265 | | | 2,442 | | | 23 | | | 3,685 | |
Corporate debt securities | 24 | | | 4 | | | 506 | | | 49 | | | 1 | | | 510 | |
Municipal bonds | 2 | | | — | | | 48 | | | 6 | | | — | | | 91 | |
U.S. government bonds | 16 | | | 3 | | | 712 | | | 25 | | | — | | | 475 | |
Other debt securities | 3 | | | 1 | | | 175 | | | 7 | | | — | | | 174 | |
Total NDTF Investments | $ | 2,932 | | | $ | 27 | | | $ | 5,759 | | | $ | 2,529 | | | $ | 24 | | | $ | 4,965 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
|
| | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the year ended December 31, 2018, and from sales of AFS securities for the years ended December 31, 2017,2021, 2020 and 2016,2019, were as follows.
|
| | | |
| Year Ended December 31, |
(in millions) | 2018 |
|
FV-NI: | |
Realized gains | $ | 89 |
|
Realized losses | 73 |
|
AFS: | |
Realized gains | 19 |
|
Realized losses | 35 |
|
| | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | FV-NI: | |
Realized gains | $ | 135 |
| | $ | 157 |
| Realized gains | $ | 440 | | | $ | 64 | | | $ | 113 | |
Realized losses | 103 |
| | 121 |
| Realized losses | 96 | | | 99 | | | 107 | |
AFS: | | AFS: | |
Realized gains | | Realized gains | 38 | | | 60 | | | 55 | |
Realized losses | | Realized losses | 37 | | | 37 | | | 38 | |
PROGRESS ENERGY
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | | December 31, 2017 |
| Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| Unrealized |
| | Unrealized |
| | | | Unrealized |
| | Unrealized |
| | |
| Holding |
| | Holding |
| | Estimated |
| | Holding |
| | Holding |
| | Estimated |
|
(in millions) | Gains |
| | Losses |
| | Fair Value |
| | Gains |
| | Losses |
| | Fair Value |
|
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 59 |
| | $ | — |
| | $ | — |
| | $ | 83 |
|
Equity securities | 1,093 |
| | 41 |
| | 1,991 |
| | 1,274 |
| | 15 |
| | 2,222 |
|
Corporate debt securities | 2 |
| | 4 |
| | 225 |
| | 8 |
| | — |
| | 211 |
|
Municipal bonds | 1 |
| | 3 |
| | 272 |
| | 4 |
| | 2 |
| | 284 |
|
U.S. government bonds | 9 |
| | 4 |
| | 601 |
| | 8 |
| | 3 |
| | 524 |
|
Other debt securities | — |
| | — |
| | 5 |
| | — |
| | — |
| | 6 |
|
Total NDTF Investments | $ | 1,105 |
| | $ | 52 |
| | $ | 3,153 |
| | $ | 1,294 |
| | $ | 20 |
| | $ | 3,330 |
|
Other Investments | |
| | |
| | |
| | |
| | |
| | |
|
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 17 |
| | $ | — |
| | $ | — |
| | $ | 12 |
|
Municipal bonds | — |
| | — |
| | 47 |
| | 2 |
| | — |
| | 47 |
|
Total Other Investments | $ | — |
| | $ | — |
| | $ | 64 |
| | $ | 2 |
| | $ | — |
| | $ | 59 |
|
Total Investments | $ | 1,105 |
| | $ | 52 |
| | $ | 3,217 |
| | $ | 1,296 |
| | $ | 20 |
| | $ | 3,389 |
|
The table below summarizes the maturity date for debt securities. |
| | | |
(in millions) | December 31, 2018 |
|
Due in one year or less | $ | 87 |
|
Due after one through five years | 306 |
|
Due after five through 10 years | 216 |
|
Due after 10 years | 541 |
|
Total | $ | 1,150 |
|
|
| |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 107 | | | $ | — | | | $ | — | | | $ | 147 | |
Equity securities | 2,018 | | | 24 | | | 3,085 | | | 1,696 | | | 31 | | | 2,550 | |
Corporate debt securities | 15 | | | 2 | | | 323 | | | 27 | | | — | | | 296 | |
Municipal bonds | 12 | | | 1 | | | 266 | | | 16 | | | — | | | 279 | |
U.S. government bonds | 15 | | | 9 | | | 856 | | | 26 | | | — | | | 886 | |
Other debt securities | — | | | — | | | 5 | | | 1 | | | — | | | 6 | |
Total NDTF Investments | $ | 2,060 | | | $ | 36 | | | $ | 4,642 | | | $ | 1,766 | | | $ | 31 | | | $ | 4,164 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 20 | | | $ | — | | | $ | — | | | $ | 106 | |
Municipal bonds | 2 | | | — | | | 26 | | | 3 | | | — | | | 26 | |
Total Other Investments | $ | 2 | | | $ | — | | | $ | 46 | | | $ | 3 | | | $ | — | | | $ | 132 | |
Total Investments | $ | 2,062 | | | $ | 36 | | | $ | 4,688 | | | $ | 1,769 | | | $ | 31 | | | $ | 4,296 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the year ended December 31, 2018, and from sales of AFS securities for the years ended December 31, 2017,2021, 2020 and 2016,2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 284 | | | $ | 302 | | | $ | 59 | |
Realized losses | 45 | | | 75 | | | 44 | |
AFS: | | | | | |
Realized gains | 16 | | | 24 | | | 36 | |
Realized losses | 14 | | | 13 | | | 29 | |
|
| | | |
| Year Ended December 31, |
(in millions) | 2018 |
|
FV-NI: | |
Realized gains | $ | 79 |
|
Realized losses | 53 |
|
AFS: | |
Realized gains | 3 |
|
Realized losses | 15 |
|
|
| | | | | | | |
| Years Ended December 31, |
(in millions) | 2017 |
| | 2016 |
|
Realized gains | $ | 65 |
| | $ | 84 |
|
Realized losses | 56 |
| | 64 |
|
| | | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | | December 31, 2017 |
| Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| Unrealized |
| | Unrealized |
| | | | Unrealized |
| | Unrealized |
| | |
| Holding |
| | Holding |
| | Estimated |
| | Holding |
| | Holding |
| | Estimated |
|
(in millions) | Gains |
| | Losses |
| | Fair Value |
| | Gains |
| | Losses |
| | Fair Value |
|
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 46 |
| | $ | — |
| | $ | — |
| | $ | 50 |
|
Equity securities | 833 |
| | 30 |
| | 1,588 |
| | 980 |
| | 12 |
| | 1,795 |
|
Corporate debt securities | 2 |
| | 3 |
| | 171 |
| | 6 |
| | — |
| | 149 |
|
Municipal bonds | 1 |
| | 3 |
| | 271 |
| | 4 |
| | 2 |
| | 283 |
|
U.S. government bonds | 6 |
| | 3 |
| | 415 |
| | 5 |
| | 2 |
| | 310 |
|
Other debt securities | — |
| | — |
| | 3 |
| | — |
| | — |
| | 4 |
|
Total NDTF Investments | $ | 842 |
| | $ | 39 |
| | $ | 2,494 |
| | $ | 995 |
| | $ | 16 |
| | $ | 2,591 |
|
Other Investments | |
| | |
| | |
| | |
| | |
| | |
|
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Total Other Investments | $ | — |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Total Investments | $ | 842 |
| | $ | 39 |
| | $ | 2,500 |
| | $ | 995 |
| | $ | 16 |
| | $ | 2,592 |
|
The table below summarizes the maturity date for debt securities. |
| | | |
(in millions) | December 31, 2018 |
|
Due in one year or less | $ | 49 |
|
Due after one through five years | 231 |
|
Due after five through 10 years | 161 |
|
Due after 10 years | 419 |
|
Total | $ | 860 |
|
|
| |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 94 | | | $ | — | | | $ | — | | | $ | 76 | |
Equity securities | 1,915 | | | 23 | | | 2,970 | | | 1,617 | | | 31 | | | 2,459 | |
Corporate debt securities | 15 | | | 2 | | | 282 | | | 27 | | | — | | | 296 | |
Municipal bonds | 12 | | | 1 | | | 266 | | | 16 | | | — | | | 279 | |
U.S. government bonds | 15 | | | 3 | | | 472 | | | 26 | | | — | | | 412 | |
Other debt securities | — | | | — | | | 5 | | | 1 | | | — | | | 6 | |
Total NDTF Investments | $ | 1,957 | | | $ | 29 | | | $ | 4,089 | | | $ | 1,687 | | | $ | 31 | | | $ | 3,528 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | |
Total Other Investments | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | |
Total Investments | $ | 1,957 | | | $ | 29 | | | $ | 4,105 | | | $ | 1,687 | | | $ | 31 | | | $ | 3,529 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the year ended December 31, 2018, and from sales of AFS securities for the years ended December 31, 2017,2021, 2020 and 2016,2019, were as follows.
|
| | | |
| Year Ended December 31, |
(in millions) | 2018 |
|
FV-NI: | |
Realized gains | $ | 68 |
|
Realized losses | 48 |
|
AFS: | |
Realized gains | $ | 2 |
|
Realized losses | 10 |
|
| | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | FV-NI: | |
Realized gains | $ | 54 |
| | $ | 71 |
| Realized gains | $ | 283 | | | $ | 52 | | | $ | 38 | |
Realized losses | 48 |
| | 55 |
| Realized losses | 44 | | | 59 | | | 33 | |
AFS: | | AFS: | |
Realized gains | | Realized gains | 15 | | | 24 | | | 7 | |
Realized losses | | Realized losses | 13 | | | 13 | | | 5 | |
DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS. | | | December 31, 2018 | | December 31, 2017 | | December 31, 2021 | | December 31, 2020 |
| Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | | Gross | | Gross | | | Gross | | Gross | |
| Unrealized |
| | Unrealized |
| | | | Unrealized |
| | Unrealized |
| | | | Unrealized | | Unrealized | | Unrealized | | Unrealized | |
| Holding |
| | Holding |
| | Estimated |
| | Holding |
| | Holding |
| | Estimated |
| | Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains |
| | Losses |
| | Fair Value |
| | Gains |
| | Losses |
| | Fair Value |
| (in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | | NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 13 |
| | $ | — |
| | $ | — |
| | $ | 33 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 13 | | | $ | — | | | $ | — | | | $ | 71 | |
Equity securities | 260 |
| | 11 |
| | 403 |
| | 294 |
| | 3 |
| | 427 |
| Equity securities | 103 | | | 1 | | | 115 | | | 79 | | | — | | | 91 | |
Corporate debt securities | — |
| | 1 |
| | 54 |
| | 2 |
| | — |
| | 62 |
| Corporate debt securities | — | | | — | | | 41 | | | — | | | — | | | — | |
Municipal bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
| |
| U.S. government bonds | 3 |
| | 1 |
| | 186 |
| | 3 |
| | 1 |
| | 214 |
| U.S. government bonds | — | | | 6 | | | 384 | | | — | | | — | | | 474 | |
Other debt securities | — |
| | — |
| | 2 |
| | — |
| | — |
| | 2 |
| |
| Total NDTF Investments(a) | $ | 263 |
| | $ | 13 |
| | $ | 659 |
| | $ | 299 |
| | $ | 4 |
| | $ | 739 |
| Total NDTF Investments(a) | $ | 103 | | | $ | 7 | | | $ | 553 | | | $ | 79 | | | $ | — | | | $ | 636 | |
Other Investments | |
| | |
| | |
| | |
| | |
| | |
| Other Investments | | | | | | |
Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
| Cash and cash equivalents | $ | — | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 1 | |
Municipal bonds | — |
| | — |
| | 47 |
| | 2 |
| | — |
| | 47 |
| Municipal bonds | 2 | | | — | | | 26 | | | 3 | | | — | | | 26 | |
Total Other Investments | $ | — |
| | $ | — |
| | $ | 48 |
| | $ | 2 |
| | $ | — |
| | $ | 48 |
| Total Other Investments | $ | 2 | | | $ | — | | | $ | 29 | | | $ | 3 | | | $ | — | | | $ | 27 | |
Total Investments | $ | 263 |
| | $ | 13 |
| | $ | 707 |
| | $ | 301 |
| | $ | 4 |
| | $ | 787 |
| Total Investments | $ | 105 | | | $ | 7 | | | $ | 582 | | | $ | 82 | | | $ | — | | | $ | 663 | |
| |
(a) | (a) During the year ended December 31, 2018, 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 dateyears ended December 31, 2021, and 2020, Duke Energy Florida continued to receive reimbursements from the NDTF for debt securities. |
| | | |
(in millions) | December 31, 2018 |
|
Due in one year or less | $ | 38 |
|
Due after one through five years | 75 |
|
Due after five through 10 years | 55 |
|
Due after 10 years | 122 |
|
Total | $ | 290 |
|
costs related to ongoing decommissioning activity of the Crystal River Unit 3.
|
| | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the year ended December 31, 2018, and from sales of AFS securities for the years ended December 31, 2017,2021, 2020 and 2016,2019, were as follows.
|
| | | |
| Year Ended December 31, |
(in millions) | 2018 |
|
FV-NI: | |
Realized gains | $ | 11 |
|
Realized losses | 5 |
|
AFS: | |
Realized gains | 1 |
|
Realized losses | 5 |
|
| | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | FV-NI: | |
Realized gains | $ | 11 |
| | $ | 13 |
| Realized gains | $ | 1 | | | $ | 250 | | | $ | 21 | |
Realized losses | 8 |
| | 9 |
| Realized losses | 1 | | | 16 | | | 11 | |
AFS: | | AFS: | |
Realized gains | | Realized gains | 1 | | | — | | | 29 | |
Realized losses | | Realized losses | 1 | | | — | | | 24 | |
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. |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | | December 31, 2017 |
| Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| Unrealized |
| | Unrealized |
| | | | Unrealized |
| | Unrealized |
| | |
| Holding |
| | Holding |
| | Estimated |
| | Holding |
| | Holding |
| | Estimated |
|
(in millions) | Gains |
| | Losses |
| | Fair Value |
| | Gains |
| | Losses |
| | Fair Value |
|
Investments | | | | | | | | | | | |
Equity securities | $ | 29 |
| | $ | — |
| | $ | 67 |
| | $ | 49 |
| | $ | — |
| | $ | 97 |
|
Corporate debt securities | — |
| | — |
| | 8 |
| | — |
| | — |
| | 3 |
|
Municipal bonds | — |
| | 1 |
| | 33 |
| | — |
| | 1 |
| | 28 |
|
Total Investments | $ | 29 |
| | $ | 1 |
| | $ | 108 |
| | $ | 49 |
| | $ | 1 |
| | $ | 128 |
|
The table below summarizes the maturity date for debt securities. |
| | | |
(in millions) | December 31, 2018 |
|
Due in one year or less | $ | 3 |
|
Due after one through five years | 20 |
|
Due after five through 10 years | 4 |
|
Due after 10 years | 14 |
|
Total | $ | 41 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | |
Equity securities | 6 | | | — | | | 97 | | | 58 | | | — | | | 97 | |
Corporate debt securities | — | | | — | | | 6 | | | — | | | — | | | 3 | |
Municipal bonds | 1 | | | 1 | | | 46 | | | 1 | | | — | | | 38 | |
U.S. government bonds | — | | | — | | | 12 | | | — | | | — | | | 4 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total Investments | $ | 7 | | | $ | 1 | | | $ | 161 | | | $ | 59 | | | $ | — | | | $ | 143 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the year ended December 31, 2018, and from sales of AFS securities for the years ended December 31, 2017,2021, 2020 and 2016,2019, were insignificant.immaterial.
The table below summarizes the maturity date for debt securities.
| | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 159 | | $ | 3 | | $ | 138 | | $ | 31 | | $ | 107 | | $ | 7 | |
Due after one through five years | 957 | | 337 | | 546 | | 256 | | 290 | | 25 | |
Due after five through 10 years | 550 | | 226 | | 248 | | 231 | | 17 | | 10 | |
Due after 10 years | 1,525 | | 875 | | 544 | | 507 | | 37 | | 22 | |
Total | $ | 3,191 | | $ | 1,441 | | $ | 1,476 | | $ | 1,025 | | $ | 451 | | $ | 64 | |
16. 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 the 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 as defined by GAAP. Certain investments are not categorized within the fair value hierarchy. These investments are measured at fair value using the NAVnet asset value per share practical expedient. The NAVnet asset value is derived based on the investment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the same issuer.
|
| |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
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 years ended December 31, 2018, 2017 and 2016. In addition, for Piedmont, there were no transfers between levels during the two months ended December 31, 2016, and the year ended October 31, 2016.
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
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 NYSE and the 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 11 for a discussion of the valuation of goodwill and intangible assets.
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 14. See Note 15 for additional information related to investments by major security type for the Duke Energy Registrants. | | | December 31, 2018 | | December 31, 2021 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
| (in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | Not Categorized |
NDTF cash and cash equivalents | | NDTF cash and cash equivalents | $ | 160 | | $ | 160 | | $ | — | | $ | — | | $ | — | |
NDTF equity securities | $ | 4,475 |
| $ | 4,410 |
| $ | — |
| $ | — |
| $ | 65 |
| NDTF equity securities | 7,350 | | 7,300 | | — | | — | | 50 | |
NDTF debt securities | 2,231 |
| 576 |
| 1,655 |
| — |
| — |
| NDTF debt securities | 2,891 | | 967 | | 1,924 | | — | | — | |
Other equity securities | 99 |
| 99 |
| — |
| — |
| — |
| Other equity securities | 156 | | 156 | | — | | — | | — | |
Other debt securities | 270 |
| 67 |
| 203 |
| — |
| — |
| Other debt securities | 300 | | 45 | | 255 | | — | | — | |
Other cash and cash equivalents | | Other cash and cash equivalents | 36 | | 36 | | — | | — | | — | |
Derivative assets | 57 |
| 4 |
| 25 |
| 28 |
| — |
| Derivative assets | 320 | | 3 | | 293 | | 24 | | — | |
Total assets | 7,132 |
| 5,156 |
| 1,883 |
| 28 |
| 65 |
| Total assets | 11,213 | | 8,667 | | 2,472 | | 24 | | 50 | |
| Derivative liabilities | (242 | ) | (11 | ) | (90 | ) | (141 | ) | — |
| Derivative liabilities | (472) | | (13) | | (314) | | (145) | | — | |
Net assets (liabilities) | $ | 6,890 |
| $ | 5,145 |
| $ | 1,793 |
| $ | (113 | ) | $ | 65 |
| Net assets (liabilities) | $ | 10,741 | | $ | 8,654 | | $ | 2,158 | | $ | (121) | | $ | 50 | |
|
| | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
| | | | | | | | | | | | | | | | | |
| 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 | |
|
| | | | | | | | | | | | | | | |
| December 31, 2017 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not Categorized |
|
NDTF equity securities | $ | 4,914 |
| $ | 4,840 |
| $ | — |
| $ | — |
| $ | 74 |
|
NDTF debt securities | 2,174 |
| 635 |
| 1,539 |
| — |
| — |
|
Other equity securities | 123 |
| 123 |
| — |
| — |
| — |
|
Other debt securities | 241 |
| 57 |
| 184 |
| — |
| — |
|
Derivative assets | 51 |
| 3 |
| 20 |
| 28 |
| — |
|
Total assets | 7,503 |
| 5,658 |
| 1,743 |
| 28 |
| 74 |
|
Derivative liabilities | (230 | ) | (2 | ) | (86 | ) | (142 | ) | — |
|
Net assets (liabilities) | $ | 7,273 |
| $ | 5,656 |
| $ | 1,657 |
| $ | (114 | ) | $ | 74 |
|
The following tables providetable provides 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' Consolidated Statements of Operations and Comprehensive Income. Amounts included in changes of net assets on the Duke Energy Registrants' Consolidated Balance Sheets are included in regulatory assets or liabilities. All derivative assets and liabilities are presented on a net basis. | | | | | | | | | | | | | Derivatives (net) | |
| December 31, 2018 | | December 31, 2017 | | | Years Ended December 31, | |
| | | | | | | | |
(in millions) | Derivatives (net) |
| | Investments |
| | Derivatives (net) |
| | Total |
| (in millions) | | 2021 | | | | 2020 | |
Balance at beginning of period | $ | (114 | ) | | $ | 5 |
| | $ | (166 | ) | | $ | (161 | ) | Balance at beginning of period | | $ | (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 | | (75) | | | | | (84) | | |
| Purchases, sales, issuances and settlements: | | | | | | | | Purchases, sales, issuances and settlements: | | | | | | | |
Purchases | 57 |
| | — |
| | 55 |
| | 55 |
| Purchases | | 21 | | | | | 14 | | |
Sales | — |
| | (6 | ) | | — |
| | (6 | ) | |
| Settlements | (57 | ) | | — |
| | (47 | ) | | (47 | ) | Settlements | | (5) | | | | | (19) | | |
Total gains included on the Consolidated Balance Sheet | 1 |
| | — |
| | 44 |
| | 44 |
| |
Net transfers Out of Level 3(a) | | Net transfers Out of Level 3(a) | | — | | | | | 117 | | |
Total gains (losses) included on the Consolidated Balance Sheet | | Total gains (losses) included on the Consolidated Balance Sheet | | 15 | | | | | (3) | | |
Balance at end of period | $ | (113 | ) | | $ | — |
| | $ | (114 | ) | | $ | (114 | ) | Balance at end of period | | $ | (121) | | | | | $ | (77) | | |
|
(a)Transferred from Level 3 to Level 2 because observable market data became available.
DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. | | | December 31, 2018 | | December 31, 2021 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
| (in millions) | Total Fair Value | Level 1 | Level 2 | | Not Categorized |
NDTF cash and cash equivalents | | NDTF cash and cash equivalents | $ | 53 | | $ | 53 | | $ | — | | | $ | — | |
NDTF equity securities | $ | 2,484 |
| $ | 2,419 |
| $ | — |
| $ | 65 |
| NDTF equity securities | 4,265 | | 4,215 | | — | | | 50 | |
NDTF debt securities | 1,069 |
| 149 |
| 920 |
| — |
| NDTF debt securities | 1,441 | | 339 | | 1,102 | | | — | |
| Derivative assets | 3 |
| — |
| 3 |
| — |
| Derivative assets | 162 | | — | | 162 | | | — | |
Total assets | 3,556 |
| 2,568 |
| 923 |
| 65 |
| Total assets | 5,921 | | 4,607 | | 1,264 | | | 50 | |
Derivative liabilities | (33 | ) | — |
| (33 | ) | — |
| Derivative liabilities | (35) | | — | | (35) | | | — | |
Net assets | $ | 3,523 |
| $ | 2,568 |
| $ | 890 |
| $ | 65 |
| Net assets | $ | 5,886 | | $ | 4,607 | | $ | 1,229 | | | $ | 50 | |
| | | | | | | | | | | | | | | |
| 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 | |
|
| | | | | | | | | | | | |
| December 31, 2017 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Not Categorized |
|
NDTF equity securities | $ | 2,692 |
| $ | 2,618 |
| $ | — |
| $ | 74 |
|
NDTF debt securities | 1,066 |
| 204 |
| 862 |
| — |
|
Derivative assets | 2 |
| — |
| 2 |
| — |
|
Total assets | 3,760 |
| 2,822 |
| 864 |
| 74 |
|
Derivative liabilities | (35 | ) | (1 | ) | (34 | ) | — |
|
Net assets | $ | 3,725 |
| $ | 2,821 |
| $ | 830 |
| $ | 74 |
|
|
| | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
The following table provides reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | |
| Investments |
| Year Ended December 31, |
(in millions) | 2017 |
|
Balance at beginning of period | $ | 3 |
|
Total pretax realized or unrealized gains included in comprehensive income | 1 |
|
Purchases, sales, issuances and settlements: | |
Sales | (4 | ) |
Balance at end of period | $ | — |
|
PROGRESS ENERGY
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. | | | December 31, 2018 | | December 31, 2017 | | December 31, 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 | $ | 107 | | $ | 107 | | $ | — | | | | $ | 147 | | $ | 147 | | $ | — | | |
NDTF equity securities | $ | 1,991 |
| $ | 1,991 |
| $ | — |
| | $ | 2,222 |
| $ | 2,222 |
| $ | — |
| NDTF equity securities | 3,085 | | 3,085 | | — | | | | 2,550 | | 2,550 | | — | | |
NDTF debt securities | 1,162 |
| 427 |
| 735 |
| | 1,108 |
| 431 |
| 677 |
| NDTF debt securities | 1,450 | | 628 | | 822 | | | | 1,467 | | 682 | | 785 | | |
Other debt securities | 64 |
| 17 |
| 47 |
| | 59 |
| 12 |
| 47 |
| Other debt securities | 26 | | — | | 26 | | | | 26 | | — | | 26 | | |
Other cash and cash equivalents | | Other cash and cash equivalents | 20 | | 20 | | — | | | | 106 | | 106 | | | |
Derivative assets | 4 |
| — |
| 4 |
| | 3 |
| 1 |
| 2 |
| Derivative assets | 124 | | — | | 124 | | | | 33 | | — | | 33 | | |
Total assets | 3,221 |
| 2,435 |
| 786 |
| | 3,392 |
| 2,666 |
| 726 |
| Total assets | 4,812 | | 3,840 | | 972 | | | | 4,329 | | 3,485 | | 844 | | |
| Derivative liabilities | (44 | ) | — |
| (44 | ) | | (36 | ) | (1 | ) | (35 | ) | Derivative liabilities | (24) | | — | | (24) | | | | (29) | | — | | (29) | | |
Net assets | $ | 3,177 |
| $ | 2,435 |
| $ | 742 |
| | $ | 3,356 |
| $ | 2,665 |
| $ | 691 |
| Net assets | $ | 4,788 | | $ | 3,840 | | $ | 948 | | | | $ | 4,300 | | $ | 3,485 | | $ | 815 | | |
DUKE ENERGY PROGRESS
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. | | | December 31, 2018 | | December 31, 2017 | | December 31, 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 | $ | 94 | | $ | 94 | | $ | — | | | | $ | 76 | | $ | 76 | | $ | — | | |
NDTF equity securities | $ | 1,588 |
| $ | 1,588 |
| $ | — |
| | $ | 1,795 |
| $ | 1,795 |
| $ | — |
| NDTF equity securities | 2,970 | | 2,970 | | — | | | | 2,459 | | 2,459 | | — | | |
NDTF debt securities | 906 |
| 294 |
| 612 |
| | 796 |
| 243 |
| 553 |
| NDTF debt securities | 1,025 | | 289 | | 736 | | | | 993 | | 237 | | 756 | | |
Other debt securities | 6 |
| 6 |
| — |
| | 1 |
| 1 |
| — |
| |
| Other cash and cash equivalents | | Other cash and cash equivalents | 16 | | 16 | | — | | | | 1 | | 1 | | — | | |
Derivative assets | 4 |
| — |
| 4 |
| | 2 |
| 1 |
| 1 |
| Derivative assets | 124 | | — | | 124 | | | | 33 | | — | | 33 | | |
Total assets | 2,504 |
| 1,888 |
| 616 |
| | 2,594 |
| 2,040 |
| 554 |
| Total assets | 4,229 | | 3,369 | | 860 | | | | 3,562 | | 2,773 | | 789 | | |
Derivative liabilities | (27 | ) | — |
| (27 | ) | | (18 | ) | (1 | ) | (17 | ) | Derivative liabilities | (10) | | — | | (10) | | | | (14) | | — | | (14) | | |
Net assets | $ | 2,477 |
| $ | 1,888 |
| $ | 589 |
| | $ | 2,576 |
| $ | 2,039 |
| $ | 537 |
| Net assets | $ | 4,219 | | $ | 3,369 | | $ | 850 | | | | $ | 3,548 | | $ | 2,773 | | $ | 775 | | |
DUKE ENERGY FLORIDA
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. | | | December 31, 2018 | | December 31, 2017 | | December 31, 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 | $ | 13 | | $ | 13 | | $ | — | | | $ | 71 | | $ | 71 | | $ | — | | |
NDTF equity securities | $ | 403 |
| $ | 403 |
| $ | — |
| | $ | 427 |
| $ | 427 |
| $ | — |
| NDTF equity securities | 115 | | 115 | | — | | | 91 | | 91 | | — | | |
NDTF debt securities | 256 |
| 133 |
| 123 |
| | 312 |
| 188 |
| 124 |
| NDTF debt securities | 425 | | 339 | | 86 | | | 474 | | 445 | | 29 | | |
Other debt securities | 48 |
| 1 |
| 47 |
| | 48 |
| 1 |
| 47 |
| Other debt securities | 26 | | — | | 26 | | | 26 | | — | | 26 | | |
Derivative assets | — |
| — |
| — |
| | 1 |
| — |
| 1 |
| |
Other cash and cash equivalents | | Other cash and cash equivalents | 3 | | 3 | | — | | | 1 | | 1 | | — | | |
| Total assets | 707 |
| 537 |
| 170 |
| | 788 |
| 616 |
| 172 |
| Total assets | 582 | | 470 | | 112 | | | 663 | | 608 | | 55 | | |
| Derivative liabilities | (9 | ) | — |
| (9 | ) | | (12 | ) | — |
| (12 | ) | Derivative liabilities | (14) | | — | | (14) | | | — | | — | | — | | |
Net assets | $ | 698 |
| $ | 537 |
| $ | 161 |
| | $ | 776 |
| $ | 616 |
| $ | 160 |
| Net assets | $ | 568 | | $ | 470 | | $ | 98 | | | $ | 663 | | $ | 608 | | $ | 55 | | |
DUKE ENERGY OHIO
The recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets were not material at December 31, 2021, and 2020.
|
| | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
DUKE ENERGY OHIOINDIANA
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. | | | December 31, 2018 | | December 31, 2017 | | December 31, 2021 | | December 31, 2020 |
(in millions) | Total Fair Value |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 2 |
| Level 3 |
| (in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | | Total Fair Value | Level 1 | Level 2 | Level 3 |
Other equity securities | | Other equity securities | $ | 97 | | $ | 97 | | $ | — | | $ | — | | | $ | 97 | | $ | 97 | | $ | — | | $ | — | |
Other debt securities | | Other debt securities | 64 | | — | | 64 | | — | | | 45 | | — | | 45 | | — | |
Other cash equivalents | | Other cash equivalents | — | | — | | — | | — | | | 1 | | 1 | | — | | — | |
Derivative assets | $ | 6 |
| $ | — |
| $ | 6 |
| | $ | 1 |
| $ | — |
| $ | 1 |
| Derivative assets | 23 | | 1 | | — | | 22 | | | 6 | | — | | — | | 6 | |
Total assets | | Total assets | 184 | | 98 | | 64 | | 22 | | | 149 | | 98 | | 45 | | 6 | |
Derivative liabilities | (5 | ) | (5 | ) | — |
| | (5 | ) | (5 | ) | — |
| Derivative liabilities | (27) | | (13) | | (14) | | — | | | (1) | | (1) | | — | | — | |
Net assets (liabilities) | $ | 1 |
| $ | (5 | ) | $ | 6 |
| | $ | (4 | ) | $ | (5 | ) | $ | 1 |
| |
Net assets | | Net assets | $ | 157 | | $ | 85 | | $ | 50 | | $ | 22 | | | $ | 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) |
| Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 |
Balance at beginning of period | $ | 1 |
| | $ | 5 |
| Balance at beginning of period | $ | 6 | | | $ | 11 | |
| Purchases, sales, issuances and settlements: | | | | Purchases, sales, issuances and settlements: | |
Purchases | 7 |
| | 3 |
| Purchases | 18 | | | 10 | |
| Settlements | (4 | ) | | (4 | ) | Settlements | (16) | | | (13) | |
Total gains included on the Consolidated Balance Sheet | 2 |
| | (3 | ) | |
| Total gains (losses) included on the Consolidated Balance Sheet | | Total gains (losses) included on the Consolidated Balance Sheet | 14 | | | (2) | |
Balance at end of period | $ | 6 |
| | $ | 1 |
| Balance at end of period | $ | 22 | | | $ | 6 | |
DUKE ENERGY INDIANAPIEDMONT
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | | December 31, 2017 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
Other equity securities | $ | 67 |
| $ | 67 |
| $ | — |
| $ | — |
| | $ | 97 |
| $ | 97 |
| $ | — |
| $ | — |
|
Other debt securities | 41 |
| — |
| 41 |
| — |
| | 31 |
| — |
| 31 |
| — |
|
Derivative assets | 23 |
| 1 |
| — |
| 22 |
| | 27 |
| — |
| — |
| 27 |
|
Total assets | $ | 131 |
| $ | 68 |
| $ | 41 |
| $ | 22 |
| | $ | 155 |
| $ | 97 |
| $ | 31 |
| $ | 27 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
(in millions) | Total Fair Value | Level 1 | Level 2 | | | Total Fair Value | Level 1 | | Level 2 |
| | | | | | | | | |
| | | | | | | | | |
Derivative assets | $ | 3 | | $ | 3 | | $ | — | | | | $ | 1 | | $ | 1 | | | $ | — | |
| | | | | | | | | |
Derivative liabilities | (139) | | — | | (139) | | | | (122) | | — | | | (122) | |
Net (liabilities) assets | $ | (136) | | $ | 3 | | $ | (139) | | | | $ | (121) | | $ | 1 | | | $ | (122) | |
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) |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
|
Balance at beginning of period | $ | 27 |
| | $ | 16 |
|
Purchases, sales, issuances and settlements: | | | |
Purchases | 50 |
| | 52 |
|
Settlements | (53 | ) | | (43 | ) |
Total (losses) gains included on the Consolidated Balance Sheet | (2 | ) | | 2 |
|
Balance at end of period | $ | 22 |
| | $ | 27 |
|
| | | | | | | | | |
| | Derivatives (net) |
| | Year Ended December 31, |
(in millions) | | | 2020 |
Balance at beginning of period | | | $ | (117) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Net transfers Out of Level 3(a) | | | 117 | |
| | | |
Balance at end of period | | | $ | — | |
(a) Transferred from Level 3 to Level 2 because observable market data became available.
|
| | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
PIEDMONT
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | |
| December 31, 2018 | | December 31, 2017 |
(in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
| | Total Fair Value |
| Level 1 |
| Level 3 |
|
Other debt securities | $ | — |
| $ | — |
| $ | — |
| | $ | 1 |
| $ | 1 |
| $ | — |
|
Derivative assets | 3 |
| 3 |
| — |
| | 2 |
| 2 |
| — |
|
Total assets | 3 |
| 3 |
| — |
| | 3 |
| 3 |
| — |
|
Derivative liabilities | (141 | ) | — |
| (141 | ) | | (142 | ) | — |
| (142 | ) |
Net (liabilities) assets | $ | (138 | ) | $ | 3 |
| $ | (141 | ) | | $ | (139 | ) | $ | 3 |
| $ | (142 | ) |
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) |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
|
Balance at beginning of period | $ | (142 | ) | | $ | (187 | ) |
Total gains and settlements | 1 |
| | 45 |
|
Balance at end of period | $ | (141 | ) | | $ | (142 | ) |
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3. |
| | | | | | | | | | | | |
| December 31, 2018 |
| Fair Value | | | | | |
Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range |
Duke Energy Ohio | | | | | | |
FTRs | $ | 6 |
| RTO auction pricing | FTR price – per MWh | $ | 1.19 |
| – | $ | 4.59 |
|
Duke Energy Indiana | | | | | | |
FTRs | 22 |
| RTO auction pricing | FTR price – per MWh | (2.07 | ) | – | 8.27 |
|
Piedmont | | | | | | |
Natural gas contracts | (141 | ) | Discounted cash flow | Forward natural gas curves — price per MMBtu | 1.87 |
| – | 2.95 |
|
Duke Energy | | | | | | |
Total Level 3 derivatives | $ | (113 | ) | | | | | |
| | | | | | | | | | | | | | | December 31, 2021 | |
| December 31, 2017 | | | 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 | $ | (145) | | RTO forward pricing | Forward electricity curves – price per MWh | $ | 19.04 | | – | $ | 139.11 | | $ | 37.57 | |
Duke Energy Ohio | | | | | | Duke Energy Ohio | |
FTRs | $ | 1 |
| RTO auction pricing | FTR price – per MWh | $ | 0.07 |
| – | $ | 1.41 |
| FTRs | 2 | | RTO auction pricing | FTR price – per MWh | 0.06 | | – | 1.79 | | 0.96 | |
Duke Energy Indiana | | | | | | Duke Energy Indiana | |
FTRs | 27 |
| RTO auction pricing | FTR price – per MWh | (0.77 | ) | – | 7.44 |
| FTRs | 22 | | RTO auction pricing | FTR price – per MWh | (1.18) | | – | 13.11 | | 2.68 | |
Piedmont | | | | | | |
Natural gas contracts | (142 | ) | Discounted cash flow | Forward natural gas curves — price per MMBtu | 2.10 |
| – | 2.88 |
| |
| Duke Energy | | | | | | Duke Energy | |
Total Level 3 derivatives | $ | (114 | ) | | | | | Total Level 3 derivatives | $ | (121) | | |
|
| |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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. | | | December 31, 2018 | | December 31, 2017 | | December 31, 2021 | | December 31, 2020 |
(in millions) | Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
| (in millions) | Book Value | | Fair Value | | Book Value | | Fair Value |
Duke Energy(a) | $ | 54,529 |
| | $ | 54,534 |
| | $ | 52,279 |
| | $ | 55,331 |
| Duke Energy(a) | $ | 63,835 | | | $ | 69,683 | | | $ | 59,863 | | | $ | 69,292 | |
Duke Energy Carolinas | 10,939 |
| | 11,471 |
| | 10,103 |
| | 11,372 |
| Duke Energy Carolinas | 13,275 | | | 15,101 | | | 12,218 | | | 14,917 | |
Progress Energy | 18,911 |
| | 19,885 |
| | 17,837 |
| | 20,000 |
| Progress Energy | 20,823 | | | 23,751 | | | 19,264 | | | 23,470 | |
Duke Energy Progress | 8,204 |
| | 8,300 |
| | 7,357 |
| | 7,992 |
| Duke Energy Progress | 10,249 | | | 11,252 | | | 9,258 | | | 10,862 | |
Duke Energy Florida | 7,321 |
| | 7,742 |
| | 7,095 |
| | 7,953 |
| Duke Energy Florida | 8,482 | | | 9,772 | | | 7,915 | | | 9,756 | |
Duke Energy Ohio | 2,165 |
| | 2,239 |
| | 2,067 |
| | 2,249 |
| Duke Energy Ohio | 3,193 | | | 3,570 | | | 3,089 | | | 3,650 | |
Duke Energy Indiana | 3,782 |
| | 4,158 |
| | 3,783 |
| | 4,464 |
| Duke Energy Indiana | 4,323 | | | 5,067 | | | 4,091 | | | 5,204 | |
Piedmont | 2,138 |
| | 2,180 |
| | 2,037 |
| | 2,209 |
| Piedmont | 2,968 | | | 3,278 | | | 2,780 | | | 3,306 | |
| |
(a) | Book value of long-term debt includes $1.6 billion as of December 31, 2018, and $1.7 billion as of December 31, 2017, of unamortized debt discount and premium, net in purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt. |
(a) Book value of long-term debt includes $1.25 billion as of December 31, 2021, and $1.3 billion as of December 31, 2020, of unamortized debt discount and premium, net in purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt.
At both December 31, 2018,2021, and December 31, 2017,2020, 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.
| | | | | |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
17. 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 reevaluation, 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.
CONSOLIDATED VIEsPipeline Investments
Piedmont owns a 21.49% investment in Cardinal, an intrastate pipeline located in North Carolina.
Duke Energy owns a 7.5% interest in Sabal Trail, a 517-mile interstate natural gas pipeline, which provides natural gas to Duke Energy Florida and Florida Power and Light.
Duke Energy recorded OTTIs of $25 million within Equity in earnings (losses) of unconsolidated affiliates on Duke Energy's Consolidated Statements of Operations for the year ended December 31, 2019, to completely impair its 24% ownership interest in Constitution.
Duke Energy owns a 47% interest in the ACP pipeline. In 2020, Duke Energy determined it would no longer continue its investment in the construction of the ACP pipeline. See Notes 3 and 7 for further information.
Storage Facilities
Piedmont owns a 45% interest in Pine Needle, an interstate LNG storage facility located in North Carolina, and a 50% interest in Hardy Storage, an underground interstate natural gas storage facility located in West Virginia.
Renewable Natural Gas Investments
Duke Energy owns a 29.68% investment in SustainRNG, a developer of renewable natural gas projects, and a 70% interest in Sustain T&W, SustainRNG's renewable natural gas project located in Georgia.
Commercial Renewables
DS Cornerstone, LLC, which owns wind farm projects in the U.S. was part of a sale of minority interest in a certain portion of renewable assets in 2019. See Note 1 for more information on the sale. Prior to the sale, Duke Energy had a 50% interest in DS Cornerstone, LLC. Subsequent to the sale, Duke Energy has a 26% interest in the investment.
In 2020, Duke Energy completed its acquisition of 70 distributed fuel cell projects from Bloom Energy Corporation, which approximates 43 MW of capacity serving commercial and industrial customers across the U.S. Duke Energy is not the primary beneficiary of the distributed fuel cell portfolio and does not consolidate these assets.
Other
Duke Energy has a 17.5% indirect economic ownership interest and a 25% board representation and voting rights interest in NMC, which owns and operates a methanol and MTBE business in Jubail, Saudi Arabia.
Significant Subsidiaries
For the year ended December 31, 2020, Duke Energy's investment in ACP met the requirements of S-X Rule 4-08(g) to provide summarized financial information. The following table provides summary information for ACP as required under S-X Rule 1-02(bb) for the period of significance and comparative prior year periods in Duke Energy's consolidated balance sheets and consolidated statements of operations. For the year ended December 31, 2021, there were no investments that met the significance requirements.
| | | | | | | | | | | | | | | |
(in millions) | | | | | December 31, 2020 |
| | | | | |
Current assets | | | | | $ | 43 | |
Noncurrent assets | | | | | 93 | |
Current liabilities | | | | | 1,965 | |
Noncurrent liabilities | | | | | 167 | |
| | | | | |
Membership interests | | | | | (1,996) | |
| | | | | |
| | | Years Ended December 31, |
| | | 2020 | | 2019 |
Net revenues | | | $ | — | | | $ | — | |
Operating loss | | | (4,612) | | | (5) | |
| | | | | |
Net (loss) income | | | (4,512) | | | 246 | |
| | | | | |
Net (loss) income attributable to Duke Energy | | | $ | (2,121) | | | $ | 116 | |
| | | | | |
| | | | | |
FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
13. RELATED PARTY TRANSACTIONS
The obligationsSubsidiary Registrants engage in related party transactions in accordance with the applicable state and federal commission regulations. Refer to the Consolidated Balance Sheets of these VIEs discussedthe Subsidiary Registrants for balances due to or due from related parties. Material amounts related to transactions with related parties included in the Consolidated Statements of Operations and Comprehensive Income are presented in the following paragraphstable.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Duke Energy Carolinas | | | | | |
Corporate governance and shared service expenses(a) | $ | 894 | | | $ | 753 | | | $ | 841 | |
Indemnification coverages(b) | 24 | | | 20 | | | 20 | |
Joint Dispatch Agreement (JDA) revenue(c) | 41 | | | 25 | | | 60 | |
JDA expense(c) | 207 | | | 114 | | | 186 | |
Intercompany natural gas purchases(d) | 11 | | | 15 | | | 15 | |
Progress Energy | | | | | |
Corporate governance and shared service expenses(a) | $ | 856 | | | $ | 715 | | | $ | 778 | |
Indemnification coverages(b) | 41 | | | 36 | | | 37 | |
JDA revenue(c) | 207 | | | 114 | | | 186 | |
JDA expense(c) | 41 | | | 25 | | | 60 | |
Intercompany natural gas purchases(d) | 75 | | | 75 | | | 76 | |
Duke Energy Progress | | | | | |
Corporate governance and shared service expenses(a) | $ | 504 | | | $ | 420 | | | $ | 462 | |
Indemnification coverages(b) | 19 | | | 17 | | | 15 | |
JDA revenue(c) | 207 | | | 114 | | | 186 | |
JDA expense(c) | 41 | | | 25 | | | 60 | |
Intercompany natural gas purchases(d) | 75 | | | 75 | | | 76 | |
Duke Energy Florida | | | | | |
Corporate governance and shared service expenses(a) | $ | 352 | | | $ | 295 | | | $ | 316 | |
Indemnification coverages(b) | 22 | | | 19 | | | 22 | |
Duke Energy Ohio | | | | | |
Corporate governance and shared service expenses(a) | $ | 329 | | | $ | 326 | | | $ | 354 | |
Indemnification coverages(b) | 4 | | | 4 | | | 4 | |
Duke Energy Indiana | | | | | |
Corporate governance and shared service expenses(a) | $ | 409 | | | $ | 401 | | | $ | 412 | |
Indemnification coverages(b) | 8 | | | 8 | | | 7 | |
Piedmont | | | | | |
Corporate governance and shared service expenses(a) | $ | 139 | | | $ | 140 | | | $ | 138 | |
Indemnification coverages(b) | 3 | | | 3 | | | 3 | |
Intercompany natural gas sales(d) | 86 | | | 90 | | | 91 | |
Natural gas storage and transportation costs(e) | 22 | | | 23 | | | 23 | |
(a)The Subsidiary Registrants are nonrecoursecharged 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 on the 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 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 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 Consolidated Statements of Operations and Comprehensive Income. These intercompany revenues and expenses are eliminated in consolidation.
(e)Piedmont has related party transactions as a customer of its equity method investments in Pine Needle, Hardy Storage, and Cardinal natural gas storage and transportation facilities. These expenses are included in Cost of natural gas on Piedmont's Consolidated Statements of Operations and Comprehensive Income.
| | | | | |
FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
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 and their proportionate share of certain charged expenses. See Note 6 for more information regarding money pool. These transactions of the Subsidiary Registrants are incurred in the ordinary course of business and are eliminated in consolidation.
As discussed in Note 17, 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 do include a subordinated note from CRC for a portion of the purchase price.
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 |
December 31, 2021 | | | | | | | |
Intercompany income tax receivable | $ | — | | $ | — | | $ | — | | $ | 40 | | $ | 19 | | $ | — | | $ | — | |
Intercompany income tax payable | 62 | | — | | 84 | | — | | — | | 10 | | 27 | |
| | | | | | | |
December 31, 2020 | | | | | | | |
Intercompany income tax receivable | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 9 | | $ | 10 | |
Intercompany income tax payable | 31 | | 33 | | 46 | | 35 | | 2 | | — | | — | |
14. 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 derivatives 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 Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the 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. The registrants have no requirementRegistrants 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 provide liquiditylock in components of current market interest rates. These instruments are later terminated prior to purchase assets of or guarantee performance of these VIEs unless noted inupon the following paragraphs.
No financial support was provided to anyissuance of the consolidated VIEs duringcorresponding debt.
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 AOCI for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, 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 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 or is expected to be providedcontracts 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 on the Duke Energy Registrant's Consolidated Statements of Operations and Comprehensive Income.
| | | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
The following tables show notional amounts of outstanding derivatives related to interest rate risk.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Indiana | | Ohio |
Cash flow hedges | $ | 2,415 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Undesignated contracts | 1,177 | | | 350 | | | 500 | | | 500 | | | 300 | | | 27 | |
Total notional amount(a) | $ | 3,592 | | | $ | 350 | | | $ | 500 | | | $ | 500 | | | $ | 300 | | | $ | 27 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | Duke | | | | Duke | | | | Duke |
| Duke | | Energy | | Progress | | Energy | | | | Energy |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | | | 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 $665 million in cash flow hedges as of December 31, 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 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 that wastransaction, 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 income (loss) for the year ended December 31, 2021, 2020 and 2019, were not previously contractually required.material. Duke Energy’s commodity derivatives designated as hedges include long-term electricity sales in the Commercial Renewables segment.
Receivables Financing – DERF/DEPR/DEFRUndesignated Contracts
DERF, DEPRFor the Subsidiary Registrants, bulk power electricity and DEFRnatural 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 bankruptcy remote, special purpose subsidiarieslargely 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 cost volatility for customers.
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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | | | Energy | | Energy | | |
| Energy | | Carolinas | | Energy | | Progress | | | | Ohio | | Indiana | | Piedmont |
Electricity (GWh)(a) | 22,344 | | | — | | | — | | | — | | | | | 1,681 | | | 10,688 | | | — | |
Natural gas (millions of Dth) | 823 | | | 264 | | | 215 | | | 215 | | | | | — | | | 8 | | | 336 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 Dth) | 678 | | | 145 | | | 158 | | | 158 | | | | | — | | | 2 | | | 373 | |
(a) Duke Energy includes 9,975 GWh and 22,048 GWh related to cash flow hedges as of December 31, 2021, and 2020, respectively.
| | | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED IN THE 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 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 | | December 31, 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 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 199 | | | $ | 99 | | | $ | 72 | | | $ | 72 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Noncurrent | | 113 | | | 63 | | | 50 | | | 50 | | | — | | | — | | | — | | | — | |
Total Derivative Assets – Commodity Contracts | | $ | 312 | | | $ | 162 | | | $ | 122 | | | $ | 122 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 3 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total Derivative Assets – Interest Rate Contracts | | $ | 8 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Derivative Assets | | $ | 320 | | | $ | 162 | | | $ | 124 | | | $ | 124 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | December 31, 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 | | $ | 27 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 117 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 72 | | | $ | 18 | | | $ | 19 | | | $ | 5 | | | $ | 14 | | | $ | — | | | $ | 13 | | | $ | 21 | |
Noncurrent | | 132 | | | 9 | | | 5 | | | 5 | | | — | | | — | | | — | | | 118 | |
Total Derivative Liabilities – Commodity Contracts | | $ | 348 | | | $ | 27 | | | $ | 24 | | | $ | 10 | | | $ | 14 | | | $ | — | | | $ | 13 | | | $ | 139 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 75 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 21 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 10 | | | 8 | | | — | | | — | | | — | | | 1 | | | — | | | — | |
Noncurrent | | 18 | | | — | | | — | | | — | | | — | | | 4 | | | 14 | | | — | |
Total Derivative Liabilities – Interest Rate Contracts | | $ | 124 | | | $ | 8 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | | | $ | 14 | | | $ | — | |
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| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Derivative Liabilities | | $ | 472 | | | $ | 35 | | | $ | 24 | | | $ | 10 | | | $ | 14 | | | $ | 5 | | | $ | 27 | | | $ | 139 | |
| | | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 |
Commodity Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 14 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 70 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 30 | | | $ | 13 | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 15 | |
Noncurrent | | 137 | | | 3 | | | 27 | | | 12 | | | — | | | — | | | — | | | 107 | |
Total Derivative Liabilities – Commodity Contracts | | $ | 251 | | | $ | 16 | | | $ | 29 | | | $ | 14 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 122 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 15 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 48 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 5 | | | 4 | | | — | | | — | | | — | | | 1 | | | — | | | — | |
Noncurrent | | 5 | | | — | | | — | | | — | | | — | | | 5 | | | — | | | — | |
Total Derivative Liabilities – Interest Rate Contracts | | $ | 73 | | | $ | 4 | | | $ | — | | | $ | — | | | $ | — | | | $ | 6 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Derivative Liabilities | | $ | 324 | | | $ | 20 | | | $ | 29 | | | $ | 14 | | | $ | — | | | $ | 6 | | | $ | 1 | | | $ | 122 | |
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FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The gross 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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Assets | | December 31, 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 | | $ | 204 | | | $ | 99 | | | $ | 74 | | | $ | 74 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Gross amounts offset | | (25) | | | (16) | | | (9) | | | (9) | | | — | | | — | | | — | | | — | |
Net amounts presented in Current Assets: Other | | $ | 179 | | | $ | 83 | | | $ | 65 | | | $ | 65 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 116 | | | $ | 63 | | | $ | 50 | | | $ | 50 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Gross amounts offset | | (23) | | | (15) | | | (8) | | | (8) | | | — | | | — | | | — | | | — | |
Net amounts presented in Other Noncurrent Assets: Other | | $ | 93 | | | $ | 48 | | | $ | 42 | | | $ | 42 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | December 31, 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 | | $ | 184 | | | $ | 26 | | | $ | 19 | | | $ | 5 | | | $ | 14 | | | $ | 1 | | | $ | 13 | | | $ | 21 | |
Gross amounts offset | | (11) | | | (6) | | | (5) | | | (5) | | | — | | | — | | | — | | | — | |
Net amounts presented in Current Liabilities: Other | | $ | 173 | | | $ | 20 | | | $ | 14 | | | $ | — | | | $ | 14 | | | $ | 1 | | | $ | 13 | | | $ | 21 | |
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 288 | | | $ | 9 | | | $ | 5 | | | $ | 5 | | | $ | — | | | $ | 4 | | | $ | 14 | | | $ | 118 | |
Gross amounts offset | | (12) | | | (8) | | | (5) | | | (5) | | | — | | | — | | | — | | | — | |
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 276 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 14 | | | $ | 118 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
15. INVESTMENTS IN DEBT AND EQUITY SECURITIES
Duke Energy’s investments in debt and equity securities are primarily comprised of investments held in (i) the NDTF at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR(ii) the grantor trusts at Duke Energy Progress, Duke Energy Florida and DEFRDuke Energy Indiana related to OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as AFS and investments in equity securities as FV-NI.
For investments in debt securities classified as AFS, the unrealized gains and losses are wholly ownedincluded 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 the majority of investments in debt and equity securities as long term, unless otherwise noted.
Investment Trusts
The investments within the 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 securities within the Investment Trusts are recognized immediately and deferred to regulatory 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 has a credit loss. The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value is related to a credit loss. If a credit loss exists, the unrealized credit loss is included in earnings. There were no material credit losses as of December 31, 2021, and 2020.
Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Consolidated Balance Sheets.
| | | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 160 | | | $ | — | | | $ | — | | | $ | 177 | |
Equity securities | 4,905 | | | 43 | | | 7,350 | | | 4,138 | | | 54 | | | 6,235 | |
Corporate debt securities | 39 | | | 6 | | | 829 | | | 76 | | | 1 | | | 806 | |
Municipal bonds | 14 | | | 1 | | | 314 | | | 22 | | | — | | | 370 | |
U.S. government bonds | 31 | | | 12 | | | 1,568 | | | 51 | | | — | | | 1,361 | |
Other debt securities | 3 | | | 1 | | | 180 | | | 8 | | | — | | | 180 | |
Total NDTF Investments | $ | 4,992 | | | $ | 63 | | | $ | 10,401 | | | $ | 4,295 | | | $ | 55 | | | $ | 9,129 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 36 | | | $ | — | | | $ | — | | | $ | 127 | |
Equity securities | 36 | | | — | | | 156 | | | 79 | | | — | | | 146 | |
Corporate debt securities | 2 | | | 1 | | | 119 | | | 8 | | | — | | | 110 | |
Municipal bonds | 3 | | | 1 | | | 80 | | | 5 | | | — | | | 86 | |
U.S. government bonds | — | | | — | | | 56 | | | — | | | — | | | 42 | |
Other debt securities | — | | | 1 | | | 45 | | | — | | | — | | | 47 | |
Total Other Investments | $ | 41 | | | $ | 3 | | | $ | 492 | | | $ | 92 | | | $ | — | | | $ | 558 | |
Total Investments | $ | 5,033 | | | $ | 66 | | | $ | 10,893 | | | $ | 4,387 | | | $ | 55 | | | $ | 9,687 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 724 | | | $ | 366 | | | $ | 172 | |
Realized losses | 141 | | | 174 | | | 151 | |
AFS: | | | | | |
Realized gains | 56 | | | 96 | | | 94 | |
Realized losses | 54 | | | 51 | | | 67 | |
DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 53 | | | $ | — | | | $ | — | | | $ | 30 | |
Equity securities | 2,887 | | | 19 | | | 4,265 | | | 2,442 | | | 23 | | | 3,685 | |
Corporate debt securities | 24 | | | 4 | | | 506 | | | 49 | | | 1 | | | 510 | |
Municipal bonds | 2 | | | — | | | 48 | | | 6 | | | — | | | 91 | |
U.S. government bonds | 16 | | | 3 | | | 712 | | | 25 | | | — | | | 475 | |
Other debt securities | 3 | | | 1 | | | 175 | | | 7 | | | — | | | 174 | |
Total NDTF Investments | $ | 2,932 | | | $ | 27 | | | $ | 5,759 | | | $ | 2,529 | | | $ | 24 | | | $ | 4,965 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 440 | | | $ | 64 | | | $ | 113 | |
Realized losses | 96 | | | 99 | | | 107 | |
AFS: | | | | | |
Realized gains | 38 | | | 60 | | | 55 | |
Realized losses | 37 | | | 37 | | | 38 | |
PROGRESS ENERGY
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 107 | | | $ | — | | | $ | — | | | $ | 147 | |
Equity securities | 2,018 | | | 24 | | | 3,085 | | | 1,696 | | | 31 | | | 2,550 | |
Corporate debt securities | 15 | | | 2 | | | 323 | | | 27 | | | — | | | 296 | |
Municipal bonds | 12 | | | 1 | | | 266 | | | 16 | | | — | | | 279 | |
U.S. government bonds | 15 | | | 9 | | | 856 | | | 26 | | | — | | | 886 | |
Other debt securities | — | | | — | | | 5 | | | 1 | | | — | | | 6 | |
Total NDTF Investments | $ | 2,060 | | | $ | 36 | | | $ | 4,642 | | | $ | 1,766 | | | $ | 31 | | | $ | 4,164 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 20 | | | $ | — | | | $ | — | | | $ | 106 | |
Municipal bonds | 2 | | | — | | | 26 | | | 3 | | | — | | | 26 | |
Total Other Investments | $ | 2 | | | $ | — | | | $ | 46 | | | $ | 3 | | | $ | — | | | $ | 132 | |
Total Investments | $ | 2,062 | | | $ | 36 | | | $ | 4,688 | | | $ | 1,769 | | | $ | 31 | | | $ | 4,296 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 284 | | | $ | 302 | | | $ | 59 | |
Realized losses | 45 | | | 75 | | | 44 | |
AFS: | | | | | |
Realized gains | 16 | | | 24 | | | 36 | |
Realized losses | 14 | | | 13 | | | 29 | |
| | | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 94 | | | $ | — | | | $ | — | | | $ | 76 | |
Equity securities | 1,915 | | | 23 | | | 2,970 | | | 1,617 | | | 31 | | | 2,459 | |
Corporate debt securities | 15 | | | 2 | | | 282 | | | 27 | | | — | | | 296 | |
Municipal bonds | 12 | | | 1 | | | 266 | | | 16 | | | — | | | 279 | |
U.S. government bonds | 15 | | | 3 | | | 472 | | | 26 | | | — | | | 412 | |
Other debt securities | — | | | — | | | 5 | | | 1 | | | — | | | 6 | |
Total NDTF Investments | $ | 1,957 | | | $ | 29 | | | $ | 4,089 | | | $ | 1,687 | | | $ | 31 | | | $ | 3,528 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | |
Total Other Investments | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | |
Total Investments | $ | 1,957 | | | $ | 29 | | | $ | 4,105 | | | $ | 1,687 | | | $ | 31 | | | $ | 3,529 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 283 | | | $ | 52 | | | $ | 38 | |
Realized losses | 44 | | | 59 | | | 33 | |
AFS: | | | | | |
Realized gains | 15 | | | 24 | | | 7 | |
Realized losses | 13 | | | 13 | | | 5 | |
DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 13 | | | $ | — | | | $ | — | | | $ | 71 | |
Equity securities | 103 | | | 1 | | | 115 | | | 79 | | | — | | | 91 | |
Corporate debt securities | — | | | — | | | 41 | | | — | | | — | | | — | |
| | | | | | | | | | | |
U.S. government bonds | — | | | 6 | | | 384 | | | — | | | — | | | 474 | |
| | | | | | | | | | | |
Total NDTF Investments(a) | $ | 103 | | | $ | 7 | | | $ | 553 | | | $ | 79 | | | $ | — | | | $ | 636 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 1 | |
Municipal bonds | 2 | | | — | | | 26 | | | 3 | | | — | | | 26 | |
Total Other Investments | $ | 2 | | | $ | — | | | $ | 29 | | | $ | 3 | | | $ | — | | | $ | 27 | |
Total Investments | $ | 105 | | | $ | 7 | | | $ | 582 | | | $ | 82 | | | $ | — | | | $ | 663 | |
(a) During the years ended December 31, 2021, and 2020, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioning activity of the Crystal River Unit 3.
| | | | | |
FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 1 | | | $ | 250 | | | $ | 21 | |
Realized losses | 1 | | | 16 | | | 11 | |
AFS: | | | | | |
Realized gains | 1 | | | — | | | 29 | |
Realized losses | 1 | | | — | | | 24 | |
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.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | |
Equity securities | 6 | | | — | | | 97 | | | 58 | | | — | | | 97 | |
Corporate debt securities | — | | | — | | | 6 | | | — | | | — | | | 3 | |
Municipal bonds | 1 | | | 1 | | | 46 | | | 1 | | | — | | | 38 | |
U.S. government bonds | — | | | — | | | 12 | | | — | | | — | | | 4 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total Investments | $ | 7 | | | $ | 1 | | | $ | 161 | | | $ | 59 | | | $ | — | | | $ | 143 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were immaterial.
DEBT SECURITY MATURITIES
The table below summarizes the maturity date for debt securities.
| | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 159 | | $ | 3 | | $ | 138 | | $ | 31 | | $ | 107 | | $ | 7 | |
Due after one through five years | 957 | | 337 | | 546 | | 256 | | 290 | | 25 | |
Due after five through 10 years | 550 | | 226 | | 248 | | 231 | | 17 | | 10 | |
Due after 10 years | 1,525 | | 875 | | 544 | | 507 | | 37 | | 22 | |
Total | $ | 3,191 | | $ | 1,441 | | $ | 1,476 | | $ | 1,025 | | $ | 451 | | $ | 64 | |
16. FAIR VALUE MEASUREMENTS
Fair value is the exchange price to sell an asset or transfer a liability companies with separate legal existencein 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 the 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 as defined by GAAP. Certain investments are not categorized within the fair value hierarchy. These investments are measured at fair value using the net asset value per share practical expedient. The net asset value is derived based on the investment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the 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.
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
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 NYSE and Nasdaq Stock Market. Foreign equity prices are translated from their parent companiestrading 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 their assetscredit 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. Commodity derivatives with observable forward curves are classified as Level 2. If forward price curves are not generally availableobservable 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 creditorsestimate the fair value of their parent companies. Onnatural gas commodity contracts by a revolvingmarket 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 11 for a discussion of the valuation of goodwill and intangible assets.
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis DERF, DEPRon the Consolidated Balance Sheets. Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 14. See Note 15 for additional information related to investments by major security type for the Duke Energy Registrants.
| | | | | | | | | | | | | | | | | |
| December 31, 2021 |
(in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | Not Categorized |
NDTF cash and cash equivalents | $ | 160 | | $ | 160 | | $ | — | | $ | — | | $ | — | |
NDTF equity securities | 7,350 | | 7,300 | | — | | — | | 50 | |
NDTF debt securities | 2,891 | | 967 | | 1,924 | | — | | — | |
Other equity securities | 156 | | 156 | | — | | — | | — | |
Other debt securities | 300 | | 45 | | 255 | | — | | — | |
Other cash and cash equivalents | 36 | | 36 | | — | | — | | — | |
Derivative assets | 320 | | 3 | | 293 | | 24 | | — | |
Total assets | 11,213 | | 8,667 | | 2,472 | | 24 | | 50 | |
| | | | | |
Derivative liabilities | (472) | | (13) | | (314) | | (145) | | — | |
Net assets (liabilities) | $ | 10,741 | | $ | 8,654 | | $ | 2,158 | | $ | (121) | | $ | 50 | |
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
| | | | | | | | | | | | | | | | | |
| 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 | |
The following table provides reconciliations of beginning and DEFR buy certain accounts receivable arisingending balances of assets and liabilities measured at fair value using Level 3 measurements.
| | | | | | | | | | | | | | | | | | | |
| | | Derivatives (net) | | |
| | | Years Ended December 31, | | |
| | | | | | | | | | | |
(in millions) | | | 2021 | | | | | | 2020 | | |
Balance at beginning of period | | | $ | (77) | | | | | | | $ | (102) | | | |
| | | | | | | | | | | |
Total pretax realized or unrealized losses included in comprehensive income | | | (75) | | | | | | | (84) | | | |
| | | | | | | | | | | |
Purchases, sales, issuances and settlements: | | | | | | | | | | | |
Purchases | | | 21 | | | | | | | 14 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Settlements | | | (5) | | | | | | | (19) | | | |
Net transfers Out of Level 3(a) | | | — | | | | | | | 117 | | | |
Total gains (losses) included on the Consolidated Balance Sheet | | | 15 | | | | | | | (3) | | | |
Balance at end of period | | | $ | (121) | | | | | | | $ | (77) | | | |
| | | | | | | | | | | |
(a)Transferred from Level 3 to Level 2 because observable market data became available.
DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the sale of electricityConsolidated Balance Sheets.
| | | | | | | | | | | | | | | |
| December 31, 2021 |
(in millions) | Total Fair Value | Level 1 | Level 2 | | Not Categorized |
NDTF cash and cash equivalents | $ | 53 | | $ | 53 | | $ | — | | | $ | — | |
NDTF equity securities | 4,265 | | 4,215 | | — | | | 50 | |
NDTF debt securities | 1,441 | | 339 | | 1,102 | | | — | |
| | | | | |
Derivative assets | 162 | | — | | 162 | | | — | |
Total assets | 5,921 | | 4,607 | | 1,264 | | | 50 | |
Derivative liabilities | (35) | | — | | (35) | | | — | |
Net assets | $ | 5,886 | | $ | 4,607 | | $ | 1,229 | | | $ | 50 | |
| | | | | | | | | | | | | | | |
| 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 | |
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
PROGRESS ENERGY
The following table provides recorded balances for assets and related services from their parent companies.liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
DERF, DEPR | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 107 | | $ | 107 | | $ | — | | | | $ | 147 | | $ | 147 | | $ | — | | |
NDTF equity securities | 3,085 | | 3,085 | | — | | | | 2,550 | | 2,550 | | — | | |
NDTF debt securities | 1,450 | | 628 | | 822 | | | | 1,467 | | 682 | | 785 | | |
Other debt securities | 26 | | — | | 26 | | | | 26 | | — | | 26 | | |
Other cash and cash equivalents | 20 | | 20 | | — | | | | 106 | | 106 | | | |
Derivative assets | 124 | | — | | 124 | | | | 33 | | — | | 33 | | |
Total assets | 4,812 | | 3,840 | | 972 | | | | 4,329 | | 3,485 | | 844 | | |
| | | | | | | | | |
Derivative liabilities | (24) | | — | | (24) | | | | (29) | | — | | (29) | | |
Net assets | $ | 4,788 | | $ | 3,840 | | $ | 948 | | | | $ | 4,300 | | $ | 3,485 | | $ | 815 | | |
DUKE ENERGY PROGRESS
The following table provides recorded balances for assets and DEFR borrow amounts under credit facilities to buy these receivables. Borrowing availability fromliabilities measured at fair value on a recurring basis on the credit facilities is limited toConsolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 94 | | $ | 94 | | $ | — | | | | $ | 76 | | $ | 76 | | $ | — | | |
NDTF equity securities | 2,970 | | 2,970 | | — | | | | 2,459 | | 2,459 | | — | | |
NDTF debt securities | 1,025 | | 289 | | 736 | | | | 993 | | 237 | | 756 | | |
| | | | | | | | | |
Other cash and cash equivalents | 16 | | 16 | | — | | | | 1 | | 1 | | — | | |
Derivative assets | 124 | | — | | 124 | | | | 33 | | — | | 33 | | |
Total assets | 4,229 | | 3,369 | | 860 | | | | 3,562 | | 2,773 | | 789 | | |
Derivative liabilities | (10) | | — | | (10) | | | | (14) | | — | | (14) | | |
Net assets | $ | 4,219 | | $ | 3,369 | | $ | 850 | | | | $ | 3,548 | | $ | 2,773 | | $ | 775 | | |
DUKE ENERGY FLORIDA
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the amount of qualified receivables purchased. Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 13 | | $ | 13 | | $ | — | | | $ | 71 | | $ | 71 | | $ | — | | |
NDTF equity securities | 115 | | 115 | | — | | | 91 | | 91 | | — | | |
NDTF debt securities | 425 | | 339 | | 86 | | | 474 | | 445 | | 29 | | |
Other debt securities | 26 | | — | | 26 | | | 26 | | — | | 26 | | |
Other cash and cash equivalents | 3 | | 3 | | — | | | 1 | | 1 | | — | | |
| | | | | | | | |
Total assets | 582 | | 470 | | 112 | | | 663 | | 608 | | 55 | | |
| | | | | | | | |
Derivative liabilities | (14) | | — | | (14) | | | — | | — | | — | | |
Net assets | $ | 568 | | $ | 470 | | $ | 98 | | | $ | 663 | | $ | 608 | | $ | 55 | | |
DUKE ENERGY OHIO
The sole source of funds to satisfy the related debt obligations is cash collections from the receivables. Amounts borrowed under the credit facilities are reflectedrecorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets as Long-Term Debt.were not material at December 31, 2021, and 2020.
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
DUKE ENERGY INDIANA
The most significant activity that impactsfollowing table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the economic performanceConsolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 97 | | $ | 97 | | $ | — | | $ | — | | | $ | 97 | | $ | 97 | | $ | — | | $ | — | |
Other debt securities | 64 | | — | | 64 | | — | | | 45 | | — | | 45 | | — | |
Other cash equivalents | — | | — | | — | | — | | | 1 | | 1 | | — | | — | |
Derivative assets | 23 | | 1 | | — | | 22 | | | 6 | | — | | — | | 6 | |
Total assets | 184 | | 98 | | 64 | | 22 | | | 149 | | 98 | | 45 | | 6 | |
Derivative liabilities | (27) | | (13) | | (14) | | — | | | (1) | | (1) | | — | | — | |
Net assets | $ | 157 | | $ | 85 | | $ | 50 | | $ | 22 | | | $ | 148 | | $ | 97 | | $ | 45 | | $ | 6 | |
The following table provides a reconciliation of DERF, DEPRbeginning and DEFR areending balances of assets and liabilities measured at fair value using Level 3 measurements.
| | | | | | | | | | | |
| Derivatives (net) |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 |
Balance at beginning of period | $ | 6 | | | $ | 11 | |
| | | |
| | | |
Purchases, sales, issuances and settlements: | | | |
Purchases | 18 | | | 10 | |
| | | |
| | | |
Settlements | (16) | | | (13) | |
| | | |
Total gains (losses) included on the Consolidated Balance Sheet | 14 | | | (2) | |
Balance at end of period | $ | 22 | | | $ | 6 | |
PIEDMONT
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the decisions madeConsolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
(in millions) | Total Fair Value | Level 1 | Level 2 | | | Total Fair Value | Level 1 | | Level 2 |
| | | | | | | | | |
| | | | | | | | | |
Derivative assets | $ | 3 | | $ | 3 | | $ | — | | | | $ | 1 | | $ | 1 | | | $ | — | |
| | | | | | | | | |
Derivative liabilities | (139) | | — | | (139) | | | | (122) | | — | | | (122) | |
Net (liabilities) assets | $ | (136) | | $ | 3 | | $ | (139) | | | | $ | (121) | | $ | 1 | | | $ | (122) | |
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) |
| | Year Ended December 31, |
(in millions) | | | 2020 |
Balance at beginning of period | | | $ | (117) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Net transfers Out of Level 3(a) | | | 117 | |
| | | |
Balance at end of period | | | $ | — | |
(a) Transferred from Level 3 to manage delinquent receivables.Level 2 because observable market data became available.
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Carolinas, DukeRegistrants' derivatives classified as Level 3.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | |
| | | | | | | Weighted |
| Fair Value | | | | | | Average |
Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | Range |
Duke Energy | | | | | | | |
Electricity contracts | $ | (145) | | RTO forward pricing | Forward electricity curves – price per MWh | $ | 19.04 | | – | $ | 139.11 | | $ | 37.57 | |
Duke Energy Ohio | | | | | | | |
FTRs | 2 | | RTO auction pricing | FTR price – per MWh | 0.06 | | – | 1.79 | | 0.96 | |
Duke Energy Indiana | | | | | | | |
FTRs | 22 | | RTO auction pricing | FTR price – per MWh | (1.18) | | – | 13.11 | | 2.68 | |
| | | | | | | |
| | | | | | | |
Duke Energy | | | | | | | |
Total Level 3 derivatives | $ | (121) | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
(in millions) | Book Value | | Fair Value | | Book Value | | Fair Value |
Duke Energy(a) | $ | 63,835 | | | $ | 69,683 | | | $ | 59,863 | | | $ | 69,292 | |
Duke Energy Carolinas | 13,275 | | | 15,101 | | | 12,218 | | | 14,917 | |
Progress Energy | 20,823 | | | 23,751 | | | 19,264 | | | 23,470 | |
Duke Energy Progress | 10,249 | | | 11,252 | | | 9,258 | | | 10,862 | |
Duke Energy Florida | 8,482 | | | 9,772 | | | 7,915 | | | 9,756 | |
Duke Energy Ohio | 3,193 | | | 3,570 | | | 3,089 | | | 3,650 | |
Duke Energy Indiana | 4,323 | | | 5,067 | | | 4,091 | | | 5,204 | |
Piedmont | 2,968 | | | 3,278 | | | 2,780 | | | 3,306 | |
(a) Book value of long-term debt includes $1.25 billion as of December 31, 2021, and $1.3 billion as of December 31, 2020, of unamortized debt discount and premium, net in purchase accounting adjustments related to the mergers with Progress Energy Progress and Duke Energy FloridaPiedmont that are consideredexcluded from fair value of long-term debt.
At both December 31, 2021, and December 31, 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 primary beneficiaries and consolidate DERF, DEPR and DEFR, respectively, as they make those decisions.short-term nature of these instruments and/or because the stated rates approximate market rates.
Receivables Financing – CRCCRC
| | | | | |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
17. 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 bankruptcy remote, special purposeVIE considers contracts with an entity, indirectly owned by Duke Energy. On a revolving basis, CRC buys certain accounts receivable arising fromcredit support for an entity, the saleadequacy of electricity, natural gasthe equity investment of an entity 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 limitedrelationship of voting power to the amount of qualified receivables sold to CRC. The sole source of funds to satisfyequity invested in an entity. This analysis is performed either upon the related debt obligation is cash collections from the receivables. Amounts borrowed under the credit facility are reflected on Duke Energy's 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 approximately 75 percent cash and 25 percent in the formcreation of a subordinated note from CRC. The subordinated notelegal entity or upon the occurrence of an event requiring reevaluation, 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 a retained interest in the receivables sold. Dependingbased on collection experience, additional equity infusions to CRC may be required by Duke Energy to maintain a minimum equity balance of $3 million.
|
| |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
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 are not performed 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 outlines amounts and expiration dates of the credit facilities described above. |
| | | | | | | | | | | | | | | |
| Duke Energy |
| | | Duke Energy |
| | Duke Energy |
| | Duke Energy |
|
| | | Carolinas |
| | Progress |
| | Florida |
|
| CRC |
| | DERF |
| | DEPR |
| | DEFR |
|
Expiration date | December 2020 |
| | December 2020 |
| | February 2021 |
| | April 2021 |
|
Credit facility amount (in millions) | $ | 325 |
| | $ | 450 |
| | $ | 300 |
| | $ | 225 |
|
Amounts borrowed at December 31, 2018 | 325 |
| | 450 |
| | 300 |
| | 225 |
|
Amounts borrowed at December 31, 2017 | 325 |
| | 450 |
| | 300 |
| | 225 |
|
Restricted Receivables at December 31, 2018 | 564 |
| | 699 |
| | 547 |
| | 357 |
|
Restricted Receivables at December 31, 2017 | 545 |
| | 640 |
| | 459 |
| | 317 |
|
Nuclear Asset-Recovery Bonds – 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.
In 2016, DEFPF issued 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. For additional information see Notes 4 and 6.
DEFPF is considered a VIE primarily because the equity capitalization is insufficient to support its operations. Duke Energy Floridawhat party 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.
The following table summarizes the impact of DEFPF on Duke Energy Florida's Consolidated Balance Sheets. |
| | | | | | |
(in millions) | December 31, 2018 |
| December 31, 2017 |
|
Receivables of VIEs | $ | 5 |
| $ | 4 |
|
Regulatory Assets: Current | 52 |
| 51 |
|
Current Assets: Other | 39 |
| 40 |
|
Other Noncurrent Assets: Regulatory assets | 1,041 |
| 1,091 |
|
Current Liabilities: Other | 10 |
| 10 |
|
Current maturities of long-term debt | 53 |
| 53 |
|
Long-Term Debt | 1,111 |
| 1,164 |
|
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 solar energy systems eligible for tax credits. The activities that most significantly impacted theimpact its economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs and EPC agreements, and decisions associated with ongoing operations and maintenance-related activities. Duke Energy(ii) what party has rights to receive benefits or is consideredobligated to absorb losses that could potentially be significant to the primary beneficiary and consolidates the entities as it is responsible for all of these decisions.
|
| |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
VIE. The table below presents material balances reported on Duke Energy's Consolidated Balance Sheets related to renewables VIEs. |
| | | | | | |
(in millions) | December 31, 2018 |
| December 31, 2017 |
|
Current Assets: Other | $ | 123 |
| $ | 174 |
|
Property, plant and equipment, cost | 4,007 |
| 3,923 |
|
Accumulated depreciation and amortization | (698 | ) | (591 | ) |
Other Noncurrent Assets: Other | 261 |
| 50 |
|
Current maturities of long-term debt | 174 |
| 170 |
|
Long-Term Debt | 1,587 |
| 1,700 |
|
Other Noncurrent Liabilities: Deferred income taxes | — |
| (148 | ) |
Other Noncurrent Liabilities: Asset Retirement Obligations | 106 |
| 83 |
|
Other Noncurrent Liabilities: Other | 212 |
| 241 |
|
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| Duke Energy | | Duke |
| | Duke |
|
| Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
(in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 93 |
| | $ | 118 |
|
Investments in equity method unconsolidated affiliates | 822 |
| | 190 |
| | 48 |
| | 1,060 |
| | — |
| | — |
|
Total assets | $ | 822 |
| | $ | 190 |
| | $ | 48 |
| | $ | 1,060 |
| | $ | 93 |
| | $ | 118 |
|
Taxes accrued | (1 | ) | | — |
| | — |
| | (1 | ) | | — |
| | — |
|
Other current liabilities | — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
|
Deferred income taxes | 21 |
| | — |
| | — |
| | 21 |
| | — |
| | — |
|
Other noncurrent liabilities | — |
| | — |
| | 12 |
| | 12 |
| | — |
| | — |
|
Total liabilities | $ | 20 |
| | $ | — |
| | $ | 16 |
| | $ | 36 |
| | $ | — |
| | $ | — |
|
Net assets | $ | 802 |
| | $ | 190 |
| | $ | 32 |
| | $ | 1,024 |
| | $ | 93 |
| | $ | 118 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| Duke Energy | | Duke |
| | Duke |
|
| Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
|
(in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
|
Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 87 |
| | $ | 106 |
|
Investments in equity method unconsolidated affiliates | 697 |
| | 180 |
| | 42 |
| | 919 |
| | — |
| | — |
|
Other noncurrent assets | 17 |
| | — |
| | — |
| | 17 |
| | — |
| | — |
|
Total assets | $ | 714 |
| | $ | 180 |
| | $ | 42 |
| | $ | 936 |
| | $ | 87 |
| | $ | 106 |
|
Taxes accrued | (29 | ) | | — |
| | — |
| | (29 | ) | | — |
| | — |
|
Other current liabilities | — |
| | — |
| | 4 |
| | 4 |
| | — |
| | — |
|
Deferred income taxes | 42 |
| | — |
| | — |
| | 42 |
| | — |
| | — |
|
Other noncurrent liabilities | — |
| | — |
| | 12 |
| | 12 |
| | — |
| | — |
|
Total liabilities | $ | 13 |
| | $ | — |
| | $ | 16 |
| | $ | 29 |
| | $ | — |
| | $ | — |
|
Net assets | $ | 701 |
| | $ | 180 |
| | $ | 26 |
| | $ | 907 |
| | $ | 87 |
| | $ | 106 |
|
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 is discussed below, and various guarantees, including Duke Energy's guarantee agreement to support its shareanalysis of the ACP revolving credit facility. Duke Energy's maximum exposure to loss under the terms of the guaranteeparty that consolidates a VIE is $677 million as of December 31, 2018. For more information on various guarantees, refer to Note 7.a continual reassessment.
Pipeline Investments
Piedmont owns a 21.49% investment in Cardinal, an intrastate pipeline located in North Carolina.
Duke Energy owns a 7.5% interest in Sabal Trail, a 517-mile interstate natural gas pipeline, which provides natural gas to Duke Energy Florida and Florida Power and Light.
Duke Energy recorded OTTIs of $25 million within Equity in earnings (losses) of unconsolidated affiliates on Duke Energy's Consolidated Statements of Operations for the year ended December 31, 2019, to completely impair its 24% ownership interest in Constitution.
Duke Energy owns a 47% interest in the ACP pipeline. In 2020, Duke Energy determined it would no longer continue its investment in the construction of the ACP pipeline. See Notes 3 and 7 for further information.
Storage Facilities
Piedmont owns a 45% interest in Pine Needle, an interstate LNG storage facility located in North Carolina, and a 50% interest in Hardy Storage, an underground interstate natural gas storage facility located in West Virginia.
Renewable Natural Gas Investments
Duke Energy owns a 29.68% investment in SustainRNG, a developer of renewable natural gas projects, and a 70% interest in Sustain T&W, SustainRNG's renewable natural gas project located in Georgia.
Commercial Renewables
DS Cornerstone, LLC, which owns wind farm projects in the U.S. was part of a sale of minority interest in a certain portion of renewable assets in 2019. See Note 1 for more information on the sale. Prior to the sale, Duke Energy had a 50% interest in DS Cornerstone, LLC. Subsequent to the sale, Duke Energy has a 26% interest in the investment.
In 2020, Duke Energy completed its acquisition of 70 distributed fuel cell projects from Bloom Energy Corporation, which approximates 43 MW of capacity serving commercial and industrial customers across the U.S. Duke Energy is not the primary beneficiary of the distributed fuel cell portfolio and does not consolidate these assets.
Other
Duke Energy has a 17.5% indirect economic ownership interest and a 25% board representation and voting rights interest in NMC, which owns and operates a methanol and MTBE business in Jubail, Saudi Arabia.
Significant Subsidiaries
For the year ended December 31, 2020, Duke Energy's investment in ACP met the requirements of S-X Rule 4-08(g) to provide summarized financial information. The following table provides summary information for ACP as required under S-X Rule 1-02(bb) for the period of significance and comparative prior year periods in Duke Energy's consolidated balance sheets and consolidated statements of operations. For the year ended December 31, 2021, there were no investments that met the significance requirements.
| | | | | | | | | | | | | | | |
(in millions) | | | | | December 31, 2020 |
| | | | | |
Current assets | | | | | $ | 43 | |
Noncurrent assets | | | | | 93 | |
Current liabilities | | | | | 1,965 | |
Noncurrent liabilities | | | | | 167 | |
| | | | | |
Membership interests | | | | | (1,996) | |
| | | | | |
| | | Years Ended December 31, |
| | | 2020 | | 2019 |
Net revenues | | | $ | — | | | $ | — | |
Operating loss | | | (4,612) | | | (5) | |
| | | | | |
Net (loss) income | | | (4,512) | | | 246 | |
| | | | | |
Net (loss) income attributable to Duke Energy | | | $ | (2,121) | | | $ | 116 | |
| | | | | |
| | | | | |
FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
13. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in accordance with the applicable state and federal commission regulations. Refer to the 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 in the Consolidated Statements of Operations and Comprehensive Income are presented in the following table.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
Duke Energy Carolinas | | | | | |
Corporate governance and shared service expenses(a) | $ | 894 | | | $ | 753 | | | $ | 841 | |
Indemnification coverages(b) | 24 | | | 20 | | | 20 | |
Joint Dispatch Agreement (JDA) revenue(c) | 41 | | | 25 | | | 60 | |
JDA expense(c) | 207 | | | 114 | | | 186 | |
Intercompany natural gas purchases(d) | 11 | | | 15 | | | 15 | |
Progress Energy | | | | | |
Corporate governance and shared service expenses(a) | $ | 856 | | | $ | 715 | | | $ | 778 | |
Indemnification coverages(b) | 41 | | | 36 | | | 37 | |
JDA revenue(c) | 207 | | | 114 | | | 186 | |
JDA expense(c) | 41 | | | 25 | | | 60 | |
Intercompany natural gas purchases(d) | 75 | | | 75 | | | 76 | |
Duke Energy Progress | | | | | |
Corporate governance and shared service expenses(a) | $ | 504 | | | $ | 420 | | | $ | 462 | |
Indemnification coverages(b) | 19 | | | 17 | | | 15 | |
JDA revenue(c) | 207 | | | 114 | | | 186 | |
JDA expense(c) | 41 | | | 25 | | | 60 | |
Intercompany natural gas purchases(d) | 75 | | | 75 | | | 76 | |
Duke Energy Florida | | | | | |
Corporate governance and shared service expenses(a) | $ | 352 | | | $ | 295 | | | $ | 316 | |
Indemnification coverages(b) | 22 | | | 19 | | | 22 | |
Duke Energy Ohio | | | | | |
Corporate governance and shared service expenses(a) | $ | 329 | | | $ | 326 | | | $ | 354 | |
Indemnification coverages(b) | 4 | | | 4 | | | 4 | |
Duke Energy Indiana | | | | | |
Corporate governance and shared service expenses(a) | $ | 409 | | | $ | 401 | | | $ | 412 | |
Indemnification coverages(b) | 8 | | | 8 | | | 7 | |
Piedmont | | | | | |
Corporate governance and shared service expenses(a) | $ | 139 | | | $ | 140 | | | $ | 138 | |
Indemnification coverages(b) | 3 | | | 3 | | | 3 | |
Intercompany natural gas sales(d) | 86 | | | 90 | | | 91 | |
Natural gas storage and transportation costs(e) | 22 | | | 23 | | | 23 | |
(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 on the 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 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 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 Consolidated Statements of Operations and Comprehensive Income. These intercompany revenues and expenses are eliminated in consolidation.
(e)Piedmont has related party transactions as a customer of its equity method investments in Pine Needle, Hardy Storage, and Cardinal natural gas storage and transportation facilities. These expenses are included in Cost of natural gas on Piedmont's Consolidated Statements of Operations and Comprehensive Income.
| | | | | |
FINANCIAL STATEMENTS | RELATED PARTY TRANSACTIONS |
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 and their proportionate share of certain charged expenses. See Note 6 for more information regarding money pool. These transactions of the Subsidiary Registrants are incurred in the ordinary course of business and are eliminated in consolidation.
As discussed in Note 17, 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 do include a subordinated note from CRC for a portion of the purchase price.
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 |
December 31, 2021 | | | | | | | |
Intercompany income tax receivable | $ | — | | $ | — | | $ | — | | $ | 40 | | $ | 19 | | $ | — | | $ | — | |
Intercompany income tax payable | 62 | | — | | 84 | | — | | — | | 10 | | 27 | |
| | | | | | | |
December 31, 2020 | | | | | | | |
Intercompany income tax receivable | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 9 | | $ | 10 | |
Intercompany income tax payable | 31 | | 33 | | 46 | | 35 | | 2 | | — | | — | |
14. 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 derivatives 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 Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the 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.
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 AOCI for the years ended December 31, 2021, 2020 and 2019, 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 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 or 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 on the Duke Energy Registrant's Consolidated Statements of Operations and Comprehensive Income.
| | | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
The following tables show notional amounts of outstanding derivatives related to interest rate risk.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Indiana | | Ohio |
Cash flow hedges | $ | 2,415 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Undesignated contracts | 1,177 | | | 350 | | | 500 | | | 500 | | | 300 | | | 27 | |
Total notional amount(a) | $ | 3,592 | | | $ | 350 | | | $ | 500 | | | $ | 500 | | | $ | 300 | | | $ | 27 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | Duke | | | | Duke | | | | Duke |
| Duke | | Energy | | Progress | | Energy | | | | Energy |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | | | 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 $665 million in cash flow hedges as of December 31, 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 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 income (loss) for the year ended December 31, 2021, 2020 and 2019, 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 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 cost volatility for customers.
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.
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| December 31, 2021 |
| | | Duke | | | | Duke | | | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | | | Energy | | Energy | | |
| Energy | | Carolinas | | Energy | | Progress | | | | Ohio | | Indiana | | Piedmont |
Electricity (GWh)(a) | 22,344 | | | — | | | — | | | — | | | | | 1,681 | | | 10,688 | | | — | |
Natural gas (millions of Dth) | 823 | | | 264 | | | 215 | | | 215 | | | | | — | | | 8 | | | 336 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 Dth) | 678 | | | 145 | | | 158 | | | 158 | | | | | — | | | 2 | | | 373 | |
(a) Duke Energy includes 9,975 GWh and 22,048 GWh related to cash flow hedges as of December 31, 2021, and 2020, respectively.
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FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED IN THE 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 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.
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Derivative Assets | | December 31, 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 | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 199 | | | $ | 99 | | | $ | 72 | | | $ | 72 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Noncurrent | | 113 | | | 63 | | | 50 | | | 50 | | | — | | | — | | | — | | | — | |
Total Derivative Assets – Commodity Contracts | | $ | 312 | | | $ | 162 | | | $ | 122 | | | $ | 122 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 3 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 2 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
Total Derivative Assets – Interest Rate Contracts | | $ | 8 | | | $ | — | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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| | | | | | | | | | | | | | | | |
Total Derivative Assets | | $ | 320 | | | $ | 162 | | | $ | 124 | | | $ | 124 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivative Liabilities | | December 31, 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 | | $ | 27 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 117 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 72 | | | $ | 18 | | | $ | 19 | | | $ | 5 | | | $ | 14 | | | $ | — | | | $ | 13 | | | $ | 21 | |
Noncurrent | | 132 | | | 9 | | | 5 | | | 5 | | | — | | | — | | | — | | | 118 | |
Total Derivative Liabilities – Commodity Contracts | | $ | 348 | | | $ | 27 | | | $ | 24 | | | $ | 10 | | | $ | 14 | | | $ | — | | | $ | 13 | | | $ | 139 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 75 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 21 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 10 | | | 8 | | | — | | | — | | | — | | | 1 | | | — | | | — | |
Noncurrent | | 18 | | | — | | | — | | | — | | | — | | | 4 | | | 14 | | | — | |
Total Derivative Liabilities – Interest Rate Contracts | | $ | 124 | | | $ | 8 | | | $ | — | | | $ | — | | | $ | — | | | $ | 5 | | | $ | 14 | | | $ | — | |
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| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Derivative Liabilities | | $ | 472 | | | $ | 35 | | | $ | 24 | | | $ | 10 | | | $ | 14 | | | $ | 5 | | | $ | 27 | | | $ | 139 | |
| | | | | |
FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 |
Commodity Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 14 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 70 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 30 | | | $ | 13 | | | $ | 2 | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 15 | |
Noncurrent | | 137 | | | 3 | | | 27 | | | 12 | | | — | | | — | | | — | | | 107 | |
Total Derivative Liabilities – Commodity Contracts | | $ | 251 | | | $ | 16 | | | $ | 29 | | | $ | 14 | | | $ | — | | | $ | — | | | $ | 1 | | | $ | 122 | |
Interest Rate Contracts | | | | | | | | | | | | | | | | |
Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | $ | 15 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Noncurrent | | 48 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
Current | | 5 | | | 4 | | | — | | | — | | | — | | | 1 | | | — | | | — | |
Noncurrent | | 5 | | | — | | | — | | | — | | | — | | | 5 | | | — | | | — | |
Total Derivative Liabilities – Interest Rate Contracts | | $ | 73 | | | $ | 4 | | | $ | — | | | $ | — | | | $ | — | | | $ | 6 | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Total Derivative Liabilities | | $ | 324 | | | $ | 20 | | | $ | 29 | | | $ | 14 | | | $ | — | | | $ | 6 | | | $ | 1 | | | $ | 122 | |
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FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The gross 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.
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Derivative Assets | | December 31, 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 | | $ | 204 | | | $ | 99 | | | $ | 74 | | | $ | 74 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Gross amounts offset | | (25) | | | (16) | | | (9) | | | (9) | | | — | | | — | | | — | | | — | |
Net amounts presented in Current Assets: Other | | $ | 179 | | | $ | 83 | | | $ | 65 | | | $ | 65 | | | $ | — | | | $ | 2 | | | $ | 23 | | | $ | 3 | |
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 116 | | | $ | 63 | | | $ | 50 | | | $ | 50 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Gross amounts offset | | (23) | | | (15) | | | (8) | | | (8) | | | — | | | — | | | — | | | — | |
Net amounts presented in Other Noncurrent Assets: Other | | $ | 93 | | | $ | 48 | | | $ | 42 | | | $ | 42 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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Derivative Liabilities | | December 31, 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 | | $ | 184 | | | $ | 26 | | | $ | 19 | | | $ | 5 | | | $ | 14 | | | $ | 1 | | | $ | 13 | | | $ | 21 | |
Gross amounts offset | | (11) | | | (6) | | | (5) | | | (5) | | | — | | | — | | | — | | | — | |
Net amounts presented in Current Liabilities: Other | | $ | 173 | | | $ | 20 | | | $ | 14 | | | $ | — | | | $ | 14 | | | $ | 1 | | | $ | 13 | | | $ | 21 | |
Noncurrent | | | | | | | | | | | | | | | | |
Gross amounts recognized | | $ | 288 | | | $ | 9 | | | $ | 5 | | | $ | 5 | | | $ | — | | | $ | 4 | | | $ | 14 | | | $ | 118 | |
Gross amounts offset | | (12) | | | (8) | | | (5) | | | (5) | | | — | | | — | | | — | | | — | |
Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 276 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 14 | | | $ | 118 | |
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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 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
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FINANCIAL STATEMENTS | DERIVATIVES AND HEDGING |
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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 | |
15. INVESTMENTS IN DEBT AND EQUITY SECURITIES
Duke Energy’s investments in debt and equity securities are primarily comprised of investments held in (i) the 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 OPEB plans and (iii) Bison. The Duke Energy Registrants classify investments in debt securities as AFS and investments in equity securities as 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 the majority of investments in debt and equity securities as long term, unless otherwise noted.
Investment Trusts
The investments within the 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 securities within the Investment Trusts are recognized immediately and deferred to regulatory 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 has a credit loss. The Duke Energy Registrants analyze all investment holdings each reporting period to determine whether a decline in fair value is related to a credit loss. If a credit loss exists, the unrealized credit loss is included in earnings. There were no material credit losses as of December 31, 2021, and 2020.
Other Investments amounts are recorded in Other within Other Noncurrent Assets on the Consolidated Balance Sheets.
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FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 160 | | | $ | — | | | $ | — | | | $ | 177 | |
Equity securities | 4,905 | | | 43 | | | 7,350 | | | 4,138 | | | 54 | | | 6,235 | |
Corporate debt securities | 39 | | | 6 | | | 829 | | | 76 | | | 1 | | | 806 | |
Municipal bonds | 14 | | | 1 | | | 314 | | | 22 | | | — | | | 370 | |
U.S. government bonds | 31 | | | 12 | | | 1,568 | | | 51 | | | — | | | 1,361 | |
Other debt securities | 3 | | | 1 | | | 180 | | | 8 | | | — | | | 180 | |
Total NDTF Investments | $ | 4,992 | | | $ | 63 | | | $ | 10,401 | | | $ | 4,295 | | | $ | 55 | | | $ | 9,129 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 36 | | | $ | — | | | $ | — | | | $ | 127 | |
Equity securities | 36 | | | — | | | 156 | | | 79 | | | — | | | 146 | |
Corporate debt securities | 2 | | | 1 | | | 119 | | | 8 | | | — | | | 110 | |
Municipal bonds | 3 | | | 1 | | | 80 | | | 5 | | | — | | | 86 | |
U.S. government bonds | — | | | — | | | 56 | | | — | | | — | | | 42 | |
Other debt securities | — | | | 1 | | | 45 | | | — | | | — | | | 47 | |
Total Other Investments | $ | 41 | | | $ | 3 | | | $ | 492 | | | $ | 92 | | | $ | — | | | $ | 558 | |
Total Investments | $ | 5,033 | | | $ | 66 | | | $ | 10,893 | | | $ | 4,387 | | | $ | 55 | | | $ | 9,687 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 724 | | | $ | 366 | | | $ | 172 | |
Realized losses | 141 | | | 174 | | | 151 | |
AFS: | | | | | |
Realized gains | 56 | | | 96 | | | 94 | |
Realized losses | 54 | | | 51 | | | 67 | |
DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
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| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 53 | | | $ | — | | | $ | — | | | $ | 30 | |
Equity securities | 2,887 | | | 19 | | | 4,265 | | | 2,442 | | | 23 | | | 3,685 | |
Corporate debt securities | 24 | | | 4 | | | 506 | | | 49 | | | 1 | | | 510 | |
Municipal bonds | 2 | | | — | | | 48 | | | 6 | | | — | | | 91 | |
U.S. government bonds | 16 | | | 3 | | | 712 | | | 25 | | | — | | | 475 | |
Other debt securities | 3 | | | 1 | | | 175 | | | 7 | | | — | | | 174 | |
Total NDTF Investments | $ | 2,932 | | | $ | 27 | | | $ | 5,759 | | | $ | 2,529 | | | $ | 24 | | | $ | 4,965 | |
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FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 440 | | | $ | 64 | | | $ | 113 | |
Realized losses | 96 | | | 99 | | | 107 | |
AFS: | | | | | |
Realized gains | 38 | | | 60 | | | 55 | |
Realized losses | 37 | | | 37 | | | 38 | |
PROGRESS ENERGY
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 107 | | | $ | — | | | $ | — | | | $ | 147 | |
Equity securities | 2,018 | | | 24 | | | 3,085 | | | 1,696 | | | 31 | | | 2,550 | |
Corporate debt securities | 15 | | | 2 | | | 323 | | | 27 | | | — | | | 296 | |
Municipal bonds | 12 | | | 1 | | | 266 | | | 16 | | | — | | | 279 | |
U.S. government bonds | 15 | | | 9 | | | 856 | | | 26 | | | — | | | 886 | |
Other debt securities | — | | | — | | | 5 | | | 1 | | | — | | | 6 | |
Total NDTF Investments | $ | 2,060 | | | $ | 36 | | | $ | 4,642 | | | $ | 1,766 | | | $ | 31 | | | $ | 4,164 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 20 | | | $ | — | | | $ | — | | | $ | 106 | |
Municipal bonds | 2 | | | — | | | 26 | | | 3 | | | — | | | 26 | |
Total Other Investments | $ | 2 | | | $ | — | | | $ | 46 | | | $ | 3 | | | $ | — | | | $ | 132 | |
Total Investments | $ | 2,062 | | | $ | 36 | | | $ | 4,688 | | | $ | 1,769 | | | $ | 31 | | | $ | 4,296 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 284 | | | $ | 302 | | | $ | 59 | |
Realized losses | 45 | | | 75 | | | 44 | |
AFS: | | | | | |
Realized gains | 16 | | | 24 | | | 36 | |
Realized losses | 14 | | | 13 | | | 29 | |
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FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 94 | | | $ | — | | | $ | — | | | $ | 76 | |
Equity securities | 1,915 | | | 23 | | | 2,970 | | | 1,617 | | | 31 | | | 2,459 | |
Corporate debt securities | 15 | | | 2 | | | 282 | | | 27 | | | — | | | 296 | |
Municipal bonds | 12 | | | 1 | | | 266 | | | 16 | | | — | | | 279 | |
U.S. government bonds | 15 | | | 3 | | | 472 | | | 26 | | | — | | | 412 | |
Other debt securities | — | | | — | | | 5 | | | 1 | | | — | | | 6 | |
Total NDTF Investments | $ | 1,957 | | | $ | 29 | | | $ | 4,089 | | | $ | 1,687 | | | $ | 31 | | | $ | 3,528 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | |
Total Other Investments | $ | — | | | $ | — | | | $ | 16 | | | $ | — | | | $ | — | | | $ | 1 | |
Total Investments | $ | 1,957 | | | $ | 29 | | | $ | 4,105 | | | $ | 1,687 | | | $ | 31 | | | $ | 3,529 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
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| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 283 | | | $ | 52 | | | $ | 38 | |
Realized losses | 44 | | | 59 | | | 33 | |
AFS: | | | | | |
Realized gains | 15 | | | 24 | | | 7 | |
Realized losses | 13 | | | 13 | | | 5 | |
DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in debt and equity securities; equity investments are classified as FV-NI and debt investments are classified as AFS.
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| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
NDTF | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 13 | | | $ | — | | | $ | — | | | $ | 71 | |
Equity securities | 103 | | | 1 | | | 115 | | | 79 | | | — | | | 91 | |
Corporate debt securities | — | | | — | | | 41 | | | — | | | — | | | — | |
| | | | | | | | | | | |
U.S. government bonds | — | | | 6 | | | 384 | | | — | | | — | | | 474 | |
| | | | | | | | | | | |
Total NDTF Investments(a) | $ | 103 | | | $ | 7 | | | $ | 553 | | | $ | 79 | | | $ | — | | | $ | 636 | |
Other Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 1 | |
Municipal bonds | 2 | | | — | | | 26 | | | 3 | | | — | | | 26 | |
Total Other Investments | $ | 2 | | | $ | — | | | $ | 29 | | | $ | 3 | | | $ | — | | | $ | 27 | |
Total Investments | $ | 105 | | | $ | 7 | | | $ | 582 | | | $ | 82 | | | $ | — | | | $ | 663 | |
(a) During the years ended December 31, 2021, and 2020, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioning activity of the Crystal River Unit 3.
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FINANCIAL STATEMENTS | INVESTMENTS IN DEBT AND EQUITY SECURITIES |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were as follows.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
FV-NI: | | | | | |
Realized gains | $ | 1 | | | $ | 250 | | | $ | 21 | |
Realized losses | 1 | | | 16 | | | 11 | |
AFS: | | | | | |
Realized gains | 1 | | | — | | | 29 | |
Realized losses | 1 | | | — | | | 24 | |
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.
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| December 31, 2021 | | December 31, 2020 |
| Gross | | Gross | | | | Gross | | Gross | | |
| Unrealized | | Unrealized | | | | Unrealized | | Unrealized | | |
| Holding | | Holding | | Estimated | | Holding | | Holding | | Estimated |
(in millions) | Gains | | Losses | | Fair Value | | Gains | | Losses | | Fair Value |
Investments | | | | | | | | | | | |
Cash and cash equivalents | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | |
Equity securities | 6 | | | — | | | 97 | | | 58 | | | — | | | 97 | |
Corporate debt securities | — | | | — | | | 6 | | | — | | | — | | | 3 | |
Municipal bonds | 1 | | | 1 | | | 46 | | | 1 | | | — | | | 38 | |
U.S. government bonds | — | | | — | | | 12 | | | — | | | — | | | 4 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total Investments | $ | 7 | | | $ | 1 | | | $ | 161 | | | $ | 59 | | | $ | — | | | $ | 143 | |
Realized gains and losses, which were determined on a specific identification basis, from sales of FV-NI and AFS securities for the years ended December 31, 2021, 2020 and 2019, were immaterial.
DEBT SECURITY MATURITIES
The table below summarizes the maturity date for debt securities.
| | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 159 | | $ | 3 | | $ | 138 | | $ | 31 | | $ | 107 | | $ | 7 | |
Due after one through five years | 957 | | 337 | | 546 | | 256 | | 290 | | 25 | |
Due after five through 10 years | 550 | | 226 | | 248 | | 231 | | 17 | | 10 | |
Due after 10 years | 1,525 | | 875 | | 544 | | 507 | | 37 | | 22 | |
Total | $ | 3,191 | | $ | 1,441 | | $ | 1,476 | | $ | 1,025 | | $ | 451 | | $ | 64 | |
16. 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 the 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 as defined by GAAP. Certain investments are not categorized within the fair value hierarchy. These investments are measured at fair value using the net asset value per share practical expedient. The net asset value is derived based on the investment cost, less any impairment, plus or minus changes resulting from observable price changes for an identical or similar investment of the 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.
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FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
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 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. Commodity derivatives with observable forward curves are classified as 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 11 for a discussion of the valuation of goodwill and intangible assets.
DUKE ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets. Derivative amounts in the tables below for all Duke Energy Registrants exclude cash collateral, which is disclosed in Note 14. See Note 15 for additional information related to investments by major security type for the Duke Energy Registrants.
| | | | | | | | | | | | | | | | | |
| December 31, 2021 |
(in millions) | Total Fair Value | Level 1 | Level 2 | Level 3 | Not Categorized |
NDTF cash and cash equivalents | $ | 160 | | $ | 160 | | $ | — | | $ | — | | $ | — | |
NDTF equity securities | 7,350 | | 7,300 | | — | | — | | 50 | |
NDTF debt securities | 2,891 | | 967 | | 1,924 | | — | | — | |
Other equity securities | 156 | | 156 | | — | | — | | — | |
Other debt securities | 300 | | 45 | | 255 | | — | | — | |
Other cash and cash equivalents | 36 | | 36 | | — | | — | | — | |
Derivative assets | 320 | | 3 | | 293 | | 24 | | — | |
Total assets | 11,213 | | 8,667 | | 2,472 | | 24 | | 50 | |
| | | | | |
Derivative liabilities | (472) | | (13) | | (314) | | (145) | | — | |
Net assets (liabilities) | $ | 10,741 | | $ | 8,654 | | $ | 2,158 | | $ | (121) | | $ | 50 | |
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
| | | | | | | | | | | | | | | | | |
| 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 | |
The following table provides reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements.
| | | | | | | | | | | | | | | | | | | |
| | | Derivatives (net) | | |
| | | Years Ended December 31, | | |
| | | | | | | | | | | |
(in millions) | | | 2021 | | | | | | 2020 | | |
Balance at beginning of period | | | $ | (77) | | | | | | | $ | (102) | | | |
| | | | | | | | | | | |
Total pretax realized or unrealized losses included in comprehensive income | | | (75) | | | | | | | (84) | | | |
| | | | | | | | | | | |
Purchases, sales, issuances and settlements: | | | | | | | | | | | |
Purchases | | | 21 | | | | | | | 14 | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Settlements | | | (5) | | | | | | | (19) | | | |
Net transfers Out of Level 3(a) | | | — | | | | | | | 117 | | | |
Total gains (losses) included on the Consolidated Balance Sheet | | | 15 | | | | | | | (3) | | | |
Balance at end of period | | | $ | (121) | | | | | | | $ | (77) | | | |
| | | | | | | | | | | |
(a)Transferred from Level 3 to Level 2 because observable market data became available.
DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | |
| December 31, 2021 |
(in millions) | Total Fair Value | Level 1 | Level 2 | | Not Categorized |
NDTF cash and cash equivalents | $ | 53 | | $ | 53 | | $ | — | | | $ | — | |
NDTF equity securities | 4,265 | | 4,215 | | — | | | 50 | |
NDTF debt securities | 1,441 | | 339 | | 1,102 | | | — | |
| | | | | |
Derivative assets | 162 | | — | | 162 | | | — | |
Total assets | 5,921 | | 4,607 | | 1,264 | | | 50 | |
Derivative liabilities | (35) | | — | | (35) | | | — | |
Net assets | $ | 5,886 | | $ | 4,607 | | $ | 1,229 | | | $ | 50 | |
| | | | | | | | | | | | | | | |
| 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 | |
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
PROGRESS ENERGY
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 107 | | $ | 107 | | $ | — | | | | $ | 147 | | $ | 147 | | $ | — | | |
NDTF equity securities | 3,085 | | 3,085 | | — | | | | 2,550 | | 2,550 | | — | | |
NDTF debt securities | 1,450 | | 628 | | 822 | | | | 1,467 | | 682 | | 785 | | |
Other debt securities | 26 | | — | | 26 | | | | 26 | | — | | 26 | | |
Other cash and cash equivalents | 20 | | 20 | | — | | | | 106 | | 106 | | | |
Derivative assets | 124 | | — | | 124 | | | | 33 | | — | | 33 | | |
Total assets | 4,812 | | 3,840 | | 972 | | | | 4,329 | | 3,485 | | 844 | | |
| | | | | | | | | |
Derivative liabilities | (24) | | — | | (24) | | | | (29) | | — | | (29) | | |
Net assets | $ | 4,788 | | $ | 3,840 | | $ | 948 | | | | $ | 4,300 | | $ | 3,485 | | $ | 815 | | |
DUKE ENERGY PROGRESS
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 94 | | $ | 94 | | $ | — | | | | $ | 76 | | $ | 76 | | $ | — | | |
NDTF equity securities | 2,970 | | 2,970 | | — | | | | 2,459 | | 2,459 | | — | | |
NDTF debt securities | 1,025 | | 289 | | 736 | | | | 993 | | 237 | | 756 | | |
| | | | | | | | | |
Other cash and cash equivalents | 16 | | 16 | | — | | | | 1 | | 1 | | — | | |
Derivative assets | 124 | | — | | 124 | | | | 33 | | — | | 33 | | |
Total assets | 4,229 | | 3,369 | | 860 | | | | 3,562 | | 2,773 | | 789 | | |
Derivative liabilities | (10) | | — | | (10) | | | | (14) | | — | | (14) | | |
Net assets | $ | 4,219 | | $ | 3,369 | | $ | 850 | | | | $ | 3,548 | | $ | 2,773 | | $ | 775 | | |
DUKE ENERGY FLORIDA
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 13 | | $ | 13 | | $ | — | | | $ | 71 | | $ | 71 | | $ | — | | |
NDTF equity securities | 115 | | 115 | | — | | | 91 | | 91 | | — | | |
NDTF debt securities | 425 | | 339 | | 86 | | | 474 | | 445 | | 29 | | |
Other debt securities | 26 | | — | | 26 | | | 26 | | — | | 26 | | |
Other cash and cash equivalents | 3 | | 3 | | — | | | 1 | | 1 | | — | | |
| | | | | | | | |
Total assets | 582 | | 470 | | 112 | | | 663 | | 608 | | 55 | | |
| | | | | | | | |
Derivative liabilities | (14) | | — | | (14) | | | — | | — | | — | | |
Net assets | $ | 568 | | $ | 470 | | $ | 98 | | | $ | 663 | | $ | 608 | | $ | 55 | | |
DUKE ENERGY OHIO
The recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets were not material at December 31, 2021, and 2020.
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
DUKE ENERGY INDIANA
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 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 | $ | 97 | | $ | 97 | | $ | — | | $ | — | | | $ | 97 | | $ | 97 | | $ | — | | $ | — | |
Other debt securities | 64 | | — | | 64 | | — | | | 45 | | — | | 45 | | — | |
Other cash equivalents | — | | — | | — | | — | | | 1 | | 1 | | — | | — | |
Derivative assets | 23 | | 1 | | — | | 22 | | | 6 | | — | | — | | 6 | |
Total assets | 184 | | 98 | | 64 | | 22 | | | 149 | | 98 | | 45 | | 6 | |
Derivative liabilities | (27) | | (13) | | (14) | | — | | | (1) | | (1) | | — | | — | |
Net assets | $ | 157 | | $ | 85 | | $ | 50 | | $ | 22 | | | $ | 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) |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 |
Balance at beginning of period | $ | 6 | | | $ | 11 | |
| | | |
| | | |
Purchases, sales, issuances and settlements: | | | |
Purchases | 18 | | | 10 | |
| | | |
| | | |
Settlements | (16) | | | (13) | |
| | | |
Total gains (losses) included on the Consolidated Balance Sheet | 14 | | | (2) | |
Balance at end of period | $ | 22 | | | $ | 6 | |
PIEDMONT
The following table provides recorded balances for assets and liabilities measured at fair value on a recurring basis on the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
(in millions) | Total Fair Value | Level 1 | Level 2 | | | Total Fair Value | Level 1 | | Level 2 |
| | | | | | | | | |
| | | | | | | | | |
Derivative assets | $ | 3 | | $ | 3 | | $ | — | | | | $ | 1 | | $ | 1 | | | $ | — | |
| | | | | | | | | |
Derivative liabilities | (139) | | — | | (139) | | | | (122) | | — | | | (122) | |
Net (liabilities) assets | $ | (136) | | $ | 3 | | $ | (139) | | | | $ | (121) | | $ | 1 | | | $ | (122) | |
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) |
| | Year Ended December 31, |
(in millions) | | | 2020 |
Balance at beginning of period | | | $ | (117) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Net transfers Out of Level 3(a) | | | 117 | |
| | | |
Balance at end of period | | | $ | — | |
(a) Transferred from Level 3 to Level 2 because observable market data became available.
| | | | | |
FINANCIAL STATEMENTS | FAIR VALUE MEASUREMENTS |
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following tables include quantitative information about the Duke Energy Registrants' derivatives classified as Level 3.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | |
| | | | | | | Weighted |
| Fair Value | | | | | | Average |
Investment Type | (in millions) | Valuation Technique | Unobservable Input | Range | Range |
Duke Energy | | | | | | | |
Electricity contracts | $ | (145) | | RTO forward pricing | Forward electricity curves – price per MWh | $ | 19.04 | | – | $ | 139.11 | | $ | 37.57 | |
Duke Energy Ohio | | | | | | | |
FTRs | 2 | | RTO auction pricing | FTR price – per MWh | 0.06 | | – | 1.79 | | 0.96 | |
Duke Energy Indiana | | | | | | | |
FTRs | 22 | | RTO auction pricing | FTR price – per MWh | (1.18) | | – | 13.11 | | 2.68 | |
| | | | | | | |
| | | | | | | |
Duke Energy | | | | | | | |
Total Level 3 derivatives | $ | (121) | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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.
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | December 31, 2020 |
(in millions) | Book Value | | Fair Value | | Book Value | | Fair Value |
Duke Energy(a) | $ | 63,835 | | | $ | 69,683 | | | $ | 59,863 | | | $ | 69,292 | |
Duke Energy Carolinas | 13,275 | | | 15,101 | | | 12,218 | | | 14,917 | |
Progress Energy | 20,823 | | | 23,751 | | | 19,264 | | | 23,470 | |
Duke Energy Progress | 10,249 | | | 11,252 | | | 9,258 | | | 10,862 | |
Duke Energy Florida | 8,482 | | | 9,772 | | | 7,915 | | | 9,756 | |
Duke Energy Ohio | 3,193 | | | 3,570 | | | 3,089 | | | 3,650 | |
Duke Energy Indiana | 4,323 | | | 5,067 | | | 4,091 | | | 5,204 | |
Piedmont | 2,968 | | | 3,278 | | | 2,780 | | | 3,306 | |
(a) Book value of long-term debt includes $1.25 billion as of December 31, 2021, and $1.3 billion as of December 31, 2020, of unamortized debt discount and premium, net in purchase accounting adjustments related to the mergers with Progress Energy and Piedmont that are excluded from fair value of long-term debt.
At both December 31, 2021, and December 31, 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.
| | | | | |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
17. 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 reevaluation, 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.
CONSOLIDATED VIEs
The obligations of the consolidated VIEs discussed in the following paragraphs are nonrecourse to the Duke Energy 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 years ended December 31, 2021, 2020 and 2019, or is expected to be provided in the future, that was not previously contractually required.
Receivables Financing – DERF/DEPR/DEFR
DERF, DEPR and 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 LLCs 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, 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 are reflected on the Consolidated Balance Sheets as 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, 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 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 approximately 75% cash and 25% 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 is not held 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 |
| | | Carolinas | | Progress | | Florida |
(in millions) | CRC | | DERF | | DEPR | | DEFR |
Expiration date | February 2023 | | January 2025 | | April 2023 | | April 2023 |
Credit facility amount | $ | 350 | | | $ | 475 | | | $ | 350 | | | $ | 250 | |
Amounts borrowed at December 31, 2021 | 350 | | | 475 | | | 350 | | | 250 | |
Amounts borrowed at December 31, 2020 | 350 | | | 364 | | | 250 | | | 250 | |
Restricted Receivables at December 31, 2021 | 587 | | | 844 | | | 574 | | | 427 | |
Restricted Receivables at December 31, 2020 | 547 | | | 696 | | | 500 | | | 397 | |
| | | | | |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
Nuclear Asset-Recovery Bonds – 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.
In 2016, DEFPF issued 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.
The following table summarizes the impact of DEFPF on Duke Energy Florida's Consolidated Balance Sheets.
| | | | | | | | |
| December 31, |
(in millions) | 2021 | 2020 |
Receivables of VIEs | $ | 5 | | $ | 4 | |
Regulatory Assets: Current | 54 | | 53 | |
Current Assets: Other | 39 | | 39 | |
Other Noncurrent Assets: Regulatory assets | 883 | | 937 | |
Current Liabilities: Other | 9 | | 10 | |
Current maturities of long-term debt | 56 | | 55 | |
Long-Term Debt | 946 | | 1,002 | |
Storm Recovery Bonds – Duke Energy Carolinas NC Storm Funding and Duke Energy Progress NC Storm Funding
Duke Energy Carolinas NC Storm Funding, LLC. (DECNCSF) and Duke Energy Progress NC Storm Funding, LLC. (DEPNCSF) are bankruptcy remote, wholly owned special purpose subsidiaries of Duke Energy Carolinas and Duke Energy Progress, respectively. These entities were formed in 2021 for the sole purpose of issuing storm recovery bonds to finance certain of Duke Energy Carolinas’ and Duke Energy Progress’ unrecovered regulatory assets related to storm costs.
In November 2021, DECNCSF and DEPNCSF issued $237 million and $770 million of senior secured bonds, respectively and used the proceeds to acquire storm recovery property from Duke Energy Carolinas and Duke Energy Progress. The storm recovery property was created by state legislation and NCUC financing orders for the purpose of financing storm costs incurred in 2018 and 2019. The storm recovery property acquired includes the right to impose, bill, collect and adjust a non-bypassable charge from all Duke Energy Carolinas’ and Duke Energy Progress’ retail customers until the bonds are paid in full and all financing costs have been recovered. The storm recovery bonds are secured by the storm recovery property and cash collections from the storm recovery charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to Duke Energy Carolinas or Duke Energy Progress. For additional information, see Notes 3 and 6.
DECNCSF and DEPNCSF are considered VIEs primarily because the equity capitalization is insufficient to support their operations. Duke Energy Carolinas and Duke Energy Progress have the power to direct the significant activities of the VIEs as described above and therefore Duke Energy Carolinas and Duke Energy Progress are considered the primary beneficiaries and consolidate DECNCSF and DEPNCSF, respectively.
The following table summarizes the impact of these VIEs on Duke Energy Carolinas’ and Duke Energy Progress’ Consolidated Balance Sheets.
| | | | | | | | |
| December 31, 2021 |
| Duke Energy | Duke Energy |
(in millions) | Carolinas | Progress |
Regulatory Assets: Current | $ | 12 | | $ | 39 | |
Other Noncurrent Assets: Regulatory assets | 220 | | 720 | |
Other Noncurrent Assets: Other | 1 | | 4 | |
Interest Accrued | 1 | | 2 | |
Current maturities of long-term debt | 5 | | 15 | |
Long-Term Debt | 228 | | 747 | |
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 impacted the economic performance of these renewable energy facilities were decisions associated with siting, negotiating PPAs and EPC 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.
| | | | | |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
The table below presents material balances reported on Duke Energy's Consolidated Balance Sheets related to Commercial Renewables VIEs.
| | | | | | | | |
| December 31, |
(in millions) | 2021 | 2020 |
Current Assets: Other | $ | 215 | | $ | 257 | |
Property, Plant and Equipment: Cost | 7,339 | | 6,394 | |
Accumulated depreciation and amortization | (1,474) | | (1,242) | |
Other Noncurrent Assets: Other | 62 | | 67 | |
Current maturities of long-term debt | 167 | | 167 | |
Long-Term Debt | 1,475 | | 1,569 | |
| | |
Other Noncurrent Liabilities: AROs | 173 | | 148 | |
Other Noncurrent Liabilities: Other | 319 | | 316 | |
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Consolidated Balance Sheets.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Duke Energy | | Duke | | Duke |
| Pipeline | | Commercial | | | | | | Energy | | Energy |
(in millions) | Investments | | Renewables | | | | Total | | Ohio | | Indiana |
Receivables from affiliated companies | $ | — | | | $ | — | | | | | $ | — | | | $ | 79 | | | $ | 97 | |
| | | | | | | | | | | |
Investments in equity method unconsolidated affiliates | 15 | | | 508 | | | | | 523 | | | — | | | — | |
Other noncurrent assets | 61 | | | — | | | | | 61 | | | — | | | — | |
Total assets | $ | 76 | | | $ | 508 | | | | | $ | 584 | | | $ | 79 | | | $ | 97 | |
| | | | | | | | | | | |
Other current liabilities | 47 | | | 4 | | | | | 51 | | | — | | | — | |
| | | | | | | | | | | |
Other noncurrent liabilities | 54 | | | 3 | | | | | 57 | | | — | | | — | |
Total liabilities | $ | 101 | | | $ | 7 | | | | | $ | 108 | | | $ | — | | | $ | — | |
Net (liabilities) assets | $ | (25) | | | $ | 501 | | | | | $ | 476 | | | $ | 79 | | | $ | 97 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 (liabilities) assets | $ | (905) | | | $ | 515 | | | | | $ | (390) | | | $ | 83 | | | $ | 110 | |
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 certain renewable energy project entities guarantees for debt services and operations and maintenance, as discussed 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.
Duke Energy has a 47% ownership interest in ACP. In 2020, Duke Energy determined that it would no longer invest in the construction of the ACP pipeline. In February 2021, Duke Energy paid approximately $855 million to fund ACP's outstanding debt, relieving Duke Energy of its guarantee. See Notes 3, 7 and 12 for further information regarding this transaction.
|
| | | | |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
The table below presents Duke Energy's ownership interest and investment balance in these joint ventures. |
| | | | | | | | | | |
| | | Investment Amount (in millions) |
| Ownership | | December 31, | | December 31, |
Entity Name | Interest | | 2018 | | 2017 |
ACP | 47 | % | | $ | 797 |
| | $ | 397 |
|
Sabal Trail(a) | 7.5 | % | | — |
| | 219 |
|
Constitution(b) | 24 | % | | 25 |
| | 81 |
|
Total | | | $ | 822 |
| | $ | 697 |
|
| |
(a) | At December 31, 2017, Sabal Trail was considered a VIE due to having insufficient equity to finance their own activities without subordinated financial support. However, Sabal Trail is now a fully operational, well capitalized entity. As a result, Sabal Trail has sufficient equity to finance its own activities, and therefore, is no longer considered a VIE. Duke Energy's investment in Sabal Trail was $112 million at December 31, 2018. |
| |
(b) | During the year ended December 31, 2018, Duke Energy recorded an OTTI of $55 million related to Constitution within Equity in earnings of unconsolidated affiliates on Duke Energy's Consolidated Statements of Income. See Note 4 for additional information. |
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.
Pioneer
owner. Duke Energy holdsalso has equity ownership in an entity, which owns a 50 percent equity interest in 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 their 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.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 ICPA,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 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. On March 31, 2018, FES, a subsidiary of FirstEnergy and an ICPA counterparty with a power participation ratio of 4.85 percent, filed for Chapter 11 bankruptcy, which could increase costs allocated to the counterparties. On July 31, 2018, the bankruptcy court rejected the FES ICPA, which means OVEC is an unsecured creditor in the FES bankruptcy proceeding. Duke Energy Ohio cannot predict the impact of the bankruptcy filing on its OVEC interests. In addition, certain proposed environmental rulemaking could result in future increased OVEC cost allocations. See Note 43 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 turnover 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 percent10% and a 20 percent20% 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.
|
| |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
Key assumptions used in estimating fair value are detailed in the following table. | | | Duke Energy Ohio | | Duke Energy Indiana | | Duke Energy Ohio | | Duke Energy Indiana |
| 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| | 2021 | | 2020 | | 2021 | | 2020 |
Anticipated credit loss ratio | 0.5 | % | | 0.5 | % | | 0.3 | % | | 0.3 | % | Anticipated credit loss ratio | 0.5 | % | | 0.5 | % | | 0.3 | % | | 0.3 | % |
Discount rate | 3.0 | % | | 2.1 | % | | 3.0 | % | | 2.1 | % | Discount rate | 1.1 | % | | 1.6 | % | | 1.1 | % | | 1.6 | % |
Receivable turnover rate | 13.5 | % | | 13.5 | % | | 11.0 | % | | 10.7 | % | Receivable turnover rate | 13.5 | % | | 13.4 | % | | 11.3 | % | | 11.3 | % |
The following table shows the gross and net receivables sold. | | | | | | | | | | | | Duke Energy Ohio | | Duke Energy Indiana |
| Duke Energy Ohio | | Duke Energy Indiana | | December 31, | | December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2018 |
| | 2017 |
| (in millions) | 2021 | | 2020 | | 2021 | | 2020 |
Receivables sold | $ | 269 |
| | $ | 273 |
| | $ | 336 |
| | $ | 312 |
| Receivables sold | $ | 269 | | | $ | 270 | | | $ | 328 | | | $ | 344 | |
Less: Retained interests | 93 |
| | 87 |
| | 118 |
| | 106 |
| Less: Retained interests | 79 | | | 83 | | | 97 | | | 110 | |
Net receivables sold | $ | 176 |
| | $ | 186 |
| | $ | 218 |
| | $ | 206 |
| Net receivables sold | $ | 190 | | | $ | 187 | | | $ | 231 | | | $ | 234 | |
The following table shows sales and cash flows related to receivables sold.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Duke Energy Ohio | | Duke Energy Indiana |
| Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 | | 2021 | | 2020 | | 2019 |
Sales | | | | | | | | | | | |
Receivables sold | $ | 2,023 | | | $ | 1,905 | | | $ | 1,979 | | | $ | 2,909 | | | $ | 2,631 | | | $ | 2,837 | |
Loss recognized on sale | 10 | | | 10 | | | 14 | | | 13 | | | 12 | | | 17 | |
Cash flows | | | | | | | | | | | |
Cash proceeds from receivables sold | 2,018 | | | 1,875 | | | 1,993 | | | 2,909 | | | 2,586 | | | 2,860 | |
Collection fees received | 1 | | | 1 | | | 1 | | | 1 | | | 1 | | | 1 | |
Return received on retained interests | 4 | | | 4 | | | 6 | | | 6 | | | 5 | | | 9 | |
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Duke Energy Ohio | | Duke Energy Indiana |
| Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| | 2018 |
| | 2017 |
| | 2016 |
|
Sales | | | | | | | | | | | |
Receivables sold | $ | 1,987 |
| | $ | 1,879 |
| | $ | 1,926 |
| | $ | 2,842 |
| | $ | 2,711 |
| | $ | 2,635 |
|
Loss recognized on sale | 13 |
| | 10 |
| | 9 |
| | 16 |
| | 12 |
| | 11 |
|
Cash Flows | | | | | | | | | | | |
Cash proceeds from receivables sold | 1,967 |
| | 1,865 |
| | 1,882 |
| | 2,815 |
| | 2,694 |
| | 2,583 |
|
Collection fees received | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
Return received on retained interests | 6 |
| | 3 |
| | 2 |
| | 9 |
| | 7 |
| | 5 |
|
| | | | | |
FINANCIAL STATEMENTS | VARIABLE INTEREST ENTITIES |
Cash flows from the 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 Consolidated Statements of Cash Flows.
Collection fees received in connection with servicing transferred accounts receivable are included in Operation, maintenance and other on Duke Energy Ohio’s and Duke Energy Indiana’s Consolidated Statements of Operations and Comprehensive Income. The loss recognized on sales of receivables is calculated monthly by multiplying receivables sold during the month by the required discount. The required discount is derived monthly utilizing 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 value 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.1%.
18. REVENUE
As described in Note 1, Duke Energy adopted Revenue from Contracts with Customers effective January 1, 2018, using the modified retrospective method of adoption, which does not require restatement of prior year reported results. No cumulative effect adjustment was recorded as the vast majority of Duke Energy’s revenues are at-will and without a defined contractual term. Additionally, comparative disclosures for 2018 operating results with the previous revenue recognition rules are not applicable as Duke Energy’s revenue recognition has not materially changed as a result of the new standard.
Duke Energy recognizes revenue consistent with amounts billed under tariff offerings or at contractually agreed upon rates based on actual physical delivery of electric or natural gas service, including estimated volumes delivered when billings have not yet occurred. As such, the majority of Duke Energy’s revenues have fixed pricing based on the contractual terms of the published tariffs, with variability in expected cash flows attributable to the customer’s volumetric demand and ultimate quantities of energy or natural gas supplied and used during the billing period. The stand-alone selling price of related sales are designed to support recovery of prudently incurred costs and an appropriate return on invested assets and are primarily governed by published tariff rates or contractual agreements approved by relevant regulatory bodies. As described in Note 1, certain excise taxes and franchise fees levied by state or local governments are required to be paid even if not collected from the customer. These taxes are recognized on a gross basis as part of revenues. Duke Energy elects to account for all other taxes net of revenues.
Performance obligations are satisfied over time as energy or natural gas is delivered and consumed with billings generally occurring monthly and related payments due within 30 days, depending on regulatory requirements. In no event does the timing between payment and delivery of the goods and services exceed one year. Using this output method for revenue recognition provides a faithful depiction of the transfer of electric and natural gas service as customers obtain control of the commodity and benefit from its use at delivery. Additionally, Duke Energy has an enforceable right to consideration for energy or natural gas delivered at any discrete point in time and will recognize revenue at an amount that reflects the consideration to which Duke Energy is entitled for the energy or natural gas delivered.
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| |
FINANCIAL STATEMENTS | REVENUE |
As described above, the majority of Duke Energy’s tariff revenues are at-will and, as such, related contracts with customers have an expected duration of one year or less and will not have future performance obligations for disclosure. Additionally, other long-term revenue streams, including wholesale contracts, generally provide services that are part of a single performance obligation, the delivery of electricity or natural gas. As such, other than material fixed consideration under long-term contracts, related disclosures for future performance obligations are also not applicable.
Duke Energy earns substantially all of its revenues through its reportable segments, Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables.
Electric Utilities and Infrastructure
Electric 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.
Retail electric service is generally marketed throughout Duke Energy's electric service territory through standard service offers. The standard service offers are through tariffs determined by regulators in Duke Energy's regulated service territory. Each tariff, which is assigned to customers based on customer class, has multiple components such as an energy charge, a demand charge, a basic facilities charge and applicable riders. Duke Energy considers each of these components to be aggregated into a single performance obligation for providing electric service, or in the case of distribution only customers in Duke Energy Ohio, for delivering electricity. Electricity is considered a single performance obligation satisfied over time consistent with the series guidance and is provided and consumed over the billing period, generally one month. Retail electric service is typically provided to at-will customers who can cancel service at any time, without a substantive penalty. Additionally, Duke Energy adheres to applicable regulatory requirements in each jurisdiction to ensure the collectability of amounts billed and appropriate mitigating procedures are followed when necessary. As such, revenue from contracts with customers for such contracts is equivalent to the electricity supplied and billed in that period (including unbilled estimates).
Wholesale electric service is generally provided under long-term contracts using cost-based pricing. FERC regulates costs that may be recovered from customers and the amount of return companies are permitted to earn. Wholesale contracts include both energy and demand charges. For full requirements contracts, Duke Energy considers both charges as a single performance obligation for providing integrated electric service. For contracts where energy and demand charges are considered separate performance obligations, energy and demand are each a distinct performance obligation under the series guidance and are satisfied as energy is delivered and stand-ready service is provided on a monthly basis. This service represents consumption over the billing period and revenue is recognized consistent with billings and unbilled estimates, which generally occur monthly. Contractual amounts owed are typically trued up annually based upon incurred costs in accordance with FERC published filings and the specific customer’s actual peak demand. Estimates of variable consideration related to potential additional billings or refunds owed are updated quarterly.
| | | | | |
FINANCIAL STATEMENTS | REVENUE |
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 | | Remaining Performance Obligations |
(in millions) | 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
| (in millions) | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total |
| Progress Energy | $ | 112 |
| $ | 121 |
| $ | 80 |
| $ | 82 |
| $ | 39 |
| $ | 42 |
| $ | 476 |
| Progress Energy | $ | 109 | | $ | 53 | | $ | 45 | | $ | 7 | | $ | 7 | | $ | 43 | | $ | 264 | |
Duke Energy Progress | 9 |
| 9 |
| 9 |
| 9 |
| 9 |
| 9 |
| 54 |
| Duke Energy Progress | 8 | | 8 | | 8 | | — | | — | | — | | 24 | |
Duke Energy Florida | 103 |
| 112 |
| 71 |
| 73 |
| 30 |
| 33 |
| 422 |
| Duke Energy Florida | 101 | | 45 | | 37 | | 7 | | 7 | | 43 | | 240 | |
Duke Energy Indiana | 9 |
| 10 |
| 5 |
| — |
| — |
| — |
| 24 |
| Duke Energy Indiana | 1 | | 9 | | 14 | | 14 | | 14 | | 12 | | 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.
Retail natural gas service is marketed throughout Duke Energy's natural gas service territory using published tariff rates. The tariff rates are established by regulators in Duke Energy's service territories. Each tariff, which is assigned to customers based on customer class, have multiple components, such as a commodity charge, demand charge, customer or monthly charge and transportation costs. Duke Energy considers each of these components to be aggregated into a single performance obligation for providing natural gas service. For contracts where Duke Energy provides all of the customer’s natural gas needs, the delivery of natural gas is considered a single performance obligation satisfied over time, and revenue is recognized monthly based on billings and unbilled estimates as service is provided and the commodity is consumed over the billing period. Additionally, natural gas service is typically at-will and customers can cancel service at any time, without a substantive penalty. Duke Energy also adheres to applicable regulatory requirements to ensure the collectability of amounts billed and receivable and appropriate mitigating procedures are followed when necessary.
|
| |
FINANCIAL STATEMENTS | REVENUE |
Certain long-term individually negotiated contracts exist to provide natural gas service. These contracts are regulated and approved by state commissions. The negotiated contracts have multiple components, including a natural gas and a demand charge, similar to retail natural gas contracts. Duke Energy considers each of these components to be a single performance obligation for providing natural gas service. This service represents consumption over the billing period, generally one month.
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 | | Remaining Performance Obligations |
(in millions) | 2019 |
| 2020 |
| 2021 |
| 2022 |
| 2023 |
| Thereafter |
| Total |
| (in millions) | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total |
Piedmont | $ | 70 |
| $ | 68 |
| $ | 63 |
| $ | 63 |
| $ | 60 |
| $ | 430 |
| $ | 754 |
| Piedmont | $ | 71 | | $ | 64 | | $ | 61 | | $ | 60 | | $ | 50 | | $ | 286 | | $ | 592 | |
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 RECs to customers. The majority of these PPAs have historically 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.
The delivery of electricity is a performance obligation satisfied over time and represents generation and consumption of the electricity over the billing period, generally one month. The delivery of RECs is a performance obligation satisfied at a point in time and represents delivery of each REC generated by the wind or solar facility. The majority of self-generated RECs are bundled with energy in Duke Energy’s contracts and, as such, related revenues are recognized as energy is generated and delivered as that pattern is consistent with Duke Energy’s performance. Commercial Renewables recognizes revenue based on the energy generated and billed for the period, generally one month, at contractual rates (including unbilled estimates) according to the invoice practical expedient. Amounts are typically due within 30 days of invoice.
Commercial Renewables also earns revenues from installation of distributed solar generation resources, which is primarily composed of EPC projects to deliver functioning solar power systems, generally completed within two to 12 months from commencement of construction. The installation of distributed solar generation resources is a performance obligation that is satisfied over time. Revenue from fixed-price EPC contracts is recognized using the input method as work is performed based on the estimated ratio of incurred costs to estimated total costs.
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
For the Electric and Gas Utility and Infrastructure segments, revenue by customer class is most meaningful to Duke Energy as each respective customer class collectively represents unique customer expectations of service, generally has different energy and demand requirements, and operates under tailored, regulatory approved pricing structures. Additionally, each customer class is impacted differently by weather and a variety of economic factors including the level of population growth, economic investment, employment levels, and regulatory activities in each of Duke Energy’s jurisdictions. As such, analyzing revenues disaggregated by customer class allows Duke Energy to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. For the Commercial Renewables segment, the majority of revenues from contracts with customers are from selling all of the unit-contingent output at contractually defined pricing under long-term PPAs with consistent expectations regarding the timing and certainty of cash flows. Disaggregated revenues are presented as follows:
| | | Year Ended December 31, 2018 | | Year Ended December 31, 2021 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | | Duke | | Duke | |
(in millions) | Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | (in millions) | Duke | Energy | Progress | Energy | |
By market or type of customer | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| By market or type of customer | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Electric Utilities and Infrastructure | | Electric Utilities and Infrastructure | |
Residential | $ | 9,587 |
| $ | 2,981 |
| $ | 4,785 |
| $ | 2,019 |
| $ | 2,766 |
| $ | 743 |
| $ | 1,076 |
| $ | — |
| Residential | $ | 10,097 | | $ | 3,054 | | $ | 5,084 | | $ | 2,156 | | $ | 2,928 | | $ | 767 | | $ | 1,188 | | $ | — | |
General | 6,127 |
| 2,119 |
| 2,809 |
| 1,280 |
| 1,529 |
| 422 |
| 778 |
| — |
| General | 6,375 | | 2,210 | | 2,883 | | 1,378 | | 1,505 | | 440 | | 825 | | — | |
Industrial | 2,974 |
| 1,180 |
| 904 |
| 642 |
| 262 |
| 131 |
| 760 |
| — |
| Industrial | 2,924 | | 1,145 | | 894 | | 634 | | 260 | | 135 | | 750 | | — | |
Wholesale | 2,324 |
| 508 |
| 1,462 |
| 1,303 |
| 159 |
| 57 |
| 298 |
| — |
| Wholesale | 2,199 | | 472 | | 1,385 | | 1,164 | | 221 | | 56 | | 285 | | — | |
Other revenues | 717 |
| 320 |
| 502 |
| 320 |
| 182 |
| 73 |
| 91 |
| — |
| Other revenues | 879 | | 264 | | 716 | | 387 | | 329 | | 83 | | 86 | | — | |
Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 21,729 |
| $ | 7,108 |
| $ | 10,462 |
| $ | 5,564 |
| $ | 4,898 |
| $ | 1,426 |
| $ | 3,003 |
| $ | — |
| Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 22,474 | | $ | 7,145 | | $ | 10,962 | | $ | 5,719 | | $ | 5,243 | | $ | 1,481 | | $ | 3,134 | | $ | — | |
| | |
Gas Utilities and Infrastructure | | Gas Utilities and Infrastructure | |
Residential | $ | 1,000 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 331 |
| $ | — |
| $ | 669 |
| Residential | $ | 1,131 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 354 | | $ | — | | $ | 777 | |
Commercial | 514 |
| — |
| — |
| — |
| — |
| 135 |
| — |
| 378 |
| Commercial | 561 | | — | | — | | — | | — | | 143 | | — | | 418 | |
Industrial | 147 |
| — |
| — |
| — |
| — |
| 18 |
| — |
| 128 |
| Industrial | 158 | | — | | — | | — | | — | | 20 | | — | | 137 | |
Power Generation | — |
| — |
| — |
| — |
| — |
| — |
| — |
| 54 |
| Power Generation | — | | — | | — | | — | | — | | — | | — | | 92 | |
Other revenues | 139 |
| — |
| — |
| — |
| — |
| 19 |
| — |
| 120 |
| Other revenues | 133 | | — | | — | | — | | — | | 28 | | — | | 45 | |
Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,800 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 503 |
| $ | — |
| $ | 1,349 |
| Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,983 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 545 | | $ | — | | $ | 1,469 | |
| | |
Commercial Renewables | | Commercial Renewables | |
Revenue from contracts with customers | $ | 209 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| Revenue from contracts with customers | $ | 217 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | |
Other | | Other | |
Revenue from contracts with customers | $ | 19 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 1 |
| $ | — |
| $ | — |
| Revenue from contracts with customers | $ | 29 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | |
Total revenue from contracts with customers | $ | 23,757 |
| $ | 7,108 |
| $ | 10,462 |
| $ | 5,564 |
| $ | 4,898 |
| $ | 1,930 |
| $ | 3,003 |
| $ | 1,349 |
| Total revenue from contracts with customers | $ | 24,703 | | $ | 7,145 | | $ | 10,962 | | $ | 5,719 | | $ | 5,243 | | $ | 2,026 | | $ | 3,134 | | $ | 1,469 | |
| | |
Other revenue sources(a) | $ | 764 |
| $ | 192 |
| $ | 266 |
| $ | 135 |
| $ | 123 |
| $ | 27 |
| $ | 56 |
| $ | 26 |
| Other revenue sources(a) | $ | 394 | | $ | (43) | | $ | 95 | | $ | 61 | | $ | 16 | | $ | 11 | | $ | 40 | | $ | 100 | |
Total revenues | $ | 24,521 |
| $ | 7,300 |
| $ | 10,728 |
| $ | 5,699 |
| $ | 5,021 |
| $ | 1,957 |
| $ | 3,059 |
| $ | 1,375 |
| Total revenues | $ | 25,097 | | $ | 7,102 | | $ | 11,057 | | $ | 5,780 | | $ | 5,259 | | $ | 2,037 | | $ | 3,174 | | $ | 1,569 | |
| |
(a) | (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. |
IMPACT OF WEATHER AND THE TIMING OF BILLING PERIODS
Revenues and costs are influenced by seasonal weather patterns. Peak sales of electricity occur during the summer and winter months, which results in higher revenue and cash flows during these periods. By contrast, lower sales of electricity occur during the spring and fall, allowing for scheduled plant maintenance. Residential and general service customers are more impacted by weather than industrial customers. Estimated weather impacts are based on actual current period weather compared to normal weather conditions. Normal weather conditions are defined as the long-term average of actual historical weather conditions. Heating-degree days measure the variation in weather based on the extent the average daily temperature falls below a base temperature. Cooling-degree days measure the variation in weather based on the extent the average daily temperature rises above the base temperature. Each degree of temperature below the base temperature counts as one heating-degree day and each degree of temperature above the base temperature counts as one cooling-degree day.
|
| | | | |
FINANCIAL STATEMENTS | REVENUE |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 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 | $ | 9,806 | | $ | 2,997 | | $ | 5,017 | | $ | 2,059 | | $ | 2,958 | | $ | 726 | | $ | 1,064 | | $ | — | |
General | 6,194 | | 2,233 | | 2,779 | | 1,312 | | 1,467 | | 442 | | 740 | | — | |
Industrial | 2,859 | | 1,137 | | 901 | | 649 | | 252 | | 137 | | 683 | | — | |
Wholesale | 1,864 | | 380 | | 1,228 | | 1,034 | | 194 | | 32 | | 224 | | — | |
Other revenues | 914 | | 281 | | 596 | | 294 | | 302 | | 82 | | 72 | | — | |
Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 21,637 | | $ | 7,028 | | $ | 10,521 | | $ | 5,348 | | $ | 5,173 | | $ | 1,419 | | $ | 2,783 | | $ | — | |
| | | | | | | | |
Gas Utilities and Infrastructure | | | | | | | | |
Residential | $ | 930 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 300 | | $ | — | | $ | 630 | |
Commercial | 446 | | — | | — | | — | | — | | 117 | | — | | 329 | |
Industrial | 127 | | — | | — | | — | | — | | 17 | | — | | 110 | |
Power Generation | — | | — | | — | | — | | — | | — | | — | | 34 | |
Other revenues | 87 | | — | | — | | — | | — | | 17 | | — | | 70 | |
Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,590 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 451 | | $ | — | | $ | 1,173 | |
| | | | | | | | |
Commercial Renewables | | | | | | | | |
Revenue from contracts with customers | $ | 227 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
Other | | | | | | | | |
Revenue from contracts with customers | $ | 26 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
Total revenue from contracts with customers | $ | 23,480 | | $ | 7,028 | | $ | 10,521 | | $ | 5,348 | | $ | 5,173 | | $ | 1,870 | | $ | 2,783 | | $ | 1,173 | |
| | | | | | | | |
Other revenue sources(a) | $ | 388 | | $ | (13) | | $ | 106 | | $ | 74 | | $ | 15 | | $ | (12) | | $ | 12 | | $ | 124 | |
Total revenues | $ | 23,868 | | $ | 7,015 | | $ | 10,627 | | $ | 5,422 | | $ | 5,188 | | $ | 1,858 | | $ | 2,795 | | $ | 1,297 | |
(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 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| | 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 | $ | 9,863 | | $ | 3,044 | | $ | 4,998 | | $ | 2,144 | | $ | 2,854 | | $ | 733 | | $ | 1,087 | | $ | — | |
General | 6,431 | | 2,244 | | 2,935 | | 1,368 | | 1,567 | | 451 | | 802 | | — | |
Industrial | 3,071 | | 1,215 | | 934 | | 675 | | 259 | | 147 | | 774 | | — | |
Wholesale | 2,212 | | 462 | | 1,468 | | 1,281 | | 187 | | 46 | | 235 | | — | |
Other revenues | 770 | | 276 | | 548 | | 317 | | 231 | | 80 | | 89 | | — | |
Total Electric Utilities and Infrastructure revenue from contracts with customers | $ | 22,347 | | $ | 7,241 | | $ | 10,883 | | $ | 5,785 | | $ | 5,098 | | $ | 1,457 | | $ | 2,987 | | $ | — | |
| | | | | | | | |
Gas Utilities and Infrastructure | | | | | | | | |
Residential | $ | 976 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 315 | | $ | — | | $ | 661 | |
Commercial | 508 | | — | | — | | — | | — | | 130 | | — | | 378 | |
Industrial | 141 | | — | | — | | — | | — | | 19 | | — | | 122 | |
Power Generation | — | | — | | — | | — | | — | | — | | — | | 51 | |
Other revenues | 129 | | — | | — | | — | | — | | 19 | | — | | 110 | |
Total Gas Utilities and Infrastructure revenue from contracts with customers | $ | 1,754 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 483 | | $ | — | | $ | 1,322 | |
| | | | | | | | |
Commercial Renewables | | | | | | | | |
Revenue from contracts with customers | $ | 223 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
Other | | | | | | | | |
Revenue from contracts with customers | $ | 24 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | |
Total revenue from contracts with customers | $ | 24,348 | | $ | 7,241 | | $ | 10,883 | | $ | 5,785 | | $ | 5,098 | | $ | 1,940 | | $ | 2,987 | | $ | 1,322 | |
| | | | | | | | |
Other revenue sources(a) | $ | 731 | | $ | 154 | | $ | 319 | | $ | 172 | | $ | 133 | | $ | — | | $ | 17 | | $ | 59 | |
Total revenues | $ | 25,079 | | $ | 7,395 | | $ | 11,202 | | $ | 5,957 | | $ | 5,231 | | $ | 1,940 | | $ | 3,004 | | $ | 1,381 | |
(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.
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 estimated impact of weather on earningsfollowing table presents the reserve for Electric Utilitiescredit losses for trade and Infrastructure isother receivables based on adoption of the temperature variances fromnew standard.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, 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 | (58) | | (13) | | (23) | | (8) | | (14) | | — | | — | | (6) | |
Credit Loss Expense | 75 | | 13 | | 29 | | 9 | | 20 | | — | | — | | 11 | |
Other Adjustments | 48 | | 12 | | 13 | | 13 | | — | | — | | — | | — | |
Balance at December 31, 2020 | $ | 146 | | $ | 23 | | $ | 37 | | $ | 23 | | $ | 14 | | $ | 4 | | $ | 3 | | $ | 12 | |
Write-Offs | (58) | | (21) | | (25) | | (12) | | (13) | | — | | — | | (9) | |
Credit Loss Expense | 54 | | 27 | | 25 | | 11 | | 14 | | — | | — | | 7 | |
Other Adjustments | (20) | | 13 | | (1) | | (1) | | 1 | | — | | — | | 5 | |
Balance at December 31, 2021 | $ | 122 | | $ | 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 normal condition and customers' historic usage patterns. The methodology usedspecified period. Historical loss rates are adjusted due to estimate the impact of weathercurrent 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 consider all variables that may impact customer response to weather conditions, such as humidityalready exist. Management reviews the assumptions and risk of loss periodically for trade and other receivables.
| | | | | |
FINANCIAL STATEMENTS | REVENUE |
The aging of trade receivables is presented in the summer or wind chill in the winter. The precision of this estimate may also be impacted by applying long-term weather trends to shorter-term periods.table below. Duke Energy considers receivables greater than 30 days outstanding past due.
Gas Utilities and Infrastructure's costs and revenues are influenced by seasonal patterns due to peak natural gas sales occurring during the winter months as a result of space heating requirements. Residential customers are the most impacted by weather. There are certain regulatory mechanisms for the North Carolina, South Carolina, Tennessee and Ohio service territories that normalize the margins collected from certain customer classes during the winter. In North Carolina, rate design provides protection from both weather and other usage variations such as conservation, while South Carolina and Tennessee revenues are adjusted solely based on weather. Ohio primarily employs a fixed charge each month regardless of the season and usage. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
(in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Unbilled Receivables(a)(b) | $ | 964 | | $ | 316 | | $ | 266 | | $ | 193 | | $ | 73 | | $ | 4 | | $ | 27 | | $ | 106 | |
0-30 days | 2,104 | | 595 | | 800 | | 405 | | 393 | | 42 | | 51 | | 202 | |
30-60 days | 212 | | 77 | | 72 | | 44 | | 28 | | 4 | | 13 | | 12 | |
60-90 days | 88 | | 37 | | 41 | | 21 | | 20 | | 1 | | 1 | | 2 | |
90+ days | 249 | | 106 | | 65 | | 37 | | 28 | | 47 | | 11 | | 7 | |
Deferred Payment Arrangements(c) | 115 | | 55 | | 45 | | 22 | | 23 | | 2 | | — | | 4 | |
Trade and Other Receivables | $ | 3,732 | | $ | 1,186 | | $ | 1,289 | | $ | 722 | | $ | 565 | | $ | 100 | | $ | 103 | | $ | 333 | |
UNBILLED 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 Receivables(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. Unbilled revenues can vary significantly from period to period as a result of seasonality, weather, customer usage patterns, customer mix, average price in effect for customer classes, timing of rendering customer billsbilled and meter reading schedules, and the impact of weather normalization or margin decoupling mechanisms.
Unbilled revenues are included within Receivables and Receivables of VIEs on the Consolidated Balance Sheets as shown in the following table.Sheets. |
| | | | | | | |
| December 31, |
(in millions) | 2018 |
| | 2017 |
|
Duke Energy | $ | 896 |
| | $ | 944 |
|
Duke Energy Carolinas | 313 |
| | 342 |
|
Progress Energy | 244 |
| | 228 |
|
Duke Energy Progress | 148 |
| | 143 |
|
Duke Energy Florida | 96 |
| | 85 |
|
Duke Energy Ohio | 2 |
| | 4 |
|
Duke Energy Indiana | 23 |
| | 21 |
|
Piedmont | 73 |
| | 86 |
|
Additionally,(b) Duke Energy Ohio and Duke Energy Indiana sell, on a revolving basis, nearly all of their retail accounts receivable, including receivables for unbilled revenues, to an affiliate, CRC, and accountsaccount for the transfers of receivables as sales. Accordingly, the receivables sold are not reflected on the Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 17 for further information. These receivables for unbilled revenues are shown in$82 million and $121 million for Duke Energy Ohio and Duke Energy Indiana, respectively, as of December 31, 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 table below.COVID-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 period of several months.
|
| | | | | | | |
| December 31, |
(in millions) | 2018 |
| | 2017 |
|
Duke Energy Ohio | $ | 86 |
| | $ | 104 |
|
Duke Energy Indiana | 128 |
| | 132 |
|
19. COMMON STOCKSTOCKHOLDERS' EQUITY
Basic 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 shares,stock, such as stock options and equity forward sale agreements, were exercised or settled. Duke Energy’s participating securities are restricted stock unitsRSUs that are entitled to dividends declared on Duke Energy common stock during the restrictedRSUs vesting periods. Dividends declared on preferred stock unit’s vesting periods.
are recorded on the 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.
|
| | | | |
FINANCIAL STATEMENTS | COMMON STOCKSTOCKHOLDERS' EQUITY |
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.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions, except per share amounts) | 2021 | | 2020 | | 2019 |
Net Income available to Duke Energy common stockholders | $ | 3,802 | | | $ | 1,270 | | | $ | 3,707 | |
Less: Income (Loss) from discontinued operations | 7 | | | 7 | | | (7) | |
Accumulated preferred stock dividends adjustment | — | | | 1 | | | (15) | |
Less: Impact of participating securities | 4 | | | 2 | | | 5 | |
Income from continuing operations available to Duke Energy common stockholders | $ | 3,791 | | | $ | 1,262 | | | $ | 3,694 | |
Weighted average common shares outstanding – basic | 769 | | | 737 | | | 729 | |
| | | | | |
Equity forwards | — | | | 1 | | | — | |
Weighted average common shares outstanding – diluted | 769 | | | 738 | | | 729 | |
EPS from continuing operations available to Duke Energy common stockholders | | | | | |
Basic and Diluted | $ | 4.93 | | | $ | 1.71 | | | $ | 5.07 | |
| | | | | |
Potentially dilutive items excluded from the calculation(a) | 2 | | | 2 | | | 2 | |
Dividends declared per common share | $ | 3.90 | | | $ | 3.82 | | | $ | 3.75 | |
Dividends declared on Series A preferred stock per depositary share | $ | 1.437 | | | $ | 1.437 | | | $ | 1.03 | |
Dividends declared on Series B preferred stock per share | $ | 48.750 | | | $ | 49.292 | | | $ | — | |
(a) Performance stock
outstandingawards were not included in the dilutive securities calculation because the performance measures related to the
diluted weighted average number of common stock outstanding.awards had not been met. |
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions, except per share amounts) | 2018 |
| | 2017 |
| | 2016 |
|
Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities | $ | 2,642 |
| | $ | 3,059 |
| | $ | 2,567 |
|
Weighted average shares outstanding – basic | 708 |
| | 700 |
| | 691 |
|
Weighted average shares outstanding – diluted | 708 |
| | 700 |
| | 691 |
|
Earnings per share from continuing operations attributable to Duke Energy common stockholders | | | | | |
Basic | $ | 3.73 |
| | $ | 4.37 |
| | $ | 3.71 |
|
Diluted | $ | 3.73 |
| | $ | 4.37 |
| | $ | 3.71 |
|
Potentially dilutive items excluded from the calculation(a) | 2 |
| | 2 |
| | 2 |
|
Dividends declared per common share | $ | 3.64 |
| | $ | 3.49 |
| | $ | 3.36 |
|
| |
(a) | Performance stock awards were not included in the dilutive securities calculation because the performance measures related to the awards had not been met. |
Equity IssuancesCommon Stock
On February 20, 2018,In November 2019, Duke Energy filed a prospectus supplement and executed an EDAEquity Distribution Agreement (EDA) under which it may sell up to $1$1.5 billion of its common stock through an ATMa new at-the-market (ATM) offering program, including an equity forward sales component. The EDA was entered into with Wells Fargo Securities, LLC, Citigroup Global Markets Inc., and J.P. Morgan Securities LLC (the Agents). Under the terms of the EDA, Duke Energy may issue and sell through any of the Agents, shares of common stock during the period endingthrough September 23, 2019. In June 2018, Duke Energy marketed two separate tranches, each for 1.3 million shares, of common stock. The first tranche was marketed with Wells Fargo Bank at an initial forward price of $72.02 per share and the second tranche was marketed with Citibank at an initial forward price of $78.71 per share through equity forward transactions under the ATM program. The Equity Forwards require Duke Energy to either physically settle the transactions by issuing 2.6 million shares in exchange for net proceeds at the then-applicable forward sale price specified by the agreements or net settle in whole or in part through the delivery or receipt of cash or shares. The settlement alternative was at Duke Energy's election. In December 2018, Duke Energy physically settled these equity forwards by delivering 2.6 million shares of common stock in exchange for net proceeds of approximately $195 million.2022.
Separately, in March 2018,November 2019, Duke Energy marketed an equity offering of 21.328.75 million shares of common stock through an Underwriting Agreement with Credit Suisse Securities (USA) LLC, J.P. Morgan Securities LLC, Barclays Capital Inc. and Goldman Sachs & Co. LLC, as representatives of several underwriters, Credit Suisse Capital LLC and J.P. Morgan Securities LLC as Forward Sellers, and Credit Suisse Capital LLC and J.P. Morgan Chase Bank, National Association, acting as forward purchasers.Agreement. In connection with the offering, Duke Energy entered into equity forward salesales agreements with Credit Suisse Securities (USA) LLC as Agent for Credit Suisse Capital LLC and J.P. Morgan Chase Bank, National Association. The sale price was $75 per share less certain net adjustments for an initial forward price of $74.07$85.99 per share. The Equity Forwards requireIn March 2020, Duke Energy to either physically settlemarketed approximately 940,000 shares of common stock through an equity forward transaction under the transactions by issuing 21.3 millionATM with an initial forward price of $89.76 per share. In May 2020, Duke Energy marketed approximately 903,000 shares in exchange for net proceeds atof common stock through an equity forward transaction under the then-applicableATM with an initial forward sale price specified byof $82.44 per share. In August 2020, Duke Energy marketed approximately 936,000 shares of common stock through an equity forward transaction under the agreements, or net settle in whole or in part through the delivery or receiptATM with an initial forward price of cash or shares. The settlement alternative was at Duke Energy's election. $79.52 per share.
In June 2018,December 2020, Duke Energy physically settled one-half of the equity forwards by delivering approximately 10.632 million shares of common stock in exchange for net cash proceeds of approximately $781 million. In December 2018,$2.6 billion.
Preferred Stock
On March 29, 2019, Duke Energy physically settledcompleted the remaining equity forward by delivering 10.6issuance of 40 million depositary shares, each representing 1/1,000th share of common stockits Series A Cumulative Redeemable Perpetual Preferred Stock, at a price of $25 per depositary share. The transaction resulted in exchange for net cash proceeds of approximately $766 million.$973 million after issuance costs with proceeds used for general corporate purposes and to reduce short-term debt. The preferred stock has a $25 liquidation preference per depositary share and earns dividends on a cumulative basis at a rate of 5.75% per annum. Dividends are payable quarterly in arrears on the 16th day of March, June, September and December, and began on June 16, 2019.
For the year ended December 31, 2018, Duke Energy issued 2.2 million shares through its DRIP with an increase in additional paid-in capital of approximately $174 million.
In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equityThe Series A Preferred Stock has no maturity or mandatory redemption date, is not redeemable at the timeoption of the offering, Duke Energy entered into Equity Forwards with Barclays.holders and includes separate call options. The Equity Forwards requiredfirst call option allows Duke Energy to either physically settlecall the transactions by issuing 10.6 million shares,Series A Preferred Stock at a redemption price of $25.50 per depositary share prior to June 15, 2024, in whole but not in part, at any time within 120 days after a ratings event where a rating agency amends, clarifies or net settlechanges the criteria it uses to assign equity credit for securities such as the preferred stock. The second call option allows Duke Energy to call the preferred stock, in whole or in part, through the deliveryat any time, on or receiptafter June 15, 2024, at a redemption price of cash or shares. On October 5, 2016, following the close of the Piedmont acquisition,$25 per depositary share. Duke Energy physically settledis also required to redeem all accumulated and unpaid dividends if either call option is exercised.
On September 12, 2019, Duke Energy completed the Equity Forwards in full by delivering 10.6issuance of 1 million shares of its Series B Fixed-Rate Reset Cumulative Redeemable Perpetual Preferred Stock, at a price of $1,000 per share. The transaction resulted in net proceeds of $989 million after issuance costs with proceeds being used to pay down short-term debt, repay at maturity $500 million senior notes due September 2019, and for general corporate purposes. The preferred stock has a $1,000 liquidation preference per share and earns dividends on a cumulative basis at an initial rate of 4.875% per annum. Dividends are payable semiannually in arrears on the 16th day of March and September, and began on March 16, 2020. On September 16, 2024, the First Call Date, and any fifth anniversary of the First Call Date (each a Reset Date), the dividend rate will reset based on the then current five-year U.S. Treasury rate plus a spread of 3.388%.
The Series B Preferred Stock has no maturity or mandatory redemption date, is not redeemable at the option of the holders and includes separate call options. The first call option allows Duke Energy to call the Series B Preferred Stock at a redemption price of $1,020 per share, in whole but not in part, at any time within 120 days after a ratings event. The second call option allows Duke Energy to call the preferred stock, in whole or in part, on the First Call Date or any subsequent Reset Date at a redemption price in cash equal to $1,000 per share. Duke Energy is also required to redeem all accumulated and unpaid dividends if either call option is exercised.
| | | | | |
FINANCIAL STATEMENTS | STOCKHOLDERS' EQUITY |
Dividends issued on its Series A and Series B Preferred Stock are subject to approval by the Board of Directors. However, the deferral of dividend payments on the preferred stock prohibits the declaration of common stock in exchange for net cash proceedsdividends.
The Series A and Series B Preferred Stock rank, with respect to dividends and distributions upon liquidation or dissolution:
•senior to Common Stock and to each other class or series of approximately $723 million. The net proceeds were used to finance a portioncapital stock established after the original issue date of the Piedmont acquisition. AsSeries A and Series B Preferred Stock that is expressly made subordinated to the Series A and Series B Preferred Stock;
•on a resultparity with any class or series of capital stock established after the original issue date of the acquisition,Series A and Series B Preferred Stock that is not expressly made senior or subordinated to the Series A or Series B Preferred Stock;
•junior to any class or series of capital stock established after the original issue date of the Series A and Series B Preferred Stock that is expressly made senior to the Series A or Series B Preferred Stock;
•junior to all of Piedmont's issuedexisting and future indebtedness (including indebtedness outstanding stock became the issuedunder Duke Energy's credit facilities, unsecured senior notes, junior subordinated debentures and outstanding shares of a wholly owned subsidiarycommercial paper) and other liabilities with respect to assets available to satisfy claims against Duke Energy; and
•structurally subordinated to existing and future indebtedness and other liabilities of Duke Energy. See Note 2Energy's subsidiaries and future preferred stock of subsidiaries.
Holders of Series A and Series B Preferred Stock have no voting rights with respect to matters that generally require the approval of voting stockholders. The limited voting rights of holders of Series A and Series B Preferred Stock include the right to vote as a single class, respectively, on certain matters that may affect the preference or special rights of the preferred stock, except in the instance that Duke Energy elects to defer the payment of dividends for a total of six quarterly full dividend periods for Series A Preferred Stock or three semiannual full dividend periods for Series B Preferred Stock. If dividends are deferred for a cumulative total of six quarterly full dividend periods for Series A Preferred Stock or three semiannual full dividend periods for Series B Preferred Stock, whether or not for consecutive dividend periods, holders of the respective preferred stock have the right to elect two additional information relatedBoard members to the Piedmont acquisition.Board of Directors.
20. SEVERANCE
During 2021, Duke Energy reviewed its operations and identified opportunities for improvement to better serve its customers. This operational review included workforce realignment to ensure the company is staffed with the right skill sets and number of teammates to execute the long-term vision for Duke Energy. As such, Duke Energy extended involuntary severance benefits to certain employees in specific areas as a part of these workforce realignment efforts.
During 2020, as a result of partial settlements between Duke Energy Carolinas, Duke Energy Progress and the Public Staff, Duke Energy Carolinas and Duke Energy Progress deferred as Regulatory assets on the Consolidated Balance Sheets, approximately $65 million and $33 million, respectively, of previously recorded severance charges within Operation, maintenance and other on the Consolidated Statements of Operations. These severance charges were previously recorded during 2018, as Duke Energy reviewed its operations and identified opportunities for improvement to better serve its customers. This operational review included the company's workforce strategy and staffing levels to ensure the company iswas staffed with the right skillsetsskill sets and number of teammates to execute the long-term vision for Duke Energy. As such, Duke Energy extended voluntary and involuntary severance benefits to certain employees in specific areas as a part of workforce planning and digital transformation efforts.
During 2016, Duke Energy and Piedmont announced severance plans covering certain eligible employees whose employment will be involuntarily terminated without cause as a result of Duke Energy's acquisition of Piedmont. These reductions continued into 2017 and were a part of the synergies expected to be realized with the acquisition. Refer to Note 2 for additional information on the Piedmont acquisition.
|
| |
FINANCIAL STATEMENTS | SEVERANCE |
Severance benefit charges for initiatives and plans discussed above were accrued for a total of approximately 1,900 employees in 2018, 100 employees in 2017 and 600 employees in 2016. The following table presents the direct and allocated severance and related charges recordedaccrued for approximately 290 employees in 2021, 30 employees in 2020 and 140 employees in 2019, by the Duke Energy Registrants. Amounts are includedRegistrants within Operation, maintenance and other on the Consolidated Statements of Operations.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
(in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Year Ended December 31, 2021(a)(b) | $ | 69 | | $ | 33 | | $ | 26 | | $ | 20 | | $ | 6 | | $ | 2 | | $ | 3 | | $ | 2 | |
Year Ended December 31, 2020(c)(d) | (85) | | (58) | | (28) | | (31) | | 3 | | — | | — | | — | |
Year Ended December 31, 2019 | 16 | | 8 | | 6 | | 3 | | 3 | | — | | 1 | | 1 | |
(a) Includes amortization of deferred severance charges of approximately $33 million, $22 million, $11 million and $11 million for Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively.
(b) Includes adjustments associated with 2018 severance charges of approximately $(3) million, $(2) million and $(1) million for Duke Energy, Duke Energy Carolinas and Duke Energy Indiana, respectively.
(c) Includes unamortized deferred severance charges of approximately $(86) million, $(57) million, $(29) million and $(29) million for Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively.
(d) Includes adjustments associated with 2018 severance charges of approximately $(6) million, $(2) million, $(3) million and $(2) million for Duke Energy, Duke Energy Carolinas, Progress Energy and Duke Energy Progress, respectively.
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont(a) |
|
Year Ended December 31, 2018 | $ | 187 |
| $ | 102 |
| $ | 69 |
| $ | 52 |
| $ | 17 |
| $ | 6 |
| $ | 7 |
| $ | 2 |
|
Year Ended December 31, 2017 | 15 |
| 2 |
| 2 |
| 1 |
| 1 |
| — |
| 1 |
| 9 |
|
Year Ended December 31, 2016 | 118 |
| 39 |
| 40 |
| 23 |
| 17 |
| 3 |
| 7 |
| |
| | | | | |
(a)FINANCIAL STATEMENTS | Piedmont severance benefit charges were $3 million for the two months ended December 31, 2016, and $19 million for the year ended October 31, 2016.SEVERANCE |
The table below presents the severance liability for past and ongoing severance plans including the plans described above. | | | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | Duke | | Duke | Duke | Duke | |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | | Duke | Energy | Progress | Energy | |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Balance at December 31, 2017 | $ | 19 |
| $ | 5 |
| $ | 2 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | 5 |
| |
Balance at December 31, 2020 | | Balance at December 31, 2020 | $ | 11 | | $ | 2 | | $ | 3 | | $ | 1 | | $ | 2 | | $ | — | | $ | 1 | | $ | — | |
Provision/Adjustments | 200 |
| 98 |
| 50 |
| 40 |
| 10 |
| 2 |
| 2 |
| — |
| Provision/Adjustments | 36 | | 1 | | 1 | | 1 | | — | | — | | — | | — | |
Cash Reductions | (14 | ) | (3 | ) | (1 | ) | — |
| (1 | ) | — |
| — |
| (5 | ) | Cash Reductions | (8) | | (1) | | (2) | | (1) | | (1) | | — | | (1) | | — | |
Balance at December 31, 2018 | $ | 205 |
| $ | 100 |
| $ | 51 |
| $ | 41 |
| $ | 9 |
| $ | 2 |
| $ | 2 |
| $ | — |
| |
Balance at December 31, 2021 | | Balance at December 31, 2021 | $ | 39 | | $ | 2 | | $ | 2 | | $ | 1 | | $ | 1 | | $ | — | | $ | — | | $ | — | |
21. STOCK-BASED COMPENSATION
The Duke Energy Corporation 2015 Long-Term Incentive Plan (the 2015 Plan) provides for the grant of stock-based compensation awards to employees and outside directors. The 2015 Plan reserves 10 million shares of common stock for issuance. Duke Energy has historically issued new shares upon exercising or vesting of share-based awards. However, Duke Energy may use a combination of new share issuances and open market repurchases for share-based awards that are exercised or vest in the future. Duke Energy has not determined with certainty the amount of such new share issuances or open market repurchases.
The following table summarizes the total expense recognized by the Duke Energy Registrants, net of tax, for stock-based compensation. | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
| (in millions) | 2021 | | 2020 | | 2019 |
Duke Energy | $ | 56 |
| | $ | 43 |
| | $ | 35 |
| Duke Energy | $ | 64 | | | $ | 61 | | | $ | 65 | |
Duke Energy Carolinas | 20 |
| | 15 |
| | 12 |
| Duke Energy Carolinas | 23 | | | 22 | | | 24 | |
Progress Energy | 21 |
| | 16 |
| | 12 |
| Progress Energy | 24 | | | 23 | | | 24 | |
Duke Energy Progress | 13 |
| | 10 |
| | 7 |
| Duke Energy Progress | 15 | | | 15 | | | 15 | |
Duke Energy Florida | 8 |
| | 6 |
| | 5 |
| Duke Energy Florida | 9 | | | 9 | | | 9 | |
Duke Energy Ohio | 4 |
| | 3 |
| | 2 |
| Duke Energy Ohio | 5 | | | 4 | | | 5 | |
Duke Energy Indiana | 5 |
| | 4 |
| | 3 |
| Duke Energy Indiana | 6 | | | 6 | | | 6 | |
Piedmont(a) | 3 |
| | 3 |
| | | |
Piedmont | | Piedmont | 3 | | | 3 | | | 3 | |
| |
(a) | Piedmont's stock-based compensation costs were not material for the two months ended December 31, 2016. See discussion below for information on Piedmont's pre-merger stock-based compensation plans. |
Duke Energy's 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. |
| | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2018 |
| | 2017 |
| | 2016 |
|
Restricted stock unit awards | $ | 43 |
| | $ | 41 |
| | $ | 36 |
|
Performance awards | 35 |
| | 27 |
| | 19 |
|
Pretax stock-based compensation cost | $ | 78 |
| | $ | 68 |
| | $ | 55 |
|
Stock-based compensation costs capitalized | 5 |
| | 4 |
| | 2 |
|
Stock-based compensation expense | $ | 73 |
| | $ | 64 |
| | $ | 53 |
|
Tax benefit associated with stock-based compensation expense | $ | 17 |
| | $ | 25 |
| | $ | 20 |
|
|
| |
FINANCIAL STATEMENTS | STOCK-BASED COMPENSATION |
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
(in millions) | 2021 | | 2020 | | 2019 |
RSU awards | $ | 49 | | | $ | 46 | | | $ | 44 | |
Performance awards | 39 | | | 38 | | | 45 | |
| | | | | |
Pretax stock-based compensation cost | $ | 88 | | | $ | 84 | | | $ | 89 | |
Stock-based compensation costs capitalized | 5 | | | 5 | | | 5 | |
Stock-based compensation expense | $ | 83 | | | $ | 79 | | | $ | 84 | |
Tax benefit associated with stock-based compensation expense | $ | 19 | | | $ | 18 | | | $ | 19 | |
RESTRICTED STOCK UNIT AWARDS
RSU awards generally vest over periods from immediate to three years. Fair value amounts are based on the market price of Duke Energy's common stock on the grant date. The following table includes information related to RSU awards.
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2021 | | 2020 | | 2019 |
Shares granted (in thousands) | 673 | | | 498 | | | 571 | |
Fair value (in millions) | $ | 59 | | | $ | 50 | | | $ | 51 | |
|
| | | | | | | | | | | |
| Years Ended December 31, |
| 2018 |
| | 2017 |
| | 2016 |
|
Shares awarded (in thousands) | 649 |
| | 583 |
| | 684 |
|
Fair value (in millions) | $ | 49 |
| | $ | 47 |
| | $ | 52 |
|
| | | | | |
FINANCIAL STATEMENTS | STOCK-BASED COMPENSATION |
The following table summarizes information about RSU awards outstanding. | | | | | | | Weighted Average |
| | | Weighted Average |
| | Shares | | Grant Date Fair Value |
| Shares |
| | Grant Date Fair Value |
| | (in thousands) | | (per share) |
| (in thousands) |
| | (per share) |
| |
Outstanding at December 31, 2017 | 1,121 |
| | $ | 78 |
| |
Outstanding at December 31, 2020 | | Outstanding at December 31, 2020 | 939 | | | $ | 93 | |
Granted | 649 |
| | 76 |
| Granted | 673 | | | 88 | |
Vested | (545 | ) | | 78 |
| Vested | (502) | | | 89 | |
Forfeited | (72 | ) | | 77 |
| Forfeited | (67) | | | 92 | |
Outstanding at December 31, 2018 | 1,153 |
| | 77 |
| |
Restricted stock unit awards expected to vest | 1,101 |
| | 77 |
| |
Outstanding at December 31, 2021 | | Outstanding at December 31, 2021 | 1,043 | | | 92 | |
RSU awards expected to vest | | RSU awards expected to vest | 996 | | | 92 | |
The total grant date fair value of shares vested during the years ended December 31, 2018, 20172021, 2020 and 2016,2019, was $45 million, $43 million $42 million and $38$49 million, respectively. At December 31, 2018,2021, Duke Energy had $29$35 million of unrecognized compensation cost, which is expected to be recognized over a weighted average period of 23 months.
PERFORMANCE AWARDS
Stock-based performance awards generally vest after three years if performance targets are met. The actual number of shares issued will range from zero to 200 percent200% of target shares, depending on the level of performance achieved.
Performance awards contain performance conditions and a market condition. The performance conditions based on relative TSR compared to a predefined peer group, as well as a performance conditionare based on Duke Energy's cumulative adjusted EPS. Performance awards granted in 2018EPS and 2017 also contain a performance condition based on the total incident case rate (total incident case rate is one of our key employee safety metrics.
metrics). The market condition componentis based on TSR of Duke Energy's performance awardsEnergy relative to a predefined peer group.
Relative TSR is valued using a path-dependent model that incorporates expected relative TSR into the fair value determination of Duke Energy’s performance-based share awards. The model uses three-year historical volatilities and correlations for all companies in the predefined peer group, including Duke Energy, to simulate Duke Energy’s relative TSR as of the end of the performance period. For each simulation, Duke Energy’s relative TSR associated with the simulated stock price at the end of the performance period plus expected dividends within the period results in a value per share for the award portfolio. The average of these simulations is the expected portfolio value per share. Actual life to date results of Duke Energy’s relative TSR for each grant are incorporated within the model. For performance awards granted in 2018,2021, the model used a risk-free interest rate of 2.4 percent,0.24%, which reflects the yield on three-year Treasury bonds as of the grant date, and an expected volatility of 16.0 percent26.9% based on Duke Energy's historical volatility over three years using daily stock prices.
The following table includes information related to stock-based performance awards. | | | Years Ended December 31, | | Years Ended December 31, |
| 2018 |
| | 2017 |
| | 2016 |
| | 2021 | | 2020 | | 2019 |
Shares granted assuming target performance (in thousands) | 372 |
| | 461 |
| | 338 |
| Shares granted assuming target performance (in thousands) | 380 | | | 319 | | | 320 | |
Fair value (in millions) | $ | 27 |
| | $ | 37 |
| | $ | 25 |
| Fair value (in millions) | $ | 33 | | | $ | 34 | | | $ | 27 | |
|
| |
FINANCIAL STATEMENTS | STOCK-BASED COMPENSATION |
The following table summarizes information about stock-based performance awards outstanding and assumes payout at the target level. | | | | | | | Weighted Average |
| | | Weighted Average |
| | Shares | | Grant Date Fair Value |
| Shares |
| | Grant Date Fair Value |
| | (in thousands) | | (per share) |
Outstanding at December 31, 2020 | | Outstanding at December 31, 2020 | 962 | | | $ | 87 | |
Granted | | Granted | 380 | | | 88 | |
| (in thousands) |
| | (per share) |
| |
Outstanding at December 31, 2017 | 1,065 |
| | $ | 79 |
| |
Granted | 372 |
| | 73 |
| |
| Vested | (155 | ) | | 81 |
| Vested | (346) | | | 73 | |
Forfeited | (165 | ) | | 80 |
| Forfeited | (44) | | | 92 | |
Outstanding at December 31, 2018 | 1,117 |
| | 77 |
| |
Outstanding at December 31, 2021 | | Outstanding at December 31, 2021 | 952 | | | 93 | |
Stock-based performance awards expected to vest | 1,086 |
| | 77 |
| Stock-based performance awards expected to vest | 927 | | | 93 | |
The total grant date fair value of shares vested during the years ended December 31, 2018,2021, and 2016,2020, was $13$25 million and $25$36 million, respectively. No performance awards vested during the year ended December 31, 2017. At December 31, 2018,2021, Duke Energy had $30$20 million of unrecognized compensation cost, which is expected to be recognized over a weighted average period of 2122 months.
Prior to Duke Energy's acquisition of Piedmont, Piedmont had an incentive compensation plan that had a series of three-year performance and RSU awards for eligible officers and other participants. The Merger Agreement provided for the conversion of the 2014-2016 and 2015-2017 performance awards and the nonvested 2016 RSU award into the right to receive $60 cash per share upon the close of the transaction. In December 2015, Piedmont's board of directors authorized the accelerated vesting, payment and taxation of the 2014-2016 and 2015-2017 performance awards, as well as the 2016 RSU award, at the election of the participant. Substantially all participants elected to accelerate the settlement of these awards. As a result of the settlement of these awards, 194 thousand shares of Piedmont shares were issued to participants, net of shares withheld for applicable federal and state income taxes, at a closing price of $56.85 and a fair value of $11 million. The 2016-2018 performance award cycle was approved subsequent to the Merger Agreement and was converted into a Duke Energy RSU award at the consummation of the acquisition.
Piedmont's stock-based compensation costs and the tax benefit associated with stock-based compensation expense are included in the following table. |
| | | |
(in millions) | Year Ended October 31, 2016 |
Pretax stock-based compensation cost | $ | 16 |
|
Tax benefit associated with stock-based compensation expense | 6 |
|
Net of tax stock-based compensation cost | $ | 10 |
|
| | | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
22. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy and certain subsidiaries maintain, and the Subsidiary Registrants participate in, qualified, non-contributory defined benefit retirement plans. The Duke Energy plans cover most employees using a cash balance formula. Under a cash balance formula, a plan participant accumulates a retirement benefit consisting of pay credits based upon a percentage of current eligible earnings, age or age and years of service and interest credits. Certain employees are eligible for benefits that use a final average earnings formula. Under these final average earnings formulas, a plan participant accumulates a retirement benefit equal to the sum of percentages of their (i) highest three-year, four-year,three-, four-, or five-year average earnings, (ii) highest three-year, four-year,three-, four-, or five-year average earnings in excess of covered compensation per year of participation (maximum of 35 years) or (iii) highest three-year average earnings times years of participation in excess of 35 years. Duke Energy also maintains, and the Subsidiary Registrants participate in, non-qualified, non-contributory defined benefit retirement plans that cover certain executives. The qualified and non-qualified, non-contributory defined benefit plans are closed to new participants.
Duke Energy approved plan amendments to restructure its qualified non-contributory defined benefit retirement plans, effective January 1, 2018. The restructuring involved (i) the spin-off of the majority of inactive participants from two plans into a separate inactive plan and (ii) the merger of the active participant portions of such plans, along with a pension plan acquired as part of the Piedmont transaction, into a single active plan. Benefits offered to the plan participants remain unchanged except that the Piedmont plan's final average earnings formula was frozen as of December 31, 2017, and affected participants were moved into the active plan's cash balance formula. Actuarial gains and losses associated with the Inactive Plan will be amortized over the remaining life expectancy of the inactive participants. The longer amortization period lowered Duke Energy's 2018 pretax qualified pension plan expense by approximately $33 million.
Duke Energy uses a December 31 measurement date for its defined benefit retirement plan assets and obligations.
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Actuarial losses experienced by the defined benefit retirement plans in remeasuring plan assets as of December 31, 2021, were primarily attributable to actual investment performance that was less than expected investment performance. Actuarial gains experienced by the defined benefit retirement plans in remeasuring plan obligations as of December 31, 2021, were primarily attributable to the increase in the discount rate used to measure plan obligations. Actuarial gains experienced by the defined benefit retirement plans in remeasuring plan assets as of December 31, 2020, were attributable to actual investment performance that exceeded expected investment performance. Actuarial losses experienced by the defined benefit retirement plans in remeasuring plan obligations as of December 31, 2020, were primarily attributable to the decrease in the discount rate used to measure plan obligations.
Net periodic benefit costs disclosed in the tables below represent the cost of the respective benefit plan for the periods presented prior to capitalization of amounts reflected as Net property, plant and equipment, on the Consolidated Balance Sheets. Only the service cost component of net periodic benefit costs is eligible to be capitalized. The remaining non-capitalized portions of net periodic benefit costs are classified as either: (1) service cost, which is recorded in Operations, maintenance and other on the Consolidated Statements of Operations; or as (2) components of non-service cost, which is recorded in Other income and expenses, net on the Consolidated Statements of Operations. Amounts presented in the tables below for the Subsidiary Registrants represent the amounts of pension and other post-retirement benefit cost allocated by Duke Energy for employees of the Subsidiary Registrants. Additionally, the Consolidated Statements of Operations of the Subsidiary Registrants also include allocated net periodic benefit costs for their proportionate share of pension and post-retirement benefit cost for employees of Duke Energy’s shared services affiliate that provide support to the Subsidiary Registrants. However, in the tables below, these amounts are only presented within the Duke Energy column.column (except for amortization of settlement charges). These allocated amounts are included in the governance and shared service costs discussed in Note 13.
Duke Energy’s policy is to fund amounts on an actuarial basis to provide assets sufficient to meet benefit payments to be paid to plan participants. Duke Energy does not anticipate making any contributions in 2019.2022. The following table includes information related to the Duke Energy Registrants’ contributions to its qualified defined benefit pension plans. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont(a) |
|
Contributions Made: | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
2018 | $ | 141 |
| | $ | 46 |
| | $ | 45 |
| | $ | 25 |
| | $ | 20 |
| | $ | — |
| | $ | 8 |
| | $ | — |
|
2017 | 19 |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | — |
| | 11 |
|
2016 | 155 |
| | 43 |
| | 43 |
| | 24 |
| | 20 |
| | 5 |
| | 9 |
| |
|
|
| |
(a) | Piedmont contributed $10 million to its U.S. qualified defined benefit pension plan during the two months ended December 31, 2016, and $10 million for the year ended October 31, 2016. |
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Contributions Made: | | | | | | | | | | | | | | | |
2021 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
2020 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
2019 | 77 | | | 7 | | | 57 | | | 4 | | | 53 | | | 2 | | | 2 | | | 1 | |
QUALIFIED PENSION PLANS
Components of Net Periodic Pension Costs |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Service cost | $ | 182 |
| | $ | 58 |
| | $ | 51 |
| | $ | 29 |
| | $ | 22 |
| | $ | 5 |
| | $ | 11 |
| | $ | 7 |
|
Interest cost on projected benefit obligation | 299 |
| | 72 |
| | 94 |
| | 43 |
| | 50 |
| | 17 |
| | 23 |
| | 11 |
|
Expected return on plan assets | (559 | ) | | (147 | ) | | (178 | ) | | (85 | ) | | (91 | ) | | (28 | ) | | (42 | ) | | (22 | ) |
Amortization of actuarial loss | 132 |
| | 29 |
| | 44 |
| | 21 |
| | 23 |
| | 5 |
| | 10 |
| | 11 |
|
Amortization of prior service credit | (32 | ) | | (8 | ) | | (3 | ) | | (2 | ) | | (1 | ) | | — |
| | (2 | ) | | (10 | ) |
Net periodic pension costs(a)(b) | $ | 22 |
|
| $ | 4 |
| | $ | 8 |
| | $ | 6 |
| | $ | 3 |
| | $ | (1 | ) | | $ | — |
| | $ | (3 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 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 | $ | 159 |
| | $ | 48 |
| | $ | 45 |
| | $ | 26 |
| | $ | 19 |
| | $ | 4 |
| | $ | 9 |
| | $ | 10 |
|
Interest cost on projected benefit obligation | 328 |
| | 79 |
| | 100 |
| | 47 |
| | 53 |
| | 18 |
| | 26 |
| | 14 |
|
Expected return on plan assets | (545 | ) | | (142 | ) | | (167 | ) | | (82 | ) | | (85 | ) | | (27 | ) | | (42 | ) | | (24 | ) |
Amortization of actuarial loss | 146 |
| | 31 |
| | 52 |
| | 23 |
| | 29 |
| | 5 |
| | 12 |
| | 11 |
|
Amortization of prior service credit | (24 | ) | | (8 | ) | | (3 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | (2 | ) | | (2 | ) |
Settlement charge | 12 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 12 |
|
Other | 8 |
| | 2 |
| | 2 |
| | 1 |
| | 1 |
| | — |
| | 1 |
| | 1 |
|
Net periodic pension costs(a)(b) | $ | 84 |
| | $ | 10 |
| | $ | 29 |
| | $ | 13 |
| | $ | 16 |
| | $ | (1 | ) | | $ | 4 |
| | $ | 22 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
Service cost | $ | 147 |
| | $ | 48 |
| | $ | 42 |
| | $ | 24 |
| | $ | 19 |
| | $ | 4 |
| | $ | 9 |
|
Interest cost on projected benefit obligation | 335 |
| | 86 |
| | 106 |
| | 49 |
| | 55 |
| | 19 |
| | 28 |
|
Expected return on plan assets | (519 | ) | | (142 | ) | | (168 | ) | | (82 | ) | | (84 | ) | | (27 | ) | | (42 | ) |
Amortization of actuarial loss | 134 |
| | 33 |
| | 51 |
| | 23 |
| | 29 |
| | 4 |
| | 11 |
|
Amortization of prior service credit | (17 | ) | | (8 | ) | | (3 | ) | | (2 | ) | | (1 | ) | | — |
| | (1 | ) |
Settlement charge | 3 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Other | 8 |
| | 2 |
| | 3 |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
Net periodic pension costs(a)(b) | $ | 91 |
| | $ | 19 |
| | $ | 31 |
| | $ | 13 |
| | $ | 19 |
| | $ | 1 |
| | $ | 6 |
|
| |
(a) | Duke Energy amounts exclude $5 million, $7 million and $8 million for the years ended December 2018, 2017 and 2016, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy's merger with Cinergy in April 2006. |
| |
(b) | Duke Energy Ohio amounts exclude $2 million, $3 million and $4 million for the years ended December 2018, 2017 and 2016, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy's merger with Cinergy in April 2006. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Service cost | $ | 176 | | | $ | 56 | | | $ | 50 | | | $ | 29 | | | $ | 21 | | | $ | 5 | | | $ | 10 | | | $ | 6 | |
Interest cost on projected benefit obligation | 220 | | | 51 | | | 70 | | | 30 | | | 39 | | | 13 | | | 18 | | | 7 | |
Expected return on plan assets | (558) | | | (141) | | | (187) | | | (84) | | | (102) | | | (28) | | | (40) | | | (20) | |
Amortization of actuarial loss | 133 | | | 29 | | | 38 | | | 18 | | | 20 | | | 7 | | | 13 | | | 10 | |
Amortization of prior service credit | (29) | | | (8) | | | (2) | | | (1) | | | (1) | | | (1) | | | (2) | | | (9) | |
Amortization of settlement charges | 9 | | | 5 | | | 2 | | | 2 | | | 1 | | | — | | | — | | | 1 | |
Net periodic pension costs(a)(b) | $ | (49) | | | $ | (8) | | | $ | (29) | | | $ | (6) | | | $ | (22) | | | $ | (4) | | | $ | (1) | | | $ | (5) | |
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Service cost | $ | 165 | | | $ | 51 | | | $ | 48 | | | $ | 27 | | | $ | 21 | | | $ | 5 | | | $ | 9 | | | $ | 6 | |
Interest cost on projected benefit obligation | 269 | | | 62 | | | 85 | | | 38 | | | 46 | | | 15 | | | 22 | | | 9 | |
Expected return on plan assets | (572) | | | (145) | | | (190) | | | (87) | | | (101) | | | (28) | | | (42) | | | (21) | |
Amortization of actuarial loss | 128 | | | 28 | | | 41 | | | 18 | | | 23 | | | 6 | | | 12 | | | 9 | |
Amortization of prior service credit | (32) | | | (8) | | | (3) | | | (2) | | | (1) | | | — | | | (2) | | | (9) | |
Amortization of settlement charges | 18 | | | 9 | | | 7 | | | 6 | | | 1 | | | — | | | 1 | | | 1 | |
| | | | | | | | | | | | | | | |
Net periodic pension costs(a)(b) | $ | (24) | | | $ | (3) | | | $ | (12) | | | $ | — | | | $ | (11) | | | $ | (2) | | | $ | — | | | $ | (5) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Service cost | $ | 158 | | | $ | 49 | | | $ | 46 | | | $ | 26 | | | $ | 20 | | | $ | 4 | | | $ | 9 | | | $ | 5 | |
Interest cost on projected benefit obligation | 317 | | | 75 | | | 100 | | | 45 | | | 54 | | | 18 | | | 26 | | | 10 | |
Expected return on plan assets | (567) | | | (147) | | | (178) | | | (88) | | | (89) | | | (28) | | | (43) | | | (22) | |
Amortization of actuarial loss | 108 | | | 24 | | | 39 | | | 15 | | | 24 | | | 4 | | | 8 | | | 8 | |
Amortization of prior service credit | (32) | | | (8) | | | (3) | | | (2) | | | (1) | | | — | | | (2) | | | (9) | |
Amortization of settlement charge | 6 | | | 2 | | | 1 | | | 1 | | | — | | | 2 | | | — | | | — | |
| | | | | | | | | | | | | | | |
Net periodic pension costs(a)(b) | $ | (10) | | | $ | (5) | | | $ | 5 | | | $ | (3) | | | $ | 8 | | | $ | — | | | $ | (2) | | | $ | (8) | |
(a) Duke Energy amounts exclude $3 million, $4 million and $4 million for the years ended December 2021, 2020 and 2019, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy's merger with Cinergy in April 2006. |
| | | | | | | |
| Piedmont |
| Two Months Ended | | Year Ended |
(in millions) | December 31, 2016 | | October 31, 2016 |
Service cost | $ | 2 |
| | $ | 11 |
|
Interest cost on projected benefit obligation | 2 |
| | 9 |
|
Expected return on plan assets | (4 | ) | | (24 | ) |
Amortization of actuarial loss | 2 |
| | 8 |
|
Amortization of prior service credit | (1 | ) | | (2 | ) |
Settlement charge | 3 |
| | — |
|
Net periodic pension costs | $ | 4 |
| | $ | 2 |
|
(b) Duke Energy Ohio amounts exclude $1 million, $2 million and $2 million for the years ended December 2021, 2020 and 2019, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy's merger with Cinergy in April 2006.Amounts Recognized in Accumulated Other Comprehensive Income and Regulatory Assets |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Regulatory assets, net increase (decrease) | $ | 298 |
| | $ | 170 |
| �� | $ | 40 |
| | $ | 31 |
| | $ | 9 |
| | $ | 10 |
| | $ | 30 |
| | $ | 8 |
|
Accumulated other comprehensive loss (income) | | | | | | | | | | | | | | | |
Deferred income tax expense | $ | (2 | ) | | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Amortization of prior year service credit | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Amortization of prior year actuarial losses | 10 |
| | — |
| | (4 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
Net amount recognized in accumulated other comprehensive income | $ | 9 |
| | $ | — |
| | $ | (3 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Regulatory assets, net (decrease) increase | $ | (212 | ) | | $ | (70 | ) | | $ | (49 | ) | | $ | (37 | ) | | $ | (11 | ) | | $ | 9 |
| | $ | (19 | ) | | $ | (64 | ) |
Accumulated other comprehensive (income) loss | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Deferred income tax expense | $ | — |
| | $ | — |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Prior year service credit arising during the year | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Amortization of prior year actuarial losses | (7 | ) | | — |
| | (7 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
Net amount recognized in accumulated other comprehensive income | $ | (6 | ) | | $ | — |
| | $ | (4 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Piedmont's regulatory asset net increase was $34 million and $35 million for the two months ended December 31, 2016, and for the year ended October 31, 2016, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Regulatory assets, net decrease | $ | (261) | | | $ | (57) | | | $ | (128) | | | $ | (31) | | | $ | (97) | | | $ | (17) | | | $ | (19) | | | $ | (5) | |
Accumulated other comprehensive loss (income) | | | | | | | | | | | | | | | |
Deferred income tax expense | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Amortization of prior year service credit | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Amortization of prior year actuarial losses | (8) | | | — | | | (1) | | | — | | | — | | | — | | | — | | | — | |
Net amount recognized in accumulated other comprehensive income | $ | (6) | | | $ | — | | | $ | (1) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Regulatory assets, net (decrease) increase | $ | (62) | | | $ | (39) | | | $ | (26) | | | $ | (30) | | | $ | 4 | | | $ | (2) | | | $ | 5 | | | $ | (1) | |
Accumulated other comprehensive loss (income) | | | | | | | | | | | | | | | |
Deferred income tax expense | $ | 2 | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | |
Amortization of prior year service credit | 1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Amortization of prior year actuarial losses | (11) | | | — | | | (1) | | | — | | | (3) | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Net amount recognized in accumulated other comprehensive income | $ | (8) | | | $ | — | | | $ | — | | | $ | — | | | $ | (2) | | | $ | — | | | $ | — | | | $ | — | |
Reconciliation of Funded Status to Net Amount Recognized |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Change in Projected Benefit Obligation | |
| | | | | | | | | | | | | | |
Obligation at prior measurement date | $ | 8,448 |
| | $ | 2,029 |
| | $ | 2,637 |
| | $ | 1,211 |
| | $ | 1,410 |
| | $ | 479 |
| | $ | 669 |
| | $ | 313 |
|
Service cost | 174 |
| | 56 |
| | 49 |
| | 28 |
| | 21 |
| | 5 |
| | 10 |
| | 7 |
|
Interest cost | 299 |
| | 72 |
| | 94 |
| | 43 |
| | 50 |
| | 17 |
| | 23 |
| | 11 |
|
Actuarial gain | (485 | ) | | (44 | ) | | (204 | ) | | (87 | ) | | (114 | ) | | (29 | ) | | (29 | ) | | (18 | ) |
Transfers | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (16 | ) |
Benefits paid | (567 | ) | | (159 | ) | | (143 | ) | | (70 | ) | | (72 | ) | | (37 | ) | | (55 | ) | | (33 | ) |
Obligation at measurement date | $ | 7,869 |
|
| $ | 1,954 |
|
| $ | 2,433 |
|
| $ | 1,125 |
|
| $ | 1,295 |
|
| $ | 435 |
|
| $ | 618 |
| | $ | 264 |
|
Accumulated Benefit Obligation at measurement date | $ | 7,818 |
| | $ | 1,954 |
| | $ | 2,404 |
| | $ | 1,125 |
| | $ | 1,265 |
| | $ | 425 |
| | $ | 614 |
| | $ | 264 |
|
Change in Fair Value of Plan Assets | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Plan assets at prior measurement date | $ | 9,003 |
| | $ | 2,372 |
| | $ | 2,814 |
| | $ | 1,366 |
| | $ | 1,429 |
| | $ | 458 |
| | $ | 684 |
| | $ | 368 |
|
Employer contributions | 141 |
| | 46 |
| | 45 |
| | 25 |
| | 20 |
| | — |
| | 8 |
| | — |
|
Actual return on plan assets | (344 | ) | | (91 | ) | | (110 | ) | | (53 | ) | | (55 | ) | | (16 | ) | | (26 | ) | | (14 | ) |
Benefits paid | (567 | ) | | (159 | ) | | (143 | ) | | (70 | ) |
| (72 | ) |
| (37 | ) |
| (55 | ) | | (33 | ) |
Transfers | — |
| | — |
| | — |
| | — |
|
| — |
|
| — |
|
| — |
| | (16 | ) |
Plan assets at measurement date | $ | 8,233 |
| | $ | 2,168 |
| | $ | 2,606 |
| | $ | 1,268 |
| | $ | 1,322 |
| | $ | 405 |
| | $ | 611 |
| | $ | 305 |
|
Funded status of plan | $ | 364 |
| | $ | 214 |
| | $ | 173 |
| | $ | 143 |
| | $ | 27 |
| | $ | (30 | ) | | $ | (7 | ) | | $ | 41 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Change in Projected Benefit Obligation | | | | | | | | | | | | | | | |
Obligation at prior measurement date | $ | 8,131 |
| | $ | 1,952 |
| | $ | 2,512 |
| | $ | 1,158 |
| | $ | 1,323 |
| | $ | 447 |
| | $ | 658 |
| | $ | 344 |
|
Service cost | 159 |
| | 48 |
| | 45 |
| | 26 |
| | 19 |
| | 4 |
| | 9 |
| | 10 |
|
Interest cost | 328 |
| | 79 |
| | 100 |
| | 47 |
| | 53 |
| | 18 |
| | 26 |
| | 14 |
|
Actuarial loss | 455 |
| | 68 |
| | 158 |
| | 57 |
| | 99 |
| | 35 |
| | 26 |
| | 38 |
|
Transfers | — |
| | 27 |
| | (32 | ) | | (2 | ) | | (15 | ) | | 12 |
| | — |
| | — |
|
Plan amendments | (61 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (61 | ) |
Benefits paid | (537 | ) | | (145 | ) | | (146 | ) | | (75 | ) | | (69 | ) | | (37 | ) | | (50 | ) | | (5 | ) |
Benefits paid — settlements | (27 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (27 | ) |
Obligation at measurement date | $ | 8,448 |
| | $ | 2,029 |
| | $ | 2,637 |
| | $ | 1,211 |
| | $ | 1,410 |
| | $ | 479 |
| | $ | 669 |
| | $ | 313 |
|
Accumulated Benefit Obligation at measurement date | $ | 8,369 |
| | $ | 2,029 |
| | $ | 2,601 |
| | $ | 1,211 |
| | $ | 1,375 |
| | $ | 468 |
| | $ | 652 |
| | $ | 313 |
|
Change in Fair Value of Plan Assets | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Plan assets at prior measurement date | $ | 8,531 |
| | $ | 2,225 |
| | $ | 2,675 |
| | $ | 1,290 |
| | $ | 1,352 |
| | $ | 428 |
| | $ | 657 |
| | $ | 346 |
|
Employer contributions | 19 |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | — |
| | 11 |
|
Actual return on plan assets | 1,017 |
| | 265 |
| | 317 |
| | 153 |
| | 161 |
| | 51 |
| | 77 |
| | 43 |
|
Benefits paid | (537 | ) | | (145 | ) | | (146 | ) | | (75 | ) | | (69 | ) | | (37 | ) | | (50 | ) | | (5 | ) |
Benefits paid — settlements | (27 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (27 | ) |
Transfers | — |
| | 27 |
| | (32 | ) | | (2 | ) | | (15 | ) | | 12 |
| | — |
| | — |
|
Plan assets at measurement date | $ | 9,003 |
| | $ | 2,372 |
| | $ | 2,814 |
| | $ | 1,366 |
| | $ | 1,429 |
| | $ | 458 |
| | $ | 684 |
| | $ | 368 |
|
Funded status of plan | $ | 555 |
| | $ | 343 |
| | $ | 177 |
| | $ | 155 |
| | $ | 19 |
| | $ | (21 | ) | | $ | 15 |
| | $ | 55 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Change in Projected Benefit Obligation | | | | | | | | | | | | | | | |
Obligation at prior measurement date | $ | 8,634 | | | $ | 1,988 | | | $ | 2,715 | | | $ | 1,193 | | | $ | 1,507 | | | $ | 502 | | | $ | 715 | | | $ | 293 | |
| | | | | | | | | | | | | | | |
Service cost | 168 | | | 54 | | | 48 | | | 28 | | | 20 | | | 5 | | | 9 | | | 6 | |
Interest cost | 220 | | | 51 | | | 70 | | | 30 | | | 39 | | | 13 | | | 18 | | | 7 | |
Actuarial gain | (200) | | | (42) | | | (108) | | | (18) | | | (89) | | | (10) | | | (10) | | | (5) | |
Benefits paid | (615) | | | (148) | | | (161) | | | (80) | | | (81) | | | (50) | | | (52) | | | (28) | |
| | | | | | | | | | | | | | | |
Transfers | — | | | — | | | (4) | | | — | | | (4) | | | (10) | | | — | | | — | |
Obligation at measurement date | $ | 8,207 | | | $ | 1,903 | | | $ | 2,560 | | | $ | 1,153 | | | $ | 1,392 | | | $ | 450 | | | $ | 680 | | | $ | 273 | |
Accumulated Benefit Obligation at measurement date | $ | 8,144 | | | $ | 1,904 | | | $ | 2,529 | | | $ | 1,154 | | | $ | 1,361 | | | $ | 439 | | | $ | 672 | | | $ | 274 | |
Change in Fair Value of Plan Assets | | | | | | | | | | | | | | | |
Plan assets at prior measurement date | $ | 9,337 | | | $ | 2,381 | | | $ | 3,049 | | | $ | 1,422 | | | $ | 1,605 | | | $ | 472 | | | $ | 684 | | | $ | 343 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Actual return on plan assets | 513 | | | 132 | | | 169 | | | 79 | | | 90 | | | 26 | | | 37 | | | 19 | |
Benefits paid | (615) | | | (148) | | | (161) | | | (80) | | | (81) | | | (50) | | | (52) | | | (28) | |
| | | | | | | | | | | | | | | |
Transfers | — | | | — | | | (4) | | | — | | | (4) | | | (10) | | | — | | | — | |
| | | | | | | | | | | | | | | |
Plan assets at measurement date | $ | 9,235 | | | $ | 2,365 | | | $ | 3,053 | | | $ | 1,421 | | | $ | 1,610 | | | $ | 438 | | | $ | 669 | | | $ | 334 | |
Funded status of plan | $ | 1,028 | | | $ | 462 | | | $ | 493 | | | $ | 268 | | | $ | 218 | | | $ | (12) | | | $ | (11) | | | $ | 61 | |
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Change in Projected Benefit Obligation | | | | | | | | | | | | | | | |
Obligation at prior measurement date | $ | 8,321 | | | $ | 1,923 | | | $ | 2,608 | | | $ | 1,170 | | | $ | 1,424 | | | $ | 481 | | | $ | 693 | | | $ | 292 | |
| | | | | | | | | | | | | | | |
Service cost | 157 | | | 49 | | | 46 | | | 26 | | | 20 | | | 4 | | | 8 | | | 5 | |
Interest cost | 269 | | | 62 | | | 85 | | | 38 | | | 46 | | | 15 | | | 22 | | | 9 | |
Actuarial loss | 433 | | | 83 | | | 144 | | | 50 | | | 93 | | | 21 | | | 46 | | | 14 | |
Benefits paid | (541) | | | (137) | | | (160) | | | (83) | | | (76) | | | (34) | | | (49) | | | (27) | |
Benefits paid – settlements | (5) | | | — | | | — | | | — | | | — | | | — | | | (5) | | | — | |
Transfers | — | | | 8 | | | (8) | | | (8) | | | — | | | 15 | | | — | | | — | |
Obligation at measurement date | $ | 8,634 | | | $ | 1,988 | | | $ | 2,715 | | | $ | 1,193 | | | $ | 1,507 | | | $ | 502 | | | $ | 715 | | | $ | 293 | |
Accumulated Benefit Obligation at measurement date | $ | 8,577 | | | $ | 1,989 | | | $ | 2,684 | | | $ | 1,194 | | | $ | 1,476 | | | $ | 493 | | | $ | 709 | | | $ | 294 | |
Change in Fair Value of Plan Assets | | | | | | | | | | | | | | | |
Plan assets at prior measurement date | $ | 8,910 | | | $ | 2,263 | | | $ | 2,898 | | | $ | 1,364 | | | $ | 1,515 | | | $ | 443 | | | $ | 667 | | | $ | 335 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Actual return on plan assets | 973 | | | 247 | | | 319 | | | 149 | | | 166 | | | 48 | | | 71 | | | 35 | |
Benefits paid | (541) | | | (137) | | | (160) | | | (83) | | | (76) | | | (34) | | | (49) | | | (27) | |
Benefits paid – settlements | (5) | | | — | | | — | | | — | | | — | | | — | | | (5) | | | — | |
Transfers | — | | | 8 | | | (8) | | | (8) | | | — | | | 15 | | | — | | | — | |
| | | | | | | | | | | | | | | |
Plan assets at measurement date | $ | 9,337 | | | $ | 2,381 | | | $ | 3,049 | | | $ | 1,422 | | | $ | 1,605 | | | $ | 472 | | | $ | 684 | | | $ | 343 | |
Funded status of plan | $ | 703 | | | $ | 393 | | | $ | 334 | | | $ | 229 | | | $ | 98 | | | $ | (30) | | | $ | (31) | | | $ | 50 | |
Amounts Recognized in the Consolidated Balance Sheets |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Prefunded pension(a) | $ | 433 |
| | $ | 214 |
| | $ | 242 |
| | $ | 143 |
| | $ | 96 |
| | $ | 24 |
| | $ | 39 |
| | $ | 41 |
|
Noncurrent pension liability(b) | $ | 69 |
| | $ | — |
| | $ | 69 |
| | $ | — |
| | $ | 69 |
| | $ | 54 |
| | $ | 46 |
| | $ | — |
|
Net asset (liability) recognized | $ | 364 |
|
| $ | 214 |
|
| $ | 173 |
|
| $ | 143 |
|
| $ | 27 |
|
| $ | (30 | ) |
| $ | (7 | ) | | $ | 41 |
|
Regulatory assets | $ | 2,184 |
| | $ | 576 |
| | $ | 796 |
| | $ | 372 |
| | $ | 424 |
| | $ | 100 |
| | $ | 182 |
| | $ | 81 |
|
Accumulated other comprehensive (income) loss | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Deferred income tax benefit | $ | (43 | ) | | $ | — |
| | $ | (2 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Prior service credit | (4 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net actuarial loss | 126 |
| | — |
| | 5 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts recognized in accumulated other comprehensive loss | $ | 79 |
| | $ | — |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Amounts to be recognized in net periodic pension costs in the next year | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Unrecognized net actuarial loss | $ | 97 |
| | $ | 22 |
| | $ | 37 |
| | $ | 13 |
| | $ | 24 |
| | $ | 3 |
| | $ | 5 |
| | $ | 7 |
|
Unrecognized prior service credit | (32 | ) | | (8 | ) | | (3 | ) | | (2 | ) | | (1 | ) | | — |
| | (2 | ) | | (9 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Prefunded pension(a) | $ | 680 |
| | $ | 343 |
| | $ | 245 |
| | $ | 155 |
| | $ | 87 |
| | $ | 8 |
| | $ | 16 |
| | $ | 55 |
|
Noncurrent pension liability(b) | $ | 125 |
| | $ | — |
| | $ | 68 |
| | $ | — |
| | $ | 68 |
| | $ | 29 |
| | $ | 1 |
| | $ | — |
|
Net asset recognized | $ | 555 |
| | $ | 343 |
| | $ | 177 |
| | $ | 155 |
| | $ | 19 |
| | $ | (21 | ) | | $ | 15 |
| | $ | 55 |
|
Regulatory assets | $ | 1,886 |
| | $ | 406 |
| | $ | 756 |
| | $ | 341 |
| | $ | 415 |
| | $ | 90 |
| | $ | 152 |
| | $ | 73 |
|
Accumulated other comprehensive (income) loss | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Deferred income tax benefit | $ | (41 | ) | | $ | — |
| | $ | (3 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Prior service credit | (5 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net actuarial loss | 116 |
| | — |
| | 9 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts recognized in accumulated other comprehensive loss | $ | 70 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Amounts to be recognized in net periodic pension costs in the next year | | | | | | | | | | | | | | | |
Unrecognized net actuarial loss | $ | 132 |
| | $ | 29 |
| | $ | 44 |
| | $ | 21 |
| | $ | 23 |
| | $ | 5 |
| | $ | 7 |
| | $ | 11 |
|
Unrecognized prior service credit | $ | (32 | ) | | $ | (8 | ) | | $ | (3 | ) | | $ | (2 | ) | | $ | (1 | ) | | $ | — |
| | $ | (2 | ) | | $ | (9 | ) |
| |
(a) | Included in Other within Other Noncurrent Assets on the Consolidated Balance Sheets. |
| |
(b) | Included in Accrued pension and other post-retirement benefit costs on the Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Prefunded pension(a) | $ | 1,071 | | | $ | 462 | | | $ | 494 | | | $ | 268 | | | $ | 219 | | | $ | 74 | | | $ | 100 | | | $ | 61 | |
Noncurrent pension liability(b) | $ | 43 | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 1 | | | $ | 86 | | | $ | 111 | | | $ | — | |
Net asset (liability) recognized | $ | 1,028 | | | $ | 462 | | | $ | 493 | | | $ | 268 | | | $ | 218 | | | $ | (12) | | | $ | (11) | | | $ | 61 | |
Regulatory assets | $ | 1,649 | | | $ | 324 | | | $ | 563 | | | $ | 252 | | | $ | 311 | | | $ | 93 | | | $ | 190 | | | $ | 75 | |
Accumulated other comprehensive (income) loss | | | | | | | | | | | | | | | |
Deferred income tax benefit | $ | (20) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Prior service credit | (1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net actuarial loss | 92 | | | — | | | 1 | | | — | | | — | | | — | | | — | | | — | |
Net amounts recognized in accumulated other comprehensive loss | $ | 71 | | | $ | — | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
Prefunded pension(a) | $ | 780 | | | $ | 393 | | | $ | 379 | | | $ | 229 | | | $ | 143 | | | $ | 58 | | | $ | 79 | | | $ | 50 | |
Noncurrent pension liability(b) | $ | 77 | | | $ | — | | | $ | 45 | | | $ | — | | | $ | 45 | | | $ | 88 | | | $ | 110 | | | $ | — | |
Net asset (liability) recognized | $ | 703 | | | $ | 393 | | | $ | 334 | | | $ | 229 | | | $ | 98 | | | $ | (30) | | | $ | (31) | | | $ | 50 | |
Regulatory assets | $ | 1,910 | | | $ | 381 | | | $ | 691 | | | $ | 283 | | | $ | 408 | | | $ | 110 | | | $ | 209 | | | $ | 80 | |
Accumulated other comprehensive (income) loss | | | | | | | | | | | | | | | |
Deferred income tax benefit | $ | (21) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Prior service credit | (2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net actuarial loss | 100 | | | — | | | 2 | | | — | | | — | | | — | | | — | | | — | |
Net amounts recognized in accumulated other comprehensive loss | $ | 77 | | | $ | — | | | $ | 2 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
(a) Included in Other within Other Noncurrent Assets on the Consolidated Balance Sheets.
(b) Included in Accrued pension and other post-retirement benefit costs on the Consolidated Balance Sheets.
Information for Plans with Accumulated Benefit Obligation in Excess of Plan Assets
|
| | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | Duke |
| Duke |
| Duke |
|
| Duke |
| Progress |
| Energy |
| Energy |
| Energy |
|
(in millions) | Energy |
| Energy |
| Florida |
| Ohio |
| Indiana |
|
Projected benefit obligation | $ | 679 |
| $ | 679 |
| $ | 679 |
| $ | 123 |
| $ | 203 |
|
Accumulated benefit obligation | 651 |
| 651 |
| 651 |
| 115 |
| 199 |
|
Fair value of plan assets | 610 |
| 610 |
| 610 |
| 69 |
| 159 |
|
| | | December 31, 2017 | | | December 31, 2021 | |
| | Duke |
| Duke |
| | | Duke | | Duke | |
| Duke |
| Progress |
| Energy |
| Energy |
| | | Energy | | Energy | |
(in millions) | Energy |
| Energy |
| Florida |
| Ohio |
| (in millions) | | Ohio | | Indiana | |
Projected benefit obligation | $ | 1,386 |
| $ | 718 |
| $ | 718 |
| $ | 337 |
| Projected benefit obligation | | $ | 153 | | | $ | 284 | | |
Accumulated benefit obligation | 1,326 |
| 683 |
| 683 |
| 326 |
| Accumulated benefit obligation | | 143 | | | 275 | | |
Fair value of plan assets | 1,260 |
| 650 |
| 650 |
| 308 |
| Fair value of plan assets | | 67 | | | 173 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| | | | | Duke | | Duke | | Duke |
| Duke | | Progress | | Energy | | Energy | | Energy |
(in millions) | Energy | | Energy | | Florida | | Ohio | | Indiana |
Projected benefit obligation | $ | 4,914 | | | $ | 828 | | | $ | 828 | | | $ | 184 | | | $ | 293 | |
Accumulated benefit obligation | 4,856 | | | 796 | | | 796 | | | 176 | | | 285 | |
Fair value of plan assets | 4,837 | | | 783 | | | 783 | | | 96 | | | 183 | |
Assumptions Used for Pension Benefits Accounting
The discount rate used to determine the current year pension obligation and following year’s pension expense is based on a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high qualityhigh-quality corporate bonds that generate sufficient cash flow to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of non-callable corporate bonds rated Aa quality or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plan’s projected benefit payments discounted at this rate with the market value of the bonds selected.
The average remaining service period for participants in active plans and life expectancy of participants in inactive plans is 1314 years for Duke Energy, Duke Energy Progress and Duke Energy Progress, 12Ohio, 15 years for Duke Energy Carolinas, Progress Energy and Duke Energy Florida, 1413 years for Duke Energy OhioCarolinas and Duke Energy Indiana and 10nine years for Piedmont.
| | | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
The following tables present the assumptions or range of assumptions used for pension benefit accounting.
| | | | December 31, | | December 31, |
| | 2018 | | 2017 | | 2016 | | 2021 | | 2020 | | 2019 |
Benefit Obligations | | | | | | | | | | | | | Benefit Obligations | |
Discount rate | | | | 4.30% | | | | 3.60% | | | | 4.10% | Discount rate | | 2.90% | | 2.60% | | 3.30% |
Interest crediting rate | | Interest crediting rate | | 4.00% | | 4.00% | | 4.00% |
Salary increase | | 3.50 | % | – | 4.00% | | 3.50 | % | – | 4.00% | | 4.00 | % | – | 4.50% | Salary increase | | 3.50 | % | – | 4.00% | | 3.50 | % | – | 4.00% | | 3.50 | % | – | 4.00% |
Net Periodic Benefit Cost | | | | | | | | | | | | | Net Periodic Benefit Cost | |
Discount rate | | | | 3.60% | | | | 4.10% | |
|
| | 4.40% | Discount rate | | 2.60% | | 3.30% | | 4.30% |
Interest crediting rate | | Interest crediting rate | | 4.00% | | 4.00% | | 4.00% |
Salary increase | | 3.50 | % | – | 4.00% | | 4.00 | % | – | 4.50% | | 4.00 | % | – | 4.40% | Salary increase | | 3.50 | % | – | 4.00% | | 3.50 | % | – | 4.00% | | 3.50 | % | – | 4.00% |
Expected long-term rate of return on plan assets | |
|
| | 6.50% | | 6.50 | % | – | 6.75% | | 6.50 | % | – | 6.75% | Expected long-term rate of return on plan assets | | 6.50% | | 6.85% | | 0 | | 6.85% |
Expected Benefit Payments
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
(in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Years ending December 31, | | | | | | | | |
2022 | $ | 652 | | $ | 174 | | $ | 177 | | $ | 95 | | $ | 81 | | $ | 37 | | $ | 48 | | $ | 27 | |
2023 | 653 | | 173 | | 180 | | 97 | | 82 | | 36 | | 48 | | 24 | |
2024 | 645 | | 171 | | 181 | | 96 | | 84 | | 35 | | 47 | | 23 | |
2025 | 632 | | 168 | | 180 | | 94 | | 85 | | 34 | | 47 | | 20 | |
2026 | 605 | | 155 | | 176 | | 90 | | 86 | | 33 | | 45 | | 21 | |
2027-2031 | 2,705 | | 655 | | 818 | | 389 | | 426 | | 149 | | 218 | | 85 | |
NON-QUALIFIED PENSION PLANS
The accumulated benefit obligation, which equals the projected benefit obligation for non-qualified pension plans, was $300 million for Duke Energy, $12 million for Duke Energy Carolinas, $104 million for Progress Energy, $31 million for Duke Energy Progress, $41 million for Duke Energy Florida, $3 million for Duke Energy Ohio, $2 million for Duke Energy Indiana and $3 million for Piedmont as of December 31, 2021.
Employer contributions, which equal benefits paid for non-qualified pension plans, were $24 million for Duke Energy, $1 million for Duke Energy Carolinas, $8 million for Progress Energy, $3 million for Duke Energy Progress and $3 million for Duke Energy Florida for the year ended December 31, 2021. Employer contributions were not material for Duke Energy Ohio, Duke Energy Indiana or Piedmont for the year ended December 31, 2021.
Net periodic pension costs for non-qualified pension plans were not material for the years ended December 31, 2021, 2020 or 2019.
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides, and the Subsidiary Registrants participate in, some health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans. The health care benefits include medical, dental, vision and prescription drug coverage and are subject to certain limitations, such as deductibles and copayments.
Duke Energy did not make any pre-funding contributions to its other post-retirement benefit plans during the years ended December 31, 2021, 2020 or 2019.
|
| | | | | | |
| | Piedmont |
| | Two Months Ended | | Year Ended |
| | December 31, 2016 | | October 31, 2016 |
Benefit Obligations | | | | |
Discount rate | | 4.10 | % | | 3.80 | % |
Salary increase | | 4.50 | % | | 4.05 | % |
Net Periodic Benefit Cost | | | | |
|
Discount rate | | 3.80 | % | | 4.34 | % |
Salary increase | | 4.05 | % | | 4.07 | % |
Expected long-term rate of return on plan assets | | 6.75 | % | | 7.25 | % |
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Expected Benefit Payments |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Years ending December 31, | | | | | | | | |
2019 | $ | 662 |
| $ | 210 |
| $ | 179 |
| $ | 105 |
| $ | 73 |
| $ | 33 |
| $ | 47 |
| $ | 20 |
|
2020 | 651 |
| 177 |
| 171 |
| 90 |
| 80 |
| 37 |
| 51 |
| 24 |
|
2021 | 663 |
| 182 |
| 177 |
| 95 |
| 81 |
| 37 |
| 51 |
| 23 |
|
2022 | 662 |
| 189 |
| 179 |
| 94 |
| 84 |
| 37 |
| 49 |
| 22 |
|
2023 | 655 |
| 185 |
| 181 |
| 95 |
| 85 |
| 35 |
| 47 |
| 22 |
|
2024-2028 | 2,993 |
| 794 |
| 902 |
| 451 |
| 447 |
| 158 |
| 217 |
| 96 |
|
NON-QUALIFIED PENSION PLANS
Components of Net Periodic PensionOther Post-Retirement Benefit Costs |
| | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | Duke |
| | Duke |
| Duke |
|
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
|
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
|
Service cost | $ | 2 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
|
Interest cost on projected benefit obligation | 12 |
| — |
| 4 |
| 1 |
| 2 |
|
Amortization of actuarial loss | 8 |
| — |
| 2 |
| 1 |
| 1 |
|
Amortization of prior service credit | (2 | ) | — |
| — |
| — |
| — |
|
Net periodic pension costs | $ | 20 |
| $ | 1 |
| $ | 6 |
| $ | 2 |
| $ | 3 |
|
| | | Year Ended December 31, 2017 | | Year Ended December 31, 2021 |
| | Duke |
| | Duke |
| Duke |
| | | Duke | | Duke | | Duke | | Duke | | Duke | |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Service cost | $ | 2 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| Service cost | $ | 4 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | |
Interest cost on projected benefit obligation | 13 |
| 1 |
| 5 |
| 1 |
| 2 |
| |
Interest cost on accumulated post-retirement benefit obligation | | Interest cost on accumulated post-retirement benefit obligation | 18 | | | 4 | | | 7 | | | 4 | | | 3 | | | 1 | | | 1 | | | 1 | |
Expected return on plan assets | | Expected return on plan assets | (11) | | | (7) | | | — | | | — | | | — | | | — | | | — | | | (2) | |
Amortization of actuarial loss | 8 |
| — |
| 2 |
| 1 |
| 1 |
| Amortization of actuarial loss | 2 | | | — | | | 1 | | | — | | | 1 | | | — | | | 4 | | | — | |
Amortization of prior service credit | (2 | ) | — |
| — |
| — |
| — |
| Amortization of prior service credit | (13) | | | (4) | | | (2) | | | (1) | | | (1) | | | (1) | | | (1) | | | (2) | |
Net periodic pension costs | $ | 21 |
| $ | 2 |
| $ | 7 |
| $ | 2 |
| $ | 3 |
| |
| Net periodic post-retirement benefit costs (a)(b) | | Net periodic post-retirement benefit costs (a)(b) | $ | — | | | $ | (6) | | | $ | 7 | | | $ | 3 | | | $ | 3 | | | $ | — | | | $ | 5 | | | $ | (3) | |
| | | Year Ended December 31, 2016 | | Year Ended December 31, 2020 |
| | Duke |
| | Duke |
| Duke |
| | | Duke | | Duke | | Duke | | Duke | | Duke | |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| (in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Service cost | $ | 2 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| Service cost | $ | 4 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | |
Interest cost on projected benefit obligation | 14 |
| 1 |
| 5 |
| 1 |
| 2 |
| |
Interest cost on accumulated post-retirement benefit obligation | | Interest cost on accumulated post-retirement benefit obligation | 23 | | | 5 | | | 10 | | | 5 | | | 4 | | | 1 | | | 2 | | | 1 | |
Expected return on plan assets | | Expected return on plan assets | (13) | | | (8) | | | — | | | — | | | — | | | — | | | — | | | (2) | |
Amortization of actuarial loss | 8 |
| 1 |
| 1 |
| 1 |
| 1 |
| Amortization of actuarial loss | 2 | | | — | | | 1 | | | — | | | 1 | | | — | | | 4 | | | — | |
Amortization of prior service credit | (1 | ) | — |
| — |
| — |
| — |
| Amortization of prior service credit | (14) | | | (4) | | | (3) | | | (1) | | | (2) | | | (1) | | | (1) | | | (2) | |
Net periodic pension costs | $ | 23 |
| $ | 2 |
| $ | 6 |
| $ | 2 |
| $ | 3 |
| |
| Net periodic post-retirement benefit costs(a)(b) | | Net periodic post-retirement benefit costs(a)(b) | $ | 2 | | | $ | (6) | | | $ | 9 | | | $ | 4 | | | $ | 3 | | | $ | — | | | $ | 6 | | | $ | (3) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Service cost | $ | 4 | | | $ | 1 | | | $ | 1 | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 1 | | | $ | — | |
Interest cost on accumulated post-retirement benefit obligation | 30 | | | 7 | | | 12 | | | 7 | | | 5 | | | 1 | | | 3 | | | 1 | |
Expected return on plan assets | (12) | | | (7) | | | — | | | — | | | — | | | — | | | — | | | (1) | |
Amortization of actuarial loss | 4 | | | 2 | | | 1 | | | — | | | 1 | | | — | | | 4 | | | — | |
Amortization of prior service credit | (19) | | | (5) | | | (8) | | | (1) | | | (7) | | | (1) | | | (1) | | | (2) | |
| | | | | | | | | | | | | | | |
Net periodic post-retirement benefit costs(a)(b) | $ | 7 | | | $ | (2) | | | $ | 6 | | | $ | 6 | | | $ | — | | | $ | — | | | $ | 7 | | | $ | (2) | |
(a)Duke Energy amounts exclude $5 million, $6 million and $6 million for the years ended December 2021, 2020 and 2019, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy's merger with Cinergy in April 2006.
(b) Duke Energy Ohio amounts exclude $1 million, $1 million and $2 million for the years ended December 2021, 2020 and 2019, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy's merger with Cinergy in April 2006.
|
| | | |
| Piedmont |
| Year Ended |
(in millions) | October 31, 2016 |
Amortization of prior service cost | $ | — |
|
Settlement charge | 1 |
|
Net periodic pension costs | $ | 1 |
|
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Amounts Recognized in Accumulated Other Comprehensive Income and Regulatory Assets and Liabilities |
| | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | Duke |
| | Duke |
| Duke |
|
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
|
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
|
Regulatory assets, net (decrease) increase | $ | (16 | ) | $ | 1 |
| $ | (6 | ) | $ | (3 | ) | $ | (3 | ) |
Accumulated other comprehensive (income) loss | |
| |
| |
| |
| |
|
Deferred income tax benefit | $ | 1 |
| $ | — |
| $ | 1 |
| $ | — |
| $ | — |
|
Actuarial gain arising during the year | (4 | ) | — |
| (3 | ) | — |
| — |
|
Net amount recognized in accumulated other comprehensive loss (income) | $ | (3 | ) | $ | — |
| $ | (2 | ) | $ | — |
| $ | — |
|
|
| | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| | Duke |
| | Duke |
| Duke |
|
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
|
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
|
Regulatory assets, net increase (decrease) | $ | 5 |
| $ | (1 | ) | $ | 3 |
| $ | 1 |
| $ | 2 |
|
Accumulated other comprehensive (income) loss | | | | | |
Prior service credit arising during the year | $ | (1 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Actuarial loss arising during the year | 2 |
| — |
| — |
| — |
| — |
|
Net amount recognized in accumulated other comprehensive loss (income) | $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Regulatory assets, net (decrease) increase | $ | (15) | | | $ | — | | | $ | (18) | | | $ | (9) | | | $ | (9) | | | $ | 4 | | | $ | (4) | | | $ | — | |
Regulatory liabilities, net increase | $ | 23 | | | $ | 12 | | | $ | — | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 1 | | | $ | 2 | |
Accumulated other comprehensive (income) loss | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Amortization of prior year actuarial gain | $ | (1) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Net amount recognized in accumulated other comprehensive income | $ | (1) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Regulatory assets, net increase (decrease) | $ | 9 | | | $ | — | | | $ | 9 | | | $ | 6 | | | $ | 3 | | | $ | — | | | $ | (4) | | | $ | — | |
Regulatory liabilities, net decrease | $ | (10) | | | $ | (7) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (1) | | | $ | — | |
Accumulated other comprehensive (income) loss | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Amortization of prior year service credit | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | |
Net amount recognized in accumulated other comprehensive income | $ | 1 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Reconciliation of Funded Status to
Net Amount RecognizedAccrued Other Post-Retirement Benefit Costs | | | Year Ended December 31, 2018 | | Year Ended December 31, 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 |
Change in Projected Benefit Obligation | |
| |
| |
| |
| |
| |
| |
| | Change in Projected Benefit Obligation | |
Obligation at prior measurement date | $ | 331 |
| $ | 14 |
| $ | 116 |
| $ | 35 |
| $ | 47 |
| $ | 4 |
| $ | 3 |
| $ | 4 |
| |
Accumulated post-retirement benefit obligation at prior measurement date | | Accumulated post-retirement benefit obligation at prior measurement date | $ | 709 | | | $ | 174 | | | $ | 299 | | | $ | 166 | | | $ | 130 | | | $ | 27 | | | $ | 61 | | | $ | 30 | |
| Service cost | 2 |
| 1 |
| — |
| — |
| — |
| — |
| — |
| — |
| Service cost | 4 | | | 1 | | | 1 | | | — | | | — | | | — | | | 1 | | | — | |
Interest cost | 12 |
| — |
| 4 |
| 1 |
| 2 |
| — |
| — |
| — |
| Interest cost | 18 | | | 4 | | | 7 | | | 4 | | | 3 | | | 1 | | | 1 | | | 1 | |
Actuarial gain | (17 | ) | — |
| (6 | ) | (2 | ) | (3 | ) | (1 | ) | — |
| (1 | ) | |
Plan participants' contributions | | Plan participants' contributions | 14 | | | 3 | | | 5 | | | 3 | | | 2 | | | 1 | | | 2 | | | — | |
Actuarial gains | | Actuarial gains | (47) | | | (14) | | | (20) | | | (10) | | | (10) | | | (1) | | | (2) | | | (2) | |
| Benefits paid | (24 | ) | (1 | ) | (8 | ) | (3 | ) | (3 | ) | — |
| — |
| — |
| Benefits paid | (73) | | | (19) | | | (29) | | | (16) | | | (13) | | | (3) | | | (9) | | | (2) | |
Obligation at measurement date | $ | 304 |
| $ | 14 |
| $ | 106 |
| $ | 31 |
| $ | 43 |
| $ | 3 |
| $ | 3 |
| $ | 3 |
| |
Accumulated Benefit Obligation at measurement date | $ | 304 |
| $ | 14 |
| $ | 106 |
| $ | 31 |
| $ | 43 |
| $ | 3 |
| $ | 3 |
| $ | 3 |
| |
Accumulated post-retirement benefit obligation at measurement date | | Accumulated post-retirement benefit obligation at measurement date | $ | 625 | | | $ | 149 | | | $ | 263 | | | $ | 147 | | | $ | 112 | | | $ | 25 | | | $ | 54 | | | $ | 27 | |
Change in Fair Value of Plan Assets | |
| |
| |
| |
| |
| |
| |
| |
| Change in Fair Value of Plan Assets | |
Plan assets at prior measurement date | | Plan assets at prior measurement date | $ | 237 | | | $ | 139 | | | $ | (1) | | | $ | (2) | | | $ | (1) | | | $ | 9 | | | $ | 7 | | | $ | 37 | |
| Actual return on plan assets | | Actual return on plan assets | 15 | | | 9 | | | — | | | — | | | — | | | 1 | | | — | | | 3 | |
Benefits paid | $ | (24 | ) | $ | (1 | ) | $ | (8 | ) | $ | (3 | ) | $ | (3 | ) | $ | — |
| $ | — |
| $ | — |
| Benefits paid | (73) | | | (19) | | | (29) | | | (16) | | | (13) | | | (3) | | | (9) | | | (2) | |
| Employer contributions | 24 |
| 1 |
| 8 |
| 3 |
| 3 |
| — |
| — |
| — |
| Employer contributions | 18 | | | 3 | | | 24 | | | 13 | | | 10 | | | 1 | | | 6 | | | 1 | |
Plan participants' contributions | | Plan participants' contributions | 14 | | | 3 | | | 5 | | | 3 | | | 2 | | | 1 | | | 2 | | | — | |
Plan assets at measurement date | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| Plan assets at measurement date | $ | 211 | | | $ | 135 | | | $ | (1) | | | $ | (2) | | | $ | (2) | | | $ | 9 | | | $ | 6 | | | $ | 39 | |
Funded status of plan | | Funded status of plan | $ | (414) | | | $ | (14) | | | $ | (264) | | | $ | (149) | | | $ | (114) | | | $ | (16) | | | $ | (48) | | | $ | 12 | |
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Change in Projected Benefit Obligation | | | | | | | | | | | | | | | |
Accumulated post-retirement benefit obligation at prior measurement date | $ | 723 | | | $ | 175 | | | $ | 303 | | | $ | 168 | | | $ | 135 | | | $ | 29 | | | $ | 64 | | | $ | 30 | |
| | | | | | | | | | | | | | | |
Service cost | 4 | | | 1 | | | 1 | | | — | | | — | | | — | | | 1 | | | — | |
Interest cost | 23 | | | 5 | | | 10 | | | 5 | | | 4 | | | 1 | | | 2 | | | 1 | |
Plan participants' contributions | 15 | | | 3 | | | 5 | | | 3 | | | 2 | | | 1 | | | 2 | | | — | |
Actuarial losses | 19 | | | 8 | | | 8 | | | 5 | | | 2 | | | — | | | 1 | | | 1 | |
| | | | | | | | | | | | | | | |
Benefits paid | (75) | | | (18) | | | (28) | | | (15) | | | (13) | | | (4) | | | (9) | | | (2) | |
Accumulated post-retirement benefit obligation at measurement date | $ | 709 | | | $ | 174 | | | $ | 299 | | | $ | 166 | | | $ | 130 | | | $ | 27 | | | $ | 61 | | | $ | 30 | |
Change in Fair Value of Plan Assets | | | | | | | | | | | | | | | |
Plan assets at prior measurement date | $ | 220 | | | $ | 130 | | | $ | (1) | | | $ | (1) | | | $ | — | | | $ | 9 | | | $ | 5 | | | $ | 34 | |
| | | | | | | | | | | | | | | |
Actual return on plan assets | 24 | | | 14 | | | — | | | — | | | — | | | — | | | 1 | | | 4 | |
Benefits paid | (75) | | | (18) | | | (28) | | | (15) | | | (13) | | | (4) | | | (9) | | | (2) | |
| | | | | | | | | | | | | | | |
Employer contributions | 53 | | | 10 | | | 23 | | | 11 | | | 10 | | | 3 | | | 8 | | | 1 | |
Plan participants' contributions | 15 | | | 3 | | | 5 | | | 3 | | | 2 | | | 1 | | | 2 | | | — | |
Plan assets at measurement date | $ | 237 | | | $ | 139 | | | $ | (1) | | | $ | (2) | | | $ | (1) | | | $ | 9 | | | $ | 7 | | | $ | 37 | |
Funded status of plan | $ | (472) | | | $ | (35) | | | $ | (300) | | | $ | (168) | | | $ | (131) | | | $ | (18) | | | $ | (54) | | | $ | 7 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Change in Projected Benefit Obligation | | |
| |
| |
| |
| |
| |
| |
Obligation at prior measurement date | $ | 332 |
| $ | 14 |
| $ | 114 |
| $ | 33 |
| $ | 46 |
| $ | 4 |
| $ | 3 |
| $ | 4 |
|
Service cost | 2 |
| 1 |
| — |
| — |
| — |
| — |
| — |
| — |
|
Interest cost | 13 |
| 1 |
| 5 |
| 1 |
| 2 |
| — |
| — |
| — |
|
Actuarial loss (gain) | 15 |
| — |
| 5 |
| 4 |
| 2 |
| — |
| — |
| — |
|
Benefits paid | (31 | ) | (2 | ) | (8 | ) | (3 | ) | (3 | ) | — |
| — |
| — |
|
Obligation at measurement date | $ | 331 |
| $ | 14 |
| $ | 116 |
| $ | 35 |
| $ | 47 |
| $ | 4 |
| $ | 3 |
| $ | 4 |
|
Accumulated Benefit Obligation at measurement date | $ | 331 |
| $ | 14 |
| $ | 116 |
| $ | 35 |
| $ | 47 |
| $ | 4 |
| $ | 3 |
| $ | 4 |
|
Change in Fair Value of Plan Assets | |
| |
| |
| |
| |
| |
| |
| |
|
Benefits paid | $ | (31 | ) | $ | (2 | ) | $ | (8 | ) | $ | (3 | ) | $ | (3 | ) | $ | — |
| $ | — |
| $ | — |
|
Employer contributions | 31 |
| 2 |
| 8 |
| 3 |
| 3 |
| — |
| — |
| — |
|
Plan assets at measurement date | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Amounts Recognized in the Consolidated Balance Sheets |
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Current pension liability(a) | $ | 21 |
| $ | 2 |
| $ | 8 |
| $ | 3 |
| $ | 3 |
| $ | — |
| $ | — |
| $ | — |
|
Noncurrent pension liability(b) | 283 |
| 12 |
| 98 |
| 28 |
| 40 |
| 3 |
| 3 |
| 3 |
|
Total accrued pension liability | $ | 304 |
| $ | 14 |
| $ | 106 |
| $ | 31 |
| $ | 43 |
| $ | 3 |
| $ | 3 |
| $ | 3 |
|
Regulatory assets | $ | 62 |
| $ | 5 |
| $ | 15 |
| $ | 5 |
| $ | 10 |
| $ | 1 |
| $ | — |
| $ | 1 |
|
Accumulated other comprehensive (income) loss | | |
| |
| |
| |
| |
| |
| |
|
Deferred income tax benefit | $ | (3 | ) | $ | — |
| $ | (2 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Prior service credit | (1 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Net actuarial loss | 8 |
| — |
| 6 |
| — |
| — |
| — |
| — |
| — |
|
Net amounts recognized in accumulated other comprehensive loss | $ | 4 |
| $ | — |
| $ | 4 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Amounts to be recognized in net periodic pension expense in the next year | | |
| |
| |
| |
| |
| |
| |
|
Unrecognized net actuarial loss | $ | 6 |
| $ | — |
| $ | 2 |
| $ | 1 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
|
Unrecognized prior service credit | (2 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Current pension liability(a) | $ | 23 |
| $ | 2 |
| $ | 8 |
| $ | 3 |
| $ | 3 |
| $ | — |
| $ | — |
| $ | — |
|
Noncurrent pension liability(b) | 308 |
| 12 |
| 108 |
| 32 |
| 44 |
| 4 |
| 3 |
| 4 |
|
Total accrued pension liability | $ | 331 |
| $ | 14 |
| $ | 116 |
| $ | 35 |
| $ | 47 |
| $ | 4 |
| $ | 3 |
| $ | 4 |
|
Regulatory assets | $ | 78 |
| $ | 4 |
| $ | 21 |
| $ | 8 |
| $ | 13 |
| $ | 1 |
| $ | — |
| $ | 1 |
|
Accumulated other comprehensive (income) loss | |
| |
| |
| |
| |
| |
| |
| |
|
Deferred income tax benefit | $ | (4 | ) | $ | — |
| $ | (3 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Prior service credit | (1 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Net actuarial loss | 12 |
| — |
| 9 |
| — |
| — |
| — |
| — |
| — |
|
Net amounts recognized in accumulated other comprehensive loss | $ | 7 |
| $ | — |
| $ | 6 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Amounts to be recognized in net periodic pension expense in the next year | | | | | | | | |
Unrecognized net actuarial loss | $ | 8 |
| $ | — |
| $ | 2 |
| $ | 1 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
|
Unrecognized prior service credit | $ | (2 | ) | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Prefunded post-retirement benefit | $ | 12 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 12 | |
Current post-retirement liability(a) | 9 | | | — | | | 5 | | | 3 | | | 2 | | | 1 | | | — | | | — | |
Noncurrent post-retirement liability(b) | 417 | | | 14 | | | 259 | | | 146 | | | 112 | | | 16 | | | 48 | | | — | |
Net liability (asset) recognized | $ | 414 | | | $ | 14 | | | $ | 264 | | | $ | 149 | | | $ | 114 | | | $ | 16 | | | $ | 48 | | | $ | (12) | |
Regulatory assets | $ | 129 | | | $ | — | | | $ | 126 | | | $ | 79 | | | $ | 47 | | | $ | 4 | | | $ | 28 | | | $ | — | |
Regulatory liabilities | $ | 162 | | | $ | 44 | | | $ | — | | | $ | — | | | $ | — | | | $ | 21 | | | $ | 63 | | | $ | 5 | |
Accumulated other comprehensive (income) loss | | | | | | | | | | | | | | | |
Deferred income tax expense | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Prior service credit | (1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net actuarial gain | (14) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net amounts recognized in accumulated other comprehensive income | $ | (12) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
Prefunded post-retirement benefit | $ | 8 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 7 | |
Current post-retirement liability(a) | 9 | | | — | | | 6 | | | 4 | | | 2 | | | 2 | | | — | | | — | |
Noncurrent post-retirement liability(b) | 471 | | | 35 | | | 294 | | | 164 | | | 129 | | | 17 | | | 54 | | | — | |
Net liability (asset) recognized | $ | 472 | | | $ | 35 | | | $ | 300 | | | $ | 168 | | | $ | 131 | | | $ | 18 | | | $ | 54 | | | $ | (7) | |
Regulatory assets | $ | 144 | | | $ | — | | | $ | 144 | | | $ | 88 | | | $ | 56 | | | $ | — | | | $ | 32 | | | $ | — | |
Regulatory liabilities | $ | 139 | | | $ | 32 | | | $ | — | | | $ | — | | | $ | — | | | $ | 17 | | | $ | 62 | | | $ | 3 | |
Accumulated other comprehensive (income) loss | | | | | | | | | | | | | | | |
Deferred income tax expense | $ | 3 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
Prior service credit | (1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net actuarial gain | (13) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Net amounts recognized in accumulated other comprehensive income | $ | (11) | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
(a) Included in Other within Current Liabilities on the Consolidated Balance Sheets.
(b) Included in Accrued pension and other post-retirement benefit costs on the Consolidated Balance Sheets.
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Information for Plans with Accumulated Benefit Obligation in Excess of Plan Assets |
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Projected benefit obligation | $ | 304 |
| $ | 14 |
| $ | 106 |
| $ | 31 |
| $ | 43 |
| $ | 3 |
| $ | 3 |
| $ | 3 |
|
Accumulated benefit obligation | 304 |
| 14 |
| 106 |
| 31 |
| 43 |
| 3 |
| 3 |
| 3 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Projected benefit obligation | $ | 331 |
| $ | 14 |
| $ | 116 |
| $ | 35 |
| $ | 47 |
| $ | 4 |
| $ | 3 |
| $ | 4 |
|
Accumulated benefit obligation | 331 |
| 14 |
| 116 |
| 35 |
| 47 |
| 4 |
| 3 |
| 4 |
|
Assumptions Used for PensionOther Post-Retirement Benefits Accounting
The discount rate used to determine the current year pensionother post-retirement benefits obligation and following year’s pensionother post-retirement benefits expense is based on a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high qualityhigh-quality corporate bonds that generate sufficient cash flow to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of non-callable corporate bonds rated Aa quality or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plan’s projected benefit payments discounted at this rate with the market value of the bonds selected.
The average remaining service period of active covered employees is 10four years for Duke Energy, 13 years for Progress Energy, 11 years for Duke Energy Progress, 15 years for Duke Energy Florida, eight years for Duke Energy Carolinas, Duke Energy Ohio, Duke Energy Indiana and Piedmont. The following tables present the assumptions used for pension benefit accounting. |
| | | | | | | | | | | | | | | |
| | December 31, |
| | 2018 | | 2017 | | 2016 |
|
Benefit Obligations | | | | |
| | | | |
| | |
|
Discount rate | |
|
| | 4.30 | % | | | | 3.60 | % | | 4.10 | % |
Salary increase | | 3.50 | % | – | 4.00 | % | | 3.50 | % | – | 4.00 | % | | 4.40 | % |
Net Periodic Benefit Cost | | | | |
| | | | |
| | |
|
Discount rate | | | | 3.60 | % | | | | 4.10 | % | | 4.40 | % |
Salary increase | | 3.50 | % | – | 4.00 | % | | | | 4.40 | % | | 4.40 | % |
|
| | | | | | |
| | Piedmont |
| | Two Months Ended | | Year Ended |
| | December 31, 2016 | | October 31, 2016 |
Benefit Obligations | | | | |
Discount rate | | 4.10 | % | | 3.80 | % |
Net Periodic Benefit Cost | | | | |
|
Discount rate | | 3.80 | % | | 3.85 | % |
Expected Benefit Payments |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Years ending December 31, | | | | | | | | |
2019 | $ | 22 |
| $ | 2 |
| $ | 8 |
| $ | 3 |
| $ | 3 |
| $ | — |
| $ | — |
| $ | — |
|
2020 | 21 |
| 1 |
| 8 |
| 2 |
| 3 |
| — |
| — |
| — |
|
2021 | 23 |
| 1 |
| 8 |
| 2 |
| 3 |
| — |
| — |
| — |
|
2022 | 25 |
| 1 |
| 8 |
| 2 |
| 3 |
| — |
| — |
| — |
|
2023 | 25 |
| 3 |
| 7 |
| 2 |
| 3 |
| — |
| — |
| — |
|
2024-2028 | 125 |
| 10 |
| 37 |
| 11 |
| 15 |
| 1 |
| 1 |
| 2 |
|
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
OTHER POST-RETIREMENT BENEFIT PLANS
Duke Energy provides, and the Subsidiary Registrants participate in, some health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans. The health care benefits include medical, dental and prescription drug coverage and are subject to certain limitations, such as deductibles and copayments.
Duke Energy did not make any pre-funding contributions to its other post-retirement benefit plans during the years ended December 31, 2018, 2017 or 2016.
Components of Net Periodic Other Post-Retirement Benefit Costs |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Service cost | $ | 6 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
|
Interest cost on accumulated post-retirement benefit obligation | 28 |
| | 7 |
| | 12 |
| | 6 |
| | 6 |
| | 1 |
| | 3 |
| | 1 |
|
Expected return on plan assets | (13 | ) | | (8 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) |
Amortization of actuarial loss | 6 |
| | 3 |
| | 1 |
| | 1 |
| | — |
| | — |
| | 4 |
| | — |
|
Amortization of prior service credit | (19 | ) | | (5 | ) | | (8 | ) | | (1 | ) | | (7 | ) | | (1 | ) | | (1 | ) | | (2 | ) |
Net periodic post-retirement benefit costs (a)(b) | $ | 8 |
| | $ | (2 | ) | | $ | 6 |
| | $ | 6 |
| | $ | — |
| | $ | 1 |
| | $ | 7 |
| | $ | (2 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 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 | $ | 4 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Interest cost on accumulated post-retirement benefit obligation | 34 |
| | 8 |
| | 13 |
| | 7 |
| | 6 |
| | 1 |
| | 3 |
| | 1 |
|
Expected return on plan assets | (14 | ) | | (8 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (2 | ) |
Amortization of actuarial loss (gain) | 10 |
| | (2 | ) | | 21 |
| | 12 |
| | 9 |
| | (2 | ) | | (1 | ) | | 1 |
|
Amortization of prior service credit | (115 | ) | | (10 | ) | | (84 | ) | | (54 | ) | | (30 | ) | | — |
| | (1 | ) | | — |
|
Curtailment credit (c) | (30 | ) | | (4 | ) | | (16 | ) | | — |
| | (16 | ) | | (2 | ) | | (2 | ) | | — |
|
Net periodic post-retirement benefit costs(a)(b) | $ | (111 | ) | | $ | (15 | ) | | $ | (66 | ) | | $ | (35 | ) | | $ | (31 | ) | | $ | (3 | ) | | $ | (2 | ) | | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
Service cost | $ | 3 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
Interest cost on accumulated post-retirement benefit obligation | 35 |
| | 8 |
| | 15 |
| | 8 |
| | 7 |
| | 1 |
| | 4 |
|
Expected return on plan assets | (12 | ) | | (8 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) |
Amortization of actuarial loss (gain) | 6 |
| | (3 | ) | | 22 |
| | 13 |
| | 9 |
| | (2 | ) | | (1 | ) |
Amortization of prior service credit | (141 | ) | | (14 | ) | | (103 | ) | | (68 | ) | | (35 | ) | | — |
| | (1 | ) |
Net periodic post-retirement benefit costs(a)(b) | $ | (109 | ) | | $ | (16 | ) | | $ | (65 | ) | | $ | (47 | ) | | $ | (18 | ) | | $ | (1 | ) | | $ | 1 |
|
| |
(a) | Duke Energy amounts exclude $7 million, $7 million and $8 million for the years ended December 2018, 2017 and 2016, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy's merger with Cinergy in April 2006. |
| |
(b) | Duke Energy Ohio amounts exclude $2 million, $2 million and $2 million for the years ended December 2018, 2017 and 2016, respectively, of regulatory asset amortization resulting from purchase accounting adjustments associated with Duke Energy's merger with Cinergy in April 2006. |
| |
(c) | Curtailment credit resulted from a reduction in average future service of plan participants due to a plan amendment. |
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
|
| | | |
| Piedmont |
| Year Ended |
(in millions) | October 31, 2016 |
Service cost | $ | 1 |
|
Interest cost on projected benefit obligation | 1 |
|
Expected return on plan assets | (2 | ) |
Amortization of actuarial loss | 1 |
|
Net periodic pension costs | $ | 1 |
|
Amounts Recognized in Accumulated Other Comprehensive Income and Regulatory Assets and Liabilities |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Regulatory assets, net increase (decrease) | $ | 137 |
| | $ | — |
| | $ | 133 |
| | $ | 84 |
| | $ | 49 |
| | $ | — |
| | $ | (5 | ) | | $ | 4 |
|
Regulatory liabilities, net increase (decrease) | $ | 154 |
| | $ | (6 | ) | | $ | 149 |
| | $ | 93 |
| | $ | 56 |
| | $ | 2 |
| | $ | 3 |
| | $ | — |
|
Accumulated other comprehensive (income) loss | | | | | | | | | | | | | | | |
Deferred income tax benefit | $ | (1 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Amortization of prior year actuarial gain | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amount recognized in accumulated other comprehensive income | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Regulatory assets, net increase (decrease) | $ | 71 |
| | $ | — |
| | $ | 81 |
| | $ | 42 |
| | $ | 39 |
| | $ | — |
| | $ | (5 | ) | | $ | (11 | ) |
Regulatory liabilities, net increase (decrease) | $ | (27 | ) | | $ | (2 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (3 | ) | | $ | (7 | ) | | $ | — |
|
Accumulated other comprehensive (income) loss | | | | | | | | | | | | | | | |
Deferred income tax benefit | $ | (1 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Amortization of prior year prior service credit | 3 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amount recognized in accumulated other comprehensive income | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Piedmont's regulatory assets net decreased $1 million for the two months ended December 31, 2016, and increased $2 million for the year ended October 31, 2016.
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Reconciliation of Funded Status to Accrued Other Post-Retirement Benefit Costs |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Change in Projected Benefit Obligation | |
| | | | | | | | | | | | | | |
Accumulated post-retirement benefit obligation at prior measurement date | $ | 813 |
| | $ | 189 |
| | $ | 342 |
| | $ | 184 |
| | $ | 156 |
| | $ | 30 |
| | $ | 78 |
| | $ | 32 |
|
Service cost | 6 |
| | 1 |
| | 1 |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 1 |
|
Interest cost | 28 |
| | 7 |
| | 12 |
| | 6 |
| | 6 |
| | 1 |
| | 3 |
| | 1 |
|
Plan participants' contributions | 18 |
| | 3 |
| | 6 |
| | 4 |
| | 3 |
| | 1 |
| | 2 |
| | — |
|
Actuarial gains | (51 | ) | | (8 | ) | | (23 | ) | | (9 | ) | | (13 | ) | | (2 | ) | | (5 | ) | | (1 | ) |
Transfers | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) |
Benefits paid | (86 | ) | | (18 | ) | | (35 | ) | | (19 | ) | | (16 | ) | | (2 | ) | | (12 | ) | | (2 | ) |
Accumulated post-retirement benefit obligation at measurement date | $ | 728 |
| | $ | 174 |
| | $ | 303 |
| | $ | 166 |
| | $ | 137 |
| | $ | 29 |
| | $ | 67 |
| | $ | 30 |
|
Change in Fair Value of Plan Assets | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Plan assets at prior measurement date | $ | 225 |
| | $ | 133 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7 |
| | $ | 11 |
| | $ | 31 |
|
Actual return on plan assets | (8 | ) | | (5 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) |
Benefits paid | (86 | ) | | (18 | ) | | (35 | ) | | (19 | ) | | (16 | ) | | (2 | ) | | (12 | ) | | (2 | ) |
Employer contributions | 46 |
| | 2 |
| | 29 |
| | 15 |
| | 13 |
| | 2 |
| | 4 |
| | 1 |
|
Plan participants' contributions | 18 |
| | 3 |
| | 6 |
|
| 4 |
|
| 3 |
|
| 1 |
|
| 2 |
| | — |
|
Plan assets at measurement date | $ | 195 |
| | $ | 115 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 8 |
| | $ | 5 |
| | $ | 29 |
|
Funded status of plan | $ | (533 | ) | | $ | (59 | ) | | $ | (303 | ) | | $ | (166 | ) | | $ | (137 | ) | | $ | (21 | ) | | $ | (62 | ) | | $ | (1 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Change in Projected Benefit Obligation | | | | | | | | | | | | | | | |
Accumulated post-retirement benefit obligation at prior measurement date | $ | 868 |
| | $ | 201 |
| | $ | 357 |
| | $ | 191 |
| | $ | 164 |
| | $ | 32 |
| | $ | 83 |
| | $ | 39 |
|
Service cost | 4 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
|
Interest cost | 34 |
| | 8 |
| | 13 |
| | 7 |
| | 6 |
| | 1 |
| | 3 |
| | 1 |
|
Plan participants' contributions | 17 |
| | 3 |
| | 6 |
| | 3 |
| | 3 |
| | 1 |
| | 2 |
| | — |
|
Actuarial losses (gains) | 4 |
| | (3 | ) | | 4 |
| | 1 |
| | 3 |
| | — |
| | 3 |
| | 1 |
|
Transfers | — |
| | 2 |
| | (1 | ) | | — |
| | (1 | ) | | 1 |
| | — |
| | — |
|
Plan amendments | (28 | ) | | (5 | ) | | (3 | ) | | (1 | ) | | (2 | ) | | (2 | ) | | (2 | ) | | (9 | ) |
Benefits paid | (86 | ) | | (18 | ) | | (34 | ) | | (17 | ) | | (17 | ) | | (3 | ) | | (11 | ) | | (1 | ) |
Accumulated post-retirement benefit obligation at measurement date | $ | 813 |
| | $ | 189 |
| | $ | 342 |
| | $ | 184 |
| | $ | 156 |
| | $ | 30 |
| | $ | 78 |
| | $ | 32 |
|
Change in Fair Value of Plan Assets | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
Plan assets at prior measurement date | $ | 244 |
| | $ | 137 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 7 |
| | $ | 22 |
| | $ | 29 |
|
Actual return on plan assets | 25 |
| | 15 |
| | 1 |
| | — |
| | — |
| | 2 |
| | 1 |
| | 3 |
|
Benefits paid | (86 | ) | | (18 | ) | | (34 | ) | | (17 | ) | | (17 | ) | | (3 | ) | | (11 | ) | | (1 | ) |
Employer contributions (reimbursements) | 25 |
| | (4 | ) | | 26 |
| | 14 |
| | 14 |
| | — |
| | (3 | ) | | — |
|
Plan participants' contributions | 17 |
| | 3 |
| | 6 |
| | 3 |
| | 3 |
| | 1 |
| | 2 |
| | — |
|
Plan assets at measurement date | $ | 225 |
| | $ | 133 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 7 |
| | $ | 11 |
| | $ | 31 |
|
Funded status of plan | $ | (588 | ) | | $ | (56 | ) | | $ | (342 | ) | | $ | (184 | ) | | $ | (156 | ) | | $ | (23 | ) | | $ | (67 | ) | | $ | (1 | ) |
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Amounts Recognized in the Consolidated Balance Sheets |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Current post-retirement liability(a) | $ | 8 |
| | $ | — |
| | $ | 5 |
| | $ | 3 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | — |
|
Noncurrent post-retirement liability(b) | 525 |
| | 59 |
| | 298 |
| | 163 |
| | 135 |
| | 19 |
| | 62 |
| | 1 |
|
Total accrued post-retirement liability | $ | 533 |
| | $ | 59 |
| | $ | 303 |
| | $ | 166 |
| | $ | 137 |
| | $ | 21 |
| | $ | 62 |
| | $ | 1 |
|
Regulatory assets | $ | 262 |
| | $ | — |
| | $ | 262 |
| | $ | 164 |
| | $ | 98 |
| | $ | — |
| | $ | 41 |
| | $ | — |
|
Regulatory liabilities | $ | 301 |
| | $ | 38 |
| | $ | 149 |
| | $ | 93 |
| | $ | 56 |
| | $ | 18 |
| | $ | 67 |
| | $ | — |
|
Accumulated other comprehensive (income) loss | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Deferred income tax expense | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Prior service credit | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net actuarial gain | (9 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts recognized in accumulated other comprehensive income | $ | (8 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Amounts to be recognized in net periodic pension expense in the next year | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Unrecognized net actuarial loss | $ | 4 |
| | $ | 2 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Unrecognized prior service credit | (19 | ) | | (5 | ) | | (7 | ) | | (1 | ) | | (6 | ) | | (1 | ) | | (1 | ) | | (2 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Current post-retirement liability(a) | $ | 36 |
| | $ | — |
| | $ | 29 |
| | $ | 15 |
| | $ | 14 |
| | $ | 2 |
| | $ | — |
| | $ | — |
|
Noncurrent post-retirement liability(b) | 552 |
| | 56 |
| | 313 |
| | 169 |
| | 142 |
| | 21 |
| | 67 |
| | 1 |
|
Total accrued post-retirement liability | $ | 588 |
| | $ | 56 |
| | $ | 342 |
| | $ | 184 |
| | $ | 156 |
| | $ | 23 |
| | $ | 67 |
| | $ | 1 |
|
Regulatory assets | $ | 125 |
| | $ | — |
| | $ | 129 |
| | $ | 80 |
| | $ | 49 |
| | $ | — |
| | $ | 46 |
| | $ | (4 | ) |
Regulatory liabilities | $ | 147 |
| | $ | 44 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 16 |
| | $ | 64 |
| | $ | — |
|
Accumulated other comprehensive (income) loss | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Deferred income tax expense | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Prior service credit | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net actuarial gain | (10 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Net amounts recognized in accumulated other comprehensive income | $ | (8 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Amounts to be recognized in net periodic pension expense in the next year | | | | | | | | | | | | | | | |
Unrecognized net actuarial loss (gain) | $ | 5 |
| | $ | 3 |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
|
Unrecognized prior service credit | (19 | ) | | (5 | ) | | (7 | ) | | (1 | ) | | (6 | ) | | (1 | ) | | (1 | ) | | (2 | ) |
| |
(a) | Included in Other within Current Liabilities on the Consolidated Balance Sheets. |
| |
(b) | Included in Accrued pension and other post-retirement benefit costs on the Consolidated Balance Sheets. |
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Assumptions Used for Other Post-Retirement Benefits Accounting
The discount rate used to determine the current year other post-retirement benefits obligation and following year’s other post-retirement benefits expense is based on a bond selection-settlement portfolio approach. This approach develops a discount rate by selecting a portfolio of high quality corporate bonds that generate sufficient cash flow to provide for projected benefit payments of the plan. The selected bond portfolio is derived from a universe of non-callable corporate bonds rated Aa quality or higher. After the bond portfolio is selected, a single interest rate is determined that equates the present value of the plan’s projected benefit payments discounted at this rate with the market value of the bonds selected. The average remaining service period of active covered employees is nine years for Duke Energy, eight years for Duke Energy Carolinas, seven years for Duke Energy Florida, Duke Energy Ohio, and Piedmont, and six years for Duke Energy Carolinas, Progress Energy, Duke Energy Progress, and Duke Energy Indiana.Indiana and Piedmont and five years for Duke Energy Ohio.
The following tables present the assumptions used for other post-retirement benefits accounting. | | | | December 31, | | December 31, |
| | 2018 |
| | 2017 |
| | 2016 |
| | 2021 | | 2020 | | 2019 |
Benefit Obligations | | |
| | |
| | | Benefit Obligations | |
Discount rate | | 4.30 | % | | 3.60 | % | | 4.10 | % | Discount rate | | 2.90 | % | | 2.60 | % | | 3.30 | % |
Net Periodic Benefit Cost | | |
| | |
| | | Net Periodic Benefit Cost | |
Discount rate | | 3.60 | % | | 4.10 | % | | 4.40 | % | Discount rate | | 2.60 | % | | 3.30 | % | | 4.30 | % |
Expected long-term rate of return on plan assets | | 6.50 | % | | 6.50 | % | | 6.50 | % | Expected long-term rate of return on plan assets | | 6.50 | % | | 6.85 | % | | 6.85 | % |
Assumed tax rate | | 35 | % | | 35 | % | | 35 | % | |
|
|
| | | | | | |
| | Piedmont |
| | Two Months Ended | | Year Ended |
| | December 31, 2016 | | October 31, 2016 |
Benefit Obligations | | | | |
Discount rate | | 4.10 | % | | 3.80 | % |
Net Periodic Benefit Cost | | | | |
|
Discount rate | | 3.80 | % | | 4.38 | % |
Expected long-term rate of return on plan assets | | 6.75 | % | | 7.25 | % |
Assumed Health Care Cost Trend Rate |
| | | | | |
| December 31, |
| 2018 |
| | 2017 |
|
Health care cost trend rate assumed for next year | 6.50 | % | | 7.00 | % |
Rate to which the cost trend is assumed to decline (the ultimate trend rate) | 4.75 | % | | 4.75 | % |
Year that rate reaches ultimate trend | 2024 |
| | 2024 |
|
Sensitivity to Changes in Assumed Health Care Cost Trend Rates |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
1-Percentage Point Increase | | | | | |
| | | |
Effect on total service and interest costs | $ | 1 |
| $ | — |
| $ | 1 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
|
Effect on post-retirement benefit obligation | 22 |
| 5 |
| 9 |
| 5 |
| 4 |
| 1 |
| 2 |
| 1 |
|
1-Percentage Point Decrease | | | | | | | | |
Effect on total service and interest costs | (1 | ) | — |
| (1 | ) | (1 | ) | — |
| — |
| — |
| — |
|
Effect on post-retirement benefit obligation | (20 | ) | (5 | ) | (8 | ) | (5 | ) | (4 | ) | (1 | ) | (2 | ) | (1 | ) |
| | | | | | | | | | | |
| December 31, |
| 2021 | | 2020 |
Health care cost trend rate assumed for next year | 6.25 | % | | 6.25 | % |
Rate to which the cost trend is assumed to decline (the ultimate trend rate) | 4.75 | % | | 4.75 | % |
Year that rate reaches ultimate trend | 2028 | | 2028 |
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Expected Benefit Payments | | | | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | Duke | | Duke | |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | | Duke | Energy | Progress | Energy | |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Years ending December 31, | | |
| | | Years ending December 31, | |
2019 | $ | 81 |
| $ | 19 |
| $ | 30 |
| $ | 16 |
| $ | 14 |
| $ | 3 |
| $ | 9 |
| $ | 2 |
| |
2020 | 75 |
| 18 |
| 29 |
| 15 |
| 13 |
| 3 |
| 8 |
| 2 |
| |
2021 | 71 |
| 18 |
| 28 |
| 15 |
| 13 |
| 3 |
| 7 |
| 2 |
| |
2022 | 68 |
| 17 |
| 27 |
| 14 |
| 12 |
| 3 |
| 7 |
| 3 |
| 2022 | $ | 70 | | $ | 17 | | $ | 26 | | $ | 15 | | $ | 12 | | $ | 3 | | $ | 7 | | $ | 2 | |
2023 | 64 |
| 16 |
| 26 |
| 14 |
| 12 |
| 3 |
| 6 |
| 3 |
| 2023 | 62 | | 15 | | 25 | | 14 | | 11 | | 3 | | 6 | | 2 | |
2024-2028 | 266 |
| 64 |
| 109 |
| 59 |
| 50 |
| 11 |
| 26 |
| 12 |
| |
2024 | | 2024 | 58 | | 14 | | 23 | | 13 | | 11 | | 3 | | 6 | | 2 | |
2025 | | 2025 | 54 | | 13 | | 22 | | 12 | | 10 | | 2 | | 5 | | 2 | |
2026 | | 2026 | 50 | | 12 | | 21 | | 12 | | 9 | | 2 | | 5 | | 2 | |
2027-2031 | | 2027-2031 | 207 | | 50 | | 87 | | 49 | | 38 | | 8 | | 19 | | 10 | |
PLAN ASSETS
Description and Allocations
Duke Energy Master Retirement Trust
Assets for both the qualified pension and other post-retirement benefits are maintained in the Duke Energy Master Retirement Trust. Qualified pension and other post-retirement assets related to Piedmont were transferred into the Duke Energy Master Retirement Trust during 2017. Approximately 98 percent98% of the Duke Energy Master Retirement Trust assets were allocated to qualified pension plans and approximately 2 percent2% were allocated to other post-retirement plans (comprised of 401(h) accounts), as of December 31, 2018,2021, and 2017.2020. The investment objective of the Duke Energy Master Retirement Trust is to invest in a diverse portfolio of assets that is expected to generate positive surplus return over time (i.e., asset growth greater than liability growth) subject to a prudent level of portfolio risk, for the purpose of enhancing the security of benefits for plan participants.
As of December 31, 2018,2021, Duke Energy assumes pension and other post-retirement plan assets will generate a long-term rate of return of 6.85 percent.6.5%. The expected long-term rate of return was developed using a weighted average calculation of expected returns based primarily on future expected returns across asset classes considering the use of active asset managers, where applicable. The asset allocation targets were set after considering the investment objective and the risk profile. Equity securities are held for their higher expected returns. Debt securities are primarily held to hedge the qualified pension plan liability. Real assets, returnplan. Return seeking fixed income,debt securities, hedge funds and other global securities are held for diversification. Investments within asset classes are diversified to achieve broad market participation and reduce the impact of individual managers or investments.
Effective January 1, 2019,2022, the target asset allocation for the Duke Energy Retirement Master Trust is 58 percent60% liability hedging assets and 42 percent40% return-seeking assets. Duke Energy periodically reviews its asset allocation targets, and over time, as the funded status of the benefit plans increase, the level of asset risk relative to plan liabilities may be reduced to better manage Duke Energy's benefit plan liabilities and reduce funded status volatility.
The Duke Energy Master Retirement Trust is authorized to engage in the lending of certain plan assets. Securities lending is an investment management enhancement that utilizes certain existing securities of the Duke Energy Master Retirement Trust to earn additional income. Securities lending involves the loaning of securities to approved parties. In return for the loaned securities, the Duke Energy Master Retirement Trust receives collateral in the form of cash and securities as a safeguard against possible default of any borrower on the return of the loan under terms that permit the Duke Energy Master Retirement Trust to sell the securities. The Duke Energy Master Retirement Trust mitigates credit risk associated with securities lending arrangements by monitoring the fair value of the securities loaned, with additional collateral obtained or refunded as necessary. The fair value of securities on loan was approximately $154$542 million and $195$482 million at December 31, 2018,2021, and 2017,2020, respectively. Cash and securities obtained as collateral exceeded the fair value of the securities loaned at December 31, 2018,2021, and 2017,2020, respectively. Securities lending income earned by the Duke Energy Master Retirement Trust was immaterial for the years ended December 31, 2018, 20172021, 2020 and 2016,2019, respectively.
Qualified pension and other post-retirement benefits for the Subsidiary Registrants are derived from the Duke Energy Master Retirement Trust, as such, each are allocated their proportionate share of the assets discussed below.
|
| |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
The following table includes the target asset allocations by asset class at December 31, 2018,2021, and the actual asset allocations for the Duke Energy Master Retirement Trust.
| | | | | | | | | | | | | | | | | |
| | | Actual Allocation at |
| Target | | December 31, |
| | | | | |
| Allocation | | 2021 | | 2020 |
| | | | | |
| | | | | |
Global equity securities | 27 | % | | 24 | % | | 30 | % |
Global private equity securities | 1 | % | | 1 | % | | 1 | % |
Debt securities | 62 | % | | 62 | % | | 55 | % |
Return seeking debt securities | 4 | % | | 4 | % | | 5 | % |
Hedge funds | 2 | % | | 3 | % | | 3 | % |
Real estate and cash | 4 | % | | 6 | % | | 6 | % |
| | | | | |
Total | 100 | % | | 100 | % | | 100 | % |
|
| | | | | | | | |
| | | Actual Allocation at |
| Target |
| | December 31, |
| Allocation |
| | 2018 |
| | 2017 |
|
U.S. equity securities | 10 | % | | 11 | % | | 11 | % |
Non-U.S. equity securities | 8 | % | | 8 | % | | 8 | % |
Global equity securities | 10 | % | | 10 | % | | 10 | % |
Global private equity securities | 3 | % | | 2 | % | | 2 | % |
Debt securities | 63 | % | | 63 | % | | 63 | % |
Hedge funds | 2 | % | | 2 | % | | 2 | % |
Real estate and cash | 2 | % | | 2 | % | | 2 | % |
Other global securities | 2 | % | | 2 | % | | 2 | % |
Total | 100 | % | | 100 | % | | 100 | % |
| | | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Other post-retirement assets
Duke Energy's other post-retirement assets are comprised of VEBAVoluntary Employees' Beneficiary Association (VEBA) trusts and 401(h) accounts held within the Duke Energy Master Retirement Trust. Duke Energy's investment objective is to achieve sufficient returns, subject to a prudent level of portfolio risk, for the purpose of promoting the security of plan benefits for participants.
The following table presents target and actual asset allocations for the VEBA trusts at December 31, 2018.2021. | | | | | Actual Allocation at | | Actual Allocation at |
| Target |
| | December 31, | | Target | | December 31, |
| Allocation |
| | 2018 |
| | 2017 |
| | Allocation | | 2021 | | 2020 |
U.S. equity securities | 32 | % | | 43 | % | | 41 | % | U.S. equity securities | 30 | % | | 19 | % | | 36 | % |
Non-U.S. equity securities | 6 | % | | 8 | % | | 8 | % | Non-U.S. equity securities | 5 | % | | 5 | % | | 6 | % |
Real estate | 2 | % | | 2 | % | | 2 | % | Real estate | 2 | % | | 3 | % | | 2 | % |
Debt securities | 45 | % | | 40 | % | | 36 | % | Debt securities | 45 | % | | 18 | % | | 42 | % |
Cash | 15 | % | | 7 | % | | 13 | % | Cash | 18 | % | | 55 | % | | 14 | % |
Total | 100 | % | | 100 | % | | 100 | % | Total | 100 | % | | 100 | % | | 100 | % |
Fair Value Measurements
Duke Energy classifies recurring and non-recurring fair value measurements based on the fair value hierarchy as discussed in Note 16.
Valuation methods of the primary fair value measurements disclosed below are as follows:
Investments in equity securities
Investments in equity securities are typically valued at the closing price in the principal active market as of the last business day of the reporting period. Principal active markets for equity prices include published exchanges such as NASDAQ and NYSE. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. Prices have not been adjusted to reflect after-hours market activity. The majority of investments in equity securities are valued using Level 1 measurements. When the price of an institutional commingled fund is unpublished, it is not categorized in the fair value hierarchy, even though the funds are readily available at the fair value.
Investments in corporate debt securities and U.S. government securities
Most debt investments are valued based on a calculation using 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. Most debt valuations are Level 2 measurements. If the market for a particular fixed-income security is relatively inactive or illiquid, the measurement is Level 3. U.S. Treasury debt is typically Level 2.
Investments in short-term investment funds
Investments in short-term investment funds are valued at the net asset value of units held at year end and are readily redeemable at the measurement date. Investments in short-term investment funds with published prices are valued as Level 1. Investments in short-term investment funds with unpublished prices are valued as Level 2.
|
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FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
Investments in real estate limited partnerships
Investments in real estate limited partnerships are valued by the trustee at each valuation date (monthly). As part of the trustee’s valuation process, properties are externally appraised generally on an annual basis, conducted by reputable, independent appraisal firms, and signed by appraisers that are members of the Appraisal Institute, with the professional designation MAI. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three valuation techniques that can be used to value investments in real estate assets: the market, income or cost approach. The appropriateness of each valuation technique depends on the type of asset or business being valued. In addition, the trustee may cause additional appraisals to be performed as warranted by specific asset or market conditions. Property valuations and the salient valuation-sensitive assumptions of each direct investment property are reviewed by the trustee quarterly and values are adjusted if there has been a significant change in circumstances related to the investment property since the last valuation. Value adjustments for interim capital expenditures are only recognized to the extent that the valuation process acknowledges a corresponding increase in fair value. An independent firm is hired to review and approve quarterly direct real estate valuations. Key inputs and assumptions used to determine fair value includes among others, rental revenue and expense amounts and related revenue and expense growth rates, terminal capitalization rates and discount rates. Development investments are valued using cost incurred to date as a primary input until substantive progress is achieved in terms of mitigating construction and leasing risk at which point a discounted cash flow approach is more heavily weighted. Key inputs and assumptions in addition to those noted above used to determine the fair value of development investments include construction costs and the status of construction completion and leasing. Investments in real estate limited partnerships are valued at net asset value of units held at year end and are not readily redeemable at the measurement date. Investments in real estate limited partnerships are not categorized within the fair value hierarchy.
Duke Energy Master Retirement Trust
The following tables provide the fair value measurement amounts for the Duke Energy Master Retirement Trust qualified pension and other post-retirement assets. |
| | | | | | | | | | | | | | | | | | | |
| December 31, 2018 |
| Total Fair |
| | | | | | | | Not |
|
(in millions) | Value |
| | Level 1 |
| | Level 2 |
| | Level 3 |
| | Categorized(b) |
|
Equity securities | $ | 2,373 |
| | $ | 1,751 |
| | $ | — |
| | $ | — |
| | $ | 622 |
|
Corporate debt securities | 4,054 |
| | — |
| | 4,054 |
| | — |
| | — |
|
Short-term investment funds | 363 |
| | 279 |
| | 84 |
| | — |
| | — |
|
Partnership interests | 120 |
| | — |
| | — |
| | — |
| | 120 |
|
Hedge funds | 226 |
| | — |
| | — |
| | — |
| | 226 |
|
Real estate limited partnerships | 144 |
| | — |
| | — |
| | — |
| | 144 |
|
U.S. government securities | 961 |
| | — |
| | 961 |
| | — |
| | — |
|
Guaranteed investment contracts | 27 |
| | — |
| | — |
| | 27 |
| | — |
|
Governments bonds – foreign | 30 |
| | — |
| | 30 |
| | — |
| | — |
|
Cash | 28 |
| | 28 |
| | — |
| | — |
| | — |
|
Net pending transactions and other investments | (2 | ) | | (6 | ) | | 4 |
| | — |
| | — |
|
Total assets(a) | $ | 8,324 |
| | $ | 2,052 |
| | $ | 5,133 |
| | $ | 27 |
|
| $ | 1,112 |
|
| |
(a) | Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana, and Piedmont were allocated approximately 27 percent, 31 percent, 15 percent, 16 percent, 5 percent, 7 percent, and 4 percent, respectively, of the Duke Energy Master Retirement Trust at December 31, 2018. Accordingly, all amounts included in the table above are allocable to the Subsidiary Registrants using these percentages. |
| |
(b) | Certain investments that are measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Total Fair | | | | | | | | Not |
(in millions) | Value | | Level 1 | | Level 2 | | Level 3 | | Categorized(b) |
Equity securities | $ | 2,575 | | | $ | 2,547 | | | $ | — | | | $ | — | | | $ | 28 | |
Corporate debt securities | 4,189 | | | — | | | 4,189 | | | — | | | — | |
Short-term investment funds | 382 | | | 272 | | | 110 | | | — | | | — | |
Partnership interests | 95 | | | — | | | — | | | 95 | | | — | |
Hedge funds | 216 | | | — | | | — | | | — | | | 216 | |
| | | | | | | | | |
U.S. government securities | 1,618 | | | — | | | 1,618 | | | — | | | — | |
| | | | | | | | | |
Governments bonds – foreign | 78 | | | — | | | 78 | | | — | | | — | |
Cash | 144 | | | 144 | | | — | | | — | | | — | |
Government and commercial mortgage backed securities | 2 | | | — | | | 2 | | | — | | | — | |
Net pending transactions and other investments | 53 | | | 12 | | | 41 | | | — | | | — | |
Total assets(a) | $ | 9,352 | | | $ | 2,975 | | | $ | 6,038 | | | $ | 95 | | | $ | 244 | |
|
| | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
(a) Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont were allocated approximately 26%, 32%, 15%, 17%, 5%, 7% and 4%, respectively, of the Duke Energy Master Retirement Trust at December 31, 2021. Accordingly, all amounts included in the table above are allocable to the Subsidiary Registrants using these percentages.
(b) Certain investments that are measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2020 |
| Total Fair | | | | | | | | Not |
(in millions) | Value | | Level 1 | | Level 2 | | Level 3 | | Categorized(b) |
Equity securities | $ | 3,202 | | | $ | 3,162 | | | $ | — | | | $ | — | | | $ | 40 | |
Corporate debt securities | 4,162 | | | — | | | 4,162 | | | — | | | — | |
Short-term investment funds | 397 | | | 247 | | | 150 | | | — | | | — | |
Partnership interests | 97 | | | — | | | — | | | — | | | 97 | |
Hedge funds | 198 | | | — | | | — | | | — | | | 198 | |
| | | | | | | | | |
U.S. government securities | 1,164 | | | — | | | 1,164 | | | — | | | — | |
| | | | | | | | | |
Governments bonds – foreign | 73 | | | — | | | 73 | | | — | | | — | |
Cash | 98 | | | 98 | | | — | | | — | | | — | |
| | | | | | | | | |
Net pending transactions and other investments | 88 | | | 34 | | | 54 | | | — | | | — | |
Total assets(a) | $ | 9,479 | | | $ | 3,541 | | | $ | 5,603 | | | $ | — | | | $ | 335 | |
|
| | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| Total Fair |
| | | | | | | | Not |
|
(in millions) | Value |
| | Level 1 |
| | Level 2 |
| | Level 3 |
| | Categorized(b) |
|
Equity securities | $ | 2,823 |
| | $ | 1,976 |
| | $ | — |
| | $ | — |
| | $ | 847 |
|
Corporate debt securities | 4,694 |
| | — |
| | 4,694 |
| | — |
| | — |
|
Short-term investment funds | 246 |
| | 192 |
| | 54 |
| | — |
| | — |
|
Partnership interests | 137 |
| | — |
| | — |
| | — |
| | 137 |
|
Hedge funds | 226 |
| | — |
| | — |
| | — |
| | 226 |
|
Real estate limited partnerships | 135 |
| | — |
| | — |
| | — |
| | 135 |
|
U.S. government securities | 762 |
| | — |
| | 762 |
| | — |
| | — |
|
Guaranteed investment contracts | 28 |
| | — |
| | — |
| | 28 |
| | — |
|
Governments bonds – foreign | 38 |
| | — |
| | 38 |
| | — |
| | — |
|
Cash | 6 |
| | 6 |
| | — |
| | — |
| | — |
|
Government and commercial mortgage backed securities | 2 |
| | — |
| | 2 |
| | — |
| | — |
|
Net pending transactions and other investments | 17 |
| | 15 |
| | 2 |
| | — |
| | — |
|
Total assets(a) | $ | 9,114 |
| | $ | 2,189 |
| | $ | 5,552 |
| | $ | 28 |
| | $ | 1,345 |
|
(a) Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont were allocated approximately 26%, 32%, 15%, 17%, 5%, 7% and 4%, respectively, of the Duke Energy Master Retirement Trust at December 31, 2020. Accordingly, all amounts included in the table above are allocable to the Subsidiary Registrants using these percentages. | |
(a) | Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana, and Piedmont were allocated approximately 27 percent, 30 percent, 15 percent, 15 percent, 5 percent, 8 percent, and 4 percent, respectively, of the Duke Energy Master Retirement Trust and Piedmont's Pension assets at December 31, 2017. Accordingly, all amounts included in the table above are allocable to the Subsidiary Registrants using these percentages. |
| |
(b) | Certain investments that are measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy. |
(b) Certain investments that are measured at fair value using the net asset value per share practical expedient have not been categorized in the fair value hierarchy.
The following table provides a reconciliation of beginning and ending balances of Duke Energy Master Retirement Trust qualified pension and other post-retirement assets at fair value on a recurring basis where the determination of fair value includes significant unobservable inputs (Level 3).
|
| | | | | | | |
(in millions) | 2018 |
| | 2017(a) |
|
Balance at January 1 | $ | 28 |
| | $ | 38 |
|
Sales | (1 | ) | | (2 | ) |
Total gains and other, net | — |
| | 1 |
|
Transfer of Level 3 assets to other classifications | — |
| | (9 | ) |
Balance at December 31 | $ | 27 |
| | $ | 28 |
|
| |
(a) | Balance at January 1 includes $9 million associated with Piedmont pension assets. |
|
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FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
| | | | | | | | | | | |
(in millions) | 2021 | | 2020 |
Balance at January 1 | $ | — | | | $ | 11 | |
| | | |
| | | |
| | | |
Sales | — | | | (12) | |
Total gains and other, net | — | | | 1 | |
Transfer of Level 3 assets from other classifications | 95 | | | — | |
Balance at December 31 | $ | 95 | | | $ | — | |
Other post-retirement assets
The following tables provide the fair value measurement amounts for VEBA trust assets. |
| | | | | | | |
| December 31, 2018 |
| Total Fair |
| | |
(in millions) | Value |
| | Level 2 |
|
Cash and cash equivalents | $ | 3 |
| | $ | 3 |
|
Real estate | 1 |
| | 1 |
|
Equity securities | 25 |
| | 25 |
|
Debt securities | 20 |
| | 20 |
|
Total assets | $ | 49 |
| | $ | 49 |
|
| | | December 31, 2017 | | December 31, 2021 |
| Total Fair |
| | | | Total Fair | | | | |
(in millions) | Value |
| | Level 2 |
| (in millions) | Value | | | Level 2 | |
Cash and cash equivalents | $ | 8 |
| | $ | 8 |
| Cash and cash equivalents | $ | 14 | | | | $ | 14 | | |
Real estate | 1 |
| | 1 |
| Real estate | 2 | | | | 2 | | |
Equity securities | 28 |
| | 28 |
| Equity securities | 18 | | | | 18 | | |
Debt securities | 21 |
| | 21 |
| Debt securities | 11 | | | | 11 | | |
Total assets | $ | 58 |
| | $ | 58 |
| Total assets | $ | 45 | | | | $ | 45 | | |
| | | | | | | | | | | | | | | |
| December 31, 2020 |
| Total Fair | | | | | | |
(in millions) | Value | | | | Level 2 | | |
Cash and cash equivalents | $ | 5 | | | | | $ | 5 | | | |
Real estate | 1 | | | | | 1 | | | |
Equity securities | 23 | | | | | 23 | | | |
Debt securities | 19 | | | | | 19 | | | |
Total assets | $ | 48 | | | | | $ | 48 | | | |
| | | | | |
FINANCIAL STATEMENTS | EMPLOYEE BENEFIT PLANS |
EMPLOYEE SAVINGS PLANS
Retirement Savings Plan
Duke Energy or its affiliates sponsor, and the Subsidiary Registrants participate in, employee savings plans that cover substantially all U.S. employees. Most employees participate in a matching contribution formula where Duke Energy provides a matching contribution generally equal to 100 percent100% of employee before-tax and Roth 401(k) contributions of up to 6 percent6% of eligible pay per pay period. Dividends on Duke Energy shares held by the savings plans are charged to retained earnings when declared and shares held in the plans are considered outstanding in the calculation of basic and diluted EPS.
For new and rehired employees who are not eligible to participate in Duke Energy’s defined benefit plans, an additional employer contribution of 4 percent4% of eligible pay per pay period, which is subject to a three-year vesting schedule, is provided to the employee’s savings plan account. Certain Piedmont employees whose participation in a prior Piedmont defined benefit plan (that was frozen as of December 31, 2017) are eligible for employer transition credit contributions of 33% to 5 percent5% of eligible pay per period, for each pay period during the three-year period ending December 31, 2020.
The following table includes pretax employer matching 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 |
Years ended December 31, | | | | | | | | | | | | | | | |
2021 | $ | 229 | | | $ | 70 | | | $ | 60 | | | $ | 39 | | | $ | 21 | | | $ | 5 | | | $ | 12 | | | $ | 11 | |
2020 | 213 | | | 67 | | | 57 | | | 38 | | | 19 | | | 5 | | | 11 | | | 13 | |
2019 | 214 | | | 66 | | | 58 | | | 38 | | | 20 | | | 5 | | | 11 | | | 13 | |
23. INCOME TAXES
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont(a) |
|
Years ended December 31, | | | | | | | | | | | | | | | |
2018 | $ | 213 |
| | $ | 68 |
| | $ | 58 |
| | $ | 40 |
| | $ | 19 |
| | $ | 4 |
| | $ | 10 |
| | $ | 12 |
|
2017 | 179 |
| | 61 |
| | 53 |
| | 37 |
| | 16 |
| | 3 |
| | 9 |
| | 7 |
|
2016 | 169 |
| | 57 |
| | 50 |
| | 35 |
| | 15 |
| | 3 |
| | 8 |
| |
|
|
| |
(a) | Piedmont's pretax employer matching contributions were $1 million and $7 million during the two months ended December 31, 2016, and for the year ended October 31, 2016, respectively. |
Money Purchase Pension PlanNorth Carolina's 2021 Appropriations Act
Piedmont sponsoredOn November 18, 2021, North Carolina Senate Bill 105 (SB 105) was signed into law by Governor Roy Cooper. Starting with tax year 2025, SB 105 begins phasing out the MPP plan, which isNorth Carolina corporate income tax rate over five years, from a defined contribution pension plan that allowed employeesstatutory rate of 2.5% to direct investments and assume riskzero. Duke Energy recorded a net reduction of investment returns. Underapproximately $490 million to its North Carolina deferred tax liability in the MPP plan, Piedmont annually depositedfourth quarter of 2021. The majority of this deferred tax liability reduction was offset by recording a percentage of each participant’s pay into an accountregulatory liability pending NCUC determination of the MPP plan. This contribution equaled 4 percentdisposition of the participant’s eligible compensation plus an additional 4 percentamounts related to Duke Energy Carolinas, Duke Energy Progress and Piedmont. In addition, Duke Energy recorded a net reduction of eligible compensation aboveNorth Carolina consolidating deferred tax assets of approximately $25 million to deferred state income tax expense in the Social Security wage base upfourth quarter of 2021. North Carolina SB 105 did not have a significant impact on the financial position, results of operation, or cash flows of Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress or Piedmont.
Consolidated Appropriations Act
On December 27, 2020, the Consolidated Appropriations Act (CAA) was signed into law. In addition to the IRS compensation limit.CAA providing funding for government operations, it also provided tax provisions to assist with COVID-19 relief, including extending certain expiring tax provisions. The participantcompany has reviewed the provisions of the CAA and has determined that there are no material impacts on the financial statements as a result of the CAA being signed into law.
CARES Act
On March 27, 2020, the CARES Act was vestedenacted. The CARES Act is an emergency economic stimulus package in MPP plan after three years of service. No contributions were maderesponse to the MPP plan duringCOVID-19 pandemic. Among other provisions, the two months endedCARES Act accelerates the remaining AMT credit refund allowances resulting in taxpayers being able to immediately claim a refund in full for any AMT credit carryforwards and deferral of certain 2020 payroll taxes. In the third quarter of 2020, Duke Energy received $572 million related to these AMT credit carryforwards and $19 million of interest income. In addition, the company deferred approximately $117 million of payroll taxes, of which, 50% were paid by December 31, 2016. Piedmont contributed $2 million to2021, with the MPP plan during each of the years endedremaining 50% payable by December 31, 2017, and October 31, 2016. Effective December 31, 2017,2022. The other provisions within the MPP Plan was merged into the Retirement Savings Plan and the money purchase plan formula was discontinued. Beginning with the 2018 plan year, the former MPP Plan participants are eligible to receive the additional employer contribution under the Retirement Savings Plan, discussed above.
CARES Act do not materially impact Duke Energy's income tax accounting.
|
| | | | |
FINANCIAL STATEMENTS | INCOME TAXES |
Income Tax Expense
Components of Income Tax Expense
23. INCOME TAXES | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
(in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Current income taxes | | | | | | | | |
Federal | $ | (2) | | $ | 241 | | $ | (15) | | $ | 113 | | $ | (75) | | $ | (8) | | $ | 65 | | $ | 23 | |
State | 2 | | 23 | | (4) | | 8 | | (17) | | (2) | | 7 | | 3 | |
Foreign | 2 | | — | | — | | — | | — | | — | | — | | — | |
Total current income taxes | 2 | | 264 | | (19) | | 121 | | (92) | | (10) | | 72 | | 26 | |
Deferred income taxes | | | | | | | | |
Federal | 199 | | (130) | | 203 | | (16) | | 202 | | 35 | | 19 | | 17 | |
State | (1) | | (79) | | 47 | | (26) | | 77 | | 5 | | 16 | | (13) | |
| | | | | | | | |
Total deferred income taxes(a) | 198 | | (209) | | 250 | | (42) | | 279 | | 40 | | 35 | | 4 | |
ITC amortization | (8) | | (4) | | (4) | | (4) | | — | | — | | — | | — | |
| | | | | | | | |
| | | | | | | | |
Total income tax expense included in Consolidated Statements of Operations | $ | 192 | | $ | 51 | | $ | 227 | | $ | 75 | | $ | 187 | | $ | 30 | | $ | 107 | | $ | 30 | |
Tax Act
On December 22, 2017, President Trump signed(a) Total deferred income taxes includes the Tax Act into law. Among other provisions, the Tax Act lowered the corporate federal incomegeneration of NOL carryforwards and tax rate from 35 to 21 percent, limits interest deductions outside of regulated utility operations, requires the normalization of excess deferred taxes associated with property under the average rate assumption method as a prerequisite to qualifying for accelerated depreciation and repealed the federal manufacturing deduction. The Tax Act also repealed the corporate AMT and stipulates a refund of 50 percent of remaining AMT credit carryforwards (to the extent the credits exceed regular tax for the year) for tax years 2018, 2019 and 2020 with all remaining AMT credits to be refunded in tax year 2021.
On December 22, 2017, the SEC staff issued SAB 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, which provides guidance on accounting for the Tax Act’s impact. SAB 118 provides a measurement period, which in no case should extend beyond one year from the Tax Act enactment date, during which a company acting in good faith may complete the accounting for the impacts of the Tax Act under ASC Topic 740. In accordance with SAB 118, a company must reflect the income tax effects of the Tax Act in the reporting period in which the accounting under ASC Topic 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, a company can determine a reasonable estimate for those effects and record a provisional estimate in the financial statements in the first reporting period in which a reasonable estimate can be determined.
As of December 31, 2018, the accounting for the effects of the Tax Act is complete. During the year ended December 31, 2018,$32 million at Duke Energy recorded the following measurement period adjustments in accordance with SAB 118:
Additional tax expense of $23Carolinas, $8 million related to the completion of the analysis of Duke Energy’s existing regulatory liability related to deferred taxes;
A $10 million tax benefit for the remeasurement of deferred tax assets and deferred tax liabilities primarily related to the guidance on bonus depreciation issued by the IRS in August 2018 affecting the computation of the Company's 2017 Federal income tax liability;
Additional tax expense of $7 million related to the portion of the deferred tax asset as of December 31, 2017, that represents nondeductible long-term incentives under the Tax Act’s limitation on the deductibility of executive compensation; and
During the fourth quarter of 2018, the Company released the $76 million valuation allowance that it recorded in the first quarter of 2018 as a result of additional guidance published by the IRS that stated refundable AMT credits would not be subject to sequestration.
The majority of Duke Energy’s operations are regulated and it is expected that the Subsidiary Registrants will ultimately pass on the savings associated with the amount representing the remeasurement of deferred tax balances related to regulated operations to customers. For Duke Energy's regulated operations, where the reduction is expected to be returned to customers in future rates, the remeasurement has been deferred as a regulatory liability. During 2018,at Duke Energy recorded an additional regulatory liability of $83Indiana, and $3 million representing the revaluation of those deferred tax balances. The Subsidiary Registrants continue to respond to requests from regulators in various jurisdictions to determine the timing and magnitude of savings they will pass on to customers.
at Piedmont. In addition, during 2018total deferred income taxes includes utilization of NOL carryforwards and tax credit carryforwards of $150 million at Duke Energy, reclassified $573$95 million at Progress Energy, $14 million at Duke Energy Progress, $64 million at Duke Energy Florida, and $2 million at Duke Energy Ohio.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 income taxes | | | | | | | | |
Federal | $ | (281) | | $ | 314 | | $ | 280 | | $ | 181 | | $ | 148 | | $ | 10 | | $ | 48 | | $ | (27) | |
State | (9) | | 35 | | 29 | | 17 | | 24 | | 1 | | 7 | | (8) | |
Foreign | 1 | | — | | — | | — | | — | | — | | — | | — | |
Total current income taxes | (289) | | 349 | | 309 | | 198 | | 172 | | 11 | | 55 | | (35) | |
Deferred income taxes | | | | | | | | |
Federal | 155 | | (171) | | (167) | | (180) | | 1 | | 30 | | 12 | | 60 | |
State | (92) | | (86) | | (24) | | (49) | | 25 | | 2 | | 17 | | (7) | |
| | | | | | | | |
Total deferred income taxes(a) | 63 | | (257) | | (191) | | (229) | | 26 | | 32 | | 29 | | 53 | |
ITC amortization | (10) | | (4) | | (5) | | (5) | | — | | — | | — | | — | |
Income tax (benefit) expense from continuing operations | (236) | | 88 | | 113 | | (36) | | 198 | | 43 | | 84 | | 18 | |
Tax expense from discontinued operations | 2 | | — | | — | | — | | — | | — | | — | | — | |
Total income tax (benefit) expense included in Consolidated Statements of Operations | $ | (234) | | $ | 88 | | $ | 113 | | $ | (36) | | $ | 198 | | $ | 43 | | $ | 84 | | $ | 18 | |
(a) Total deferred income taxes includes the generation of AMTNOL carryforwards and tax credit carryforwards from noncurrentof $20 million at Duke Energy Carolinas, $3 million at Duke Energy Progress, $8 million at Duke Energy Indiana, and $11 million at Piedmont. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax liabilities to a current federal income tax receivable as the Company expects to receive this amount via a refund from the IRS in 2019, based on the expected filingcredit carryforwards of $39 million at Progress Energy, $30 million at Duke Energy's 2018 income tax return in the second quarter of 2019.
Energy Florida and $79 million at Duke Energy.
|
| | | | |
FINANCIAL STATEMENTS | INCOME TAXES |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 | |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
(in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Current income taxes | | | | | | | | |
Federal | $ | (299) | | $ | 164 | | $ | (173) | | $ | (36) | | $ | (43) | | $ | (41) | | $ | (23) | | $ | (92) | |
State | 10 | | 13 | | (7) | | (3) | | 18 | | (1) | | 1 | | (1) | |
Foreign | 2 | | — | | — | | — | | — | | — | | — | | — | |
Total current income taxes | (287) | | 177 | | (180) | | (39) | | (25) | | (42) | | (22) | | (93) | |
Deferred income taxes | | | | | | | | |
Federal | 855 | | 175 | | 422 | | 220 | | 153 | | 77 | | 128 | | 133 | |
State | (38) | | (37) | | 17 | | (18) | | 27 | | 5 | | 28 | | 3 | |
| | | | | | | | |
Total deferred income taxes(a) | 817 | | 138 | | 439 | | 202 | | 180 | | 82 | | 156 | | 136 | |
ITC amortization | (11) | | (4) | | (6) | | (6) | | — | | — | | — | | — | |
Income tax expense from continuing operations | 519 | | 311 | | 253 | | 157 | | 155 | | 40 | | 134 | | 43 | |
Tax benefit from discontinued operations | (2) | | — | | — | | — | | — | | — | | — | | — | |
Total income tax expense included in Consolidated Statements of Operations | $ | 517 | | $ | 311 | | $ | 253 | | $ | 157 | | $ | 155 | | $ | 40 | | $ | 134 | | $ | 43 | |
(a) Total deferred income taxes includes the generation of tax credit carryforwards of $8 million at Duke Energy Carolinas. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax credit carryforwards of $243 million at Progress Energy, $35 million at Duke Energy Progress, $152 million at Duke Energy Florida, $25 million at Duke Energy Ohio, $60 million at Duke Energy Indiana, $90 million at Piedmont and $775 million at Duke Energy.
Income Tax Expense
Components of Income Tax Expense |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Current income taxes | | | | | | | | |
Federal | $ | (647 | ) | $ | (8 | ) | $ | (135 | ) | $ | (71 | ) | $ | (49 | ) | $ | 20 |
| $ | 29 |
| $ | 67 |
|
State | (11 | ) | 6 |
| (5 | ) | (5 | ) | (10 | ) | (1 | ) | 3 |
| 1 |
|
Foreign | 3 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total current income taxes | (655 | ) | (2 | ) | (140 | ) | (76 | ) | (59 | ) | 19 |
| 32 |
| 68 |
|
Deferred income taxes | | | | | | | | |
Federal | 1,064 |
| 299 |
| 341 |
| 256 |
| 115 |
| 21 |
| 74 |
| (36 | ) |
State | 49 |
| 11 |
| 20 |
| (17 | ) | 45 |
| 3 |
| 22 |
| 5 |
|
Total deferred income taxes(a)(b) | 1,113 |
| 310 |
| 361 |
| 239 |
| 160 |
| 24 |
| 96 |
| (31 | ) |
Investment tax credit amortization | (10 | ) | (5 | ) | (3 | ) | (3 | ) | — |
| — |
| — |
| — |
|
Income tax expense from continuing operations | 448 |
| 303 |
| 218 |
| 160 |
| 101 |
| 43 |
| 128 |
| 37 |
|
Tax benefit from discontinued operations | (26 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total income tax expense included in Consolidated Statements of Operations | $ | 422 |
| $ | 303 |
| $ | 218 |
| $ | 160 |
| $ | 101 |
| $ | 43 |
| $ | 128 |
| $ | 37 |
|
| |
(a) | Includes benefits of NOL carryforwards and tax credit carryforwards of $22 million at Duke Energy Carolinas, $293 million at Progress Energy, $59 million at Duke Energy Progress, $219 million at Duke Energy Florida, $17 million at Duke Energy Ohio, $21 million at Duke Energy Indiana and $39 million at Piedmont. In addition, total deferred income taxes includes utilization of NOL carryforwards and tax credit carryforwards of $18 million at Duke Energy. |
| |
(b) | For the year ended December 31, 2018, the Company has revised the December 31, 2017, estimates of the income tax effects of the Tax Act, in accordance with SAB 118. See the Statutory Rate Reconciliation section below for additional information on the Tax Act's impact on income tax expense. |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 | |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Current income taxes | | | | | | | | |
Federal | $ | (247 | ) | $ | 221 |
| $ | (436 | ) | $ | (95 | ) | $ | (188 | ) | $ | (37 | ) | $ | 128 |
| $ | (90 | ) |
State | 4 |
| 20 |
| (5 | ) | 2 |
| (11 | ) | 2 |
| 21 |
| (3 | ) |
Foreign | 3 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total current income taxes | (240 | ) | 241 |
| (441 | ) | (93 | ) | (199 | ) | (35 | ) | 149 |
| (93 | ) |
Deferred income taxes | | | | | | | | |
Federal | 1,344 |
| 381 |
| 664 |
| 378 |
| 194 |
| 99 |
| 138 |
| 147 |
|
State | 102 |
| 35 |
| 44 |
| 10 |
| 51 |
| (4 | ) | 14 |
| 8 |
|
Total deferred income taxes(a)(b) | 1,446 |
| 416 |
| 708 |
| 388 |
| 245 |
| 95 |
| 152 |
| 155 |
|
Investment tax credit amortization | (10 | ) | (5 | ) | (3 | ) | (3 | ) | — |
| (1 | ) | — |
| — |
|
Income tax expense from continuing operations | 1,196 |
| 652 |
| 264 |
| 292 |
| 46 |
| 59 |
| 301 |
| 62 |
|
Tax benefit from discontinued operations | (6 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total income tax expense included in Consolidated Statements of Operations | $ | 1,190 |
| $ | 652 |
| $ | 264 |
| $ | 292 |
| $ | 46 |
| $ | 59 |
| $ | 301 |
| $ | 62 |
|
| |
(a) | Includes utilization of NOL carryforwards and tax credit carryforwards of $428 million at Duke Energy, $74 million at Progress Energy, $36 million at Duke Energy Florida, $17 million at Duke Energy Ohio, $42 million at Duke Energy Indiana and $79 million at Piedmont. In addition, total deferred income taxes includes benefits of NOL carryforwards and tax credit carryforwards of $10 million at Duke Energy Carolinas and $1 million at Duke Energy Progress. |
| |
(b) | As a result of the Tax Act, Duke Energy's deferred tax assets and liabilities were revalued as of December 31, 2017. See the Statutory Rate Reconciliation section below for additional information on the Tax Act's impact on income tax expense. |
|
| |
FINANCIAL STATEMENTS | INCOME TAXES |
|
| | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
|
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
|
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
|
Current income taxes | | | | | | | |
Federal | $ | — |
| $ | 139 |
| $ | 15 |
| $ | (59 | ) | $ | 76 |
| $ | (7 | ) | $ | 7 |
|
State | (15 | ) | 25 |
| (19 | ) | (25 | ) | 22 |
| (13 | ) | 6 |
|
Foreign | 2 |
| — |
| — |
| — |
| — |
| — |
| — |
|
Total current income taxes | (13 | ) | 164 |
| (4 | ) | (84 | ) | 98 |
| (20 | ) | 13 |
|
Deferred income taxes | | | | | | | |
Federal | 1,064 |
| 430 |
| 486 |
| 350 |
| 199 |
| 88 |
| 202 |
|
State | 117 |
| 45 |
| 50 |
| 40 |
| 25 |
| 11 |
| 11 |
|
Total deferred income taxes(a) | 1,181 |
| 475 |
| 536 |
| 390 |
| 224 |
| 99 |
| 213 |
|
Investment tax credit amortization | (12 | ) | (5 | ) | (5 | ) | (5 | ) | — |
| (1 | ) | (1 | ) |
Income tax expense from continuing operations | 1,156 |
| 634 |
| 527 |
| 301 |
| 322 |
| 78 |
| 225 |
|
Tax (benefit) expense from discontinued operations | (30 | ) | — |
| 1 |
| — |
| — |
| (36 | ) | — |
|
Total income tax expense included in Consolidated Statements of Operations | $ | 1,126 |
| $ | 634 |
| $ | 528 |
| $ | 301 |
| $ | 322 |
| $ | 42 |
| $ | 225 |
|
| |
(a) | Includes benefits of NOL carryforwards and utilization of NOL and tax credit carryforwards of $648 million at Duke Energy, $4 million at Duke Energy Carolinas, $190 million at Progress Energy, $60 million at Duke Energy Progress, $49 million at Duke Energy Florida, $26 million at Duke Energy Ohio and $58 million at Duke Energy Indiana. |
|
| | | | | | |
| Piedmont |
| Two Months Ended | Year Ended October 31, |
(in millions) | December 31, 2016 | 2016 |
Current income taxes | | |
Federal | $ | 4 |
| $ | 27 |
|
State | (2 | ) | 12 |
|
Total current income taxes | 2 |
| 39 |
|
Deferred income taxes | | |
Federal | 24 |
| 79 |
|
State | 6 |
| 6 |
|
Total deferred income taxes(a) | 30 |
| 85 |
|
Total income tax expense from continuing operations included in Consolidated Statements of Operations | $ | 32 |
| $ | 124 |
|
| |
(a) | Includes benefits of NOL and tax carryforwards of $17 million and $91 million for the two months ended December 31, 2016, and the year ended October 31, 2016, respectively. |
Duke Energy Income from Continuing Operations before Income Taxes | | | Years Ended December 31, | | Years Ended December 31, |
(in millions) | 2018 | | 2017 | | 2016 | (in millions) | 2021 | | 2020 | | 2019 |
Domestic(a) | $ | 3,018 |
| | $ | 4,207 |
| | $ | 3,689 |
| |
Domestic | | Domestic | $ | 3,720 | | | $ | 826 | | | $ | 4,053 | |
Foreign | 55 |
| | 59 |
| | 45 |
| Foreign | 44 | | | 13 | | | 44 | |
Income from continuing operations before income taxes | $ | 3,073 |
| | $ | 4,266 |
| | $ | 3,734 |
| Income from continuing operations before income taxes | $ | 3,764 | | | $ | 839 | | | $ | 4,097 | |
| |
(a) | Includes a $16 million expense in 2017 related to the Tax Act impact on equity earnings included within Equity in earnings (losses) of unconsolidated affiliates on the Consolidated Statement of Operations. |
Taxes on Foreign Earnings
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 the historical unremitted foreign earnings by approximately $95 million during the year ended December 31, 2016.
|
| |
FINANCIAL STATEMENTS | INCOME TAXES |
Due to the classification of the International Disposal Group as discontinued operations beginning in the fourth quarter of 2016, income tax amounts related to the International Disposal Group's foreign earnings are presented within Income (Loss) From Discontinued Operations, net of tax on the Consolidated Statements of Operations. In December 2016, Duke Energy closed on the sale of the International Disposal Group in two separate transactions to execute the divestiture. See Note 2 for additional information on the sale.
Statutory Rate Reconciliation
The following tables present a reconciliation of income tax expense at the U.S. federal statutory tax rate to the actual tax expense from continuing operations. |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Income tax expense, computed at the statutory rate of 21 percent | $ | 645 |
| $ | 288 |
| $ | 263 |
| $ | 174 |
| $ | 137 |
| $ | 46 |
| $ | 109 |
| $ | 35 |
|
State income tax, net of federal income tax effect | 30 |
| 14 |
| 13 |
| (17 | ) | 28 |
| 2 |
| 20 |
| 4 |
|
Amortization of excess deferred income tax | (61 | ) | — |
| (55 | ) | (1 | ) | (54 | ) | (3 | ) | (2 | ) | — |
|
AFUDC equity income | (42 | ) | (15 | ) | (22 | ) | (12 | ) | (10 | ) | (2 | ) | (2 | ) | — |
|
AFUDC equity depreciation | 31 |
| 18 |
| 9 |
| 5 |
| 4 |
| 1 |
| 4 |
| — |
|
Renewable energy production tax credits | (129 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Other tax credits | (28 | ) | (7 | ) | (13 | ) | (5 | ) | (8 | ) | (1 | ) | (1 | ) | (3 | ) |
Tax Act(a) | 20 |
| 1 |
| 25 |
| 19 |
| — |
| 2 |
| — |
| — |
|
Other items, net | (18 | ) | 4 |
| (2 | ) | (3 | ) | 4 |
| (2 | ) | — |
| 1 |
|
Income tax expense from continuing operations | $ | 448 |
| $ | 303 |
| $ | 218 |
| $ | 160 |
| $ | 101 |
| $ | 43 |
| $ | 128 |
| $ | 37 |
|
Effective tax rate | 14.6 | % | 22.1 | % | 17.4 | % | 19.3 | % | 15.4 | % | 19.6 | % | 24.6 | % | 22.3 | % |
| |
(a) | For the year ended December 31, 2018, the Company revised the December 31, 2017 estimates of the income tax effects of the Tax Act, in accordance with SAB 118. Amounts primarily include but are not limited to items that are excluded for ratemaking purposes related certain wholesale fixed rate contracts, remeasurement of nonregulated net deferred tax liabilities, Federal net operating losses, and valuation allowance on foreign tax credits. |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2021 |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
(in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Income tax expense, computed at the statutory rate of 21% | $ | 790 | | $ | 291 | | $ | 384 | | $ | 224 | | $ | 194 | | $ | 49 | | $ | 123 | | $ | 71 | |
State income tax, net of federal income tax effect | 1 | | (44) | | 34 | | (14) | | 47 | | 2 | | 18 | | (8) | |
Amortization of excess deferred income tax | (438) | | (184) | | (174) | | (120) | | (54) | | (22) | | (34) | | (25) | |
AFUDC equity income | (34) | | (14) | | (11) | | (7) | | (3) | | (2) | | (4) | | (4) | |
AFUDC equity depreciation | 35 | | 18 | | 10 | | 5 | | 5 | | 2 | | 5 | | — | |
Noncontrolling Interests | 72 | | — | | — | | — | | — | | — | | — | | — | |
Renewable energy PTCs | (100) | | — | | — | | — | | — | | — | | — | | — | |
Other tax credits | (30) | | (12) | | (11) | | (8) | | (3) | | (1) | | (2) | | (4) | |
Valuation Allowance(a) | (85) | | — | | — | | — | | — | | — | | — | | — | |
Other items, net | (19) | | (4) | | (5) | | (5) | | 1 | | 2 | | 1 | | — | |
Income tax expense from continuing operations | $ | 192 | | $ | 51 | | $ | 227 | | $ | 75 | | $ | 187 | | $ | 30 | | $ | 107 | | $ | 30 | |
Effective tax rate | 5.1 | % | 3.7 | % | 12.4 | % | 7.0 | % | 20.2 | % | 12.8 | % | 18.2 | % | 8.8 | % |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 | |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Income tax expense, computed at the statutory rate of 35 percent | $ | 1,493 |
| $ | 653 |
| $ | 536 |
| $ | 353 |
| $ | 265 |
| $ | 88 |
| $ | 229 |
| $ | 70 |
|
State income tax, net of federal income tax effect | 69 |
| 36 |
| 25 |
| 8 |
| 26 |
| (1 | ) | 23 |
| 3 |
|
AFUDC equity income | (81 | ) | (37 | ) | (32 | ) | (17 | ) | (16 | ) | (4 | ) | (8 | ) | — |
|
Renewable energy production tax credits | (132 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Tax Act(a) | (112 | ) | 15 |
| (246 | ) | (40 | ) | (226 | ) | (23 | ) | 55 |
| (12 | ) |
Tax true up | (52 | ) | (24 | ) | (19 | ) | (13 | ) | (7 | ) | (5 | ) | (6 | ) | — |
|
Other items, net | 11 |
| 9 |
| — |
| 1 |
| 4 |
| 4 |
| 8 |
| 1 |
|
Income tax expense from continuing operations | $ | 1,196 |
| $ | 652 |
| $ | 264 |
| $ | 292 |
| $ | 46 |
| $ | 59 |
| $ | 301 |
| $ | 62 |
|
Effective tax rate | 28.0 | % | 34.9 | % | 17.2 | % | 29.0 | % | 6.1 | % | 23.4 | % | 46.0 | % | 30.8 | % |
| |
(a) | Amounts primarily include but are not limited to items that are excluded for ratemaking purposes related to abandoned or impaired assets, certain wholesale fixed rate contracts, remeasurement of nonregulated net deferred tax liabilities, Federal net operating losses, and valuation allowance on foreign tax credits. |
(a) In the fourth quarter of 2021, the company recognized a federal capital gain in the amount of $426 million. As a result, a valuation allowance of $85 million related to a federal capital loss carryforward was released. This valuation allowance was originally recorded as a result of the 2019 sale of minority interest of certain renewable assets within the Commercial Renewables segment.
|
| | | | |
FINANCIAL STATEMENTS | INCOME TAXES |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Income tax expense, computed at the statutory rate of 21% | $ | 176 | | $ | 219 | | $ | 243 | | $ | 80 | | $ | 204 | | $ | 62 | | $ | 103 | | $ | 61 | |
State income tax, net of federal income tax effect | (80) | | (40) | | 4 | | (25) | | 39 | | 2 | | 19 | | (12) | |
Amortization of excess deferred income tax | (276) | | (82) | | (118) | | (68) | | (49) | | (20) | | (36) | | (21) | |
AFUDC equity income | (48) | | (13) | | (9) | | (6) | | (3) | | (2) | | (4) | | (10) | |
AFUDC equity depreciation | 103 | | 19 | | 10 | | 5 | | 5 | | 1 | | 4 | | — | |
Noncontrolling Interests | 62 | | — | | — | | — | | — | | — | | — | | — | |
Renewable energy PTCs | (110) | | — | | — | | — | | — | | — | | — | | — | |
Other tax credits | (37) | | (13) | | (16) | | (14) | | (2) | | (1) | | (3) | | (2) | |
Tax true up | (12) | | (3) | | 1 | | (5) | | 5 | | — | | (1) | | 1 | |
| | | | | | | | |
| | | | | | | | |
Other items, net | (14) | | 1 | | (2) | | (3) | | (1) | | 1 | | 2 | | 1 | |
Income tax (benefit) expense from continuing operations | $ | (236) | | $ | 88 | | $ | 113 | | $ | (36) | | $ | 198 | | $ | 43 | | $ | 84 | | $ | 18 | |
Effective tax rate | (28.1) | % | 8.4 | % | 9.7 | % | (9.5) | % | 20.4 | % | 14.6 | % | 17.1 | % | 6.2 | % |
|
| | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
|
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
|
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
|
Income tax expense, computed at the statutory rate of 35 percent | $ | 1,307 |
| $ | 630 |
| $ | 548 |
| $ | 315 |
| $ | 306 |
| $ | 95 |
| $ | 212 |
|
State income tax, net of federal income tax effect | 64 |
| 46 |
| 20 |
| 10 |
| 30 |
| (2 | ) | 11 |
|
AFUDC equity income | (70 | ) | (36 | ) | (26 | ) | (17 | ) | (9 | ) | (2 | ) | (6 | ) |
Renewable energy production tax credits | (97 | ) | — |
| — |
| — |
| — |
| — |
| — |
|
Audit adjustment | 5 |
| 3 |
| — |
| — |
| — |
| — |
| — |
|
Tax true up | (14 | ) | (14 | ) | (11 | ) | (3 | ) | (9 | ) | (16 | ) | 2 |
|
Other items, net | (39 | ) | 5 |
| (4 | ) | (4 | ) | 4 |
| 3 |
| 6 |
|
Income tax expense from continuing operations | $ | 1,156 |
| $ | 634 |
| $ | 527 |
| $ | 301 |
| $ | 322 |
| $ | 78 |
| $ | 225 |
|
Effective tax rate | 31.0 | % | 35.2 | % | 33.7 | % | 33.4 | % | 36.9 | % | 28.9 | % | 37.1 | % |
| | | | | | | | Year Ended December 31, 2019 | |
| Piedmont | | | Duke | | Duke | |
| Two Months Ended | Year Ended October 31, | | Duke | Energy | Progress | Energy | |
(in millions) | December 31, 2016 | 2016 | (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Income tax expense, computed at the statutory rate of 35 percent | $ | 30 |
| $ | 111 |
| |
Income tax expense, computed at the statutory rate of 21% | | Income tax expense, computed at the statutory rate of 21% | $ | 860 | | $ | 360 | | $ | 332 | | $ | 202 | | $ | 178 | | $ | 59 | | $ | 120 | | $ | 51 | |
State income tax, net of federal income tax effect | 1 |
| 11 |
| State income tax, net of federal income tax effect | (22) | | (19) | | 8 | | (17) | | 35 | | 3 | | 22 | | 2 | |
Amortization of excess deferred income tax | | Amortization of excess deferred income tax | (121) | | (29) | | (64) | | (10) | | (54) | | (12) | | (6) | | (10) | |
AFUDC equity income | | AFUDC equity income | (52) | | (9) | | (14) | | (13) | | (1) | | (3) | | (3) | | — | |
AFUDC equity depreciation | | AFUDC equity depreciation | 34 | | 19 | | 10 | | 5 | | 5 | | 1 | | 4 | | — | |
Renewable energy PTCs | | Renewable energy PTCs | (120) | | — | | — | | — | | — | | — | | — | | — | |
Other tax credits | | Other tax credits | (23) | | (11) | | (9) | | (7) | | (2) | | (1) | | (1) | | (1) | |
Tax true up | | Tax true up | (64) | | (9) | | (8) | | (3) | | (5) | | (7) | | (1) | | — | |
Other items, net | 1 |
| 2 |
| Other items, net | 27 | | 9 | | (2) | | — | | (1) | | — | | (1) | | 1 | |
Income tax expense from continuing operations | $ | 32 |
| $ | 124 |
| Income tax expense from continuing operations | $ | 519 | | $ | 311 | | $ | 253 | | $ | 157 | | $ | 155 | | $ | 40 | | $ | 134 | | $ | 43 | |
Effective tax rate | 37.2 | % | 39.1 | % | Effective tax rate | 12.7 | % | 18.1 | % | 16.0 | % | 16.3 | % | 18.3 | % | 14.3 | % | 23.5 | % | 17.6 | % |
Valuation allowances have been established for certain state NOL carryforwards and state income tax credits that reduce deferred tax assets to an amount that will be realized on a more-likely-than-not basis. The net change in the total valuation allowance is included in the Statestate income tax, net of federal income tax effect, in the above tables.
|
| | | | |
FINANCIAL STATEMENTS | INCOME TAXES |
DEFERRED TAXES
Net Deferred Income Tax Liability Components | | | December 31, 2018 | | December 31, 2021 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | | Duke | | Duke | |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | | Duke | Energy | Progress | Energy | |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Deferred credits and other liabilities | $ | 164 |
| $ | 64 |
| $ | 35 |
| $ | 53 |
| $ | — |
| $ | 17 |
| $ | 6 |
| $ | 17 |
| Deferred credits and other liabilities | $ | 347 | | $ | 121 | | $ | 101 | | $ | 60 | | $ | 40 | | $ | 19 | | $ | 7 | | $ | 18 | |
Capital lease obligations | 60 |
| 26 |
| — |
| — |
| — |
| — |
| 2 |
| — |
| |
Lease obligations | | Lease obligations | 346 | | 91 | | 197 | | 121 | | 76 | | 4 | | 16 | | 4 | |
Pension, post-retirement and other employee benefits | 347 |
| 24 |
| 110 |
| 47 |
| 58 |
| 16 |
| 24 |
| (1 | ) | Pension, post-retirement and other employee benefits | 207 | | (36) | | 30 | | 17 | | 7 | | 11 | | 20 | | (8) | |
Progress Energy merger purchase accounting adjustments(a) | 483 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| Progress Energy merger purchase accounting adjustments(a) | 340 | | — | | — | | — | | — | | — | | — | | — | |
Tax credits and NOL carryforwards | 4,580 |
| 257 |
| 693 |
| 215 |
| 363 |
| 42 |
| 237 |
| 110 |
| Tax credits and NOL carryforwards | 3,784 | | 349 | | 497 | | 160 | | 306 | | 13 | | 195 | | 29 | |
Regulatory liabilities and deferred credits | — |
| — |
| — |
| — |
| — |
| 56 |
| — |
| 48 |
| Regulatory liabilities and deferred credits | — | | 11 | | — | | — | | — | | 16 | | — | | 6 | |
Investments and other assets | — |
| — |
| — |
| — |
| — |
| 18 |
| — |
| 16 |
| Investments and other assets | — | | — | | — | | — | | — | | 5 | | 6 | | — | |
Other | 25 |
| 6 |
| 5 |
| 5 |
| — |
| 1 |
| (1 | ) | — |
| Other | 85 | | 12 | | 12 | | 7 | | 4 | | 7 | | 2 | | 8 | |
Valuation allowance | (484 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| Valuation allowance | (518) | | — | | — | | — | | — | | — | | — | | — | |
Total deferred income tax assets | 5,175 |
| 377 |
| 843 |
| 320 |
| 421 |
| 150 |
| 268 |
| 190 |
| Total deferred income tax assets | 4,591 | | 548 | | 837 | | 365 | | 433 | | 75 | | 246 | | 57 | |
Investments and other assets | (1,317 | ) | (795 | ) | (430 | ) | (272 | ) | (163 | ) | — |
| (5 | ) | — |
| Investments and other assets | (2,428) | | (1,205) | | (742) | | (610) | | (135) | | — | | — | | (39) | |
Accelerated depreciation rates | (10,124 | ) | (3,207 | ) | (3,369 | ) | (1,735 | ) | (1,670 | ) | (967 | ) | (1,081 | ) | (733 | ) | Accelerated depreciation rates | (10,391) | | (2,977) | | (3,891) | | (1,546) | | (2,382) | | (1,125) | | (1,496) | | (833) | |
Regulatory assets and deferred debits, net | (1,540 | ) | (64 | ) | (985 | ) | (432 | ) | (574 | ) | — |
| (191 | ) | — |
| Regulatory assets and deferred debits, net | (1,151) | | — | | (768) | | (417) | | (350) | | — | | (53) | | — | |
Other | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (8 | ) | |
| Total deferred income tax liabilities | (12,981 | ) | (4,066 | ) | (4,784 | ) | (2,439 | ) | (2,407 | ) | (967 | ) | (1,277 | ) | (741 | ) | Total deferred income tax liabilities | (13,970) | | (4,182) | | (5,401) | | (2,573) | | (2,867) | | (1,125) | | (1,549) | | (872) | |
Net deferred income tax liabilities | $ | (7,806 | ) | $ | (3,689 | ) | $ | (3,941 | ) | $ | (2,119 | ) | $ | (1,986 | ) | $ | (817 | ) | $ | (1,009 | ) | $ | (551 | ) | Net deferred income tax liabilities | $ | (9,379) | | $ | (3,634) | | $ | (4,564) | | $ | (2,208) | | $ | (2,434) | | $ | (1,050) | | $ | (1,303) | | $ | (815) | |
| |
(a) | Primarily related to capital lease obligations and debt fair value adjustments. |
(a) Primarily related to lease obligations and debt fair value adjustments.
The following table presents the expiration of tax credits and NOL carryforwards.
|
| | | | | | | | | |
| December 31, 2018 |
(in millions) | Amount |
| | Expiration Year |
Investment tax credits | $ | 1,614 |
| | 2024 | | — | | 2038 |
Alternative minimum tax credits | 574 |
| | Refundable by 2021 |
Federal NOL carryforwards(a)(e) | 788 |
| | 2022 | | — | | Indefinite |
State NOL carryforwards and credits(b)(e) | 301 |
| | 2019 | | — | | Indefinite |
Foreign NOL carryforwards(c) | 12 |
| | 2027 | | — | | 2037 |
Foreign Tax Credits(d) | 1,271 |
| | 2024 | | — | | 2027 |
Charitable contribution carryforwards | 20 |
| | 2019 | | — | | 2023 |
Total tax credits and NOL carryforwards | $ | 4,580 |
| | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 |
(in millions) | Amount | | Expiration Year |
General Business Credits | $ | 2,312 | | | 2024 | | — | | 2041 |
Federal NOL carryforwards(a) | 4 | | | 2024 | | — | | 2026 |
State carryforwards and credits(b) (e) | 328 | | | 2022 | | — | | Indefinite |
Foreign NOL carryforwards(c) | 12 | | | 2027 | | — | | 2037 |
Foreign Tax Credits(d) | 1,128 | | | 2024 | | — | | 2027 |
Total tax credits and NOL carryforwards | $ | 3,784 | | | | | | | |
| |
(a) | A valuation allowance of $4 million has been recorded on the Federal NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table. |
| |
(b) | A valuation allowance of $85 million has been recorded on the state NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table. |
| |
(c) | A valuation allowance of $12 million has been recorded on the foreign NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table. |
| |
(d) | A valuation allowance of $383 million has been recorded on the foreign tax credits, as presented in the Net Deferred Income Tax Liability Components table. |
| |
(e) | (a) A valuation allowance of $4 million has been recorded on the Federal NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table. (b) A valuation allowance of $112 million has been recorded on the state NOL and attribute carryforwards, as presented in the Net Deferred Income Tax Liability Components table. (c) A valuation allowance of $12 million has been recorded on the foreign NOL carryforwards, as presented in the Net Deferred Income Tax Liability Components table. (d) A valuation allowance of $390 million has been recorded on the foreign tax credits, as presented in the Net Deferred Income Tax Liability Components table. (e) Indefinite carryforward for Federal NOLs, and NOLs for states that have adopted the Tax Act's NOL provisions, generated in tax years beginning after December 31, 2017. |
|
| | | | |
FINANCIAL STATEMENTS | INCOME TAXES |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
Deferred credits and other liabilities | $ | 286 | | $ | 85 | | $ | 87 | | $ | 67 | | $ | 18 | | $ | 21 | | $ | 7 | | $ | 38 | |
Lease obligations | 515 | | 96 | | 208 | | 120 | | 87 | | 5 | | 16 | | 5 | |
Pension, post-retirement and other employee benefits | 236 | | (30) | | 68 | | 24 | | 38 | | 16 | | 26 | | (5) | |
Progress Energy merger purchase accounting adjustments(a) | 441 | | — | | — | | — | | — | | — | | — | | — | |
Tax credits and NOL carryforwards | 3,909 | | 285 | | 508 | | 179 | | 282 | | 16 | | 183 | | 29 | |
Regulatory liabilities and deferred credits | — | | 11 | | — | | — | | — | | 18 | | — | | — | |
Investments and other assets | — | | — | | — | | — | | — | | 7 | | | — | |
Other | 93 | | 8 | | 14 | | 9 | | 4 | | 7 | | 1 | | 8 | |
Valuation allowance | (586) | | — | | — | | — | | — | | — | | — | | — | |
Total deferred income tax assets | 4,894 | | 455 | | 885 | | 399 | | 429 | | 90 | | 233 | | 75 | |
Investments and other assets | (2,267) | | (1,127) | | (669) | | (507) | | (164) | | — | | (14) | | (48) | |
Accelerated depreciation rates | (10,729) | | (3,170) | | (3,868) | | (1,778) | | (2,124) | | (1,071) | | (1,433) | | (844) | |
Regulatory assets and deferred debits, net | (1,142) | | — | | (744) | | (412) | | (332) | | — | | (14) | | (4) | |
| | | | | | | | |
Total deferred income tax liabilities | (14,138) | | (4,297) | | (5,281) | | (2,697) | | (2,620) | | (1,071) | | (1,461) | | (896) | |
Net deferred income tax liabilities | $ | (9,244) | | $ | (3,842) | | $ | (4,396) | | $ | (2,298) | | $ | (2,191) | | $ | (981) | | $ | (1,228) | | $ | (821) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2017 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Deferred credits and other liabilities | $ | 143 |
| $ | 33 |
| $ | 78 |
| $ | 23 |
| $ | 49 |
| $ | 11 |
| $ | 6 |
| $ | (5 | ) |
Capital lease obligations | 49 |
| 14 |
| — |
| — |
| — |
| — |
| 2 |
| — |
|
Pension, post-retirement and other employee benefits | 295 |
| (17 | ) | 111 |
| 44 |
| 60 |
| 14 |
| 18 |
| (4 | ) |
Progress Energy merger purchase accounting adjustments(a) | 536 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
Tax credits and NOL carryforwards | 4,527 |
| 234 |
| 402 |
| 156 |
| 143 |
| 25 |
| 216 |
| 70 |
|
Regulatory liabilities and deferred credits | — |
| 222 |
| — |
| — |
| — |
| 65 |
| — |
| 61 |
|
Investments and other assets | — |
| — |
| — |
| — |
| — |
| — |
| 1 |
| 18 |
|
Other | 73 |
| 10 |
| 1 |
| 4 |
| — |
| — |
| — |
| — |
|
Valuation allowance | (519 | ) | — |
| (14 | ) | — |
| — |
| — |
| — |
| — |
|
Total deferred income tax assets | 5,104 |
| 496 |
| 578 |
| 227 |
| 252 |
| 115 |
| 243 |
| 140 |
|
Investments and other assets | (1,419 | ) | (849 | ) | (470 | ) | (289 | ) | (187 | ) | — |
| (14 | ) | — |
|
Accelerated depreciation rates | (9,216 | ) | (3,060 | ) | (2,803 | ) | (1,583 | ) | (1,257 | ) | (896 | ) | (966 | ) | (697 | ) |
Regulatory assets and deferred debits, net | (1,090 | ) | — |
| (807 | ) | (238 | ) | (569 | ) | — |
| (188 | ) | — |
|
Other | — |
| — |
| — |
| — |
| — |
| — |
| — |
| (7 | ) |
Total deferred income tax liabilities | (11,725 | ) | (3,909 | ) | (4,080 | ) | (2,110 | ) | (2,013 | ) | (896 | ) | (1,168 | ) | (704 | ) |
Net deferred income tax liabilities | $ | (6,621 | ) | $ | (3,413 | ) | $ | (3,502 | ) | $ | (1,883 | ) | $ | (1,761 | ) | $ | (781 | ) | $ | (925 | ) | $ | (564 | ) |
| |
(a) | (a) Primarily related to capital lease obligations and debt fair value adjustments. |
On June 28, 2017, the North Carolina General Assembly amended N.C. Gen. Stat. 105-130.3, reducing the North Carolina corporate income tax rate from a statutory rate of 3.0 to 2.5 percent beginning January 1, 2019. Duke Energy recorded a net reduction of approximately $55 million to their North Carolina deferred tax liabilities in the second quarter of 2017. The significant majority of this deferred tax liability reduction was offset by recording a regulatory liability pending NCUC determination of the disposition of amounts related to Duke Energy Carolinas, Duke Energy Progresslease obligations and Piedmont. The impact did not have a significant impact on the financial position, results of operation or cash flows of Duke Energy, Duke Energy Carolinas, Progress Energy or Duke Energy Progress.debt fair value adjustments.
UNRECOGNIZED TAX BENEFITS
The following tables present changes to unrecognized tax benefits. | | | Year Ended December 31, 2018 | | Year Ended December 31, 2021 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | | Duke | | Duke | |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | | Duke | Energy | Progress | Energy | |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Unrecognized tax benefits – January 1 | $ | 25 |
| $ | 5 |
| $ | 5 |
| $ | 5 |
| $ | 5 |
| $ | 1 |
| $ | 1 |
| $ | 3 |
| Unrecognized tax benefits – January 1 | $ | 125 | | $ | 10 | | $ | 10 | | $ | 6 | | $ | 3 | | $ | 1 | | $ | 1 | | $ | 1 | |
Unrecognized tax benefits increases (decreases) | | |
Gross decreases – tax positions in prior periods | (2 | ) | (1 | ) | — |
| — |
| (4 | ) | — |
| — |
| — |
| |
| Gross decreases – tax positions in prior periods(a) | | Gross decreases – tax positions in prior periods(a) | (86) | | — | | — | | — | | — | | — | | — | | — | |
Gross increases – current period tax positions | 7 |
| 2 |
| 4 |
| 1 |
| 2 |
| — |
| — |
| 1 |
| Gross increases – current period tax positions | 12 | | 3 | | 5 | | 4 | | 1 | | — | | 1 | | 3 | |
Decreases due to settlements | (6 | ) | — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
| Total changes | (1 | ) | 1 |
| 4 |
| 1 |
| (2 | ) | — |
| — |
| 1 |
| Total changes | (74) | | 3 | | 5 | | 4 | | 1 | | — | | 1 | | 3 | |
Unrecognized tax benefits – December 31 | $ | 24 |
| $ | 6 |
| $ | 9 |
| $ | 6 |
| $ | 3 |
| $ | 1 |
| $ | 1 |
| $ | 4 |
| Unrecognized tax benefits – December 31 | $ | 51 | | $ | 13 | | $ | 15 | | $ | 10 | | $ | 4 | | $ | 1 | | $ | 2 | | $ | 4 | |
(a) In the fourth quarter of 2021, the company recognized a federal capital gain in the amount of $426 million. As a result of the capital gain, a previously recorded unrecognized tax benefit related to the character of a taxable loss has been reversed. See note (a) under the Statutory Rate Reconciliation table for more details.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Unrecognized tax benefits – January 1 | $ | 126 | | $ | 8 | | $ | 9 | | $ | 6 | | $ | 3 | | $ | 1 | | $ | 1 | | $ | 4 | |
| | | | | | | | |
| | | | | | | | |
Gross decreases – tax positions in prior periods | (2) | | — | | — | | — | | — | | — | | — | | — | |
| | | | | | | | |
Gross increases – current period tax positions | 4 | | 2 | | 1 | | — | | — | | — | | — | | — | |
| | | | | | | | |
| | | | | | | | |
Reduction due to lapse of statute of limitations | (3) | | — | | — | | — | | — | | — | | — | | (3) | |
Total changes | (1) | | 2 | | 1 | | — | | — | | — | | — | | (3) | |
Unrecognized tax benefits – December 31 | $ | 125 | | $ | 10 | | $ | 10 | | $ | 6 | | $ | 3 | | $ | 1 | | $ | 1 | | $ | 1 | |
|
| | | | |
FINANCIAL STATEMENTS | INCOME TAXES |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 | |
| | Duke | | Duke | Duke | Duke | Duke | |
| Duke | Energy | Progress | Energy | Energy | Energy | Energy | |
(in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Unrecognized tax benefits – January 1 | $ | 24 | | $ | 6 | | $ | 9 | | $ | 6 | | $ | 3 | | $ | 1 | | $ | 1 | | $ | 4 | |
| | | | | | | | |
Unrecognized tax benefits increases | 105 | | 2 | | 1 | | 1 | | — | | — | | — | | — | |
Gross decreases – tax positions in prior periods | (3) | | — | | (1) | | (1) | | — | | — | | — | | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total changes | 102 | | 2 | | — | | — | | — | | — | | — | | — | |
Unrecognized tax benefits – December 31 | $ | 126 | | $ | 8 | | $ | 9 | | $ | 6 | | $ | 3 | | $ | 1 | | $ | 1 | | $ | 4 | |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 | |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
Unrecognized tax benefits – January 1 | $ | 17 |
| $ | 1 |
| $ | 2 |
| $ | 2 |
| $ | 4 |
| $ | 4 |
| $ | — |
| $ | — |
|
Unrecognized tax benefits increases (decreases) | | | | | | | | |
Gross increases – tax positions in prior periods | 12 |
| 4 |
| 3 |
| 3 |
| 1 |
| 1 |
| 1 |
| 3 |
|
Gross decreases – tax positions in prior periods | (4 | ) | — |
| — |
| — |
| — |
| (4 | ) | — |
| — |
|
Total changes | 8 |
| 4 |
| 3 |
| 3 |
| 1 |
| (3 | ) | 1 |
| 3 |
|
Unrecognized tax benefits – December 31 | $ | 25 |
| $ | 5 |
| $ | 5 |
| $ | 5 |
| $ | 5 |
| $ | 1 |
| $ | 1 |
| $ | 3 |
|
|
| | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
|
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
|
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
|
Unrecognized tax benefits – January 1 | $ | 88 |
| $ | 72 |
| $ | 1 |
| $ | 3 |
| $ | — |
| $ | — |
| $ | 1 |
|
Unrecognized tax benefits increases (decreases) | | | | | | | |
Gross increases – tax positions in prior periods | — |
| — |
| — |
| — |
| 4 |
| 4 |
| — |
|
Gross decreases – tax positions in prior periods | (4 | ) | (4 | ) | (1 | ) | (1 | ) | — |
| — |
| — |
|
Decreases due to settlements | (68 | ) | (67 | ) | — |
| — |
| — |
| — |
| (1 | ) |
Reduction due to lapse of statute of limitations | 1 |
| — |
| 2 |
| — |
| — |
| — |
| — |
|
Total changes | (71 | ) | (71 | ) | 1 |
| (1 | ) | 4 |
| 4 |
| (1 | ) |
Unrecognized tax benefits – December 31 | $ | 17 |
| $ | 1 |
| $ | 2 |
| $ | 2 |
| $ | 4 |
| $ | 4 |
| $ | — |
|
The following table includes additional information regarding the Duke Energy Registrants' unrecognized tax benefits at December 31, 2018. All2021. Duke Energy Registrants do not anticipate a material increase or decrease in unrecognized tax benefits within the next 12 months. | | | December 31, 2018 | | December 31, 2021 |
| | Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| | | | Duke | | Duke | |
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| | | Duke | Energy | Progress | Energy | |
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
| (in millions) | Energy | Carolinas | Energy | Progress | Florida | Ohio | Indiana | Piedmont |
Amount that if recognized, would affect the effective tax rate or regulatory liability(a) | $ | 21 |
| $ | 6 |
| $ | 9 |
| $ | 6 |
| $ | 3 |
| $ | 1 |
| $ | 1 |
| $ | 4 |
| Amount that if recognized, would affect the effective tax rate or regulatory liability(a) | $ | 47 | | $ | 13 | | $ | 14 | | $ | 10 | | $ | 4 | | $ | 1 | | $ | 2 | | $ | 4 | |
Amount that if recognized, would be recorded as a component of discontinued operations | 2 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| |
|
| |
(a) | Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont are unable to estimate the specific amounts that would affect the effective tax rate(a) The Duke Energy Registrants are unable to estimate the specific amounts that would affect the ETR versus the regulatory liability. |
|
| |
FINANCIAL STATEMENTS | INCOME TAXES |
OTHER TAX MATTERS
The following tables include interest recognized in the Consolidated Statements of Operations and the Consolidated Balance Sheets. |
| | | | | | | | | |
| Year Ended December 31, 2018 |
| | | Duke |
|
| Duke |
| Progress |
| Energy |
|
(in millions) | Energy |
| Energy |
| Progress |
|
Net interest income recognized related to income taxes | $ | 2 |
| $ | — |
| $ | — |
|
Interest payable related to income taxes | 3 |
| 1 |
| 1 |
|
|
| | | | | | | | | | | | | | | |
| Year Ended December 31, 2017 |
| | Duke |
| | Duke |
| Duke |
|
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
|
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
|
Net interest income recognized related to income taxes | $ | — |
| $ | — |
| $ | 1 |
| $ | — |
| $ | 1 |
|
Net interest expense recognized related to income taxes | — |
| 2 |
| — |
| — |
| — |
|
Interest payable related to income taxes | 5 |
| 25 |
| 1 |
| 1 |
| — |
|
|
| | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| | Duke |
| | Duke |
| Duke |
|
| Duke |
| Energy |
| Progress |
| Energy |
| Energy |
|
(in millions) | Energy |
| Carolinas |
| Energy |
| Progress |
| Florida |
|
Net interest income recognized related to income taxes | $ | — |
| $ | — |
| $ | 1 |
| $ | — |
| $ | 2 |
|
Net interest expense recognized related to income taxes | — |
| 7 |
| — |
| — |
| — |
|
Interest payable related to income taxes | 4 |
| 23 |
| 1 |
| 1 |
| — |
|
Piedmont recognized $1 million in net interest income related to income taxes in the Consolidated Statements of Operations for the year ended October 31, 2016.
Duke Energy and its subsidiaries are no longer subject to U.S. federal, examination for years before 2015. With few exceptions, Duke Energy and its subsidiaries are no longer subject to state, local or non-U.S. income tax examinations by tax authorities for years before 2015.2016, aside from certain state tax attributes carried forward for utilization in future years.
24. OTHER INCOME AND EXPENSES, NET
The components of Other income and expenses, net on the Consolidated Statements of Operations are as follows. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Interest income | $ | 20 |
| | $ | 1 |
| | $ | 18 |
| | $ | 1 |
| | $ | 18 |
| | $ | 7 |
| | $ | 9 |
| | $ | 1 |
|
AFUDC equity | 221 |
| | 73 |
| | 104 |
| | 57 |
| | 47 |
| | 11 |
| | 32 |
| | — |
|
Post in-service equity returns | 15 |
| | 9 |
| | 5 |
| | 5 |
| | — |
| | 1 |
| | — |
| | — |
|
Nonoperating income, other | 143 |
| | 70 |
| | 38 |
| | 24 |
| | 21 |
| | 4 |
| | 4 |
| | 13 |
|
Other income and expense, net | $ | 399 |
| | $ | 153 |
| | $ | 165 |
| | $ | 87 |
| | $ | 86 |
| | $ | 23 |
| | $ | 45 |
| | $ | 14 |
|
| | | Year Ended December 31, 2017 | | Year Ended December 31, 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 |
Interest income | $ | 13 |
| | $ | 2 |
| | $ | 6 |
| | $ | 2 |
| | $ | 5 |
| | $ | 6 |
| | $ | 8 |
| | $ | — |
| Interest income | $ | 16 | | | $ | 4 | | | $ | 8 | | | $ | 6 | | | $ | 2 | | | $ | 4 | | | $ | 6 | | | $ | 19 | |
AFUDC equity | 237 |
| | 106 |
| | 92 |
| | 47 |
| | 45 |
| | 11 |
| | 28 |
| | — |
| AFUDC equity | 171 | | | 65 | | | 51 | | | 34 | | | 16 | | | 7 | | | 27 | | | 20 | |
Post in-service equity returns | 40 |
| | 28 |
| | 12 |
| | 12 |
| | — |
| | — |
| | — |
| | — |
| Post in-service equity returns | 39 | | | 21 | | | 16 | | | 16 | | | — | | | 1 | | | 1 | | | — | |
Nonoperating income, other | 218 |
| | 63 |
| | 99 |
| | 54 |
| | 46 |
| | 6 |
| | 11 |
| | (11 | ) | Nonoperating income, other | 417 | | | 180 | | | 140 | | | 87 | | | 53 | | | 6 | | | 8 | | | 16 | |
Other income and expense, net | $ | 508 |
| | $ | 199 |
| | $ | 209 |
| | $ | 115 |
| | $ | 96 |
| | $ | 23 |
| | $ | 47 |
| | $ | (11 | ) | Other income and expense, net | $ | 643 | | | $ | 270 | | | $ | 215 | | | $ | 143 | | | $ | 71 | | | $ | 18 | | | $ | 42 | | | $ | 55 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Interest income | $ | 32 | | | $ | 4 | | | $ | 8 | | | $ | 2 | | | $ | 6 | | | $ | 4 | | | $ | 6 | | | $ | 17 | |
AFUDC equity | 154 | | | 62 | | | 42 | | | 29 | | | 12 | | | 7 | | | 23 | | | 19 | |
Post in-service equity returns | 27 | | | 17 | | | 8 | | | 8 | | | — | | | 1 | | | 1 | | | — | |
Nonoperating income, other | 240 | | | 94 | | | 71 | | | 36 | | | 35 | | | 4 | | | 7 | | | 15 | |
Other income and expense, net | $ | 453 | | | $ | 177 | | | $ | 129 | | | $ | 75 | | | $ | 53 | | | $ | 16 | | | $ | 37 | | | $ | 51 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2019 | | |
| | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
| Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
(in millions) | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
Interest income | $ | 31 | | | $ | 1 | | | $ | 11 | | | $ | — | | | $ | 11 | | | $ | 10 | | | $ | 10 | | | $ | 1 | |
AFUDC equity | 139 | | | 42 | | | 66 | | | 60 | | | 6 | | | 13 | | | 18 | | | — | |
Post in-service equity returns | 29 | | | 20 | | | 7 | | | 7 | | | — | | | 1 | | | — | | | — | |
Nonoperating income, other | 231 | | | 88 | | | 57 | | | 33 | | | 31 | | | — | | | 13 | | | 19 | |
Other income and expense, net | $ | 430 | | | $ | 151 | | | $ | 141 | | | $ | 100 | | | $ | 48 | | | $ | 24 | | | $ | 41 | | | $ | 20 | |
|
| | | | |
FINANCIAL STATEMENTS | OTHER INCOME AND EXPENSES, NETSUBSEQUENT EVENTS |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2016 |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
Interest income | $ | 21 |
| | $ | 4 |
| | $ | 4 |
| | $ | 3 |
| | $ | 2 |
| | $ | 5 |
| | $ | 6 |
|
AFUDC equity | 200 |
| | 102 |
| | 76 |
| | 50 |
| | 26 |
| | 6 |
| | 16 |
|
Post in-service equity returns | 67 |
| | 55 |
| | 12 |
| | 12 |
| | — |
| | — |
| | — |
|
Nonoperating income, other | 175 |
| | 53 |
| | 94 |
| | 67 |
| | 35 |
| | — |
| | 4 |
|
Other income and expense, net(a) | $ | 463 |
| | $ | 214 |
| | $ | 186 |
| | $ | 132 |
| | $ | 63 |
| | $ | 11 |
| | $ | 26 |
|
| |
(a) | Amounts for Piedmont for the two months ended December 31, 2016, and for the year ended October 31, 2016, were not material. |
25. SUBSEQUENT EVENTS
For information on subsequent events related to the adoption of the new lease accounting standard, regulatory matters and commitments and contingencies, and debt and credit facilities, see Notes 1,3 and 4, 5 and 6, respectively.
|
| | | | |
FINANCIAL STATEMENTSINDEPENDENT ACCOUNTANTS | QUARTERLY FINANCIAL DATA |
26. QUARTERLY FINANCIAL DATA (UNAUDITED)
DUKE ENERGY
Quarterly EPS amounts may not sum to the full-year total due to changes in the weighted average number of common shares outstanding and rounding. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions, except per share data) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Operating revenues | $ | 6,135 |
| | $ | 5,643 |
| | $ | 6,628 |
| | $ | 6,115 |
| | $ | 24,521 |
|
Operating income | 1,256 |
| | 979 |
| | 1,579 |
| | 871 |
| | 4,685 |
|
Income from continuing operations | 622 |
| | 507 |
| | 1,062 |
| | 434 |
| | 2,625 |
|
(Loss) Income from discontinued operations, net of tax | — |
| | (5 | ) | | 4 |
| | 20 |
| | 19 |
|
Net income | 622 |
| | 502 |
| | 1,066 |
| | 454 |
| | 2,644 |
|
Net income attributable to Duke Energy Corporation | 620 |
| | 500 |
| | 1,082 |
| | 464 |
| | 2,666 |
|
Earnings per share: | | | | | | | | | |
Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | 0.88 |
| | $ | 0.72 |
| | $ | 1.51 |
| | $ | 0.62 |
| | $ | 3.73 |
|
Diluted | $ | 0.88 |
| | $ | 0.72 |
| | $ | 1.51 |
| | $ | 0.62 |
| | $ | 3.73 |
|
(Loss) Income from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | — |
| | $ | (0.01 | ) | | $ | — |
| | $ | 0.03 |
| | $ | 0.03 |
|
Diluted | $ | — |
| | $ | (0.01 | ) | | $ | — |
| | $ | 0.03 |
| | $ | 0.03 |
|
Net income attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | 0.88 |
| | $ | 0.71 |
| | $ | 1.51 |
| | $ | 0.65 |
| | $ | 3.76 |
|
Diluted | $ | 0.88 |
| | $ | 0.71 |
| | $ | 1.51 |
| | $ | 0.65 |
| | $ | 3.76 |
|
2017 | | | | | | | | | |
Operating revenues | $ | 5,729 |
| | $ | 5,555 |
| | $ | 6,482 |
| | $ | 5,799 |
| | $ | 23,565 |
|
Operating income | 1,402 |
| | 1,353 |
| | 1,661 |
| | 1,209 |
| | 5,625 |
|
Income from continuing operations | 717 |
| | 691 |
| | 957 |
| | 705 |
| | 3,070 |
|
Loss from discontinued operations, net of tax | — |
| | (2 | ) | | (2 | ) | | (2 | ) | | (6 | ) |
Net income | 717 |
| | 689 |
| | 955 |
| | 703 |
| | 3,064 |
|
Net income attributable to Duke Energy Corporation | 716 |
| | 686 |
| | 954 |
| | 703 |
| | 3,059 |
|
Earnings per share: | | | | | | | | | |
Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | 1.02 |
| | $ | 0.98 |
| | $ | 1.36 |
| | $ | 1.00 |
| | $ | 4.37 |
|
Diluted | $ | 1.02 |
| | $ | 0.98 |
| | $ | 1.36 |
| | $ | 1.00 |
| | $ | 4.37 |
|
Loss from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | (0.01 | ) |
Diluted | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | (0.01 | ) |
Net income attributable to Duke Energy Corporation common stockholders | | | | | | | | | |
Basic | $ | 1.02 |
| | $ | 0.98 |
| | $ | 1.36 |
| | $ | 1.00 |
| | $ | 4.36 |
|
Diluted | $ | 1.02 |
| | $ | 0.98 |
| | $ | 1.36 |
| | $ | 1.00 |
| | $ | 4.36 |
|
|
| |
FINANCIAL STATEMENTS | QUARTERLY FINANCIAL DATA |
The following table includes unusual or infrequently occurring items in each quarter during the two most recently completed fiscal years. All amounts discussed below are pretax. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (17 | ) | | $ | (20 | ) | | $ | (16 | ) | | $ | (31 | ) | | $ | (84 | ) |
Regulatory and Legislative Impacts (see Note 4) | (86 | ) | | (179 | ) | | — |
| | — |
| | (265 | ) |
Sale of Retired Plant (see Note 3) | (107 | ) | | — |
| | — |
| | — |
| | (107 | ) |
Impairment Charges (see Notes 4, 11 and 12) | (55 | ) | | — |
| | (93 | ) | | (60 | ) | | (208 | ) |
Severance Charges (see Note 20) | — |
| | — |
| | — |
| | (187 | ) | | (187 | ) |
Impacts of the Tax Act (see Note 23) | (76 | ) | | — |
| | 3 |
| | 53 |
| | (20 | ) |
Total | $ | (341 | ) | | $ | (199 | ) | | $ | (106 | ) | | $ | (225 | ) | | $ | (871 | ) |
2017 | | | | | | | | | |
|
Costs to Achieve Mergers (see Note 2) | $ | (16 | ) | | $ | (30 | ) | | $ | (23 | ) | | $ | (34 | ) | | $ | (103 | ) |
Regulatory Settlements (see Note 4) | — |
| | — |
| | (135 | ) | | (23 | ) | | (158 | ) |
Commercial Renewables Impairments (see Notes 10 and 11) | — |
| | — |
| | (84 | ) | | (18 | ) | | (102 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | 102 |
| | 102 |
|
Total | $ | (16 | ) | | $ | (30 | ) | | $ | (242 | ) | | $ | 27 |
| | $ | (261 | ) |
|
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Operating revenues | $ | 1,763 |
| | $ | 1,672 |
| | $ | 2,090 |
| | $ | 1,775 |
| | $ | 7,300 |
|
Operating income | 482 |
| | 224 |
| | 713 |
| | 241 |
| | 1,660 |
|
Net income | 323 |
| | 117 |
| | 496 |
| | 135 |
| | 1,071 |
|
2017 | | | | | | | | | |
Operating revenues | $ | 1,716 |
| | $ | 1,729 |
| | $ | 2,136 |
| | $ | 1,721 |
| | $ | 7,302 |
|
Operating income | 471 |
| | 471 |
| | 763 |
| | 384 |
| | 2,089 |
|
Net income | 270 |
| | 273 |
| | 466 |
| | 205 |
| | 1,214 |
|
The following table includes unusual or infrequently occurring items in each quarter during the two most recently completed fiscal years. All amounts discussed below are pretax. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (4 | ) | | $ | (2 | ) | | $ | (2 | ) |
| $ | (1 | ) | | $ | (9 | ) |
Regulatory and Legislative Impacts (see Note 4) | (19 | ) | | (179 | ) | | — |
| | — |
| | (198 | ) |
Severance Charges (see Note 20) | — |
| | — |
| | — |
| | (102 | ) | | (102 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Total | $ | (23 | ) | | $ | (181 | ) | | $ | (3 | ) | | $ | (103 | ) | | $ | (310 | ) |
2017 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (4 | ) | | $ | (6 | ) | | $ | (5 | ) | | $ | (5 | ) | | $ | (20 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | (15 | ) | | (15 | ) |
Total | $ | (4 | ) | | $ | (6 | ) | | $ | (5 | ) | | $ | (20 | ) | | $ | (35 | ) |
|
| |
FINANCIAL STATEMENTS | QUARTERLY FINANCIAL DATA |
|
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Operating revenues | $ | 2,576 |
| | $ | 2,498 |
| | $ | 3,045 |
| | $ | 2,609 |
| | $ | 10,728 |
|
Operating income | 447 |
| | 484 |
| | 663 |
| | 334 |
| | 1,928 |
|
Net income | 237 |
| | 267 |
| | 406 |
| | 123 |
| | 1,033 |
|
Net income attributable to Parent | 235 |
| | 265 |
| | 404 |
| | 123 |
| | 1,027 |
|
2017 | | | | | | | | | |
Operating revenues | $ | 2,179 |
| | $ | 2,392 |
| | $ | 2,864 |
| | $ | 2,348 |
| | $ | 9,783 |
|
Operating income | 471 |
| | 576 |
| | 641 |
| | 459 |
| | 2,147 |
|
Net income | 201 |
| | 277 |
| | 343 |
| | 447 |
| | 1,268 |
|
Net income attributable to Parent | 199 |
| | 274 |
| | 341 |
| | 444 |
| | 1,258 |
|
The following table includes unusual or infrequently occurring items in each quarter during the two most recently completed fiscal years. All amounts discussed below are pretax. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (4 | ) | | $ | (3 | ) | | $ | (1 | ) | | $ | (2 | ) | | $ | (10 | ) |
Regulatory and Legislative Impacts (see Note 4) | (67 | ) | | — |
| | — |
| | — |
| | (67 | ) |
Impairment Charges (see Note 4) | — |
| | — |
| | — |
| | (60 | ) | | (60 | ) |
Severance Charges (see Note 20) | — |
| | — |
| | — |
| | (69 | ) | | (69 | ) |
Impacts of the Tax Act (see Note 23) | (1 | ) | | — |
| | (5 | ) | | (19 | ) | | (25 | ) |
Total | $ | (72 | ) | | $ | (3 | ) | | $ | (6 | ) | | $ | (150 | ) | | $ | (231 | ) |
2017 | | | | | | | | | |
|
Costs to Achieve Piedmont Merger (see Note 2) | $ | (4 | ) | | $ | (7 | ) | | $ | (6 | ) | | $ | (6 | ) | | $ | (23 | ) |
Regulatory Settlements (see Note 4) | — |
| | — |
| | (135 | ) | | (23 | ) | | (158 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | 246 |
| | 246 |
|
Total | $ | (4 | ) | | $ | (7 | ) | | $ | (141 | ) | | $ | 217 |
| | $ | 65 |
|
|
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Operating revenues | $ | 1,460 |
| | $ | 1,291 |
| | $ | 1,582 |
| | $ | 1,366 |
| | $ | 5,699 |
|
Operating income | 269 |
| | 233 |
| | 330 |
| | 227 |
| | 1,059 |
|
Net income | 177 |
| | 139 |
| | 216 |
| | 135 |
| | 667 |
|
2017 | | | | | | | | | |
Operating revenues | $ | 1,219 |
| | $ | 1,199 |
| | $ | 1,460 |
| | $ | 1,251 |
| | $ | 5,129 |
|
Operating income | 274 |
| | 270 |
| | 398 |
| | 243 |
| | 1,185 |
|
Net income | 147 |
| | 154 |
| | 246 |
| | 168 |
| | 715 |
|
|
| |
FINANCIAL STATEMENTS | QUARTERLY FINANCIAL DATA |
The following table includes unusual or infrequently occurring items in each quarter during the two most recently completed fiscal years. All amounts discussed below are pretax. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (2 | ) | | $ | (2 | ) | | $ | (1 | ) | | $ | (1 | ) | | $ | (6 | ) |
Regulatory and Legislative Impacts (see Note 4) | (67 | ) | | — |
| | — |
| | — |
| | (67 | ) |
Severance Charges (see Note 20) | — |
| | — |
| | — |
| | (52 | ) | | (52 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | (4 | ) | | (15 | ) | | (19 | ) |
Total | $ | (69 | ) |
| $ | (2 | ) |
| $ | (5 | ) |
| $ | (68 | ) |
| $ | (144 | ) |
2017 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (2 | ) | | $ | (4 | ) | | $ | (4 | ) | | $ | (4 | ) | | $ | (14 | ) |
Regulatory Settlements (see Note 4) | — |
| | — |
| | — |
| | (23 | ) | | (23 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | 40 |
| | 40 |
|
Total | $ | (2 | ) | | $ | (4 | ) | | $ | (4 | ) | | $ | 13 |
| | $ | 3 |
|
|
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Operating revenues | $ | 1,115 |
| | $ | 1,203 |
| | $ | 1,462 |
| | $ | 1,241 |
| | $ | 5,021 |
|
Operating income | 173 |
| | 245 |
| | 331 |
| | 107 |
| | 856 |
|
Net income | 103 |
| | 168 |
| | 243 |
| | 40 |
| | 554 |
|
2017 | | | | | | | | | |
Operating revenues | $ | 959 |
| | $ | 1,191 |
| | $ | 1,401 |
| | $ | 1,095 |
| | $ | 4,646 |
|
Operating income | 192 |
| | 301 |
| | 236 |
| | 212 |
| | 941 |
|
Net income | 90 |
| | 158 |
| | 120 |
| | 344 |
| | 712 |
|
The following table includes unusual or infrequently occurring items in each quarter during the two most recently completed fiscal years. All amounts discussed below are pretax. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (2 | ) | | $ | (1 | ) | | $ | — |
| | $ | (1 | ) | | $ | (4 | ) |
Impairment Charges (see Note 4) | — |
| | — |
| | — |
| | (60 | ) | | (60 | ) |
Severance Charges (see Note 20) | — |
| | — |
| | — |
| | (17 | ) | | (17 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | (2 | ) | | 2 |
| | — |
|
Total | $ | (2 | ) | | $ | (1 | ) | | $ | (2 | ) | | $ | (76 | ) | | $ | (81 | ) |
2017 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (2 | ) | | $ | (3 | ) | | $ | (2 | ) | | $ | (2 | ) | | $ | (9 | ) |
Regulatory Settlements (see Note 4) | — |
| | — |
| | (135 | ) | | — |
| | (135 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | 226 |
| | 226 |
|
Total | $ | (2 | ) | | $ | (3 | ) | | $ | (137 | ) | | $ | 224 |
| | $ | 82 |
|
|
| |
FINANCIAL STATEMENTS | QUARTERLY FINANCIAL DATA |
|
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Operating revenues | $ | 524 |
| | $ | 459 |
| | $ | 469 |
| | $ | 505 |
| | $ | 1,957 |
|
Operating (loss) income | (21 | ) | | 77 |
| | 139 |
| | 93 |
| | 288 |
|
Net (loss) income | (25 | ) | | 46 |
| | 100 |
| | 55 |
| | 176 |
|
2017 | | | | | | | | | |
Operating revenues | $ | 518 |
| | $ | 437 |
| | $ | 471 |
| | $ | 497 |
| | $ | 1,923 |
|
Operating income | 82 |
| | 64 |
| | 101 |
| | 73 |
| | 320 |
|
Loss from discontinued operations, net of tax | — |
| | — |
| | (1 | ) | | — |
| | (1 | ) |
Net income | 42 |
| | 30 |
| | 55 |
| | 65 |
| | 192 |
|
The following table includes unusual or infrequently occurring items in each quarter during the two most recently completed fiscal years. All amounts discussed below are pretax. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (3 | ) | | $ | (5 | ) | | $ | — |
| | $ | (6 | ) | | $ | (14 | ) |
Sale of Retired Plant (see Note 3) | (107 | ) | | — |
| | — |
| | — |
| | (107 | ) |
Severance Charges (see Note 20) | — |
| | — |
| | — |
| | (6 | ) | | (6 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
Total | $ | (110 | ) | | $ | (5 | ) | | $ | — |
| | $ | (14 | ) | | $ | (129 | ) |
2017 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (1 | ) | | $ | (1 | ) | | $ | (2 | ) | | $ | (2 | ) | | $ | (6 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | 23 |
| | 23 |
|
Total | $ | (1 | ) | | $ | (1 | ) | | $ | (2 | ) | | $ | 21 |
| | $ | 17 |
|
|
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Operating revenues | $ | 731 |
| | $ | 738 |
| | $ | 819 |
| | $ | 771 |
| | $ | 3,059 |
|
Operating income | 168 |
| | 169 |
| | 173 |
| | 133 |
| | 643 |
|
Net income | 100 |
| | 98 |
| | 119 |
| | 76 |
| | 393 |
|
2017 | | | | | | | | | |
Operating revenues | $ | 758 |
| | $ | 742 |
| | $ | 802 |
| | $ | 745 |
| | $ | 3,047 |
|
Operating income | 184 |
| | 208 |
| | 228 |
| | 166 |
| | 786 |
|
Net income | 91 |
| | 106 |
| | 121 |
| | 36 |
| | 354 |
|
The following table includes unusual or infrequently occurring items in each quarter during the two most recently completed fiscal years. All amounts discussed below are pretax. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | — |
| | $ | — |
| | $ | (2 | ) | | $ | — |
| | $ | (2 | ) |
Severance Charges (see Note 20) | — |
| | — |
| | — |
| | (7 | ) | | (7 | ) |
Total | $ | — |
| | $ | — |
| | $ | (2 | ) | | $ | (7 | ) | | $ | (9 | ) |
2017 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (1 | ) | | $ | (2 | ) | | $ | (2 | ) | | $ | (1 | ) | | $ | (6 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | (55 | ) | | (55 | ) |
Total | $ | (1 | ) | | $ | (2 | ) | | $ | (2 | ) | | $ | (56 | ) | | $ | (61 | ) |
|
| |
FINANCIAL STATEMENTS | QUARTERLY FINANCIAL DATA |
|
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Operating revenues | $ | 553 |
| | $ | 215 |
| | $ | 172 |
| | $ | 435 |
| | $ | 1,375 |
|
Operating income (loss) | 161 |
| | 5 |
| | (19 | ) | | 79 |
| | 226 |
|
Net income (loss) | 110 |
| | (8 | ) | | (21 | ) | | 48 |
| | 129 |
|
2017 | | | | | | | | | |
Operating revenues | $ | 500 |
| | $ | 201 |
| | $ | 183 |
| | $ | 444 |
| | $ | 1,328 |
|
Operating income (loss) | 170 |
| | 5 |
| | (4 | ) | | 126 |
| | 297 |
|
Net income (loss) | 95 |
| | (8 | ) | | (11 | ) | | 63 |
| | 139 |
|
The following table includes unusual or infrequently occurring items in each quarter during the two most recently completed fiscal years. All amounts discussed below are pretax. |
| | | | | | | | | | | | | | | | | | | |
| First |
| | Second |
| | Third |
| | Fourth |
| | |
(in millions) | Quarter |
| | Quarter |
| | Quarter |
| | Quarter |
| | Total |
|
2018 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (6 | ) | | $ | (9 | ) | | $ | (11 | ) | | $ | (22 | ) | | $ | (48 | ) |
Severance Charges (see Note 20) | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
Total | $ | (6 | ) | | $ | (9 | ) | | $ | (11 | ) | | $ | (24 | ) | | $ | (50 | ) |
2017 | | | | | | | | | |
Costs to Achieve Piedmont Merger (see Note 2) | $ | (6 | ) | | $ | (13 | ) | | $ | (8 | ) | | $ | (19 | ) | | $ | (46 | ) |
Impacts of the Tax Act (see Note 23) | — |
| | — |
| | — |
| | 2 |
| | 2 |
|
Total | $ | (6 | ) | | $ | (13 | ) | | $ | (8 | ) | | $ | (17 | ) | | $ | (44 | ) |
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
ITEM 9A. 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 Exchange Act is 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 is 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 December 31, 2018,2021, 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
During the fourth quarter of 2021, Duke Energy Progress and Duke Energy Florida implemented Customer Connect, an SAP based customer engagement and billing solution. Customer Connect was previously implemented at Duke Energy Carolinas during the second quarter of 2021. As a result of this implementation, we modified certain existing internal controls and implemented new controls and procedures related to Customer Connect. We evaluated the design and operating effectiveness of these internal controls and do not believe this implementation had an adverse effect on our 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 and 15d-15 under the Exchange Act) that occurred during the fiscal quarteryear ended December 31, 2018,2021, and have concludedother than with respect to the Customer Connect SAP implementation, there were no change hasother changes in our internal control over financial reporting during the year ended December 31, 2021, that have materially affected, or isare reasonably likely to materially affect, our internal controlcontrols over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
The Duke Energy Registrants’ management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Duke Energy Registrants’ internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles in the United States.GAAP. Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
The Duke Energy Registrants’ management, including their Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of their internal control over financial reporting as of December 31, 2018,2021, based on the framework in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, management concluded that its internal controls over financial reporting were effective as of December 31, 2018.2021.
Deloitte & Touche LLP, Duke Energy’s independent registered public accounting firm, has issued an attestation report on the effectiveness of Duke Energy’s internal control over financial reporting, which is included herein. This report is not applicable to the Subsidiary Registrants as these companies are not accelerated or large accelerated filers.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Duke Energy Corporation
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Duke Energy Corporation and subsidiaries (the “Company”) as of December 31, 2018,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018,2021, based on criteria established in Internal Control -— Integrated Framework (2013) issued by COSO.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018,2021, of the Company and our report dated February 28, 2019,24, 2022, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting.Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Charlotte, North Carolina
February 28, 2019
24, 2022
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Information regarding Duke Energy's Executive Officers is set forth in Part I, Item 1, "Business – Information about Our Executive Officers, of the Registrants," in this Annual Report on Form 10-K. Duke Energy will provide information that is responsive to the remainder of this Item 10 in its definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 10 by reference.
ITEM 11. EXECUTIVE COMPENSATION Duke Energy will provide information that is responsive to this Item 11 in its definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 11 by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Equity Compensation Plan Information
The following table shows information as of December 31, 2018,2021, about securities to be issued upon exercise of outstanding options, warrants and rights under Duke Energy's equity compensation plans, along with the weighted-averageweighted average exercise price of the outstanding options, warrants and rights and the number of securities remaining available for future issuance under the plans. | | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b)(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b)(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) |
Equity compensation plans approved by security holders | 3,729,606 |
| (2) | n/a | 6,080,741 | (3) | Equity compensation plans approved by security holders | 3,277,358 | | (2) | n/a | 3,470,774 | (3) |
Equity compensation plans not approved by security holders | 186,900 |
| (4) | n/a | (5) | Equity compensation plans not approved by security holders | 113,176 | | (4) | n/a | (5) |
Total | 3,916,506 |
| | n/a | 6,080,741 | | Total | 3,390,534 | | | n/a | 3,470,774 | |
| |
(1) | As of December 31, 2018, no options were outstanding under equity compensation plans. |
| |
(2) | Includes restricted stock units and performance shares (assuming the maximum payout level) granted under the Duke Energy Corporation 2015 Long-Term Incentive Plan, as well as shares that could be payable with respect to certain compensation deferred under the Executive Savings Plan or the Directors’ Savings Plan. |
| |
(3) | Includes shares remaining available for issuance pursuant to stock awards under the Duke Energy Corporation 2015 Long-Term Incentive Plan. |
| |
(4) | Includes shares that could be payable with respect to certain compensation deferred under the Executive Savings Plan or and the Directors' Savings Plan, each of which is a non-qualified deferred compensation plan described in more detail below. |
| |
(5) | The number of shares remaining available for future issuance under equity compensation plans not approved by security holders cannot be determined because it is based on the amount of future voluntary deferrals, if any, under the Executive Savings Plan and the Directors' Savings Plan. |
(1) As of December 31, 2021, no options were outstanding under equity compensation plans.
(2) Includes RSUs and performance shares (assuming the maximum payout level) granted under the Duke Energy Corporation 2015 Long-Term Incentive Plan, as well as shares that could be payable with respect to certain compensation deferred under the Duke Energy Corporation Executive Savings Plan (Executive Savings Plan) or the Directors’ Savings Plan.
(3) Includes shares remaining available for issuance pursuant to stock awards under the Duke Energy Corporation 2015 Long-Term Incentive Plan.
(4) Includes shares that could be payable with respect to certain compensation deferred under the Executive Savings Plan or the Duke Energy Corporation Directors' Savings Plan (Directors' Savings Plan), each of which is a non-qualified deferred compensation plan described in more detail below.
(5) The number of shares remaining available for future issuance under equity compensation plans not approved by security holders cannot be determined because it is based on the amount of future voluntary deferrals, if any, under the Executive Savings Plan and the Directors' Savings Plan.
Under the Executive Savings Plan, participants can elect to defer a portion of their base salary and short‑term incentive compensation. Participants also receive a company matching contribution in excess of the contribution limits prescribed by the Internal Revenue Code under the Duke Energy Retirement Savings Plan, which is the 401(k) plan in which employees are generally eligible to participate. Eligible participants may also earn pay credits based on age and length of service on eligible earnings that exceed limited prescribed by the Internal Revenue Code.
In general, payments are made following termination of employment or death in the form of a lump sum or installments, as selected by the participant. Participants may direct the deemed investment of base salary deferrals, short-term incentive compensation deferrals and matching contributionstheir accounts (with certain exceptions) among investment options available under the Duke Energy Retirement Savings Plan, including the Duke Energy Common Stock Fund. Participants may change their investment elections on a daily basis. Deferrals of equity awards are credited with earnings and losses based on the performance of the Duke Energy Common Stock Fund. The benefits payable under the plan are unfunded and subject to the claims of Duke Energy’s creditors.
Under the Directors’ Savings Plan, outside directors may elect to defer all or a portion of their annual compensation, generally consisting of retainers. Deferred amounts are credited to an unfunded account, the balance of which is adjusted for the performance of phantom investment options, including the Duke Energy common stock fund,Common Stock Fund, as elected by the director, and generally are paid when the director terminates his or her service from the Board of Directors.
Duke Energy will provide additional information that is responsive to this Item 12 in its definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 12 by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE Duke Energy will provide information that is responsive to this Item 13 in its definitive proxy statement or in an amendment to this Annual Report not later than 120 days after the end of the fiscal year covered by this Annual Report. That information is incorporated in this Item 13 by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Deloitte provided professional services to the Duke Energy Registrants. The following tables present the Deloitte fees for services rendered to the Duke Energy Registrants during 20182021 and 2017. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, 2018 | | |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
(in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Types of Fees | | | | | | | | | | | | | | | |
Audit Fees(a) | $ | 14.0 |
| | $ | 5.0 |
| | $ | 5.5 |
| | $ | 3.3 |
| | $ | 2.2 |
| | $ | 0.9 |
| | $ | 1.4 |
| | $ | 0.8 |
|
Audit-Related Fees(b) | 0.4 |
| | — |
| | 0.1 |
| | — |
| | 0.1 |
| | — |
| | — |
| | — |
|
Tax Fees(c) | 0.6 |
| | 0.2 |
| | 0.2 |
| | 0.1 |
| | 0.1 |
| | — |
| | 0.1 |
| | 0.1 |
|
Other Fees(d) | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total Fees | $ | 15.0 |
| | $ | 5.2 |
| | $ | 5.8 |
| | $ | 3.4 |
| | $ | 2.4 |
| | $ | 0.9 |
| | $ | 1.5 |
| | $ | 0.9 |
|
2020. | | | Year Ended December 31, 2017 | | | | Year Ended December 31, 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 |
Types of Fees | | | | | | | | | | | | | | | | Types of Fees | | | | | | | | | | | | | | |
Audit Fees(a) | $ | 13.6 |
| | $ | 4.7 |
| | $ | 5.6 |
| | $ | 3.1 |
| | $ | 2.4 |
| | $ | 0.8 |
| | $ | 1.4 |
| | $ | 0.8 |
| Audit Fees(a) | $ | 13.2 | | | $ | 3.1 | | | $ | 4.7 | | | $ | 2.4 | | | $ | 2.3 | | | $ | 1.9 | | | $ | 1.7 | | | $ | 1.3 | |
Audit-Related Fees(b) | 0.2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| Audit-Related Fees(b) | 1.5 | | | 0.1 | | | 0.2 | | | 0.1 | | | 0.1 | | | 0.2 | | | — | | | — | |
Tax Fees(c) | 1.7 |
| | 0.6 |
| | 0.1 |
| | 0.4 |
| | — |
| | 0.1 |
| | 0.1 |
| | 0.1 |
| |
Other Fees(d) | 0.1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| |
| Total Fees | $ | 15.6 |
| | $ | 5.3 |
| | $ | 5.7 |
| | $ | 3.5 |
| | $ | 2.4 |
| | $ | 0.9 |
| | $ | 1.5 |
| | $ | 0.9 |
| Total Fees | $ | 14.7 | | | $ | 3.2 | | | $ | 4.9 | | | $ | 2.5 | | | $ | 2.4 | | | $ | 2.1 | | | $ | 1.7 | | | $ | 1.3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended 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 |
Types of Fees | | | | | | | | | | | | | | | |
Audit Fees(a) | $ | 12.9 | | | $ | 3.0 | | | $ | 4.5 | | | $ | 2.3 | | | $ | 2.2 | | | $ | 1.9 | | | $ | 1.7 | | | $ | 1.3 | |
Audit-Related Fees(b) | 1.7 | | | 0.2 | | | 0.3 | | | 0.1 | | | 0.2 | | | 0.3 | | | 0.1 | | | — | |
Tax Fees(c) | 0.1 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | |
Total Fees | $ | 14.7 | | | $ | 3.2 | | | $ | 4.8 | | | $ | 2.4 | | | $ | 2.4 | | | $ | 2.2 | | | $ | 1.8 | | | $ | 1.3 | |
| |
(a) | Audit Fees are fees billed, or expected to be billed, by Deloitte for professional services for the financial statement audits, audit of the Duke Energy Registrants’ financial statements included in the Annual Report on Form 10-K, reviews of financial statements included in Quarterly Reports on Form 10‑Q, and services associated with securities filings such as comfort letters and consents. |
| |
(b) | Audit-Related Fees are fees billed, or expected to be billed, by Deloitte for assurance and related services that are reasonably related to the performance of an audit or review of financial statements, including statutory reporting requirements. |
| |
(c) | (a) Audit Fees are fees billed, or expected to be billed, by Deloitte for professional services for the financial statement audits, audit of the Duke Energy Registrants’ financial statements included in the Annual Report on Form 10-K, reviews of financial statements included in Quarterly Reports on Form 10‑Q, and services associated with securities filings such as comfort letters and consents. (b) Audit-Related Fees are fees billed, or expected to be billed, by Deloitte for assurance and related services that are reasonably related to the performance of an audit or review of financial statements, including statutory reporting requirements. (c) Tax Fees are fees billed by Deloitte for tax return assistance and preparation, tax examination assistance and professional services related to tax planning and tax strategy. |
| |
(d) | Other Fees are billed by Deloitte for attendance at Deloitte-sponsored conferences and access to Deloitte research tools and subscription services. |
To safeguard the continued independence of the independent auditor, the Audit Committee of Duke Energy adopted a policy that all services provided by the independent auditor require preapproval by the Audit Committee. Pursuant to the policy, certain audit services, audit-related services, tax services and other services have been specifically preapproved up to fee limits. In the event the cost of any of these services may exceed the fee limits, the Audit Committee must specifically approve the service. All services performed in 20182021 and 20172020 by the independent accountant were approved by the Audit Committee pursuant to the preapproval policy.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | |
(a) | Consolidated Financial Statements, Supplemental Financial Data and Supplemental Schedules included in Part II of this Annual Report are as follows: |
(a) Consolidated Financial Statements and Supplemental Schedules included in Part II of this Annual Report are as follows:
Duke Energy Corporation
Consolidated Financial Statements
Consolidated Statements of Operations for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Balance Sheets as of December 31, 2018,2021, and 20172020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 26 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Carolinas, LLC
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Balance Sheets as of December 31, 2018,2021, and 20172020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 26 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Progress Energy, Inc.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Balance Sheets as of December 31, 2018,2021, and 20172020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 26 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Progress, LLC
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Balance Sheets as of December 31, 2018,2021, and 20172020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 26 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Florida, LLC
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Balance Sheets as of December 31, 2018,2021, and 20172020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 26 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Ohio, Inc.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2018, 2017 and 2016
Consolidated Balance Sheets as of December 31, 2018, and 2017
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 2017 and 2016
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 26 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Duke Energy Indiana, LLCOhio, Inc.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Balance Sheets as of December 31, 2018,2021, and 20172020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 20172021, 2020 and 20162019
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited,Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in Note 26the Consolidated Financial Statements or Notes.
Duke Energy Indiana, LLC
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Balance Sheets as of December 31, 2021, and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2021, 2020 and 2019
Notes to the Consolidated Financial Statements)Statements
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
Piedmont Natural Gas Company, Inc.
Consolidated Financial Statements
Consolidated Statements of Operations and Comprehensive Income for the Years Ended December 31, 2018,2021, 2020 and 2017, Two Months Ended December 31, 2016, and the Year Ended October 31, 20162019
Consolidated Balance Sheets as of December 31, 2018,2021, and 20172020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018,2021, 2020 and 2017, Two Months Ended December 31, 2016, and the Year Ended October 31, 20162019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018,2021, 2020 and 2017, Two Months Ended December 31, 2016, and the Year Ended October 31, 20162019
Notes to the Consolidated Financial Statements
Quarterly Financial Data, (unaudited, included in Note 26 to the Consolidated Financial Statements)
Report of Independent Registered Public Accounting Firm
All other schedules are omitted because they are not required, or because the required information is included in the Consolidated Financial Statements or Notes.
EXHIBIT INDEX
Exhibits filed herewithinherewith 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 Company 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 (***). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke | | | | Duke | | Duke | | Duke | | Duke | | |
Exhibit | | Duke | | Energy | | Progress | | Energy | | Energy | | Energy | | Energy | | |
Number | | Energy | | Carolinas | | Energy | | Progress | | Florida | | Ohio | | Indiana | | Piedmont |
2.1 | | X | | | | X | | | | | | | | | | |
2.2 | | X | | | | | | | | | | | | | | X |
3.1 | | X | | | | | | | | | | | | | | |
3.2 | | X | | | | | | | | | | | | | | |
3.3 | | | | X | | | | | | | | | | | | |
3.3.1 | | | | X | | | | | | | | | | | | |
3.4 | | | | | | | | | | | | X | | | | |
3.4.1 | | | | | | | | | | | | X | | | | |
3.5 | | | | | | | | | | | | | | X | | |
3.5.1 | | | | | | | | | | | | | | X | | |
3.5.2 | | | | | | | | | | | | | | X | | |
3.5.3 | | | | | | | | | | | | | | X | | |
3.5.4 | | | | | | | | | | | | | | X | | |
3.6 | | | | X | | | | | | | | | | | | |
3.7 | | | | | | | | | | | | X | | | | |
3.8 | | | | | | | | X | | | | | | | | |
3.8.1 | | | | | | | | X | | | | | | | | |
3.8.2 | | | | | | | | X | | | | | | | | |
3.9 | | | | | | X | | | | | | | | | | |
3.9.1 | | | | | | X | | | | | | | | | | |
3.9.2 | | | | | | X | | | | | | | | | | |
3.9.3 | | | | | | X | | | | | | | | | | |
3.10 | | | | | | | | | | X | | | | | | |
3.10.1 | | | | | | | | | | X | | | | | | |
3.10.2 | | | | | | | | | | X | | | | | | |
3.10.3 | | | | | | | | | | X | | | | | | |
3.11 | | | | | | | | | | | | | | | | X |
3.11.1 | | | | | | | | | | | | | | | | X |
4.13.12 | | X | | | | | | | | | | | | | | |
3.13 | | X | | | | | | | | | | | | | | |
3.14 | | X | | | | | | | | | | | | | | |
3.15 | | | | | | | | | | | | | | | | X |
3.16 | | | | | | | | X | | | | | | | | |
3.17 | | | | | | | | | | | | X | | | | |
3.18 | | | | | | | | | | | | | | X | | |
3.19 | | | | | | | | | | X | | | | | | |
3.20 | | | | X | | | | | | | | | | | | |
4.1 | | X | | | | | | | | | | | | | | |
4.1.1 | | X | | | | | | | | | | | | | | |
4.1.2 | | X | | | | | | | | | | | | | | |
4.1.3 | | X | | | | | | | | | | | | | | |
4.1.4 | | X | | | | | | | | | | | | | | |
4.1.5 | | X | | | | | | | | | | | | | | |
4.1.6 | | X | | | | | | | | | | | | | | |
4.1.7 | | X | | | | | | | | | | | | | | |
4.1.8 | | X | | | | | | | | | | | | | | |
4.1.9 | | X | | | | | | | | | | | | | | |
4.1.10 | | X | | | | | | | | | | | | | | |
4.1.11 | | X | | | | | | | | | | | | | | |
4.1.12 | | X | | | | | | | | | | | | | | |
4.1.13 | Thirteenth Supplemental Indenture, dated as of April 18, 2016, to the indenture dated as of June 3, 2008, between Duke Energy Corporation and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to Duke Energy Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016, File No. 1-32853). | X | | | | | | | | | | | | | | |
4.1.14 | | X | | | | | | | | | | | | | | |
4.1.15 | | X | | | | | | | | | | | | | | |
4.1.16 | | X | | | | | | | | | | | | | | |
4.1.17 | | X | | | | | | | | | | | | | | |
4.1.18 | | X | | | | | | | | | | | | | | |
4.1.19 |
| X | | | | | | | | | | | | | | |
4.1.20 | | X | | | | | | | | | | | | | | |
4.24.1.21
| | X | | | | | | | | | | | | | | |
4.1.22
| | X | | | | | | | | | | | | | | |
4.1.23 | | X | | | | | | | | | | | | | | |
4.1.24 | | X | | | | | | | | | | | | | | |
4.1.25 | | X | | | | | | | | | | | | | | |
4.1.26 | | X | | | | | | | | | | | | | | |
4.2 | | | | X | | | | | | | | | | | | |
4.2.1 | | | | X | | | | | | | | | | | | |
4.2.2 | | | | X | | | | | | | | | | | | |
4.3 | First and Refunding Mortgage from Duke Energy Carolinas, LLC to The Bank of New York Mellon Trust Company, N.A., successor trustee to Guaranty Trust Company of New York, dated as of December 1, 1927 (incorporated by reference to Exhibit 7(a) to registrant's Form S-1, effective October 15, 1947, File No. 2-7224). | | | X | | | | | | | | | | | | |
4.3.1 | Instrument of Resignation, Appointment and Acceptance among Duke Energy Carolinas, LLC, JPMorgan Chase Bank, N.A., as Trustee, and The Bank of New York Mellon Trust Company, N.A., as Successor Trustee, dated as of September 24, 2007, (incorporated by reference to Exhibit 4.6.1 to registrant's Registration Statement on Form S-3 filed on October 3, 2007, File No. 333-146483). | | | X | | | | | | | | | | | | |
4.3.2 | Ninth Supplemental Indenture, dated as of February 1, 1949 (incorporated by reference to Exhibit 7(j) to registrant's Form S-1 filed on February 3, 1949, File No. 2-7808). | | | X | | | | | | | | | | | | |
4.3.3 | Twentieth Supplemental Indenture, dated as of June 15, 1964 (incorporated by reference to Exhibit 4-B-20 to registrant's Form S-1 filed on August 23, 1966, File No. 2-25367). | | | X | | | | | | | | | | | | |
4.3.4 | Twenty-third Supplemental Indenture, dated as of February 1, 1968 (incorporated by reference to Exhibit 2-B-26 to registrant's Form S-9 filed on January 21, 1969, File No. 2-31304). | | | X | | | | | | | | | | | | |
4.3.5 | Sixtieth Supplemental Indenture, dated as of March 1, 1990 (incorporated by reference to Exhibit 4-B-61 to registrant's Annual Report on Form 10-K for the year ended December 31, 1990, File No.1-4928). | | | X | | | | | | | | | | | | |
4.3.6 | Sixty-third Supplemental Indenture, dated as of July 1, 1991 (incorporated by reference to Exhibit 4-B-64 to registrant's Registration Statement on Form S-3 filed on February 13, 1992, File No. 33-45501). | | | X | | | | | | | | | | | | |
4.3.7 | | | | X | | | | | | | | | | | | |
4.3.8 | | | | X | | | | | | | | | | | | |
4.3.9 | | | | X | | | | | | | | | | | | |
4.3.10 | | | | X | | | | | | | | | | | | |
4.3.11 | | | | X | | | | | | | | | | | | |
4.3.12 | | | | X | | | | | | | | | | | | |
4.3.13 | | | | X | | | | | | | | | | | | |
4.3.14 | | | | X | | | | | | | | | | | | |
4.3.15 | | | | X | | | | | | | | | | | | |
4.3.16 | | | | X | | | | | | | | | | | | |
4.3.17 | | | | X | | | | | | | | | | | | |
4.3.18 | | | | X | | | | | | | | | | | | |
4.3.19 | | | | X | | | | | | | | | | | | |
4.3.20 | | | | X | | | | | | | | | | | | |
4.44.3.21 | | | | X | | | | | | | | | | | | |
4.3.22 | | | | X | | | | | | | | | | | | |
4.3.23 | | | | X | | | | | | | | | | | | |
4.3.24 | | | | X | | | | | | | | | | | | |
4.4 | Mortgage and Deed of Trust between Duke Energy Progress, Inc. (formerly Carolina Power & Light Company) and The Bank of New York Mellon (formerly Irving Trust Company) and Frederick G. Herbst (Tina D. Gonzalez, successor), as Trustees, dated as of May 1, 1940. | | | | | | | X | | | | | | | | |
4.4.1 | First through Fifth Supplemental Indentures thereto (incorporated by reference to Exhibit 2(b), File No. 2-64189). | | | | | | | X | | | | | | | | |
4.4.2 | Sixth Supplemental Indenture dated April 1, 1960 (incorporated by reference to Exhibit 2(b)-5, File No. 2-16210). | | | | | | | X | | | | | | | | |
4.4.3 | Seventh Supplemental Indenture dated November 1, 1961 (incorporated by reference to Exhibit 2(b)-6, File No. 2-16210). | | | | | | | X | | | | | | | | |
4.4.4 | Eighth Supplemental Indenture dated July 1, 1964 (incorporated by reference to Exhibit 4(b)-8, File No. 2-19118). | | | | | | | X | | | | | | | | |
4.4.5 | Ninth Supplemental Indenture dated April 1, 1966 (incorporated by reference to Exhibit 4(b)-2, File No. 2-22439). | | | | | | | X | | | | | | | | |
4.4.6 | Tenth Supplemental Indenture dated October 1, 1967 (incorporated by reference to Exhibit 4(b)-2, File No. 2-24624). | | | | | | | X | | | | | | | | |
4.4.7 | Eleventh Supplemental Indenture dated October 1, 1968 (incorporated by reference to Exhibit 2(c), File No. 2-27297). | | | | | | | X | | | | | | | | |
4.4.8 | Twelfth Supplemental Indenture dated January 1, 1970 (incorporated by reference to Exhibit 2(c), File No. 2-30172). | | | | | | | X | | | | | | | | |
4.4.9 | Thirteenth Supplemental Indenture dated August 1, 1970 (incorporated by reference to Exhibit 2(c), File No. 2-35694). | | | | | | | X | | | | | | | | |
4.4.10 | Fourteenth Supplemental Indenture dated January 1, 1971 (incorporated by reference to Exhibit 2(c), File No. 2-37505). | | | | | | | X | | | | | | | | |
4.4.11 | Fifteenth Supplemental Indenture dated October 1, 1971 (incorporated by reference to Exhibit 2(c), File No. 2-39002). | | | | | | | X | | | | | | | | |
4.4.12 | Sixteenth Supplemental Indenture dated May 1, 1972 (incorporated by reference to Exhibit 2(c), File No. 2-41738). | | | | | | | X | | | | | | | | |
4.4.13 | Seventeenth Supplemental Indenture dated November 1, 1973 (incorporated by reference to Exhibit 2(c), File No. 2-43439). | | | | | | | X | | | | | | | | |
4.4.14 | Eighteenth Supplemental Indenture dated (incorporated by reference to Exhibit 2(c), File No. 2-47751). | | | | | | | X | | | | | | | | |
4.4.15 | Nineteenth Supplemental Indenture dated May 1, 1974 (incorporated by reference to Exhibit 2(c), File No. 2-49347). | | | | | | | X | | | | | | | | |
4.4.16 | Twentieth Supplemental Indenture dated December 1, 1974 (incorporated by reference to Exhibit 2(c), File No. 2-53113). | | | | | | | X | | | | | | | | |
4.4.17 | Twenty-first Supplemental Indenture dated April 15, 1975 (incorporated by reference to Exhibit 2(d), File No. 2-53113). | | | | | | | X | | | | | | | | |
4.4.18 | Twenty-second Supplemental Indenture dated October 1, 1977 (incorporated by reference to Exhibit 2(c), File No. 2-59511). | | | | | | | X | | | | | | | | |
4.4.19 | Twenty-third Supplemental Indenture dated June 1, 1978 (incorporated by reference to Exhibit 2(c), File No. 2-61611). | | | | | | | X | | | | | | | | |
4.4.20 | Twenty-fourth Supplemental Indenture dated May 15, 1979 (incorporated by reference to Exhibit 2(d), File No. 2-64189). | | | | | | | X | | | | | | | | |
4.4.21 | Twenty-fifth Supplemental Indenture dated November 1, 1979 (incorporated by reference to Exhibit 2(c), File No. 2-65514). | | | | | | | X | | | | | | | | |
4.4.22 | Twenty-sixth Supplemental Indenture dated November 1, 1979 (incorporated by reference to Exhibit 2(c), File No. 2-66851). | | | | | | | X | | | | | | | | |
4.4.23 | Twenty-seventh Supplemental Indenture dated April 1, 1980 (incorporated by reference to Exhibit 2 (d), File No. 2-66851). | | | | | | | X | | | | | | | | |
4.4.24 | Twenty-eighth Supplemental Indenture dated October 1, 1980 (incorporated by reference to Exhibit 4(b)-1, File No. 2-81299). | | | | | | | X | | | | | | | | |
4.4.25 | Twenty-ninth Supplemental Indenture dated October 1, 1980 (incorporated by reference to Exhibit 4(b)-2, File No. 2-81299). | | | | | | | X | | | | | | | | |
4.4.26 | Thirtieth Supplemental Indenture dated December 1, 1982 (incorporated by reference to Exhibit 4(b)- 3, File No. 2-81299). | | | | | | | X | | | | | | | | |
4.4.27 | Thirty-first Supplemental Indenture dated March 15, 1983 (incorporated by reference to Exhibit 4(c)-1, File No. 2-95505). | | | | | | | X | | | | | | | | |
4.4.28 | Thirty-second Supplemental Indenture dated March 15, 1983 (incorporated by reference to Exhibit 4(c)-2, File No. 2-95505). | | | | | | | X | | | | | | | | |
4.4.29 | Thirty-third Supplemental Indenture dated December 1, 1983 (incorporated by reference to Exhibit 4(c)-3, File No. 2-95505). | | | | | | | X | | | | | | | | |
4.4.30 | Thirty-fourth Supplemental Indenture dated December 15, 1983 (incorporated by reference to Exhibit 4(c)-4, File No. 2-95505). | | | | | | | X | | | | | | | | |
4.4.31 | Thirty-fifth Supplemental Indenture dated April 1, 1984 (incorporated by reference to Exhibit 4(c)-5, File No. 2-95505). | | | | | | | X | | | | | | | | |
4.4.32 | Thirty-sixth Supplemental Indenture dated June 1, 1984 (incorporated by reference to Exhibit 4(c)-6, File No. 2-95505). | | | | | | | X | | | | | | | | |
4.4.33 | Thirty-seventh Supplemental Indenture dated June 1, 1984 (incorporated by reference to Exhibit 4(c)-7, File No. 2-95505). | | | | | | | X | | | | | | | | |
4.4.34 | Thirty-eighth Supplemental Indenture dated June 1, 1984 (incorporated by reference to Exhibit 4(c)- 8, File No. 2-95505). | | | | | | | X | | | | | | | | |
4.4.35 | Thirty-ninth Supplemental Indenture dated April 1, 1985 (incorporated by reference to Exhibit 4(b), File No. 33-25560). | | | | | | | X | | | | | | | | |
4.4.36 | Fortieth Supplemental Indenture dated October 1, 1985 (incorporated by reference to Exhibit 4(c), File No. 33-25560). | | | | | | | X | | | | | | | | |
4.4.37 | Forty-first Supplemental Indenture dated March 1, 1986 (incorporated by reference to Exhibit 4(d), File No. 33-25560). | | | | | | | X | | | | | | | | |
4.4.38 | Forty-second Supplemental Indenture dated July 1, 1986 (incorporated by reference to Exhibit 4(e), File No. 33-25560). | | | | | | | X | | | | | | | | |
4.4.39 | Forty-third Supplemental Indenture dated January 1, 1987 (incorporated by reference to Exhibit 4(f), File No. 33-25560). | | | | | | | X | | | | | | | | |
4.4.40 | Forty-fourth Supplemental Indenture dated December 1, 1987 (incorporated by reference to Exhibit 4(g), File No. 33-25560). | | | | | | | X | | | | | | | | |
4.4.41 | Forty-fifth supplementalSupplemental Indenture dated September 1, 1988 (incorporated by reference to Exhibit 4(h), File No. 33-25560). | | | | | | | X | | | | | | | | |
4.4.42 | Forty-sixth Supplemental Indenture dated April 1, 1989 (incorporated by reference to Exhibit 4(b), File No. 33-33431). | | | | | | | X | | | | | | | | |
4.4.43 | Forty-seventh Supplemental Indenture dated August 1, 1989 (incorporated by reference to Exhibit 4(c), File No. 33-33431). | | | | | | | X | | | | | | | | |
4.4.44 | Forty-eighth Supplemental Indenture dated November 15, 1990 (incorporated by reference to Exhibit 4(b), File No. 33-38298). | | | | | | | X | | | | | | | | |
4.4.45 | Forty-ninth Supplemental Indenture dated November 15, 1990 (incorporated by reference to Exhibit 4(c), File No. 33-38298). | | | | | | | X | | | | | | | | |
4.4.46 | Fiftieth Supplemental Indenture dated February 15, 1991 (incorporated by reference to Exhibit 4(h), File No. 33-42869). | | | | | | | X | | | | | | | | |
4.4.47 | Fifty-first Supplemental Indenture dated April 1, 1991 (incorporated by reference to Exhibit 4(i), File No. 33-42869). | | | | | | | X | | | | | | | | |
4.4.48 | Fifty-second Supplemental Indenture dated September 15, 1991(incorporated by reference to Exhibit 4(e), File No. 33-48607). | | | | | | | X | | | | | | | | |
4.4.49 | Fifty-third Supplemental Indenture dated January 1, 1992 (incorporated by reference to Exhibit 4(f), File No. 33-48607). | | | | | | | X | | | | | | | | |
4.4.50 | Fifty-fourth Supplemental Indenture dated April 15, 1992 (incorporated by reference to Exhibit 4 (g), File No. 33-48607). | | | | | | | X | | | | | | | | |
4.4.51 | Fifty-fifth Supplemental Indenture dated July 1, 1992 (incorporated by reference to Exhibit 4(e), File No. 33-55060). | | | | | | | X | | | | | | | | |
4.4.52 | Fifty-sixth Supplemental Indenture dated October 1, 1992 (incorporated by reference to Exhibit 4(f), File No. 33-55060). | | | | | | | X | | | | | | | | |
4.4.53 | Fifty-seventh Supplemental Indenture dated February 1, 1993 (incorporated by reference to Exhibit 4(e), File No. 33-60014). | | | | | | | X | | | | | | | | |
4.4.54 | Fifty-eighth Supplemental Indenture dated March 1, 1993 (incorporated by reference to Exhibit 4(f), File No. 33-60014). | | | | | | | X | | | | | | | | |
4.4.55 | Fifty-ninth Supplemental Indenture dated July 1, 1993 (incorporated by reference to Exhibit 4(a) to Post-Effective Amendment No. 1, File No. 33-38349). | | | | | | | X | | | | | | | | |
4.4.56 | Sixtieth Supplemental Indenture dated July 1, 1993 (incorporated by reference to Exhibit 4(b) to Post-Effective Amendment No. 1, File No. 33-38349). | | | | | | | X | | | | | | | | |
4.4.57 | Sixty-first Supplemental Indenture dated August 15, 1993 (incorporated by reference to Exhibit 4(e), File No. 33-50597). | | | | | | | X | | | | | | | | |
4.4.58 | | | | | | | | X | | | | | | | | |
4.4.59 | | | | | | | | X | | | | | | | | |
4.4.60 | | | | | | | | X | | | | | | | | |
4.4.61 | | | | | | | | X | | | | | | | | |
4.4.62 | | | | | | | | X | | | | | | | | |
4.4.63 | | | | | | | | X | | | | | | | | |
4.4.64 | | | | | | | | X | | | | | | | | |
4.4.65 | | | | | | | | X | | | | | | | | |
4.4.66 | | | | | | | | X | | | | | | | | |
4.4.67 | | | | | | | | X | | | | | | | | |
4.4.68 | | | | | | | | X | | | | | | | | |
4.4.69 | | | | | | | | X | | | | | | | | |
4.4.70 | | | | | | | | X | | | | | | | | |
4.4.71 | | | | | | | | X | | | | | | | | |
4.4.72 | | | | | | | | X | | | | | | | | |
4.4.73 | | | | | | | | X | | | | | | | | |
4.4.74 | | | | | | | | X | | | | | | | | |
4.4.75 | | | | | | | | X | | | | | | | | |
4.4.76 | | | | | | | | X | | | | | | | | |
4.4.77 | | | | | | | | X | | | | | | | | |
4.4.78 | | | | | | | | X | | | | | | | | |
4.4.79 | | | | | | | | X | | | | | | | | |
4.4.80 | | | | | | | | X | | | | | | | | |
4.4.81 | | | | | | | | X | | | | | | | | |
4.54.4.82 | | | | | | | | X | | | | | | | | |
4.4.83 | | | | | | | | X | | | | | | | | |
4.4.84 | | | | | | | | X | | | | | | | | |
4.4.85 | | | | | | | | X | | | | | | | | |
4.5 | | | | | | | | X | | | | | | | | |
4.6 | | | | | | | | X | | | | | | | | |
4.7 | Indenture (for First Mortgage Bonds) between Duke Energy Florida, Inc. (formerly Florida Power Corporation) and The Bank of New York Mellon (as successor to Guaranty Trust Company of New York and The Florida National Bank of Jacksonville), as Trustee, dated as of January 1, 1944, (incorporated by reference to Exhibit B-18 to registrant's Form A-2, File No. 2-5293). | | | | | | | | | X | | | | | | |
4.7.1 | Seventh Supplemental Indenture (incorporated by reference to Exhibit 4(b) to Duke Energy Florida, Inc.'s (formerly Florida Power Corporation) Registration Statement on Form S-3 filed on September 27, 1991, File No. 33-16788). | | | | | | | | | X | | | | | | |
4.7.2 | Eighth Supplemental Indenture (incorporated by reference to Exhibit 4(c) to Duke Energy Florida, Inc.'s (formerly Florida Power Corporation) Registration Statement on Form S-3 filed on September 27, 1991, File No. 33-16788). | | | | | | | | | X | | | | | | |
4.7.3 | Sixteenth Supplemental Indenture (incorporated by reference to Exhibit 4(d) to Duke Energy Florida, Inc.'s (formerly Florida Power Corporation) Registration Statement on Form S-3 filed on September 27, 1991, File No. 33-16788). | | | | | | | | | X | | | | | | |
4.7.4 | Twenty-ninth Supplemental Indenture (incorporated by reference to Exhibit 4(c) to Duke Energy Florida, Inc.'s (formerly Florida Power Corporation) Registration Statement on Form S-3 filed on September 17, 1982, File No. 2-79832). | | | | | | | | | X | | | | | | |
4.7.5 | | | | | | | | | | X | | | | | | |
4.7.6 | | | | | | | | | | X | | | | | | |
4.7.7 | | | | | | | | | | X | | | | | | |
4.7.8 | | | | | | | | | | X | | | | | | |
4.7.9 | | | | | | | | | | X | | | | | | |
4.7.10 | | | | | | | | | | X | | | | | | |
4.7.11 | | | | | | | | | | X | | | | | | |
4.7.12 | | | | | | | | | | X | | | | | | |
4.7.13 | | | | | | | | | | X | | | | | | |
4.7.14 | | | | | | | | | | X | | | | | | |
4.7.15 | | | | | | | | | | X | | | | | | |
4.7.16 | | | | | | | | | | X | | | | | | |
4.7.17 |
| | | | | | | | | X | | | | | | |
4.84.7.18 | | | | | | | | | | X | | | | | | |
4.7.19 | | | | | | | | | | X | | | | | | |
4.7.20 | | | | | | | | | | X | | | | | | |
4.8 | | | | | | | | | | X | | | | | | |
4.8.1 | | | | | | | | | | X | | | | | | |
4.94.8.2 | | | | | | | | | | X | | | | | | |
4.9 | | | | | | | | | | X | | | | | | |
4.10 | | | | | | | | | | | | X | | | | |
4.10.1 | | | | | | | | | | | | X | | | | |
4.10.2 | | | | | | | | | | | | X | | | | |
4.11 | Original Indenture (First Mortgage Bonds) between Duke Energy Ohio, Inc. (formerly The Cincinnati Gas & Electric Company) and The Bank of New York Mellon Trust Company, N.A., as Successor Trustee, dated as of August 1, 1936 (incorporated by reference to an exhibit to registrant's Registration Statement No. 2-2374). | | | | | | | | | | | X | | | | |
4.11.1 | | | | | | | | | | | | X | | | | |
4.11.2 | | | | | | | | | | | | X | | | | |
4.11.3 | | | | | | | | | | | | X | | | | |
4.11.4 | | | | | | | | | | | | X | | | | |
4.11.5 | | | | | | | | | | | | X | | | | |
4.124.11.6 | | | | | | | | | | | | X | | | | |
4.12 | Indenture between Duke Energy Indiana, LLC (formerly PSI Energy, Inc.) and The Bank of New York Mellon Trust Company, N.A., as Successor Trustee, dated as of November 15, 1996 (incorporated by reference to Exhibit 4(v) to the Cinergy Corp. Form 10-K for the year ended December 31, 1996, filed on March 27, 1997, File No. 1-11377). | | | | | | | | | | | | | X | | |
4.12.1 | | | | | | | | | | | | | | X | | |
4.12.2 | | | | | | | | | | | | | | X | | |
4.12.3 | | | | | | | | | | | | | | X | | |
4.12.4 | | | | | | | | | | | | | | X | | |
4.13 | Original Indenture (First Mortgage Bonds) between Duke Energy Indiana, LLC (formerly PSI Energy, Inc.) and Deutsche Bank National Trust Company, as Successor Trustee, dated as of September 1, 1939, (filed as an exhibit in File No. 70-258). | | | | | | | | | | | | | X | | |
4.13.1 | Tenth Supplemental Indenture, dated as of July 1, 1952, (filed as an exhibit in File No. 2-9687). | | | | | | | | | | | | | X | | |
4.13.2 | Twenty-third Supplemental Indenture, dated as of January 1, 1977, (filed as an exhibit in File No. 2-57828). | | | | | | | | | | | | | X | | |
4.13.3 | Twenty-fifth Supplemental Indenture, dated as of September 1, 1978, (filed as an exhibit in File No. 2-62543). | | | | | | | | | | | | | X | | |
4.13.4 | Twenty-sixth Supplemental Indenture, dated as of September 1, 1978, (filed as an exhibit in File No. 2-62543). | | | | | | | | | �� | | | | X | | |
4.13.5 | Thirtieth Supplemental Indenture, dated as of August 1, 1980, (filed as an exhibit in File No. 2-68562). | | | | | | | | | | | | | X | | |
4.13.6 | Thirty-fifth Supplemental Indenture, dated as of March 30, 1984, (filed as an exhibit to registrant's Annual Report on Form 10-K for the year ended December 31, 1984, File No. 1-3543). | | | | | | | | | | | | | X | | |
4.13.7 | Forty-sixth Supplemental Indenture, dated as of June 1, 1990, (filed as an exhibit to registrant's Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-3543). | | | | | | | | | | | | | X | | |
4.13.8 | Forty-seventh Supplemental Indenture, dated as of July 15, 1991, (filed as an exhibit to registrant's Annual Report on Form 10-K for the year ended December 31, 1991, File No. 1-3543). | | | | | | | | | | | | | X | | |
4.13.9 | Forty-eighth Supplemental Indenture, dated as of July 15, 1992, (filed as an exhibit to registrant's Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-3543). | | | | | | | | | | | | | X | | |
4.13.10 | | | | | | | | | | | | | | X | | |
4.13.11 | | | | | | | | | | | | | | X | | |
4.13.12 | | | | | | | | | | | | | | X | | |
4.13.13 | | | | | | | | | | | | | | X | | |
4.13.14 | | | | | | | | | | | | | | X | | |
4.13.15 | | | | | | | | | | | | | | X | | |
4.13.16 | | | | | | | | | | | | | | X | | |
4.13.17 | | | | | | | | | | | | | | X | | |
4.13.18 | | | | | | | | | | | | | | X | | |
4.13.19 | | | | | | | | | | | | | | X | | |
4.13.20 | | | | | | | | | | | | | | X | | |
4.13.21 | Sixty-seventh Supplemental Indenture, dated as of January 1, 2016, between Duke Energy Indiana, Inc. and Deutsche Bank National Trust Company, as Trustee, supplementing and amending the Indenture of Mortgage or Deed of Trust, dated September 1, 1939, between Duke Energy Indiana, Inc. and Deutsche Bank National Trust Company, as Trustee (incorporated by reference to Exhibit 4.2 to Duke Energy Indiana, LLC's (formerly PSI Energy, Inc.) Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, filed on May 5, 2016, File No. 1-3543). | | | | | | | | | | | | | X | | |
4.13.22 | | | | | | | | | | | | | | X | | |
4.144.13.23 | | | | | | | | | | | | | | X | | |
4.13.24 | | | | | | | | | | | | | | X | | |
4.14 | Repayment Agreement between Duke Energy Ohio, Inc. (formerly The Cincinnati Gas & Electric Company) and The Dayton Power and Light Company, dated as of December 23, 1992, (filed with registrant's Annual Report on Form 10-K for the year ended December 31, 1992, File No. 1-1232). | | | | | | | | | | | X | | | | |
4.15 | | | | | | | | | | | | | | X | | |
4.16 | | | | | | | | | | �� | | | | X | | |
4.17 | | | | | | | | | | | | | | X | | |
4.18 | | | | | | X | | | | | | | | | | |
4.19 | | | | | | | | | | | | | | | | X |
4.20 | | | | | | | | | | | | | | | | X |
4.21 | | | | | | | | | | | | | | | | X |
4.22 | | | | | | | | | | | | | | | | X |
4.23 | | | | | | | | | | | | | | | | X |
4.24 | | | | | | | | | | | | | | | | X |
4.25 | | | | | | | | | | | | | | | | X |
4.26 | | | | | | | | | | | | | | | | X |
4.26.1 | | | | | | | | | | | | | | | | X |
4.26.2 | | | | | | | | | | | | | | | | X |
4.26.3 | | | | | | | | | | | | | | | | X |
4.26.4 | | | | | | | | | | | | | | | | X |
4.26.5 | | | | | | | | | | | | | | | | X |
4.26.6 | | | | | | | | | | | | | | | | X |
4.274.26.7 | | | | | | | | | | | | | | | | X |
4.26.8 | | | | | | | | | | | | | | | | X |
4.26.9 | | | | | | | | | | | | | | | | X |
4.27 | Medium-Term Note, Series A, dated as of October 6, 1993 (incorporated by reference to Exhibit 4.8 to registrant's Annual Report on Form 10-K for the year ended October 31, 1993, File No. 1-06196). | | | | | | | | | | | | | | | X |
4.28 | | | | | | | | | | | | | | | | X |
4.29 | | | | | | | | | | | | | | | | X |
4.30 | | | | | | | | | | | | | | | | X |
4.31 | | | | | | | | | | | | | | | | X |
4.32 | | | | | | | | | | | | | | | | X |
4.33 | | | | | | | | | | | | | | | | X |
4.34 | Agreement of Resignation, Appointment and Acceptance dated as of March 29, 2007, by and among Piedmont Natural Gas Company, Inc., Citibank, N.A., and The Bank of New York Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to registrant's Quarterly Report on Form 10-Q for the quarter ended April 30, 2007, filed on June 8, 2007, File No. 1-06196). | | | | | | | | | | | | | | | X |
10.1 | | | | X | | | | | | | | | | | | |
10.2 | | | | X | | | | | | | | | | | | |
10.3 | | | | X | | | | | | | | | | | | |
10.4 | | | | | | | | | | | | | | | | X |
10.5 | | | | | | | | | | | | | | | | X |
10.6 | | | | X | | | | | | | | | | | | |
10.7 | | | | | | | | | | | | | | | | X |
10.8 | Engineering, Procurement and Construction Management Agreement between Duke Energy Indiana, LLC (formerly PSI Energy, Inc.) and Bechtel Power Corporation, dated as of December 15, 2008 (incorporated by reference to Exhibit 10.16 to registrant's Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 13, 2009, File No. 1-3543). (Portions of the exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.) | | | | | | | | | | | | | X | | |
10.9 | Formation and Sale Agreement between Duke Ventures, LLC, Crescent Resources, LLC, Morgan Stanley Real Estate Fund V U.S. L.P., Morgan Stanley Real Estate Fund V Special U.S., L.P., Morgan Stanley Real Estate Investors V U.S., L.P., MSP Real Estate Fund V, L.P., and Morgan Stanley Strategic Investments, Inc., dated as of September 7, 2006 (incorporated by reference to Exhibit 10.3 to Duke Energy Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, filed on November 9, 2006, File No. 1-32853). | X | | | | | | | | | | | | | | |
10.10 | | X | | | | | | | | | | | | | | |
10.11** | | X | | | | | | | | | | | | | | |
10.12*10.12** | | X | | | | | | | | | | | | | | |
10.13 | | X | | | | | | | | | | | | X | | |
10.13*10.14** | | X | | | | | | | | | | | | | | |
10.1410.15 | $6,000,000,000 Five-Year Credit Agreement between Duke Energy Corporation, Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, LLC, Duke Energy Kentucky, Inc., Carolina Power and Light Company d/b/a Duke Energy Progress, Inc. and Florida Power Corporation, d/b/a Duke Energy Florida, Inc., as Borrowers, the lenders listed therein, Wells Fargo Bank, National Association, as Administrative Agent, Bank of America, N.A. and The Royal Bank of Scotland plc, as Co-Syndication Agents and Bank of China, New York Branch, Barclays Bank PLC, Citibank, N.A., Credit Suisse AG, Cayman Islands Branch, Industrial and Commercial Bank of China Limited, New York Branch, JPMorgan Chase Bank, N.A. and UBS Securities LLC, as Co-Documentation Agents, dated as of November 18, 2011 (incorporated by reference to Exhibit 10.1 to registrant's Current Report on Form 8-K filed on November 25, 2011, File Nos. 1-32853, 1-4928, 1-1232 and 1-3543). | X | | X | | | | | | | | X | | X | | |
10.14.110.15.1 | Amendment No. 1 and Consent between Duke Energy Corporation, Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, LLC, Duke Energy Kentucky, Inc., Duke Energy Progress, Inc., Duke Energy Florida, Inc., and Wells Fargo Bank, National Association, dated as of December 18, 2013 (incorporated by reference to Exhibit 10.1 to registrant's Current Report on Form 8-K filed on December 23, 2013, File Nos. 1-32853, 1-4928, 1-3382, 1-3274, 1-1232 and 1-3543). | X | | X | | | | X | | X | | X | | X | | |
10.14.210.15.2 | Amendment No. 2 and Consent between Duke Energy Corporation, Duke Energy Carolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, LLC, Duke Energy Kentucky, Inc., Duke Energy Progress, Inc., and Duke Energy Florida, Inc., the Lenders party hereto, the issuing Lenders party hereto, Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender, dated as of January 30, 2015 (incorporated by reference to Exhibit 10.1 of registrant's Current Report on Form 8-K filed on February 5, 2015, File Nos. 1-32853, 1-4928, 1-1232, 1-3543, 1-3382 and 1-3274). | X | | X | | | | X | | X | | X | | X | | |
10.14.310.15.3 | Amendment No. 3 and Consent, dated as of March 16, 2017, among the registrants, the Lenders party thereto, the issuing Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender (incorporated by reference to Exhibit 10.1 to registrants' Current Report on Form 8-K filed on March 17, 2017, File Nos. 1-32853, 1-04928, 1-03382, 1-03274, 1-01232, 1-03543, 1-06196). | X | | X | | | | X | | X | | X | | X | | X |
10.15**10.15.4 | | X | | | | | | | | | | | | | | |
10.15.1** | Amendment to Duke Energy Corporation 2010 Long-Term Incentive PlanCarolinas, LLC, Duke Energy Ohio, Inc., Duke Energy Indiana, LLC, Duke Energy Kentucky, Inc., Duke Energy Progress, LLC, Duke Energy Florida, LLC, and Piedmont Natural Gas Company, Inc., the Lenders party thereto, the Issuing Lenders party thereto, and Wells Fargo Bank, National Association, as Administrative Agent and Swingline Lender (incorporated by reference to Exhibit 10.310.1 to registrant's Quarterlyregistrants’ Current Report on Form 10-Q for the quarter ended June 30, 2012,8-K filed on August 8, 2012,March 21, 2019, File No. 1-32853)Nos. 1-32853. 1-4928, 1-3382, 1-3274, 1-1232, 1-3543, 1-6196). | X | | X | | | | X | | X | | X | | X | | X |
10.16**10.15.5 | Amendment No. 5 and Consent, dated as of March 16, 2020, among registrants', the Lenders party thereto, the Issuing Lenders party thereto, and Wells Fargo Bank, N.A., as Administrative Agent, and Swingline Lender (incorporated by reference to Exhibit 10.1 to registrants' Current Report on Form 8-K filed on March 17, 2020, File Nos. 1-32853, 1-4928, 1-3382, 1-3274, 1-1232, 1-3543, 1-6196). | X | | X | | | | X | | X | | X | | X | | X |
10.16** | | X | | | | | | | | | | | | | | |
*10.16.1** | | X | | | | | | | | | | | | | | |
10.17** | | X | | | | | | | | | | | | | | |
10.18*10.17** | | X | | | | | | | | | | | | | | |
10.19** | | X | | | | | | | | | | | | | | |
10.20*10.18** | | X | | | | | | | | | | | | | | |
10.21*10.19** | | X | | | | | | | | | | | | | | |
10.22*10.20** | | X | | | | | | | | | | | | | | |
10.23*10.21** | | X | | | | | | | | | | | | | | |
10.2410.22 | | X | | | | | | | | | | | | | | |
10.2510.23 | | X | | | | | | | | | | | | | | |
10.26**10.24 | | | | X | | | | X | | | | | | | | |
10.25 | | X | | X | | | | X | | | | | | | | |
10.26 | Coal Combustion Residuals Settlement Agreement between registrants and the Public Staff-North Carolina Utilities Commission, the North Carolina Attorney General's Office, and the Sierra Club, dated as of January 22, 2021 (incorporated by reference to Exhibit 10.1 to registrants' Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed on May 10, 2021, File Nos. 1-32853, 1-4928, 1-3382). | X | | X | | | | X | | | | | | | | |
10.27 | Investment Agreement by and among Cinergy Corp., Duke Energy Indiana HoldCo, LLC, Duke Energy Corporation, and Epson Investment PTE. LTD,. dated as of January 28, 2021 (incorporated by reference to Exhibit 10.2 to registrants' Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed on May 10, 2021, File Nos. 1-32853, 1-3543). | X | | | | | | | | | | | | X | | |
10.28 | | X | | | | | | | | | | | | | | |
10.29** | | X | | | | | | | | | | | | | | |
10.27*10.30** | | X | | | | | | | | | | | | | | |
10.2810.30.1** | | X | | | | | | | | | | | | | | |
10.31 | Purchase, Construction and Ownership Agreement, dated as of July 30, 1981, between Duke Energy Progress, Inc. (formerly Carolina Power & Light Company) and North Carolina Municipal Power Agency Number 3 and Exhibits, together with resolution, dated as of December 16, 1981, changing name to North Carolina Eastern Municipal Power Agency, amending letter, dated as of February 18, 1982, and amendment, dated as of February 24, 1982 (incorporated by reference to Exhibit 10(a) to registrant's File No. 33-25560). | | | | | | | X | | | | | | | | |
10.2910.32 | Operating and Fuel Agreement, dated as of July 30, 1981, between Duke Energy Progress, Inc. (formerly Carolina Power & Light Company) and North Carolina Municipal Power Agency Number 3 and Exhibits, together with resolution, dated as of December 16, 1981, changing name to North Carolina Eastern Municipal Power Agency, amending letters, dated as of August 21, 1981, and December 15, 1981, and amendment, dated as of February 24, 1982 (incorporated by reference to Exhibit 10(b) to registrant's File No. 33-25560). | | | | | | | X | | | | | | | | |
10.3010.33 | Power Coordination Agreement, dated as of July 30, 1981, between Duke Energy Progress, Inc. (formerly Carolina Power & Light Company) and North Carolina Municipal Power Agency Number 3 and Exhibits, together with resolution, dated as of December 16, 1981, changing name to North Carolina Eastern Municipal Power Agency and amending letter, dated as of January 29, 1982 (incorporated by reference to Exhibit 10(c) to registrant's File No. 33-25560). | | | | | | | X | | | | | | | | |
10.3110.34 | Amendment, dated as of December 16, 1982, to Purchase, Construction and Ownership Agreement, dated as of July 30, 1981, between Duke Energy Progress, Inc. (formerly Carolina Power & Light Company) and North Carolina Eastern Municipal Power Agency (incorporated by reference to Exhibit 10(d) to registrant's File No. 33-25560). | | | | | | | X | | | | | | | | |
10.32**10.35 | | | | | | X | | | | | | | | | | |
10.33 | Precedent and Related Agreements between Duke Energy Florida, Inc. (formerly Florida Power Corporation d/b/a Progress Energy Florida, Inc. (“PEF”)), Southern Natural Gas Company, Florida Gas Transmission Company (“FGT”), and BG LNG Services, LLC (“BG”), including: a) Precedent Agreement between Southern Natural Gas Company and PEF, dated as of December 2, 2004; b) Gas Sale and Purchase Contract between BG and PEF, dated as of December 1, 2004; c) Interim Firm Transportation Service Agreement by and between FGT and PEF, dated as of December 2, 2004; d) Letter Agreement between FGT and PEF, dated as of December 2, 2004, and Firm Transportation Service Agreement between FGT and PEF to be entered into upon satisfaction of certain conditions precedent; e) Discount Agreement between FGT and PEF, dated as of December 2, 2004; f) Amendment to Gas Sale and Purchase Contract between BG and PEF, dated as of January 28, 2005; and g) Letter Agreement between FGT and PEF, dated as of January 31, 2005 (incorporated by reference to Exhibit 10.1 to registrant's Current Report on Form 8-K/A filed on March 15, 2005, File Nos. 1-15929 and 1-3274). (Portions of the exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.) | | | | | X | | | | X | | | | | | |
10.3410.36 | Engineering, Procurement and Construction Agreement between Duke Energy Florida, Inc. (formerly Florida Power Corporation d/b/a/ Progress Energy Florida, Inc.), as owner, and a consortium consisting of Westinghouse Electric Company LLC and Stone & Webster, Inc., as contractor, for a two-unit AP1000 Nuclear Power Plant, dated as of December 31, 2008 (incorporated by reference to Exhibit 10.1 to registrant's Current Report on Form 8-K filed on March 2, 2009, File Nos. 1-15929 and 1-3274). (Portions of the exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.) | | | | | X | | | | X | | | | | | |
10.35*10.37** | | X | | | | | | | | | | | | | | |
10.35.1*10.37.1** | | X | | | | | | | | | | | | | | |
10.36*10.38** | | X | | | | | | | | | | | | | | |
10.37*10.39** | | X | | | | | | | | | | | | | | |
10.38*10.40** | | X | | | | | | | | | | | | | | |
10.38.110.40.1** | | X | | | | | | | | | | | | | | |
10.3910.40.2** | | X | | | | | | | | | | | | | | |
10.41** | | X | | | | | | | | | | | | | | |
*10.42** | | X | | | | | | | | | | | | | | |
10.43 | Agreement between Duke Energy SAM, LLC, Duke Energy Ohio, Inc., Duke Energy Commercial Enterprise, Inc. and Dynegy Resource I, LLC, dated as of August 21, 2014 (incorporated by reference to Exhibit 10.61 to Duke Energy Corporation's Annual Report on Form 10-K for the year ended December 31, 2014, filed on March 2, 2015, File No. 1-32853). | X | | | | | | | | | | X | | | | |
10.4010.44 | | X | | | | | | X | | | | | | | | |
10.41 | | X | | | | | | | | | | | | | | |
10.4210.45 | | X | | | | | | | | | | | | | | |
10.4310.46 | | X | | | | | | | | | | | | | | |
10.4410.47 | | X | | | | | | | | | | | | | | |
10.4510.48 | $1,500,000,000 Amended and Restated Term Loan Agreement among Duke Energy Corporation, as Borrower, the Lenders listed therein, The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Administrative Agent, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., Santander Bank, N.A. and TD Bank, N.A., as Joint Lead Arrangers and Bookrunners, dated as of August 1, 2016, (incorporated by reference to Exhibit 10.1 to Duke Energy Corporation's Quarterly Report on Form 10-Q for the quarter ended June 30,2016, filed on August 4, 2016, File No. 1-32853). | X | | | | | | | | | | | | | | |
10.46 | | X | | | | | | | | | | | | | | |
10.4710.49 | Purchase and Sale Agreement by and among Duke Energy Brazil Holdings II, C.V., Duke Energy International Uruguay Investments SRL, Duke Energy International Group S.à.r.l., Duke Energy International España Holdings SL, Duke Energy International Investments No. 2 Ltd., ISQ Enerlam Aggregator, L.P., and Enerlam (UK) Holdings Ltd., dated as of October 10, 2016 (incorporated by reference to Exhibit 2.2. to registrant's Current Report on Form 8-K filed on October 13, 2016, File No. 1-32853). | X | | | | | | | | | | | | | | |
10.48**10.50 | | X | | | | | | | | | | | | | | |
10.49** | | X | | | | | | | | | | | | | | |
10.50** | | X | | | | | | | | | | | | | | |
10.50.1** | | X | | | | | | | | | | | | | | |
10.51** | | X | | | | | | | | | | | | | | |
10.52** | | X | | | | | | | | | | | | | | |
10.53** | | X | | | | | | | | | | | | | | |
10.54** | | X | | | | | | | | | | | | | | |
10.55 | $1,000,000,000 Credit Agreement, dated as of June 14, 2017, among Duke Energy Corporation, the lendersLenders listed therein, The Bank of Nova Scotia, as Administrative Agent, PNC Bank, National Association,N.A., Sumitomo Mitsui Banking Corporation, and TD Bank, N.A., as C0-Syndication Agents, and Bank of China, New York Branch, BNP Paribas, Santander Bank, N.A. and U.S. Bank National Association,N.A., as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to registrant's Current Report on Form 8-K filed on June 14, 2017, File No. 1-32853). | X | | | | | | | | | | | | | | |
10.5610.51 | $250,000,0001,000,000,000 Credit Agreement, dated as of May 15, 2019, among Duke Energy Corporation, the Lenders party thereto, The Bank of Nova Scotia, as Administrative Agent, PNC Bank, N.A., Sumitomo Mitsui Banking Corporation, and TD Bank, N.A., as Co-Syndication Agents, and Bank of China, New York Branch, BNP Paribas, Santander Bank, N.A., and U.S. Bank, N.A., as Co-Documentation Agents (incorporated by reference to Exhibit 10.1 to registrant’s Current Report on Form 8-K filed on May 16, 2019, File No. 1-32853). | X | | | | | | | | | | | | | | |
10.51.1 | First Amendment to $1,000,000,000 Credit Agreement, dated as of May 15, 2019, among Duke Energy Corporation, the Lenders party therein, The Bank of Nova Scotia, as Administrative Agent, PNC Bank, N.A., Sumitomo Mitsui Banking Corporation, and TD Bank, N.A., as Co-Syndication Agents, and Bank of China, New York Branch, BNP Paribas, Santander Bank, N.A., and U.S> Bank, N.A., as Co-Documentation Agents (incorporated by reference to Exhibit 10.3 to registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, filed on May 10, 2021, File No. 1-32853). | X | | | | | | | | | | | | | | |
10.52 | $1.5 billion 364-Day Term Loan Credit Agreement, dated as of June 14, 2017,March 19, 2020, among Piedmont Natural Gas Company, Inc. the lenders listed therein, U.S.registrant, as Borrower, certain Lenders from time to time parties thereto, and PNC Bank, National Association,N.A., as Administrative Agent, Branch Banking and Trust Company and Regions Bank, as Co-Syndication Agents and PNC Bank, National Association, as Documentation Agentregistrant's borrowing of the remaining $500 million under registrant's existing $1 billion revolving credit facility on March 17, 2020 (incorporated by reference to Exhibit 10.1 to registrant's Current Report on Form 8-K filed on June 14, 2017,March 19, 2020, File No. 1-06196)1-32853). | X | | | | | | | | | | | | | | X |
10.56.110.52.1 | Amendment No. 1 to the Term Loan CreditJoinder Agreement, dated as of September 13, 2018,March 27, 2020, by and among, Piedmont Natural Gas Company, Inc., the lendersregistrant, each of the Incremental Lenders listed therein, U.S. Bank National Association, as Administrative Agent, and PNC Bank, National Association, Bank of New York Mellon and KeyBank, National Association,N.A., as Co-Documentation AgentsAdministrative Agent (incorporated by reference to Exhibit 10.110.2.1 to registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed on November 2, 2018,May 12, 2020, File No. 1-32853).
| X | | | | | | | | | | | | | | |
10.5710.53 | | | | | | | | | | | | | | | | X |
10.5810.54 | | | | | | | | | | | | | | | | X |
10.58.110.54.1 | First Amendment to Amended and Restated Limited Liability Company Agreement of Constitution Pipeline Company, LLC, dated as of November 9, 2012, by and among Constitution Pipeline Company, LLC, Williams Partners Operating LLC, Cabot Pipeline Holdings LLC, and Piedmont Constitution Pipeline Company, LLC (incorporated by reference to Exhibit 10.2 to registrant's Quarterly Report on Form 10-Q for the quarter ended January 31, 2013, filed on March 6, 2013, File No. 1-06196). | | | | | | | | | | | | | | | X |
10.58.210.54.2 | Second Amendment to Amended and Restated Limited Liability Company Agreement of Constitution Pipeline Company, LLC, dated as of May 29, 2013, by and among Constitution Pipeline Company, LLC, Williams Partners Operating LLC, Cabot Pipeline Holdings LLC, Piedmont Constitution Pipeline Company, LLC, and Capitol Energy Ventures Corp. (incorporated by reference to Exhibit 99.1 to registrant's Current Report on Form 8-K filed on September 4, 2013, File No. 1-06196). | | | | | | | | | | | | | | | X |
10.5910.55 | | | | | | | | | | | | | | | | X |
10.6010.56 | Limited Liability Company Agreement of Atlantic Coast Pipeline, LLC, dated as of September 2, 2014, by and between Dominion Atlantic Coast Pipeline, LLC, Duke Energy ACP, LLC, Piedmont ACP Company, LLC, and Maple Enterprise Holdings, Inc. (incorporated by reference to Exhibit 10.35 to registrant's Annual Report on Form 10-K for the year ended October 31, 2014, filed on December 23, 2014, File No. 1-06196). | | | | | | | | | | | | | | | X |
*2110.57 | | X | | | | | | | | | | | | X | | |
10.58 | Engineering, Procurement and Construction Agreement between Duke Energy Business Services, LLC, as agent for and on behalf of Piedmont Natural Gas Company Inc. and Matrix Service, Inc., dated as of April 30, 2019 (incorporated by reference to Exhibit 10.1 to registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed on August 6, 2019, File No. 1-06196). (Portions of the exhibit have been omitted for confidentiality.) | | | | | | | | | | | | | | | X |
10.59 | | | | | | | | | | X | | | | | | |
10.60 | | X | | | | | | | | | | | | | | |
10.61 | Lease Agreement dated as of December 23, 2019, between the registrant and CGA 525 South Tryon TIC 1, LLC, a Delaware limited liability company, CGA 525 South Tryon TIC 2, LLC, a Delaware limited liability company, and CK 525 South Tryon TIC, LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.64 to registrant's Annual Report on Form 10-K for the year ended December 31, 2019, filed on February 20, 2020, File No. 1-4928). | | | X | | | | | | | | | | | | |
10.62 | Construction Agency Agreement dated as of December 23, 2019, between the registrant and CGA 525 South Tryon TIC 1, LLC, a Delaware limited liability company, CGA 525 South Tryon TIC 2, LLC, a Delaware limited liability company, and CK 525 South Tryon TIC, LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.65 to registrant's Annual Report on Form 10-K for the year ended December 31, 2019, filed on February 20, 2020, File No. 1-4928). | | | X | | | | | | | | | | | | |
*21 | | X | | | | | | | | | | | | | | |
*23.1.1 | | X | | | | | | | | | | | | | | |
*23.1.2 | | | | X | | | | | | | | | | | | |
*23.1.3 | | | | | | | | X | | | | | | | | |
*23.1.4 | | | | | | | | | | X | | | | | | |
*23.1.5 | | | | | | | | | | | | X | | | | |
*23.1.6 | | | | | | | | | | | | | | X | | |
*23.1.7 | | | | | | | | | | | | | | | | X |
*24.1 | | X | | | | | | | | | | | | | | |
*24.2 | | 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 | | | | |
*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 (this does not appear in the Interactive Data File because it's 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 each respective 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 such registrant and its subsidiaries on a consolidated basis. Each 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 Section 13 or 15(d) 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.
24, 2022 |
| | | | | | | | | | |
| DUKE ENERGY CORPORATION (Registrant) | |
| By: | /s/ LYNN J. GOOD |
| | | Lynn J. Good Chairman, Chair, President and Chief Executive Officer
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. |
| | | | | | | |
(i) | /s/ LYNN J. GOOD | |
| Lynn J. Good |
| Chairman,Chair, President and Chief Executive Officer (Principal Executive Officer and Director) |
| |
(ii) | /s/ STEVEN K. YOUNG | |
| Steven K. Young |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| |
(iii) | /s/ DWIGHT L. JACOBSCYNTHIA S. LEE | |
| Dwight L. JacobsCynthia S. Lee |
| Senior Vice President, Chief Accounting Officer Tax and Controller (Principal Accounting Officer) |
| | |
(iv) | Directors: | |
| | |
| Michael G. Browning* | James B. Hyler, Jr.*Lynn J. Good* |
| | |
| Annette K. Clayton* | William E. Kennard*John T. Herron* |
| | |
| Theodore F. Craver, Jr.* | Idalene F. Kesner* |
| | |
| Robert M. Davis* | E. Marie McKee* |
| | |
| Robert M. Davis*Caroline D. Dorsa* | Charles W. Moorman IV*Michael J. Pacilio* |
| | |
| Daniel R. DiMicco*W. Roy Dunbar* | Carlos A. Saladrigas* |
| | |
| John H. Forsgren* | Thomas E. Skains* |
| | |
| Lynn J. Good*Nicholas C. Fanandakis* | William E. Webster, Jr.* |
| | |
| John T. Herron* | |
Steven K. Young, by signing his name hereto, does hereby sign this document on behalf of the registrant and on behalf of each of the above-named persons previously indicated by asterisk (*) pursuant to a power of attorney duly executed by the registrant and such persons, filed with the Securities and Exchange Commission as an exhibit hereto. |
| | | | | | | | | | |
| | |
| By: | /s/ STEVEN K. YOUNG |
| | Attorney-In-Fact |
| | | |
Date: February 28, 201924, 2022
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 28, 2019
|
| | | | | | | | | | |
| DUKE ENERGY CAROLINAS, LLC (Registrant) | |
| By: | /s/ LYNN J. GOOD |
| | | Lynn J. Good
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. |
| | | | | | | |
| | |
(i) | /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| Chief Executive Officer (Principal Executive Officer) |
| | |
(ii) | /s/ STEVEN K. YOUNG | |
| Steven K. Young | |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| | |
(iii) | /s/ DWIGHT L. JACOBSCYNTHIA S. LEE | |
| Dwight L. JacobsCynthia S. Lee | |
| Senior Vice President, Chief Accounting Officer Tax and Controller (Principal Accounting Officer) |
| | |
(iv) | Directors: | |
| | |
| /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| | |
| /s/ DHIAA M. JAMIL | |
| Dhiaa M. Jamil | |
| | |
| /s/ LLOYD M. YATESJULIA S. JANSON | |
| Lloyd M. YatesJulia S. Janson | |
Date: February 28, 201924, 2022
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
24, 2022 |
| | | | | | | | | | |
| PROGRESS ENERGY, INC. (Registrant) | |
| By: | /s/ LYNN J. GOOD |
| | | Lynn J. Good
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. |
| | | | | | | |
| | |
(i) | /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| Chief Executive Officer (Principal Executive Officer) |
| | |
(ii) | /s/ STEVEN K. YOUNG | |
| Steven K. Young | |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| | |
(iii) | /s/ DWIGHT L. JACOBSCYNTHIA S. LEE | |
| Dwight L. JacobsCynthia S. Lee | |
| Senior Vice President, Chief Accounting Officer Tax and Controller (Principal Accounting Officer) |
| | |
(iv) | Directors: | |
| | |
| /s/ KODWO GHARTEY-TAGOE | |
| Kodwo Ghartey-Tagoe | |
| | |
| /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| | |
| /s/ JULIA S. JANSON | |
| Julia S. Janson | |
Date: February 28, 201924, 2022
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
24, 2022 |
| | | | | | | | | | |
| DUKE ENERGY PROGRESS, LLC (Registrant) | |
| By: | /s/ LYNN J. GOOD |
| | | Lynn J. Good
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. |
| | | | | | | |
(i) | /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| Chief Executive Officer (Principal Executive Officer) |
| | |
(ii) | /s/ STEVEN K. YOUNG | |
| Steven K. Young | |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| | |
(iii) | /s/ DWIGHT L. JACOBSCYNTHIA S. LEE | |
| Dwight L. JacobsCynthia S. Lee | |
| Senior Vice President, Chief Accounting Officer Tax and Controller (Principal Accounting Officer) |
| | |
(iv) | Directors: | |
| | |
| /s/ DOUGLAS F ESAMANNKODWO GHARTEY-TAGOE | |
| Douglas F EsamannKodwo Ghartey-Tagoe | |
| | |
| /s/ R. ALEXANDER GLENN | |
| R. Alexander Glenn | |
| | |
| /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| | |
| /s/ DHIAA M. JAMIL | |
| Dhiaa M. Jamil | |
| | |
| /s/ JULIA S. JANSON | |
| Julia S. Janson | |
| | |
| /s/ LLOYD M. YATES | |
| Lloyd M. Yates | |
Date: February 28, 201924, 2022
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 28, 201924, 2022 |
| | | | | | | | | | |
| DUKE ENERGY FLORIDA, LLC (Registrant) | |
| By: | /s/ LYNN J. GOOD |
| | | Lynn J. Good
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. |
| | | | | | | |
| | |
(i) | /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| Chief Executive Officer (Principal Executive Officer) |
| | |
(ii) | /s/ STEVEN K. YOUNG | |
| Steven K. Young | |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| | |
(iii) | /s/ DWIGHT L. JACOBSCYNTHIA S. LEE | |
| Dwight L. JacobsCynthia S. Lee | |
| Senior Vice President, Chief Accounting Officer Tax and Controller (Principal Accounting Officer) |
| | |
(iv) | Directors: | |
| | |
| /s/ DOUGLAS F ESAMANNKODWO GHARTEY-TAGOE | |
| Douglas F EsamannKodwo Ghartey-Tagoe | |
| | |
| /s/ R. ALEXANDER GLENN | |
| R. Alexander Glenn | |
| | |
| /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| | |
| /s/ DHIAA M. JAMIL | |
| Dhiaa M. Jamil | |
| | |
| /s/ JULIA S. JANSON | |
| Julia S. Janson | |
| | |
| /s/ LLOYD M. YATES | |
| Lloyd M. Yates | |
Date: February 28, 201924, 2022
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
24, 2022 |
| | | | | | | | | | |
| DUKE ENERGY OHIO, INC. (Registrant) | |
| By: | /s/ LYNN J. GOOD |
| | | Lynn J. Good
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. |
| | | | | | | |
| | |
(i) | /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| Chief Executive Officer (Principal Executive Officer) |
| | |
(ii) | /s/ STEVEN K. YOUNG | |
| Steven K. Young | |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| | |
(iii) | /s/ DWIGHT L. JACOBSCYNTHIA S. LEE | |
| Dwight L. JacobsCynthia S. Lee | |
| Senior Vice President, Chief Accounting Officer Tax and Controller (Principal Accounting Officer) |
| | |
(iv) | Directors: | |
| | |
| /s/ DOUGLAS F ESAMANNR. ALEXANDER GLENN | |
| Douglas F EsamannR. Alexander Glenn | |
| | |
| /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| | |
| /s/ DHIAA M. JAMIL | |
| Dhiaa M. Jamil | |
Date: February 28, 201924, 2022
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
24, 2022 |
| | | | | | | | | | |
| DUKE ENERGY INDIANA, LLC (Registrant) | |
| By: | /s/ LYNN J. GOOD |
| | | Lynn J. Good
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. |
| | | | | | | |
| | |
(i) | /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| Chief Executive Officer (Principal Executive Officer) |
| | |
(ii) | /s/ STEVEN K. YOUNG | |
| Steven K. Young | |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| | |
(iii) | /s/ DWIGHT L. JACOBSCYNTHIA S. LEE | |
| Dwight L. JacobsCynthia S. Lee | |
| Senior Vice President, Chief Accounting Officer Tax and Controller (Principal Accounting Officer) |
| | |
(iv) | Directors: | |
| | |
| /s/ DOUGLAS F ESAMANNR. ALEXANDER GLENN | |
| Douglas F EsamannR. Alexander Glenn | |
| | |
| /s/ KELLEY A. KARN | |
| Kelley A. Karn | |
| | |
| /s/ STAN PINEGAR | |
| Stan Pinegar | |
Date: February 28, 201924, 2022
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
24, 2022 |
| | | | | | | | | | |
| PIEDMONT NATURAL GAS COMPANY, INC. (Registrant) | |
| By: | /s/ LYNN J. GOOD |
| | | Lynn J. Good
Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. |
| | | | | | | |
| | |
(i) | /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| Chief Executive Officer (Principal Executive Officer) |
| | |
(ii) | /s/ STEVEN K. YOUNG | |
| Steven K. Young | |
| Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
| | |
(iii) | /s/ DWIGHT L. JACOBSCYNTHIA S. LEE | |
| Dwight L. JacobsCynthia S. Lee | |
| Senior Vice President, Chief Accounting Officer Tax and Controller (Principal Accounting Officer) |
| | |
(iv) | Directors: | |
| | |
| /s/ LYNN J. GOOD | |
| Lynn J. Good | |
| | |
| /s/ DHIAA M. JAMIL | |
| Dhiaa M. Jamil | |
| | |
| /s/ FRANKLIN H. YOHOBRIAN D. SAVOY | |
| Franklin H. YohoBrian D. Savoy | |
Date: February 28, 201924, 2022