UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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| ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2016March 31, 2017
OR
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| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
________________________
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| Commission file number | Registrant, State of Incorporation or Organization, Address of Principal Executive Offices and Telephone Number | IRS Employer Identification No. |
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| 1-32853 | DUKE ENERGY CORPORATION (a Delaware corporation) 550 South Tryon Street Charlotte, North Carolina 28202-1803 704-382-3853 | 20-2777218 |
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| Commission file number | 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 (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. (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 (a North Carolina limited liability company) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-0165465 | | 1-3543 | DUKE ENERGY INDIANA, LLC (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 | | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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| Duke Energy Corporation (Duke Energy) | Yes x | No ¨ | | Duke Energy Florida, LLC (Duke Energy Florida) | Yes x | No ¨ |
| Duke Energy Carolinas, LLC (Duke Energy Carolinas) | Yes x | No ¨ | | Duke Energy Ohio, Inc. (Duke Energy Ohio) | Yes x | No ¨ |
| Progress Energy, Inc. (Progress Energy) | Yes x | No ¨ | | Duke Energy Indiana, LLC (Duke Energy Indiana) | Yes x | No ¨ |
| Duke Energy Progress, LLC (Duke Energy Progress) | Yes x | No ¨ | | Piedmont Natural Gas Company, Inc. (Piedmont) | Yesx | No ¨ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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| Duke Energy | Yes x | No ¨ | | Duke Energy Florida | Yes x | No ¨ |
| Duke Energy Carolinas | Yes x | No ¨ | | Duke Energy Ohio | Yes x | No ¨ |
| Progress Energy | Yes x | No ¨ | | Duke Energy Indiana | Yes x | No ¨ |
| Duke Energy Progress | Yes x | No ¨ | | Piedmont | Yesx | No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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| Duke Energy | Large accelerated filer x | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company¨ | Emerging Growth Company ¨ |
| Duke Energy Carolinas | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Progress Energy | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company¨ | Emerging Growth Company ¨ |
| Duke Energy Progress | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Duke Energy Florida | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company¨ | Emerging Growth Company ¨ |
| Duke Energy Ohio | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Duke Energy Indiana | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer x | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Piedmont | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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| Duke Energy | Yes ¨ | No x | | Duke Energy Florida | Yes ¨ | No x |
| Duke Energy Carolinas | Yes ¨ | No x | | Duke Energy Ohio | Yes ¨ | No x |
| Progress Energy | Yes ¨ | No x | | Duke Energy Indiana | Yes ¨ | No x |
| Duke Energy Progress | Yes ¨ | No x | | Piedmont | Yes ¨ | Nox |
Number of shares of Common stock outstanding at September 30, 2016:March 31, 2017:
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| Registrant | Description | Shares |
| Duke Energy | Common stock, $0.001 par value | 688,941,372 |
Duke Energy Carolinas | All of the registrant's limited liability company member interests are directly owned by Duke Energy. |
Progress Energy | All of the registrant's common stock is directly owned by Duke Energy. |
Duke Energy Progress | All of the registrant's limited liability company member interests are indirectly owned by Duke Energy. |
Duke Energy Florida | All of the registrant's limited liability company member interests are indirectly owned by Duke Energy. |
Duke Energy Ohio | All of the registrant's common stock is indirectly owned by Duke Energy. |
Duke Energy Indiana | All of the registrant's limited liability company member interests are indirectly owned by Duke Energy.699,883,528 |
This combined Form 10-Q is filed separately by seveneight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, and 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, and Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
TABLE OF CONTENTSDUKE ENERGY CORPORATION
(a Delaware corporation)
550 South Tryon Street
Charlotte, North Carolina 28202-1803
704-382-3853
20-2777218 | |
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| Commission file number | 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 (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. (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 (a North Carolina limited liability company) 410 South Wilmington Street Raleigh, North Carolina 27601-1748 704-382-3853 56-0165465 | | 1-3543 | DUKE ENERGY INDIANA, LLC (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 | | | |
PART I. FINANCIAL INFORMATION |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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| Note 1 – Organization and Basis of Presentation | |
| Note 2 – Acquisitions and Dispositions | |
| Note 3 – Business Segments | |
| Note 4 – Regulatory Matters | |
| Note 5 – Commitments and Contingencies | |
| Note 6 – Debt and Credit Facilities | |
| Note 7 – Asset Retirement Obligations | |
| Note 8 – Goodwill and Intangible Assets | |
| Note 9 – Related Party Transactions | |
| Note 10 – Derivatives and Hedging | |
| Note 11 – Investments in Debt and Equity Securities | |
| Note 12 – Fair Value Measurements | |
| Note 13 – Variable Interest Entities | |
| Note 14 – Common Stock | |
| Note 15 – Stock-Based Compensation | |
| Note 16 – Employee Benefit Plans | |
| Note 17 – Income Taxes | |
| Note 18 – Subsequent Events | |
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PART II. OTHER INFORMATION |
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| | 127 | | | | | | | | | Duke Energy Corporation (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) | Yesx | No ¨ | | Duke Energy Indiana, LLC (Duke Energy Indiana) | Yesx | No ¨ | | Duke Energy Progress, LLC (Duke Energy Progress) | Yesx | No ¨ | | Piedmont Natural Gas Company, Inc. (Piedmont) | Yesx | No ¨ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). | | | | | | | | | Duke Energy | Yesx | No ¨ | | Duke Energy Florida | Yesx | No ¨ | | Duke Energy Carolinas | Yesx | No ¨ | | Duke Energy Ohio | Yesx | No ¨ | | Progress Energy | Yesx | No ¨ | | Duke Energy Indiana | Yesx | No ¨ | | Duke Energy Progress | Yesx | No ¨ | | Piedmont | Yesx | No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. | | | | | | | | Duke Energy | Large accelerated filerx | Accelerated filer ¨ | Non-accelerated filer ¨ | Smaller reporting company ¨ | Emerging Growth Company ¨ | | Duke Energy Carolinas | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ | | Progress Energy | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ | | Duke Energy Progress | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ | | Duke Energy Florida | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ | | Duke Energy Ohio | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ | | Duke Energy Indiana | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ | | Piedmont | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). | | | | | | | | | Duke Energy | Yes ¨ | Nox | | Duke Energy Florida | Yes ¨ | Nox | | Duke Energy Carolinas | Yes ¨ | Nox | | Duke Energy Ohio | Yes ¨ | Nox | | Progress Energy | Yes ¨ | Nox | | Duke Energy Indiana | Yes ¨ | Nox | | Duke Energy Progress | Yes ¨ | Nox | | Piedmont | Yes ¨ | Nox |
Number of shares of Common stock outstanding at March 31, 2017: | | | | | Registrant | Description | Shares | | Duke Energy | Common stock, $0.001 par value | 699,883,528 |
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants. Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
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:
| | ◦ | State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or climate change, as well as rulings that affect cost and investment recovery or have an impact on rate structures or market prices; |
| | ◦ | The extent and timing of costs and liabilities to comply with federal and state laws, regulations and legal requirements related to coal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate; |
| | ◦ | The ability to recover eligible costs, including amounts associated with coal ash impoundment retirement obligations and costs related to significant weather events, and to earn an adequate return on investment through the regulatory process; |
| | ◦ | 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; |
| | ◦ | Credit ratings of the Duke Energy Registrants may be different from what is expected; |
| | ◦ | 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 variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including self-generation and distributed generation technologies; |
| | ◦ | Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as rooftop solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs; |
| | ◦ | Advancements in technology; |
| | ◦ | Additional competition in electric markets and continued industry consolidation; |
| | ◦ | Political, economic and regulatory uncertainty in Brazil and other countries in which Duke Energy conducts business; |
| | ◦ | 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; |
| | ◦ | 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; |
| | ◦ | The ability to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business; |
| | ◦ | Operational interruptions to our gas distribution and transmission activities; |
| | ◦ | The impact on facilities and business from a terrorist attack, cybersecurity threats, data security breaches, and other catastrophic events such as fires, explosions, pandemic health events or other similar occurrences; |
| | ◦ | The inherent risks associated with the operation and potential construction of nuclear facilities, including environmental, health, safety, regulatory and financial risks; |
| | ◦ | The timing and extent of changes in commodity prices, interest rates and foreign currency exchange 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, and general economic conditions; |
| | ◦ | 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 Duke Energy Registrants’ capital investment projects, including risks related to financing, obtaining and complying with terms of permits, meeting construction budgets and schedules, and satisfying operating and environmental performance standards, as well as the ability to recover costs from customers in a timely manner or at all; |
| | ◦ | Changes in rules for regional transmission organizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the default of other participants; |
| | ◦ | The ability to control operation and maintenance costs; |
| | ◦ | The level of creditworthiness of counterparties to transactions; |
| | ◦ | 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 potential goodwill impairments; |
| | ◦ | The ability to successfully complete future merger, acquisition or divestiture plans, including the proposed sale of International Energy, excluding the equity investment in National Methanol Company; and |
| | ◦ | The ability to successfully integrate the natural gas businesses since the acquisition of Piedmont Natural Gas Company, Inc. and realize anticipated benefits and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect. |
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at www.sec.gov. 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.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION Condensed Consolidated Statements of Operations(a Delaware corporation)
(Unaudited)550 South Tryon Street
Charlotte, North Carolina 28202-1803 704-382-3853 | 20-2777218 |
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| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions, except per-share amounts) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
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| Operating Revenues | | | | | | | |
| Regulated electric | $ | 6,303 |
| | $ | 6,017 |
| | $ | 16,321 |
| | $ | 16,564 |
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| Nonregulated electric and other | 429 |
| | 377 |
| | 1,251 |
| | 1,157 |
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| Regulated natural gas | 89 |
| | 89 |
| | 355 |
| | 416 |
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| Total operating revenues | 6,821 |
| | 6,483 |
| | 17,927 |
| | 18,137 |
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| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power – regulated | 2,016 |
| | 2,113 |
| | 5,102 |
| | 5,775 |
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| Fuel used in electric generation and purchased power – nonregulated | 75 |
| | 61 |
| | 215 |
| | 283 |
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| Cost of natural gas | 17 |
| | 21 |
| | 98 |
| | 158 |
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| Operation, maintenance and other | 1,547 |
| | 1,426 |
| | 4,467 |
| | 4,274 |
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| Depreciation and amortization | 837 |
| | 774 |
| | 2,464 |
| | 2,341 |
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| Property and other taxes | 303 |
| | 293 |
| | 893 |
| | 836 |
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| Impairment charges | 10 |
| | 111 |
| | 208 |
| | 111 |
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| Total operating expenses | 4,805 |
| | 4,799 |
| | 13,447 |
| | 13,778 |
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| Gains on Sales of Other Assets and Other, net | 6 |
| | 4 |
| | 20 |
| | 31 |
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| Operating Income | 2,022 |
| | 1,688 |
| | 4,500 |
| | 4,390 |
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| Other Income and Expenses | | | | | | | |
| Equity in earnings (losses) of unconsolidated affiliates | (60 | ) | | 17 |
| | (37 | ) | | 53 |
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| Other income and expenses, net | 99 |
| | 57 |
| | 270 |
| | 203 |
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| Total other income and expenses | 39 |
| | 74 |
| | 233 |
| | 256 |
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| Interest Expense | 482 |
| | 402 |
| | 1,493 |
| | 1,208 |
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| Income From Continuing Operations Before Income Taxes | 1,579 |
| | 1,360 |
| | 3,240 |
| | 3,438 |
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| Income Tax Expense from Continuing Operations | 520 |
| | 420 |
| | 972 |
| | 1,118 |
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| Income From Continuing Operations | 1,059 |
| | 940 |
| | 2,268 |
| | 2,320 |
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| Income (Loss) From Discontinued Operations, net of tax | 122 |
| | (5 | ) | | 124 |
| | 29 |
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| Net Income | 1,181 |
| | 935 |
| | 2,392 |
| | 2,349 |
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| Less: Net Income Attributable to Noncontrolling Interests | 5 |
| | 3 |
| | 13 |
| | 10 |
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| Net Income Attributable to Duke Energy Corporation | $ | 1,176 |
| | $ | 932 |
| | $ | 2,379 |
| | $ | 2,339 |
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| Earnings Per Share – Basic and Diluted | | | | | | | |
| Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 1.52 |
| | $ | 1.36 |
| | $ | 3.27 |
| | $ | 3.31 |
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| Diluted | $ | 1.52 |
| | $ | 1.36 |
| | $ | 3.26 |
| | $ | 3.31 |
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| Income (Loss) from discontinued operations attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 0.18 |
| | $ | (0.01 | ) | | $ | 0.18 |
| | $ | 0.05 |
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| Diluted | $ | 0.18 |
| | $ | (0.01 | ) | | $ | 0.18 |
| | $ | 0.05 |
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| Net income attributable to Duke Energy Corporation common stockholders | | | | | | | |
| Basic | $ | 1.70 |
| | $ | 1.35 |
| | $ | 3.45 |
| | $ | 3.36 |
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| Diluted | $ | 1.70 |
| | $ | 1.35 |
| | $ | 3.44 |
| | $ | 3.36 |
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| Weighted average shares outstanding | | | | | | | |
| Basic | 689 |
| | 688 |
| | 689 |
| | 696 |
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| Diluted | 691 |
| | 688 |
| | 690 |
| | 696 |
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DUKE ENERGY CORPORATION
Condensed Consolidated Statements |
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| Commission file number | Registrant, State of Comprehensive Income(Unaudited)
| | | | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| | Net Income | $ | 1,181 |
| | $ | 935 |
| | $ | 2,392 |
| | $ | 2,349 |
| | Other Comprehensive (Loss) Income, net of tax | | | | | | | | | Foreign currency translation adjustments | (12 | ) | | (122 | ) | | 95 |
| | (238 | ) | | Pension and OPEB adjustments | — |
| | (3 | ) | | 2 |
| | (1 | ) | | Net unrealized gains (losses) on cash flow hedges | 6 |
| | (9 | ) | | (19 | ) | | (7 | ) | | Reclassification into earnings from cash flow hedges | 1 |
| | 1 |
| | 3 |
| | 6 |
| | Unrealized (losses) gains on available-for-sale securities | — |
| | (2 | ) | | 7 |
| | (5 | ) | | Other Comprehensive (Loss) Income, net of tax | (5 | ) | | (135 | ) | | 88 |
| | (245 | ) | | Comprehensive Income | 1,176 |
| | 800 |
| | 2,480 |
| | 2,104 |
| | Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests | 4 |
| | (2 | ) | | 16 |
| | — |
| | Comprehensive Income Attributable to Duke Energy Corporation | $ | 1,172 |
| | $ | 802 |
| | $ | 2,464 |
| | $ | 2,104 |
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DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | September 30, 2016 | | December 31, 2015 | | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 6,179 |
| | $ | 857 |
| | Receivables (net of allowance for doubtful accounts of $25 at 2016 and $18 at 2015) | 583 |
| | 703 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $54 at 2016 and $53 at 2015) | 2,139 |
| | 1,748 |
| | Inventory | 3,351 |
| | 3,810 |
| | Regulatory assets (includes $51 related to VIEs at 2016) | 853 |
| | 877 |
| | Other | 429 |
| | 327 |
| | Total current assets | 13,534 |
| | 8,322 |
| | Investments and Other Assets | | | | | Investments in equity method unconsolidated affiliates | 604 |
| | 499 |
| | Nuclear decommissioning trust funds | 6,112 |
| | 5,825 |
| | Goodwill | 16,354 |
| | 16,343 |
| | Other | 2,948 |
| | 3,042 |
| | Total investments and other assets | 26,018 |
| | 25,709 |
| | Property, Plant and Equipment | | | | | Cost | 116,376 |
| | 112,826 |
| | Accumulated depreciation and amortization | (38,812 | ) | | (37,665 | ) | | Generation facilities to be retired, net | 652 |
| | 548 |
| | Net property, plant and equipment | 78,216 |
| | 75,709 |
| | Regulatory Assets and Deferred Debits | | | | | Regulatory assets (includes $1,156 related to VIEs at 2016) | 11,896 |
| | 11,373 |
| | Other | 22 |
| | 43 |
| | Total regulatory assets and deferred debits | 11,918 |
| | 11,416 |
| | Total Assets | $ | 129,686 |
| | $ | 121,156 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 2,138 |
| | $ | 2,400 |
| | Notes payable and commercial paper | 3,011 |
| | 3,633 |
| | Taxes accrued | 636 |
| | 348 |
| | Interest accrued | 504 |
| | 430 |
| | Current maturities of long-term debt (includes $258 at 2016 and $125 at 2015 related to VIEs) | 3,201 |
| | 2,074 |
| | Asset retirement obligations | 539 |
| | — |
| | Regulatory liabilities | 319 |
| | 400 |
| | Other | 1,728 |
| | 2,115 |
| | Total current liabilities | 12,076 |
| | 11,400 |
| | Long-Term Debt (includes $3,641 at 2016 and $2,197 at 2015 related to VIEs) | 43,964 |
| | 37,495 |
| | Deferred Credits and Other Liabilities | | | | | Deferred income taxes | 13,201 |
| | 12,705 |
| | Investment tax credits | 486 |
| | 472 |
| | Accrued pension and other post-retirement benefit costs | 1,030 |
| | 1,088 |
| | Asset retirement obligations | 10,291 |
| | 10,264 |
| | Regulatory liabilities | 6,241 |
| | 6,255 |
| | Other | 1,851 |
| | 1,706 |
| | Total deferred credits and other liabilities | 33,100 |
| | 32,490 |
| | Commitments and Contingencies |
|
| |
|
| | Equity | | | | | Common stock, $0.001 par value, 2 billion shares authorized; 689 million and 688 million shares outstanding at 2016 and 2015, respectively | 1 |
| | 1 |
| | Additional paid-in capital | 37,997 |
| | 37,968 |
| | Retained earnings | 3,212 |
| | 2,564 |
| | Accumulated other comprehensive loss | (721 | ) | | (806 | ) | | Total Duke Energy Corporation stockholders' equity | 40,489 |
| | 39,727 |
| | Noncontrolling interests | 57 |
| | 44 |
| | Total equity | 40,546 |
| | 39,771 |
| | Total Liabilities and Equity | $ | 129,686 |
| | $ | 121,156 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated StatementsIncorporation or Organization, Address of Cash Flows
(Unaudited)
| | | | | | | | | | | Nine Months Ended | | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 2,392 |
| | $ | 2,349 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion (including amortization of nuclear fuel) | 2,847 |
| | 2,680 |
| | Equity component of AFUDC | (140 | ) | | (123 | ) | | Gains on sales of other assets | (27 | ) | | (44 | ) | | Impairment charges | 279 |
| | 145 |
| | Deferred income taxes | 648 |
| | 1,104 |
| | Equity in earnings of unconsolidated affiliates | (34 | ) | | (53 | ) | | Accrued pension and other post-retirement benefit costs | 12 |
| | 53 |
| | Contributions to qualified pension plans | — |
| | (143 | ) | | Payments for asset retirement obligations | (443 | ) | | (208 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | 36 |
| | (23 | ) | | Receivables | (295 | ) | | 67 |
| | Inventory | 455 |
| | (13 | ) | | Other current assets | (163 | ) | | (119 | ) | | Increase (decrease) in | | | | | Accounts payable | (207 | ) | | (182 | ) | | Taxes accrued | 417 |
| | 41 |
| | Other current liabilities | (157 | ) | | 79 |
| | Other assets | (64 | ) | | (143 | ) | | Other liabilities | 36 |
| | (71 | ) | | Net cash provided by operating activities | 5,592 |
| | 5,396 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (5,242 | ) | | (4,642 | ) | | Investment expenditures | (198 | ) | | (209 | ) | | Acquisitions | (10 | ) | | (1,317 | ) | | Purchases of available-for-sale securities | (4,048 | ) | | (3,017 | ) | | Proceeds from sales and maturities of available-for-sale securities | 4,107 |
| | 3,037 |
| | Net proceeds from the sale of the Midwest Generation Disposal Group | — |
| | 2,792 |
| | Net proceeds from the sales of equity investments and other assets | 6 |
| | 124 |
| | Change in restricted cash | (34 | ) | | (49 | ) | | Other | (136 | ) | | (10 | ) | | Net cash used in investing activities | (5,555 | ) | | (3,291 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the: | | | | | Issuance of long-term debt | 8,647 |
| | 1,780 |
| | Issuance of common stock related to employee benefit plans | 7 |
| | 16 |
| | Payments for the redemption of long-term debt | (988 | ) | | (1,264 | ) | | Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 1,424 |
| | 287 |
| | Payments for the redemption of short-term debt with original maturities greater than 90 days | (492 | ) | | (931 | ) | | Notes payable and commercial paper | (1,579 | ) | | 531 |
| | Distributions to noncontrolling interests | (3 | ) | | (7 | ) | | Dividends paid | (1,731 | ) | | (1,685 | ) | | Repurchase of common shares | — |
| | (1,500 | ) | | Other | — |
| | 2 |
| | Net cash provided by (used in) financing activities | 5,285 |
| | (2,771 | ) | | Net increase (decrease) in cash and cash equivalents | 5,322 |
| | (666 | ) | | Cash and cash equivalents at beginning of period | 857 |
| | 2,036 |
| | Cash and cash equivalents at end of period | $ | 6,179 |
| | $ | 1,370 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 631 |
| | $ | 610 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated StatementsPrincipal Executive Offices, Telephone Number and IRS Employer Identification Number
| | Commission file number | Registrant, State of Changes in Equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated Other Comprehensive Loss | | | | | | | | | | | | | | | | | | | | | Net Unrealized |
| | | | Total |
| | | | | | | | | | | | | | | Foreign |
| | Net |
| | (Losses) Gains |
| | | | Duke Energy |
| | | | | | | Common |
| | | | Additional |
| | | | Currency |
| | Losses on |
| | on Available- |
| | Pension and |
| | Corporation |
| | | | | | | Stock |
| | Common |
| | Paid-in |
| | Retained |
| | Translation |
| | Cash Flow |
| | for-Sale- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
| | (in millions) | Shares |
| | Stock |
| | Capital |
| | Earnings |
| | Adjustments |
| | Hedges |
| | Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
| | Balance at December 31, 2014 | 707 |
| | $ | 1 |
| | $ | 39,405 |
| | $ | 2,012 |
| | $ | (439 | ) | | $ | (59 | ) | | $ | 3 |
| | $ | (48 | ) | | $ | 40,875 |
| | $ | 24 |
| | $ | 40,899 |
| | Net income | — |
| | — |
| | — |
| | 2,339 |
| | — |
| | — |
| | — |
| | — |
| | 2,339 |
| | 10 |
| | 2,349 |
| | Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (228 | ) | | (1 | ) | | (5 | ) | | (1 | ) | | (235 | ) | | (10 | ) | | (245 | ) | | Common stock issuances, including dividend reinvestment and employee benefits | 1 |
| | — |
| | 48 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 48 |
| | — |
| | 48 |
| | Stock repurchase | (20 | ) | | — |
| | (1,500 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (1,500 | ) | | — |
| | (1,500 | ) | | Common stock dividends | — |
| | — |
| | — |
| | (1,685 | ) | | — |
| | — |
| | — |
| | — |
| | (1,685 | ) | | — |
| | (1,685 | ) | | Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (7 | ) | | (7 | ) | Other(a) | — |
| | — |
| | — |
| | (10 | ) | | — |
| | — |
| | — |
| | — |
| | (10 | ) | | 19 |
| | 9 |
| | Balance at September 30, 2015 | 688 |
| | $ | 1 |
|
| $ | 37,953 |
|
| $ | 2,656 |
|
| $ | (667 | ) |
| $ | (60 | ) |
| $ | (2 | ) |
| $ | (49 | ) |
| $ | 39,832 |
|
| $ | 36 |
|
| $ | 39,868 |
| | | | | | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2015 | 688 |
| | $ | 1 |
| | $ | 37,968 |
| | $ | 2,564 |
| | $ | (692 | ) | | $ | (50 | ) | | $ | (3 | ) | | $ | (61 | ) | | $ | 39,727 |
| | $ | 44 |
| | $ | 39,771 |
| | Net income | — |
| | — |
| | — |
| | 2,379 |
| | — |
| | — |
| | — |
| | — |
| | 2,379 |
| | 13 |
| | 2,392 |
| | Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 92 |
| | (16 | ) | | 7 |
| | 2 |
| | 85 |
| | 3 |
| | 88 |
| | Common stock issuances, including dividend reinvestment and employee benefits | 1 |
| | — |
| | 29 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 29 |
| | — |
| | 29 |
| | Common stock dividends | — |
| | — |
| | — |
| | (1,731 | ) | | — |
| | — |
| | — |
| | — |
| | (1,731 | ) | | — |
| | (1,731 | ) | | Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3 | ) | | (3 | ) | | Balance at September 30, 2016 | 689 |
|
| $ | 1 |
|
| $ | 37,997 |
|
| $ | 3,212 |
|
| $ | (600 | ) |
| $ | (66 | ) |
| $ | 4 |
|
| $ | (59 | ) |
| $ | 40,489 |
|
| $ | 57 |
|
| $ | 40,546 |
|
Incorporation or Organization, Address of Principal Executive Offices, Telephone Number and IRS Employer Identification Number| 1-4928 | | (a) | The $19 million change in Noncontrolling Interests for the nine months ended September 30, 2015, is primarily related to an acquisition of majority interest in a solar company. |
DUKE ENERGY CAROLINAS, LLC Condensed Consolidated Statements of Operations and Comprehensive Income(a North Carolina limited liability company)
(Unaudited)526 South Church Street
Charlotte, North Carolina 28202-1803 | | | | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| | Operating Revenues | $ | 2,226 |
| | $ | 2,061 |
| | $ | 5,641 |
| | $ | 5,669 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 581 |
| | 548 |
| | 1,391 |
| | 1,553 |
| | Operation, maintenance and other | 493 |
| | 511 |
| | 1,481 |
| | 1,469 |
| | Depreciation and amortization | 268 |
| | 269 |
| | 802 |
| | 779 |
| | Property and other taxes | 68 |
| | 67 |
| | 206 |
| | 204 |
| | Total operating expenses | 1,410 |
| | 1,395 |
| | 3,880 |
| | 4,005 |
| | Losses on Sales of Other Assets and Other, net | (1 | ) | | — |
| | (1 | ) | | — |
| | Operating Income | 815 |
| | 666 |
| | 1,760 |
| | 1,664 |
| | Other Income and Expenses, net | 39 |
| | 42 |
| | 121 |
| | 125 |
| | Interest Expense | 102 |
| | 105 |
| | 316 |
| | 313 |
| | Income Before Income Taxes | 752 |
| | 603 |
| | 1,565 |
| | 1,476 |
| | Income Tax Expense | 258 |
| | 220 |
| | 539 |
| | 536 |
| | Net Income | $ | 494 |
| | $ | 383 |
| | $ | 1,026 |
| | $ | 940 |
| | Other Comprehensive Income, net of tax | | | | | | | | | Reclassification into earnings from cash flow hedges | — |
| | 1 |
| | 1 |
| | 1 |
| | Unrealized gains on available-for-sale securities | — |
| | 1 |
| | — |
| | 1 |
| | Other Comprehensive Income, net of tax | — |
| | 2 |
| | 1 |
| | 2 |
| | Comprehensive Income | $ | 494 |
| | $ | 385 |
| | $ | 1,027 |
| | $ | 942 |
|
56-0205520
| | 1-3274 | DUKE ENERGY CAROLINAS,FLORIDA, LLC Condensed Consolidated Balance Sheets(a Florida limited liability company)
(Unaudited)299 First Avenue North
St. Petersburg, Florida 33701 | | | | | | | | | | (in millions) | September 30, 2016 |
| | December 31, 2015 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 82 |
| | $ | 13 |
| | Receivables (net of allowance for doubtful accounts of $2 at 2016 and $3 at 2015) | 129 |
| | 142 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2016 and 2015) | 780 |
| | 596 |
| | Receivables from affiliated companies | 88 |
| | 107 |
| | Notes receivable from affiliated companies | 32 |
| | 163 |
| | Inventory | 1,053 |
| | 1,276 |
| | Regulatory assets | 256 |
| | 305 |
| | Other | 22 |
| | 128 |
| | Total current assets | 2,442 |
| | 2,730 |
| | Investments and Other Assets | | | | | Nuclear decommissioning trust funds | 3,234 |
| | 3,050 |
| | Other | 923 |
| | 999 |
| | Total investments and other assets | 4,157 |
| | 4,049 |
| | Property, Plant and Equipment | | | | | Cost | 40,495 |
| | 39,398 |
| | Accumulated depreciation and amortization | (14,125 | ) | | (13,521 | ) | | Net property, plant and equipment | 26,370 |
| | 25,877 |
| | Regulatory Assets and Deferred Debits | | | | | Regulatory assets | 3,040 |
| | 2,766 |
| | Other | 3 |
| | 4 |
| | Total regulatory assets and deferred debits | 3,043 |
| | 2,770 |
| | Total Assets | $ | 36,012 |
| | $ | 35,426 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 582 |
| | $ | 753 |
| | Accounts payable to affiliated companies | 149 |
| | 229 |
| | Taxes accrued | 198 |
| | 25 |
| | Interest accrued | 125 |
| | 95 |
| | Current maturities of long-term debt | 468 |
| | 356 |
| | Asset retirement obligations | 303 |
| | — |
| | Regulatory liabilities | 125 |
| | 39 |
| | Other | 417 |
| | 519 |
| | Total current liabilities | 2,367 |
|
| 2,016 |
| | Long-Term Debt | 8,592 |
| | 7,711 |
| | Long-Term Debt Payable to Affiliated Companies | 300 |
| | 300 |
| | Deferred Credits and Other Liabilities | | | | | Deferred income taxes | 6,464 |
| | 6,146 |
| | Investment tax credits | 195 |
| | 199 |
| | Accrued pension and other post-retirement benefit costs | 93 |
| | 107 |
| | Asset retirement obligations | 3,622 |
| | 3,918 |
| | Regulatory liabilities | 2,864 |
| | 2,802 |
| | Other | 685 |
| | 621 |
| | Total deferred credits and other liabilities | 13,923 |
| | 13,793 |
| | Commitments and Contingencies |
|
| |
|
| | Equity | | | | | Member's equity | 10,840 |
| | 11,617 |
| | Accumulated other comprehensive loss | (10 | ) | | (11 | ) | | Total equity | 10,830 |
| | 11,606 |
| | Total Liabilities and Equity | $ | 36,012 |
| | $ | 35,426 |
|
704-382-3853
PART I59-0247770
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Nine Months Ended | | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 1,026 |
| | $ | 940 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation and amortization (including amortization of nuclear fuel) | 1,020 |
| | 1,016 |
| | Equity component of AFUDC | (75 | ) | | (73 | ) | | Losses on sales of other assets and other, net | 1 |
| | — |
| | Deferred income taxes | 382 |
| | 183 |
| | Accrued pension and other post-retirement benefit costs | 3 |
| | 11 |
| | Contributions to qualified pension plans | — |
| | (42 | ) | | Payments for asset retirement obligations | (204 | ) | | (104 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | 4 |
| | — |
| | Receivables | (191 | ) | | (9 | ) | | Receivables from affiliated companies | 19 |
| | — |
| | Inventory | 217 |
| | (48 | ) | | Other current assets | 81 |
| | 42 |
| | Increase (decrease) in | | | | | Accounts payable | (179 | ) | | (141 | ) | | Accounts payable to affiliated companies | (100 | ) | | (11 | ) | | Taxes accrued | 248 |
| | 182 |
| | Other current liabilities | 51 |
| | 49 |
| | Other assets | 57 |
| | 97 |
| | Other liabilities | (15 | ) | | (61 | ) | | Net cash provided by operating activities | 2,345 |
| | 2,031 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (1,531 | ) | | (1,372 | ) | | Purchases of available-for-sale securities | (2,070 | ) | | (1,926 | ) | | Proceeds from sales and maturities of available-for-sale securities | 2,070 |
| | 1,926 |
| | Notes receivable from affiliated companies | 131 |
| | (549 | ) | | Other | (65 | ) | | (13 | ) | | Net cash used in investing activities | (1,465 | ) | | (1,934 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 992 |
| | 496 |
| | Payments for the redemption of long-term debt | (3 | ) | | (3 | ) | | Distributions to parent | (1,800 | ) | | (401 | ) | | Other | — |
| | (4 | ) | | Net cash (used in) provided by financing activities | (811 | ) | | 88 |
| | Net increase in cash and cash equivalents | 69 |
| | 185 |
| | Cash and cash equivalents at beginning of period | 13 |
| | 13 |
| | Cash and cash equivalents at end of period | $ | 82 |
| | $ | 198 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 228 |
| | $ | 229 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | Accumulated Other | | | | | | | Comprehensive Loss | | | | | | | | | Net Unrealized |
| | | | | | | Net Losses on |
| | Losses on |
| | | | | Member's |
| | Cash Flow |
| | Available-for- |
| | Total |
| | (in millions) | Equity |
| | Hedges |
| | Sale Securities |
| | Equity |
| | Balance at December 31, 2014 | $ | 10,937 |
| | $ | (12 | ) | | $ | (1 | ) | | $ | 10,924 |
| | Net income | 940 |
| | — |
| | — |
| | 940 |
| | Other comprehensive income | — |
| | 1 |
| | 1 |
| | 2 |
| | Distributions to parent | (401 | ) | | — |
| | — |
| | (401 | ) | | Balance at September 30, 2015 | $ | 11,476 |
| | $ | (11 | ) | | $ | — |
| | $ | 11,465 |
| | | | | | | | | | | Balance at December 31, 2015 | $ | 11,617 |
| | $ | (11 | ) | | $ | — |
| | $ | 11,606 |
| | Net income | 1,026 |
| | — |
| | — |
| | 1,026 |
| | Other comprehensive income | — |
| | 1 |
| | — |
| | 1 |
| | Distributions to parent | (1,800 | ) | | — |
| | — |
| | (1,800 | ) | | Other | (3 | ) | | — |
| | — |
| | (3 | ) | | Balance at September 30, 2016 | $ | 10,840 |
| | $ | (10 | ) | | $ | — |
| | $ | 10,830 |
|
|
| 1-15929 | PROGRESS ENERGY, INC. Condensed Consolidated Statements of Operations and Comprehensive Income(a North Carolina corporation)
(Unaudited)410 South Wilmington Street
Raleigh, North Carolina 27601-1748 | | | | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| | Operating Revenues | $ | 2,965 |
| | $ | 2,929 |
| | $ | 7,645 |
| | $ | 7,941 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 1,120 |
| | 1,238 |
| | 2,832 |
| | 3,273 |
| | Operation, maintenance and other | 582 |
| | 539 |
| | 1,699 |
| | 1,672 |
| | Depreciation and amortization | 318 |
| | 261 |
| | 904 |
| | 831 |
| | Property and other taxes | 136 |
| | 132 |
| | 375 |
| | 367 |
| | Impairment charges | 1 |
| | 7 |
| | 4 |
| | 7 |
| | Total operating expenses | 2,157 |
| | 2,177 |
| | 5,814 |
| | 6,150 |
| | Gains on Sales of Other Assets and Other, net | 6 |
| | 4 |
| | 18 |
| | 18 |
| | Operating Income | 814 |
| | 756 |
| | 1,849 |
| | 1,809 |
| | Other Income and Expenses, net | 31 |
| | 17 |
| | 79 |
| | 63 |
| | Interest Expense | 177 |
| | 170 |
| | 497 |
| | 504 |
| | Income From Continuing Operations Before Income Taxes | 668 |
| | 603 |
| | 1,431 |
| | 1,368 |
| | Income Tax Expense From Continuing Operations | 219 |
| | 151 |
| | 496 |
| | 435 |
| | Income From Continuing Operations | 449 |
| | 452 |
| | 935 |
| | 933 |
| | Loss From Discontinued Operations, net of tax | — |
| | (1 | ) | | — |
| | (2 | ) | | Net Income | 449 |
| | 451 |
| | 935 |
| | 931 |
| | Less: Net Income Attributable to Noncontrolling Interests | 3 |
| | 3 |
| | 8 |
| | 8 |
| | Net Income Attributable to Parent | $ | 446 |
| | $ | 448 |
| | $ | 927 |
| | $ | 923 |
| | | | | | | | | | | Net Income | $ | 449 |
| | $ | 451 |
| | $ | 935 |
| | $ | 931 |
| | Other Comprehensive Income, net of tax | | | | | | | | | Pension and OPEB adjustments | — |
| | (3 | ) | | 2 |
| | (1 | ) | | Reclassification into earnings from cash flow hedges | 1 |
| | 3 |
| | 4 |
| | 2 |
| | Unrealized gains (losses) on available-for-sale securities | 1 |
| | — |
| | 2 |
| | (1 | ) | | Other Comprehensive Income, net of tax | 2 |
|
| — |
|
| 8 |
|
| — |
| | Comprehensive Income | 451 |
| | 451 |
| | 943 |
| | 931 |
| | Less: Comprehensive Income Attributable to Noncontrolling Interests | 3 |
| | 3 |
| | 8 |
| | 8 |
| | Comprehensive Income Attributable to Parent | $ | 448 |
|
| $ | 448 |
|
| $ | 935 |
|
| $ | 923 |
|
56-2155481
| | 1-1232 |
PROGRESSDUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets(an Ohio corporation)
(Unaudited)139 East Fourth Street
| | | | | | | | | | (in millions) | September 30, 2016 |
| | December 31, 2015 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 165 |
| | $ | 44 |
| | Receivables (net of allowance for doubtful accounts of $6 at 2016 and 2015) | 109 |
| | 151 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $8 at 2016 and 2015) | 857 |
| | 658 |
| | Receivables from affiliated companies | 8 |
| | 375 |
| | Notes receivable from affiliated companies | 43 |
| | — |
| | Inventory | 1,653 |
| | 1,751 |
| | Regulatory assets (includes $51 related to VIEs at 2016) | 347 |
| | 362 |
| | Other | 183 |
| | 156 |
| | Total current assets | 3,365 |
| | 3,497 |
| | Investments and Other Assets | | | | | Nuclear decommissioning trust funds | 2,879 |
| | 2,775 |
| | Goodwill | 3,655 |
| | 3,655 |
| | Other | 865 |
| | 834 |
| | Total investments and other assets | 7,399 |
| | 7,264 |
| | Property, Plant and Equipment | | | | | Cost | 44,151 |
| | 42,666 |
| | Accumulated depreciation and amortization | (15,169 | ) | | (14,867 | ) | | Generation facilities to be retired, net | 562 |
| | 548 |
| | Net property, plant and equipment | 29,544 |
| | 28,347 |
| | Regulatory Assets and Deferred Debits | | | | | Regulatory assets (includes $1,156 related to VIEs at 2016) | 5,652 |
| | 5,435 |
| | Other | 4 |
| | 5 |
| | Total regulatory assets and deferred debits | 5,656 |
| | 5,440 |
| | Total Assets | $ | 45,964 |
| | $ | 44,548 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 673 |
| | $ | 722 |
| | Accounts payable to affiliated companies | 202 |
| | 311 |
| | Notes payable to affiliated companies | 510 |
| | 1,308 |
| | Taxes accrued | 228 |
| | 53 |
| | Interest accrued | 186 |
| | 195 |
| | Current maturities of long-term debt (includes $62 related to VIEs at 2016) | 578 |
| | 315 |
| | Asset retirement obligations | 236 |
| | — |
| | Regulatory liabilities | 148 |
| | 286 |
| | Other | 721 |
| | 891 |
| | Total current liabilities | 3,482 |
| | 4,081 |
| | Long-Term Debt (includes $1,741 at 2016 and $479 at 2015 related to VIEs) | 15,792 |
| | 13,999 |
| | Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| | Deferred Credits and Other Liabilities | | | | | Deferred income taxes | 5,148 |
| | 4,790 |
| | Accrued pension and other post-retirement benefit costs | 516 |
| | 536 |
| | Asset retirement obligations | 5,421 |
| | 5,369 |
| | Regulatory liabilities | 2,353 |
| | 2,387 |
| | Other | 379 |
| | 383 |
| | Total deferred credits and other liabilities | 13,817 |
| | 13,465 |
| | Commitments and Contingencies |
| |
| | Equity | | | | | Common stock, $0.01 par value, 100 shares authorized and outstanding at 2016 and 2015 | — |
| | — |
| | Additional paid-in capital | 8,096 |
| | 8,092 |
| | Retained earnings | 4,683 |
| | 4,831 |
| | Accumulated other comprehensive loss | (40 | ) | | (48 | ) | | Total Progress Energy, Inc. stockholders' equity | 12,739 |
| | 12,875 |
| | Noncontrolling interests | (16 | ) | | (22 | ) | | Total equity | 12,723 |
| | 12,853 |
| | Total Liabilities and Equity | $ | 45,964 |
| | $ | 44,548 |
|
704-382-3853
PART I31-0240030
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Nine Months Ended | | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 935 |
| | $ | 931 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion (including amortization of nuclear fuel) | 1,071 |
| | 962 |
| | Equity component of AFUDC | (51 | ) | | (40 | ) | | Gains on sales of other assets | (23 | ) | | (24 | ) | | Impairment charges | 4 |
| | 7 |
| | Deferred income taxes | 425 |
| | 512 |
| | Accrued pension and other post-retirement benefit costs | (19 | ) | | (4 | ) | | Contributions to qualified pension plans | — |
| | (42 | ) | | Payments for asset retirement obligations | (203 | ) | | (90 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | 33 |
| | 6 |
| | Receivables | (155 | ) | | (103 | ) | | Receivables from affiliated companies | 329 |
| | (62 | ) | | Inventory | 99 |
| | 44 |
| | Other current assets | (30 | ) | | 298 |
| | Increase (decrease) in | | | | | Accounts payable | (24 | ) | | (157 | ) | | Accounts payable to affiliated companies | (109 | ) | | 35 |
| | Taxes accrued | 159 |
| | 75 |
| | Other current liabilities | (156 | ) | | 115 |
| | Other assets | (90 | ) | | (116 | ) | | Other liabilities | (4 | ) | | (87 | ) | | Net cash provided by operating activities | 2,191 |
| | 2,260 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (2,276 | ) | | (1,816 | ) | | Acquisitions | (10 | ) | | (1,249 | ) | | Purchases of available-for-sale securities | (1,849 | ) | | (829 | ) | | Proceeds from sales and maturities of available-for-sale securities | 1,899 |
| | 895 |
| | Proceeds from insurance | 58 |
| | — |
| | Proceeds from the sale of nuclear fuel | — |
| | 81 |
| | Notes receivable from affiliated companies | (43 | ) | | (31 | ) | | Change in restricted cash | (6 | ) | | — |
| | Other | (17 | ) | | (44 | ) | | Net cash used in investing activities | (2,244 | ) | | (2,993 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 2,375 |
| | 1,195 |
| | Payments for the redemption of long-term debt | (327 | ) | | (555 | ) | | Notes payable to affiliated companies | (798 | ) | | (401 | ) | | Distributions to noncontrolling interests | (1 | ) | | (4 | ) | | Capital contribution from parent | — |
| | 625 |
| | Dividends to parent | (1,075 | ) | | — |
| | Other | — |
| | (11 | ) | | Net cash provided by financing activities | 174 |
| | 849 |
| | Net increase in cash and cash equivalents | 121 |
| | 116 |
| | Cash and cash equivalents at beginning of period | 44 |
| | 42 |
| | Cash and cash equivalents at end of period | $ | 165 |
| | $ | 158 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 228 |
| | $ | 276 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated Other Comprehensive Loss | | | | | | | | | | | | | | | Net |
| | Net Unrealized |
| | | | Total Progress |
| | | | | | | | | Additional |
| | | | Losses on |
| | Gains on |
| | Pension and |
| | Energy, Inc. |
| | | | | | | Common |
| | Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
| | (in millions) | Stock |
| | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
| | Balance at December 31, 2014 | $ | — |
| | $ | 7,467 |
| | $ | 3,782 |
| | $ | (35 | ) | | $ | 1 |
| | $ | (7 | ) | | $ | 11,208 |
| | $ | (32 | ) | | $ | 11,176 |
| | Net income | — |
| | — |
| | 923 |
| | — |
| | — |
| | — |
| | 923 |
| | 8 |
| | 931 |
| | Other comprehensive income (loss) | — |
| | — |
| | — |
| | 2 |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (4 | ) | | (4 | ) | | Capital contribution from parent | — |
| | 625 |
| | — |
| | — |
| | — |
| | — |
| | 625 |
| | — |
| | 625 |
| | Other | — |
| | — |
| | (2 | ) | | — |
| | — |
| | — |
| | (2 | ) | | 3 |
| | 1 |
| | Balance at September 30, 2015 | $ | — |
|
| $ | 8,092 |
|
| $ | 4,703 |
|
| $ | (33 | ) |
| $ | — |
|
| $ | (8 | ) |
| $ | 12,754 |
|
| $ | (25 | ) |
| $ | 12,729 |
| | | | | | | | | | | | | | | | | | | | | Balance at December 31, 2015 | $ | — |
| | $ | 8,092 |
| | $ | 4,831 |
| | $ | (31 | ) | | $ | — |
| | $ | (17 | ) | | $ | 12,875 |
| | $ | (22 | ) | | $ | 12,853 |
| | Net income | — |
| | — |
| | 927 |
| | — |
| | — |
| | — |
| | 927 |
| | 8 |
| | 935 |
| | Other comprehensive income | — |
| | — |
| | — |
| | 4 |
| | 2 |
| | 2 |
| | 8 |
| | — |
| | 8 |
| | Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) | | Dividends to parent | — |
| | — |
| | (1,075 | ) | | — |
| | — |
| | — |
| | (1,075 | ) | | — |
| | (1,075 | ) | | Other | — |
| | 4 |
| | — |
| | — |
| | — |
| | — |
| | 4 |
| | (1 | ) | | 3 |
| | Balance at September 30, 2016 | $ | — |
|
| $ | 8,096 |
|
| $ | 4,683 |
|
| $ | (27 | ) |
| $ | 2 |
|
| $ | (15 | ) |
| $ | 12,739 |
|
| $ | (16 | ) |
| $ | 12,723 |
|
|
| 1-3382 | DUKE ENERGY PROGRESS, LLC Condensed Consolidated Statements of Operations and Comprehensive Income(a North Carolina limited liability company)
(Unaudited)410 South Wilmington Street
Raleigh, North Carolina 27601-1748 | | | | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| | Operating Revenues | $ | 1,583 |
| | $ | 1,488 |
| | $ | 4,103 |
| | $ | 4,130 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 569 |
| | 584 |
| | 1,441 |
| | 1,608 |
| | Operation, maintenance and other | 360 |
| | 329 |
| | 1,067 |
| | 1,066 |
| | Depreciation and amortization | 176 |
| | 147 |
| | 526 |
| | 462 |
| | Property and other taxes | 40 |
| | 35 |
| | 119 |
| | 102 |
| | Impairment charges | 1 |
| | — |
| | 1 |
| | — |
| | Total operating expenses | 1,146 |
| | 1,095 |
| | 3,154 |
| | 3,238 |
| | Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
| | 2 |
| | 2 |
| | Operating Income | 438 |
| | 394 |
| | 951 |
| | 894 |
| | Other Income and Expenses, net | 18 |
| | 14 |
| | 47 |
| | 49 |
| | Interest Expense | 61 |
| | 59 |
| | 188 |
| | 175 |
| | Income Before Income Taxes | 395 |
| | 349 |
| | 810 |
| | 768 |
| | Income Tax Expense | 124 |
| | 120 |
| | 271 |
| | 271 |
| | Net Income and Comprehensive Income | $ | 271 |
| | $ | 229 |
| | $ | 539 |
| | $ | 497 |
|
56-0165465
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | September 30, 2016 |
| | December 31, 2015 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 136 |
| | $ | 15 |
| | Receivables (net of allowance for doubtful accounts of $4 at 2016 and 2015) | 42 |
| | 87 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2016 and 2015) | 473 |
| | 349 |
| | Receivables from affiliated companies | 5 |
| | 16 |
| | Notes receivable from affiliated companies | 65 |
| | — |
| | Inventory | 998 |
| | 1,088 |
| | Regulatory assets | 186 |
| | 264 |
| | Other | 83 |
| | 121 |
| | Total current assets | 1,988 |
| | 1,940 |
| | Investments and Other Assets | | | | | Nuclear decommissioning trust funds | 2,171 |
| | 2,035 |
| | Other | 518 |
| | 486 |
| | Total investments and other assets | 2,689 |
| | 2,521 |
| | Property, Plant and Equipment | | | | | Cost | 28,001 |
| | 27,313 |
| | Accumulated depreciation and amortization | (10,508 | ) | | (10,141 | ) | | Generation facilities to be retired, net | 562 |
| | 548 |
| | Net property, plant and equipment | 18,055 |
| | 17,720 |
| | Regulatory Assets and Deferred Debits | | | | | Regulatory assets | 3,093 |
| | 2,710 |
| | Other | 2 |
| | 3 |
| | Total regulatory assets and deferred debits | 3,095 |
| | 2,713 |
| | Total Assets | $ | 25,827 |
| | $ | 24,894 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 319 |
| | $ | 399 |
| | Accounts payable to affiliated companies | 143 |
| | 190 |
| | Notes payable to affiliated companies | — |
| | 209 |
| | Taxes accrued | 91 |
| | 15 |
| | Interest accrued | 81 |
| | 96 |
| | Current maturities of long-term debt | 252 |
| | 2 |
| | Asset retirement obligations | 236 |
| | — |
| | Regulatory liabilities | 129 |
| | 85 |
| | Other | 326 |
| | 412 |
| | Total current liabilities | 1,577 |
| | 1,408 |
| | Long-Term Debt | 6,609 |
| | 6,366 |
| | Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
| | Deferred Credits and Other Liabilities | | | | | Deferred income taxes | 3,279 |
| | 3,027 |
| | Investment tax credits | 148 |
| | 132 |
| | Accrued pension and other post-retirement benefit costs | 247 |
| | 262 |
| | Asset retirement obligations | 4,623 |
| | 4,567 |
| | Regulatory liabilities | 1,874 |
| | 1,878 |
| | Other | 23 |
| | 45 |
| | Total deferred credits and other liabilities | 10,194 |
| | 9,911 |
| | Commitments and Contingencies |
| |
| | Member's Equity | 7,297 |
| | 7,059 |
| | Total Liabilities and Equity | $ | 25,827 |
| | $ | 24,894 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Nine Months Ended | | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 539 |
| | $ | 497 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion (including amortization of nuclear fuel) | 679 |
| | 587 |
| | Equity component of AFUDC | (34 | ) | | (35 | ) | | Gains on sales of other assets | (4 | ) | | (5 | ) | | Impairment charges | 1 |
| | — |
| | Deferred income taxes | 325 |
| | 308 |
| | Accrued pension and other post-retirement benefit costs | (24 | ) | | (11 | ) | | Contributions to qualified pension plans | — |
| | (21 | ) | | Payments for asset retirement obligations | (163 | ) | | (53 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | — |
| | (3 | ) | | Receivables | (78 | ) | | (51 | ) | | Receivables from affiliated companies | 11 |
| | 4 |
| | Inventory | 91 |
| | 37 |
| | Other current assets | 37 |
| | 187 |
| | Increase (decrease) in | | | | | Accounts payable | (44 | ) | | (69 | ) | | Accounts payable to affiliated companies | (47 | ) | | 21 |
| | Taxes accrued | 76 |
| | 34 |
| | Other current liabilities | 37 |
| | 22 |
| | Other assets | (32 | ) | | (41 | ) | | Other liabilities | (10 | ) | | (64 | ) | | Net cash provided by operating activities | 1,360 |
| | 1,344 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (1,106 | ) | | (1,120 | ) | | Acquisitions | — |
| | (1,249 | ) | | Purchases of available-for-sale securities | (1,470 | ) | | (511 | ) | | Proceeds from sales and maturities of available-for-sale securities | 1,448 |
| | 488 |
| | Notes receivable from affiliated companies | (65 | ) | | (70 | ) | | Other | (27 | ) | | (35 | ) | | Net cash used in investing activities | (1,220 | ) | | (2,497 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 505 |
| | 1,195 |
| | Payments for the redemption of long-term debt | (15 | ) | | (544 | ) | | Notes payable to affiliated companies | (209 | ) | | — |
| | Capital contribution from parent | — |
| | 625 |
| | Distributions to parent | (301 | ) | | — |
| | Other | 1 |
| | (9 | ) | | Net cash (used in) provided by financing activities | (19 | ) | | 1,267 |
| | Net increase in cash and cash equivalents | 121 |
| | 114 |
| | Cash and cash equivalents at beginning of period | 15 |
| | 9 |
| | Cash and cash equivalents at end of period | $ | 136 |
| | $ | 123 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 66 |
| | $ | 136 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | Common |
| | Retained |
| | Member's |
| | Total |
| | (in millions) | Stock |
| | Earnings |
| | Equity |
| | Equity |
| | Balance at December 31, 2014 | $ | 2,159 |
| | $ | 3,708 |
| | $ | — |
| | $ | 5,867 |
| | Net income | — |
| | 355 |
| | 142 |
| | 497 |
| | Contribution from parent | — |
| | — |
| | 625 |
| | 625 |
| | Transfer to Member's Equity | (2,159 | ) | | (4,063 | ) | | 6,222 |
| | — |
| | Balance at September 30, 2015 | $ | — |
| | $ | — |
| | $ | 6,989 |
| | $ | 6,989 |
| | | | | | | | | | | Balance at December 31, 2015 | $ | — |
| | $ | — |
| | $ | 7,059 |
| | $ | 7,059 |
| | Net income | — |
| | — |
| | 539 |
| | 539 |
| | Distributions to parent | — |
| | — |
| | (301 | ) | | (301 | ) | | Balance at September 30, 2016 | $ | — |
| | $ | — |
| | $ | 7,297 |
| | $ | 7,297 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| | Operating Revenues | $ | 1,381 |
| | $ | 1,436 |
| | $ | 3,538 |
| | $ | 3,803 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power | 550 |
| | 654 |
| | 1,391 |
| | 1,665 |
| | Operation, maintenance and other | 219 |
| | 208 |
| | 623 |
| | 598 |
| | Depreciation and amortization | 142 |
| | 113 |
| | 378 |
| | 369 |
| | Property and other taxes | 96 |
| | 97 |
| | 256 |
| | 265 |
| | Impairment charges | 1 |
| | 7 |
| | 4 |
| | 7 |
| | Total operating expenses | 1,008 |
| | 1,079 |
| | 2,652 |
| | 2,904 |
| | Operating Income | 373 |
| | 357 |
| | 886 |
| | 899 |
| | Other Income and Expenses, net | 11 |
| | 2 |
| | 30 |
| | 12 |
| | Interest Expense | 62 |
| | 50 |
| | 143 |
| | 149 |
| | Income Before Income Taxes | 322 |
| | 309 |
| | 773 |
| | 762 |
| | Income Tax Expense | 116 |
| | 93 |
| | 286 |
| | 268 |
| | Net Income | $ | 206 |
| | $ | 216 |
| | $ | 487 |
| | $ | 494 |
| | Other Comprehensive Income, net of tax |
| |
| |
|
| |
|
| | Unrealized gains on available-for-sale securities | 1 |
| | — |
| | 2 |
| | — |
| | Comprehensive Income | $ | 207 |
| | $ | 216 |
| | $ | 489 |
|
| $ | 494 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | September 30, 2016 |
| | December 31, 2015 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 10 |
| | $ | 8 |
| | Receivables (net of allowance for doubtful accounts of $2 at 2016 and 2015) | 65 |
| | 60 |
| | Receivables of VIEs (net of allowance for doubtful accounts of $3 at 2016 and 2015) | 385 |
| | 308 |
| | Receivables from affiliated companies | 5 |
| | 84 |
| | Inventory | 656 |
| | 663 |
| | Regulatory assets (includes $51 related to VIEs at 2016) | 161 |
| | 98 |
| | Other | 46 |
| | 21 |
| | Total current assets | 1,328 |
| | 1,242 |
| | Investments and Other Assets | | | | | Nuclear decommissioning trust funds | 708 |
| | 740 |
| | Other | 292 |
| | 292 |
| | Total investments and other assets | 1,000 |
| | 1,032 |
| | Property, Plant and Equipment | | | | | Cost | 16,139 |
| | 15,343 |
| | Accumulated depreciation and amortization | (4,654 | ) | | (4,720 | ) | | Net property, plant and equipment | 11,485 |
| | 10,623 |
| | Regulatory Assets and Deferred Debits | | | | | Regulatory assets (includes $1,156 related to VIEs at 2016) | 2,559 |
| | 2,725 |
| | Other | 2 |
| | 2 |
| | Total regulatory assets and deferred debits | 2,561 |
| | 2,727 |
| | Total Assets | $ | 16,374 |
| | $ | 15,624 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 354 |
| | $ | 322 |
| | Accounts payable to affiliated companies | 61 |
| | 116 |
| | Notes payable to affiliated companies | 63 |
| | 813 |
| | Taxes accrued | 209 |
| | 132 |
| | Interest accrued | 58 |
| | 43 |
| | Current maturities of long-term debt (includes $62 related to VIEs at 2016) | 326 |
| | 13 |
| | Regulatory liabilities | 18 |
| | 200 |
| | Other | 367 |
| | 452 |
| | Total current liabilities | 1,456 |
| | 2,091 |
| | Long-Term Debt (includes $1,441 at 2016 and $225 at 2015 related to VIEs) | 5,802 |
| | 4,253 |
| | Deferred Credits and Other Liabilities | | | | | Deferred income taxes | 2,597 |
| | 2,460 |
| | Accrued pension and other post-retirement benefit costs | 237 |
| | 242 |
| | Asset retirement obligations | 798 |
| | 802 |
| | Regulatory liabilities | 478 |
| | 509 |
| | Other | 167 |
| | 146 |
| | Total deferred credits and other liabilities | 4,277 |
| | 4,159 |
| | Commitments and Contingencies |
| |
| | Equity | | | | | Member's equity | 4,837 |
| | 5,121 |
| | Accumulated other comprehensive income | 2 |
| | — |
| | Total equity | 4,839 |
| | 5,121 |
| | Total Liabilities and Equity | $ | 16,374 |
| | $ | 15,624 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Nine Months Ended | | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 487 |
| | $ | 494 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion | 383 |
| | 373 |
| | Equity component of AFUDC | (16 | ) | | (4 | ) | | Impairment charges | 4 |
| | 7 |
| | Deferred income taxes | 136 |
| | 341 |
| | Accrued pension and other post-retirement benefit costs | 2 |
| | 4 |
| | Contributions to qualified pension plans | — |
| | (21 | ) | | Payments for asset retirement obligations | (41 | ) | | (37 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | 34 |
| | 3 |
| | Receivables | (78 | ) | | (52 | ) | | Receivables from affiliated companies | 41 |
| | (58 | ) | | Inventory | 8 |
| | 7 |
| | Other current assets | (32 | ) | | 78 |
| | Increase (decrease) in | | | | | Accounts payable | 20 |
| | (88 | ) | | Accounts payable to affiliated companies | (55 | ) | | 10 |
| | Taxes accrued | 61 |
| | 43 |
| | Other current liabilities | (183 | ) | | 97 |
| | Other assets | (56 | ) | | (73 | ) | | Other liabilities | 1 |
| | (29 | ) | | Net cash provided by operating activities | 716 |
| | 1,095 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (1,169 | ) | | (696 | ) | | Acquisitions | (10 | ) | | — |
| | Purchases of available-for-sale securities | (379 | ) | | (318 | ) | | Proceeds from sales and maturities of available-for-sale securities | 450 |
| | 408 |
| | Proceeds from insurance | 58 |
| | — |
| | Proceeds from the sale of nuclear fuel | — |
| | 81 |
| | Change in restricted cash | (6 | ) | | — |
| | Other | 10 |
| | (12 | ) | | Net cash used in investing activities | (1,046 | ) | | (537 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 1,870 |
| | — |
| | Payments for the redemption of long-term debt | (12 | ) | | (11 | ) | | Notes payable to affiliated companies | (750 | ) | | 161 |
| | Dividends to parent | — |
| | (350 | ) | | Distributions to parent | (774 | ) | | (350 | ) | | Other | (2 | ) | | — |
| | Net cash provided by (used in) financing activities | 332 |
| | (550 | ) | | Net increase in cash and cash equivalents | 2 |
| | 8 |
| | Cash and cash equivalents at beginning of period | 8 |
| | 8 |
| | Cash and cash equivalents at end of period | $ | 10 |
| | $ | 16 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 162 |
| | $ | 140 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | Other | | | | | | | | | | | Comprehensive | | | | | | | | | | | Income | | | | | | | | | | | Net Unrealized |
| | | | | | | | | | | Gains on |
| | | | | Common |
| | Retained |
| | Member's |
| | Available-for-Sale |
| | Total |
| | (in millions) | Stock |
| | Earnings |
| | Equity |
| | Securities |
| | Equity |
| | Balance at December 31, 2014 | $ | 1,762 |
| | $ | 3,460 |
| | $ | — |
| | $ | — |
| | $ | 5,222 |
| | Net income | — |
| | 351 |
| | 143 |
| | — |
| | 494 |
| | Dividends to parent | — |
| | (350 | ) | | — |
| | — |
| | (350 | ) | | Distribution to parent | — |
| | — |
| | (350 | ) | | — |
| | (350 | ) | | Transfer to Member's Equity | (1,762 | ) | | (3,461 | ) | | 5,223 |
| | — |
| | — |
| | Balance at September 30, 2015 | $ | — |
| | $ | — |
| | $ | 5,016 |
| | $ | — |
| | $ | 5,016 |
| | | | | | | | | | | | | Balance at December 31, 2015 | $ | — |
| | $ | — |
| | $ | 5,121 |
| | $ | — |
| | $ | 5,121 |
| | Net income | — |
| | — |
| | 487 |
| | — |
| | 487 |
| | Other comprehensive income | — |
| | — |
| | — |
| | 2 |
| | 2 |
| | Distributions to parent | — |
| | — |
| | (774 | ) | | — |
| | (774 | ) | | Other | — |
| | — |
| | 3 |
| | — |
| | 3 |
| | Balance at September 30, 2016 | $ | — |
| | $ | — |
| | $ | 4,837 |
| | $ | 2 |
| | $ | 4,839 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
| | | | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | 2016 |
|
| 2015 |
| | Operating Revenues | | | | | | | | | Regulated electric | $ | 390 |
| | $ | 367 |
| | $ | 1,053 |
| | $ | 1,005 |
| | Nonregulated electric and other | 10 |
| | 6 |
| | 22 |
| | 29 |
| | Regulated natural gas | 89 |
| | 89 |
| | 358 |
| | 419 |
| | Total operating revenues | 489 |
| | 462 |
| | 1,433 |
| | 1,453 |
| | Operating Expenses | | | | | | | | | Fuel used in electric generation and purchased power – regulated | 129 |
| | 128 |
| | 340 |
| | 350 |
| | Fuel used in electric generation and purchased power – nonregulated | 14 |
| | 10 |
| | 37 |
| | 36 |
| | Cost of natural gas | 6 |
| | 7 |
| | 64 |
| | 116 |
| | Operation, maintenance and other | 126 |
| | 124 |
| | 367 |
| | 370 |
| | Depreciation and amortization | 50 |
| | 57 |
| | 175 |
| | 172 |
| | Property and other taxes | 59 |
| | 60 |
| | 195 |
| | 187 |
| | Total operating expenses | 384 |
| | 386 |
| | 1,178 |
| | 1,231 |
| | Gains on Sales of Other Assets and Other, net | 1 |
| | — |
| | 2 |
| | 8 |
| | Operating Income | 106 |
| | 76 |
| | 257 |
| | 230 |
| | Other Income and Expenses, net | 3 |
| | — |
| | 6 |
| | (2 | ) | | Interest Expense | 22 |
| | 20 |
| | 63 |
| | 58 |
| | Income From Continuing Operations Before Income Taxes | 87 |
| | 56 |
| | 200 |
| | 170 |
| | Income Tax Expense From Continuing Operations | 32 |
| | 22 |
| | 65 |
| | 64 |
| | Income From Continuing Operations | 55 |
| | 34 |
| | 135 |
| | 106 |
| | Income (Loss) From Discontinued Operations, net of tax | 34 |
| | (2 | ) | | 36 |
| | 23 |
| | Net Income and Comprehensive Income | $ | 89 |
| | $ | 32 |
| | $ | 171 |
| | $ | 129 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | | | (in millions) | September 30, 2016 |
| | December 31, 2015 |
| | ASSETS | | | | | Current Assets | | | | | Cash and cash equivalents | $ | 99 |
| | $ | 14 |
| | Receivables (net of allowance for doubtful accounts of $2 at 2016 and 2015) | 68 |
| | 66 |
| | Receivables from affiliated companies | 96 |
| | 84 |
| | Notes receivable from affiliated companies | 47 |
| | — |
| | Inventory | 110 |
| | 105 |
| | Regulatory assets | 46 |
| | 36 |
| | Other | 59 |
| | 110 |
| | Total current assets | 525 |
| | 415 |
| | Investments and Other Assets | | | | | Goodwill | 920 |
| | 920 |
| | Other | 18 |
| | 20 |
| | Total investments and other assets | 938 |
| | 940 |
| | Property, Plant and Equipment | | | | | Cost | 8,019 |
| | 7,750 |
| | Accumulated depreciation and amortization | (2,566 | ) | | (2,507 | ) | | Net property, plant and equipment | 5,453 |
| | 5,243 |
| | Regulatory Assets and Deferred Debits | | | | | Regulatory assets | 490 |
| | 497 |
| | Other | 2 |
| | 2 |
| | Total regulatory assets and deferred debits | 492 |
| | 499 |
| | Total Assets | $ | 7,408 |
| | $ | 7,097 |
| | LIABILITIES AND EQUITY | | | | | Current Liabilities | | | | | Accounts payable | $ | 250 |
| | $ | 207 |
| | Accounts payable to affiliated companies | 49 |
| | 53 |
| | Notes payable to affiliated companies | — |
| | 103 |
| | Taxes accrued | 163 |
| | 171 |
| | Interest accrued | 32 |
| | 18 |
| | Current maturities of long-term debt | 54 |
| | 106 |
| | Regulatory liabilities | 17 |
| | 12 |
| | Other | 84 |
| | 153 |
| | Total current liabilities | 649 |
| | 823 |
| | Long-Term Debt | 1,808 |
| | 1,467 |
| | Long-Term Debt Payable to Affiliated Companies | 25 |
| | 25 |
| | Deferred Credits and Other Liabilities | | | | | Deferred income taxes | 1,422 |
| | 1,407 |
| | Accrued pension and other post-retirement benefit costs | 51 |
| | 56 |
| | Asset retirement obligations | 108 |
| | 125 |
| | Regulatory liabilities | 238 |
| | 245 |
| | Other | 168 |
| | 165 |
| | Total deferred credits and other liabilities | 1,987 |
| | 1,998 |
| | Commitments and Contingencies |
| |
| | Equity | | | | | Common stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at 2016 and 2015 | 762 |
| | 762 |
| | Additional paid-in capital | 2,695 |
| | 2,720 |
| | Accumulated deficit | (518 | ) | | (698 | ) | | Total equity | 2,939 |
| | 2,784 |
| | Total Liabilities and Equity | $ | 7,408 |
| | $ | 7,097 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | | | | Nine Months Ended | | | September 30, | | (in millions) | 2016 |
| | 2015 |
| | CASH FLOWS FROM OPERATING ACTIVITIES | | | | | Net income | $ | 171 |
| | $ | 129 |
| | Adjustments to reconcile net income to net cash provided by operating activities: | | | | | Depreciation, amortization and accretion | 178 |
| | 175 |
| | Equity component of AFUDC | (4 | ) | | (2 | ) | | Gains on sales of other assets and other, net | (2 | ) | | (8 | ) | | Impairment charges | — |
| | 40 |
| | Deferred income taxes | 36 |
| | 127 |
| | Accrued pension and other post-retirement benefit costs | 4 |
| | 7 |
| | Contributions to qualified pension plans | — |
| | (4 | ) | | Payments for asset retirement obligations | (4 | ) | | (2 | ) | | (Increase) decrease in | | | | | Net realized and unrealized mark-to-market and hedging transactions | — |
| | (11 | ) | | Receivables | (1 | ) | | 8 |
| | Receivables from affiliated companies | (3 | ) | | 46 |
| | Inventory | (5 | ) | | 2 |
| | Other current assets | 50 |
| | 6 |
| | Increase (decrease) in | | | | | Accounts payable | 13 |
| | 7 |
| | Accounts payable to affiliated companies | (4 | ) | | (32 | ) | | Taxes accrued | (13 | ) | | (58 | ) | | Other current liabilities | (53 | ) | | 101 |
| | Other assets | (8 | ) | | 28 |
| | Other liabilities | (28 | ) | | (57 | ) | | Net cash provided by operating activities | 327 |
| | 502 |
| | CASH FLOWS FROM INVESTING ACTIVITIES | | | | | Capital expenditures | (334 | ) | | (266 | ) | | Notes receivable from affiliated companies | (47 | ) | | 145 |
| | Other | (21 | ) | | (9 | ) | | Net cash used in investing activities | (402 | ) | | (130 | ) | | CASH FLOWS FROM FINANCING ACTIVITIES | | | | | Proceeds from the issuance of long-term debt | 341 |
| | — |
| | Payments for the redemption of long-term debt | (53 | ) | | (153 | ) | | Notes payable to affiliated companies | (103 | ) | | (64 | ) | | Dividends to parent | (25 | ) | | (149 | ) | | Other | — |
| | (2 | ) | | Net cash provided by (used in) financing activities | 160 |
| | (368 | ) | | Net increase in cash and cash equivalents | 85 |
| | 4 |
| | Cash and cash equivalents at beginning of period | 14 |
| | 20 |
| | Cash and cash equivalents at end of period | $ | 99 |
| | $ | 24 |
| | Supplemental Disclosures: | | | | | Significant non-cash transactions: | | | | | Accrued capital expenditures | $ | 56 |
| | $ | 24 |
| | Distribution of membership interest of Duke Energy SAM, LLC to parent | — |
| | 1,912 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | Additional |
| | | | | | | Common |
| | Paid-in |
| | Accumulated |
| | Total |
| | (in millions) | Stock |
| | Capital |
| | Deficit |
| | Equity |
| | Balance at December 31, 2014 | $ | 762 |
| | $ | 4,782 |
| | $ | (870 | ) | | $ | 4,674 |
| | Net income | — |
| | — |
| | 129 |
| | 129 |
| | Dividends to parent | — |
| | (149 | ) | | — |
| | (149 | ) | | Distribution of membership interest of Duke Energy SAM, LLC to parent | — |
| | (1,912 | ) | | — |
| | (1,912 | ) | | Balance at September 30, 2015 | $ | 762 |
| | $ | 2,721 |
| | $ | (741 | ) | | $ | 2,742 |
| | | | | | | | | | | Balance at December 31, 2015 | $ | 762 |
| | $ | 2,720 |
| | $ | (698 | ) | | $ | 2,784 |
| | Net income | — |
| | — |
| | 171 |
| | 171 |
| | Dividends to parent | — |
| | (25 | ) | | — |
| | (25 | ) | | Contribution from parent | — |
| | — |
| | 9 |
| | 9 |
| | Balance at September 30, 2016 | $ | 762 |
|
| $ | 2,695 |
|
| $ | (518 | ) |
| $ | 2,939 |
|
| | 1-3543 | DUKE ENERGY INDIANA, LLC Condensed Consolidated Statements of Operations and Comprehensive Income(an Indiana limited liability company)
(Unaudited)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 | | | |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
|
| Operating Revenues | $ | 809 |
| | $ | 749 |
| | $ | 2,225 |
| | $ | 2,223 |
|
| Operating Expenses | | | | | | | |
| Fuel used in electric generation and purchased power | 242 |
| | 250 |
| | 690 |
| | 779 |
|
| Operation, maintenance and other | 175 |
| | 164 |
| | 526 |
| | 525 |
|
| Depreciation and amortization | 123 |
| | 109 |
| | 345 |
| | 320 |
|
| Property and other taxes | 22 |
| | 23 |
| | 67 |
| | 41 |
|
| Impairment charges | 8 |
| | 85 |
| | 8 |
| | 85 |
|
| Total operating expenses | 570 |
| | 631 |
| | 1,636 |
| | 1,750 |
|
| Loss on Sale of Other Assets and Other, net | — |
|
| (1 | ) | | — |
| | — |
|
| Operating Income | 239 |
| | 117 |
|
| 589 |
|
| 473 |
|
| Other Income and Expenses, net | 5 |
| | — |
| | 15 |
| | 9 |
|
| Interest Expense | 45 |
| | 44 |
| | 136 |
| | 132 |
|
| Income Before Income Taxes | 199 |
| | 73 |
|
| 468 |
|
| 350 |
|
| Income Tax Expense | 70 |
| | 27 |
| | 159 |
| | 128 |
|
| Net Income | $ | 129 |
| | $ | 46 |
|
| $ | 309 |
|
| $ | 222 |
|
| Other Comprehensive Loss, net of tax | | | | | | | |
| Reclassification into earnings from cash flow hedges | — |
| | (1 | ) | | (1 | ) | | (2 | ) |
| Comprehensive Income | $ | 129 |
| | $ | 45 |
|
| $ | 308 |
|
| $ | 220 |
|
|
| | | | | | |
| Duke Energy Corporation (Duke Energy) | Yesx |
No ¨
| | Duke Energy Florida, LLC (Duke Energy Florida) | Yesx |
No ¨
|
| Duke Energy Carolinas, LLC (Duke Energy Carolinas) | PART IYesx
| No ¨ | | Duke Energy Ohio, Inc. (Duke Energy Ohio) |
Yesx
| DUKE ENERGY INDIANA,No ¨
|
| Progress Energy, Inc. (Progress Energy) | Yesx | No ¨ | | Duke Energy Indiana, LLC (Duke Energy Indiana) | Yesx | Condensed Consolidated Balance SheetsNo ¨
|
| Duke Energy Progress, LLC (Duke Energy Progress) | (Unaudited)Yesx
| No ¨ | | Piedmont Natural Gas Company, Inc. (Piedmont) | Yesx | No ¨ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
|
| | | | | | | |
| (in millions) | September 30, 2016 |
| | December 31, 2015 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 94 |
| | $ | 9 |
|
| Receivables (net of allowance for doubtful accounts of $1 at 2016 and 2015) | 84 |
| | 96 |
|
| Receivables from affiliated companies | 74 |
| | 71 |
|
| Notes receivable from affiliated companies | 38 |
| | 83 |
|
| Inventory | 424 |
| | 570 |
|
| Regulatory assets | 131 |
| | 102 |
|
| Other | 104 |
| | 15 |
|
| Total current assets | 949 |
| | 946 |
|
| Investments and Other Assets | 174 |
| | 212 |
|
| Property, Plant and Equipment | | | |
| Cost | 14,069 |
| | 14,007 |
|
| Accumulated depreciation and amortization | (4,225 | ) | | (4,484 | ) |
| Generation facilities to be retired, net | 90 |
| | — |
|
| Net property, plant and equipment | 9,934 |
| | 9,523 |
|
| Regulatory Assets and Deferred Debits | | | |
| Regulatory assets | 909 |
| | 716 |
|
| Other | 2 |
| | 2 |
|
| Total regulatory assets and deferred debits | 911 |
| | 718 |
|
| Total Assets | $ | 11,968 |
| | $ | 11,399 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 167 |
| | $ | 189 |
|
| Accounts payable to affiliated companies | 82 |
| | 83 |
|
| Taxes accrued | 48 |
| | 89 |
|
| Interest accrued | 54 |
| | 56 |
|
| Current maturities of long-term debt | 71 |
| | 547 |
|
| Regulatory liabilities | 30 |
| | 62 |
|
| Other | 95 |
| | 97 |
|
| Total current liabilities | 547 |
| | 1,123 |
|
| Long-Term Debt | 3,566 |
| | 3,071 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
|
| Deferred Credits and Other Liabilities | | | |
| Deferred income taxes | 1,822 |
| | 1,657 |
|
| Investment tax credits | 137 |
| | 138 |
|
| Accrued pension and other post-retirement benefit costs | 72 |
| | 80 |
|
| Asset retirement obligations | 847 |
| | 525 |
|
| Regulatory liabilities | 738 |
| | 754 |
|
| Other | 94 |
| | 65 |
|
| Total deferred credits and other liabilities | 3,710 |
| | 3,219 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's equity | 3,995 |
| | — |
|
| Common stock, no par; $0.01 stated value, 60,000,000 shares authorized; 53,913,701 shares outstanding at 2015 | — |
| | 1 |
|
| Additional paid-in capital | — |
| | 1,384 |
|
| Retained earnings | — |
| | 2,450 |
|
| Accumulated other comprehensive income | — |
| | 1 |
|
| Total equity | 3,995 |
| | 3,836 |
|
| Total Liabilities and Equity | $ | 11,968 |
| | $ | 11,399 |
|
|
| | | | | | |
| Duke Energy | Yesx | No ¨ | | Duke Energy Florida |
Yesx
| PART INo ¨
|
| Duke Energy Carolinas | Yesx |
No ¨
| | Duke Energy Ohio | DUKE ENERGY INDIANA, LLCYesx
| Condensed Consolidated Statements of Cash FlowsNo ¨
|
| Progress Energy | (Unaudited)Yesx
| No ¨ | | Duke Energy Indiana | Yesx | No ¨ |
| Duke Energy Progress | Yesx | No ¨ | | Piedmont | Yesx | No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
| | | | | | | |
| | Nine Months Ended |
| | September 30, |
| (in millions) | 2016 |
| | 2015 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 309 |
| | $ | 222 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 347 |
| | 323 |
|
| Equity component of AFUDC | (11 | ) | | (9 | ) |
| Impairment charges | 8 |
| | 85 |
|
| Deferred income taxes | 122 |
| | 276 |
|
| Accrued pension and other post-retirement benefit costs | 6 |
| | 10 |
|
| Contributions to qualified pension plans | — |
| | (9 | ) |
| Payments for asset retirement obligations | (31 | ) | | (12 | ) |
| (Increase) decrease in | | | |
| Receivables | 16 |
| | (5 | ) |
| Receivables from affiliated companies | (3 | ) | | 43 |
|
| Inventory | 146 |
| | (27 | ) |
| Other current assets | (105 | ) | | 67 |
|
| Increase (decrease) in | | | |
| Accounts payable | (14 | ) | | 11 |
|
| Accounts payable to affiliated companies | (1 | ) | | (8 | ) |
| Taxes accrued | 12 |
| | (11 | ) |
| Other current liabilities | (85 | ) | | 16 |
|
| Other assets | (38 | ) | | (50 | ) |
| Other liabilities | 64 |
| | (1 | ) |
| Net cash provided by operating activities | 742 |
| | 921 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (540 | ) | | (506 | ) |
| Purchases of available-for-sale securities | (12 | ) | | (5 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 9 |
| | 8 |
|
| Proceeds from the sales of other assets | — |
| | 14 |
|
| Notes receivable from affiliated companies | 45 |
| | (166 | ) |
| Other | (28 | ) | | 13 |
|
| Net cash used in investing activities | (526 | ) | | (642 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 495 |
| | — |
|
| Payments for the redemption of long-term debt | (476 | ) | | (2 | ) |
| Notes payable to affiliated companies | — |
| | (71 | ) |
| Dividends to parent | — |
| | (150 | ) |
| Distributions to parent | (149 | ) | | — |
|
| Other | (1 | ) | | — |
|
| Net cash used in financing activities | (131 | ) | | (223 | ) |
| Net increase in cash and cash equivalents | 85 |
|
| 56 |
|
| Cash and cash equivalents at beginning of period | 9 |
| | 6 |
|
| Cash and cash equivalents at end of period | $ | 94 |
| | $ | 62 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 56 |
| | $ | 46 |
|
|
| | | | | |
| Duke Energy | Large accelerated filerx | Accelerated filer ¨ |
Non-accelerated filer ¨
| PART ISmaller reporting company ¨
| Emerging Growth Company ¨ |
| Duke Energy Carolinas |
Large accelerated filer ¨
| DUKE ENERGY INDIANA, LLCAccelerated filer ¨
| Condensed Consolidated Statements of Changes in EquityNon-accelerated filerx
| (Unaudited)Smaller reporting company ¨
| Emerging Growth Company ¨ |
| Progress Energy | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Duke Energy Progress | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Duke Energy Florida | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Duke Energy Ohio | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Duke Energy Indiana | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ |
| Piedmont | Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filerx | Smaller reporting company ¨ | Emerging Growth Company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | 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, 2014 | $ | 1 |
| | $ | 1,384 |
| | $ | 2,460 |
| | $ | — |
| | $ | 3 |
| | $ | 3,848 |
|
| Net income | — |
| | — |
| | 222 |
| | — |
| | — |
| | 222 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
| Dividends to parent | — |
| | — |
| | (150 | ) | | — |
| | — |
| | (150 | ) |
| Balance at September 30, 2015 | $ | 1 |
| | $ | 1,384 |
| | $ | 2,532 |
|
| $ | — |
| | $ | 1 |
| | $ | 3,918 |
|
| | | | | | | | | | | | |
| Balance at December 31, 2015 | $ | 1 |
| | $ | 1,384 |
| | $ | 2,450 |
| | $ | — |
| | $ | 1 |
| | $ | 3,836 |
|
| Net income | — |
| | — |
| | — |
| | 309 |
| | — |
| | 309 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
| Distributions to parent | — |
| | — |
| | — |
| | (149 | ) | | — |
| | (149 | ) |
| Transfer to Member's Equity | (1 | ) | | (1,384 | ) | | (2,450 | ) | | 3,835 |
| | — |
| | — |
|
| Balance at September 30, 2016 | $ | — |
| | $ | — |
| | $ | — |
|
| $ | 3,995 |
| | $ | — |
| | $ | 3,995 |
|
|
| | | | | | |
| Duke Energy | Yes ¨ | Nox | | Duke Energy Florida | Yes ¨ | Nox |
| Duke Energy Carolinas | Yes ¨ | Nox | | Duke Energy Ohio | Yes ¨ | Nox |
| Progress Energy | Yes ¨ | Nox | | Duke Energy Indiana | Yes ¨ | Nox |
| Duke Energy Progress | Yes ¨ | Nox | | Piedmont | Yes ¨ | Nox |
Number of shares of Common stock outstanding at March 31, 2017:
|
| | |
| Registrant | Description | Shares |
| Duke Energy | Common stock, $0.001 par value | 699,883,528 |
This combined Form 10-Q is filed separately by eight registrants: Duke Energy, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont (collectively the Duke Energy Registrants). Information contained herein relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, Duke Energy Indiana and Piedmont meet the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and are therefore filing this form with the reduced disclosure format specified in General Instructions H(2) of Form 10-Q.
TABLE OF CONTENTS
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PART II. FINANCIAL INFORMATION |
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| Piedmont Natural Gas Company, Inc. Financial Statements | |
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| Note 1 – Organization and Basis of Presentation | |
| Note 2 – Acquisitions and Dispositions | |
| Note 3 – Business Segments | |
| Note 4 – Regulatory Matters | |
| Note 5 – Commitments and Contingencies | |
| Note 6 – Debt and Credit Facilities | |
| Note 7 – Goodwill and Intangible Assets | |
| Note 8 – Related Party Transactions | |
| Note 9 – Derivatives and Hedging | |
| Note 10 – Investments in Debt and Equity Securities | |
| Note 11 – Fair Value Measurements | |
| Note 12 – Variable Interest Entities | |
| Note 13 – Common Stock | |
| Note 14 – Stock-Based Compensation | |
| Note 15 – Employee Benefit Plans | |
| Note 16 – Income Taxes | |
| Note 17 – Subsequent Events | |
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| PART II. OTHER INFORMATION |
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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:
| |
| ◦ | State, federal and foreign legislative and regulatory initiatives, including costs of compliance with existing and future environmental requirements or 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 Combined Notescomply with federal and state laws, regulations and legal requirements related to Condensed Consolidated Financial Statementscoal ash remediation, including amounts for required closure of certain ash impoundments, are uncertain and difficult to estimate; |
| |
| ◦ | The unaudited notesability 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 the regulatory process; |
| |
| ◦ | 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; |
| |
| ◦ | 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 variations in customer usage patterns, including energy efficiency efforts and use of alternative energy sources, including self-generation and distributed generation technologies; |
| |
| ◦ | Federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in Duke Energy service territories could result in customers leaving the electric distribution system, excess generation resources as well as stranded costs; |
| |
| ◦ | Advancements in technology; |
| |
| ◦ | Additional competition in electric and natural gas markets and continued industry consolidation; |
| |
| ◦ | The influence of weather and other natural phenomena on operations, including the economic, operational and other effects of severe storms, hurricanes, droughts, earthquakes and tornadoes, including extreme weather associated with climate change; |
| |
| ◦ | The ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to the condensed consolidated financial statementscompany resulting from an incident that follow areaffects the U.S. electric grid or generating resources; |
| |
| ◦ | The ability to complete necessary or desirable pipeline expansion or infrastructure projects in our natural gas business; |
| |
| ◦ | Operational interruptions to our 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 combined presentation. The following list indicates the registrants to which the footnotes apply. Tables within the notes may not sum across due to Progress Energy's consolidation of Duke Energy Progress, Duke Energy Floridaterrorist attack, cybersecurity threats, data security breaches, and other subsidiaries that are not registrants. In addition,catastrophic events such as fires, explosions, pandemic health events or other similar occurrences; |
| |
| ◦ | The inherent risks associated with the Duke Energy amounts include balances from subsidiaries that are not registrants. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Applicable Notes | | Registrant | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 13 | | 14 | | 15 | | 16 | | 17 | | 18 | | Duke Energy Corporation | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • | | Duke Energy Carolinas, LLC | • | | | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • | | Progress Energy, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • | | Duke Energy Progress, LLC | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • | | Duke Energy Florida, LLC | • | | | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • | | Duke Energy Ohio, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | | | | | • | | • | | • | | Duke Energy Indiana, LLC | • | | | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
1. ORGANIZATION AND BASIS OF PRESENTATION
NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION
Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquarteredoperation and potential construction 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 Charlotte, North Carolina, subjectcommodity prices and interest rates and the ability to regulation byrecover such costs through the Federal Energy Regulatory Commission (FERC). Duke Energy operates inregulatory process, where appropriate, and their impact on liquidity positions and the United States (U.S.) and Latin America primarily through its direct and indirect subsidiaries. See Note 2 for information on the proposed salevalue of International Energy. Duke Energy’s subsidiaries include its subsidiary registrants, 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) and Duke Energy Indiana, LLC (Duke Energy Indiana). When discussing Duke Energy’s consolidated financial information, it necessarily includes theunderlying assets; |
| |
| ◦ | The results of its six separate subsidiary registrants (collectively referredfinancing efforts, including the ability to as the Subsidiary Registrants),obtain financing on favorable terms, which along with Duke Energy, are collectively referred to as the Duke Energy Registrants (Duke Energy Registrants).These Condensed Consolidated Financial Statements include, after eliminating intercompany transactionscan be affected by various factors, including credit ratings, interest rate fluctuations, and balances, the accountsgeneral economic conditions;
|
| |
| ◦ | Credit ratings of the Duke Energy Registrants may be different from what is expected; |
| |
| ◦ | Declines in the market prices of equity and subsidiaries wherefixed-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 respective Duke Energy Registrants have control. These Condensed Consolidated Financial Statements also reflectcompletion of the Duke Energy Registrants’ proportionate sharecapital investment projects, including risks related to financing, obtaining and complying with terms of certain jointly owned generationpermits, 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 facilities.Duke Energy Carolinas is a regulated public utility primarily engagedorganizations, including changes in rate designs and new and evolving capacity markets, and risks related to obligations created by the generation, transmission, distributiondefault of other participants;
|
| |
| ◦ | The ability to control operation and salemaintenance costs; |
| |
| ◦ | The level of electricity in portionscreditworthiness of North Carolinacounterparties to transactions; |
| |
| ◦ | Employee workforce factors, including the potential inability to attract and South Carolina. Duke Energy Carolinas is subjectretain key personnel; |
| |
| ◦ | The ability of subsidiaries to the regulatory provisions of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (PSCSC), U.S. Nuclear Regulatory Commission (NRC) and FERC. Substantially all of Duke Energy Carolinas’ operations qualify for regulatory accounting.Progress Energy is a public utility holding company headquartered in Raleigh, North Carolina, subject to regulation by FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida. Substantially all of Progress Energy’s operations qualify for regulatory accounting.
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. Substantially all of Duke Energy Progress’ operations qualify for regulatory accounting.
Duke Energy Florida is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Duke Energy Florida is subject to the regulatory provisions of the Florida Public Service Commission (FPSC), NRC and FERC. Substantially all of Duke Energy Florida’s operations qualify for regulatory accounting.
Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, the generation and sale of electricity in portions of Kentucky and the transportation and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers and recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky). References hereinpay dividends or distributions to Duke Energy Ohio collectively include Duke Energy OhioCorporation holding company (the Parent);
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| ◦ | The performance of projects undertaken by our nonregulated businesses and its subsidiaries, unless otherwise noted. Duke Energy Ohio is subjectthe success of efforts to the regulatory provisionsinvest in and develop new opportunities; |
| |
| ◦ | The effect of the Public Utilities Commission of Ohio (PUCO), Kentucky Public Service Commission (KPSC) and FERC. On April 2, 2015, Duke Energy completed the sale of its nonregulated Midwest generation business, which sold power into wholesale energy markets, to a subsidiary of Dynegy Inc. (Dynegy). See Note 2 for additional information. Substantially all of Duke Energy Ohio’s operations that remain after the sale qualify for regulatory accounting.Duke Energy Indiana is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the Indiana Utility Regulatory Commission (IURC) and FERC. Substantially all of Duke Energy Indiana’s operations qualify for regulatory accounting. On January 1, 2016, Duke Energy Indiana, an Indiana corporation, converted into an Indiana limited liability company.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
accounting pronouncements issued periodically by accounting standard-setting bodies; |
See Note 2 for information regarding Duke Energy's | |
| ◦ | Substantial revision to the U.S. tax code, such as changes to the corporate tax rate or material change in the deductibility of interest; |
| |
| ◦ | The impact of potential goodwill impairments; |
| |
| ◦ | The ability to successfully complete future merger, acquisition or divestiture plans; and |
| |
| ◦ | The ability to successfully integrate the natural gas businesses following the acquisition of Piedmont Natural Gas Company, Inc. (Piedmont) that closed on October 3, 2016. Forand realize anticipated benefits. |
Additional risks and uncertainties are identified and discussed in the Duke Energy Registrants' reports filed with the SEC and available at the SEC's website at www.sec.gov. 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.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Operations
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions, except per-share amounts) | 2017 |
| | 2016 |
|
| Operating Revenues | | | |
| Regulated electric | $ | 4,913 |
| | $ | 5,053 |
|
| Regulated natural gas | 646 |
| | 169 |
|
| Nonregulated electric and other | 170 |
| | 155 |
|
| Total operating revenues | 5,729 |
| | 5,377 |
|
| Operating Expenses | | | |
| Fuel used in electric generation and purchased power | 1,449 |
| | 1,588 |
|
| Cost of natural gas | 258 |
| | 49 |
|
| Operation, maintenance and other | 1,433 |
| | 1,416 |
|
| Depreciation and amortization | 859 |
| | 793 |
|
| Property and other taxes | 304 |
| | 295 |
|
| Impairment charges | — |
| | 3 |
|
| Total operating expenses | 4,303 |
| | 4,144 |
|
| Gains on Sales of Other Assets and Other, net | 11 |
| | 7 |
|
| Operating Income | 1,437 |
| | 1,240 |
|
| Other Income and Expenses | | | |
| Equity in earnings of unconsolidated affiliates | 29 |
| | 8 |
|
| Other income and expenses, net | 86 |
| | 70 |
|
| Total other income and expenses | 115 |
| | 78 |
|
| Interest Expense | 491 |
| | 489 |
|
| Income From Continuing Operations Before Income Taxes | 1,061 |
| | 829 |
|
| Income Tax Expense from Continuing Operations | 344 |
| | 252 |
|
| Income From Continuing Operations | 717 |
| | 577 |
|
| Income From Discontinued Operations, net of tax | — |
| | 122 |
|
| Net Income | 717 |
| | 699 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 1 |
| | 5 |
|
| Net Income Attributable to Duke Energy Corporation | $ | 716 |
| | $ | 694 |
|
| | | | |
| Earnings Per Share – Basic and Diluted | | | |
| Income from continuing operations attributable to Duke Energy Corporation common stockholders | | | |
| Basic | $ | 1.02 |
| | $ | 0.83 |
|
| Diluted | $ | 1.02 |
| | $ | 0.83 |
|
| Income from discontinued operations attributable to Duke Energy Corporation common stockholders | | | |
| Basic | $ | — |
| | $ | 0.18 |
|
| Diluted | $ | — |
| | $ | 0.18 |
|
| Net income attributable to Duke Energy Corporation common stockholders | | | |
| Basic | $ | 1.02 |
| | $ | 1.01 |
|
| Diluted | $ | 1.02 |
| | $ | 1.01 |
|
| Weighted average shares outstanding | | | |
| Basic | 700 |
| | 689 |
|
| Diluted | 700 |
| | 689 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Net Income | $ | 717 |
| | $ | 699 |
|
| Other Comprehensive Income, net of tax | | | |
| Foreign currency translation adjustments | — |
| | 49 |
|
| Pension and OPEB adjustments | 1 |
| | — |
|
| Net unrealized gains (losses) on cash flow hedges | 2 |
| | (14 | ) |
| Reclassification into earnings from cash flow hedges | 1 |
| | 2 |
|
| Unrealized gains on available-for-sale securities | 4 |
| | 4 |
|
| Other Comprehensive Income, net of tax | 8 |
| | 41 |
|
| Comprehensive Income | 725 |
| | 740 |
|
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 1 |
| | 6 |
|
| Comprehensive Income Attributable to Duke Energy Corporation | $ | 724 |
| | $ | 734 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 | | December 31, 2016 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 878 |
| | $ | 392 |
|
| Receivables (net of allowance for doubtful accounts of $13 at 2017 and $14 at 2016) | 623 |
| | 751 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $57 at 2017 and $54 at 2016) | 1,682 |
| | 1,893 |
|
| Inventory | 3,366 |
| | 3,522 |
|
| Regulatory assets (includes $53 at 2017 and $50 at 2016 related to VIEs) | 1,031 |
| | 1,023 |
|
| Other | 425 |
| | 458 |
|
| Total current assets | 8,005 |
| | 8,039 |
|
| Property, Plant and Equipment | | | |
| Cost | 123,301 |
| | 121,397 |
|
| Accumulated depreciation and amortization | (40,293 | ) | | (39,406 | ) |
| Generation facilities to be retired, net | 508 |
| | 529 |
|
| Net property, plant and equipment | 83,516 |
| | 82,520 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 19,425 |
| | 19,425 |
|
| Regulatory assets (includes $1,131 at 2017 and $1,142 at 2016 related to VIEs) | 12,838 |
| | 12,878 |
|
| Nuclear decommissioning trust funds | 6,448 |
| | 6,205 |
|
| Investments in equity method unconsolidated affiliates | 1,122 |
| | 925 |
|
| Other | 2,754 |
| | 2,769 |
|
| Total other noncurrent assets | 42,587 |
| | 42,202 |
|
| Total Assets | $ | 134,108 |
| | $ | 132,761 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 2,203 |
| | $ | 2,994 |
|
| Notes payable and commercial paper | 3,558 |
| | 2,487 |
|
| Taxes accrued | 363 |
| | 384 |
|
| Interest accrued | 526 |
| | 503 |
|
| Current maturities of long-term debt (includes $281 at 2017 and $260 at 2016 related to VIEs) | 1,977 |
| | 2,319 |
|
| Asset retirement obligations | 404 |
| | 411 |
|
| Regulatory liabilities | 340 |
| | 409 |
|
| Other | 1,570 |
| | 2,044 |
|
| Total current liabilities | 10,941 |
| | 11,551 |
|
| Long-Term Debt (includes $4,108 at 2017 and $3,587 at 2016 related to VIEs) | 47,021 |
| | 45,576 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 14,443 |
| | 14,155 |
|
| Asset retirement obligations | 10,186 |
| | 10,200 |
|
| Regulatory liabilities | 6,972 |
| | 6,881 |
|
| Accrued pension and other post-retirement benefit costs | 1,115 |
| | 1,111 |
|
| Investment tax credits | 537 |
| | 493 |
|
| Other | 1,707 |
| | 1,753 |
|
| Total other noncurrent liabilities | 34,960 |
| | 34,593 |
|
| Commitments and Contingencies |
|
| |
|
|
| Equity | | | |
| Common stock, $0.001 par value, 2 billion shares authorized; 700 million shares outstanding at 2017 and 2016 | 1 |
| | 1 |
|
| Additional paid-in capital | 38,742 |
| | 38,741 |
|
| Retained earnings | 2,521 |
| | 2,384 |
|
| Accumulated other comprehensive loss | (85 | ) | | (93 | ) |
| Total Duke Energy Corporation stockholders' equity | 41,179 |
| | 41,033 |
|
| Noncontrolling interests | 7 |
| | 8 |
|
| Total equity | 41,186 |
| | 41,041 |
|
| Total Liabilities and Equity | $ | 134,108 |
| | $ | 132,761 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 717 |
| | $ | 699 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 991 |
| | 931 |
|
| Equity component of AFUDC | (62 | ) | | (42 | ) |
| Gains on sales of other assets | (11 | ) | | (9 | ) |
| Impairment charges | — |
| | 3 |
|
| Deferred income taxes | 342 |
| | 181 |
|
| Equity in earnings of unconsolidated affiliates | (29 | ) | | (8 | ) |
| Accrued pension and other post-retirement benefit costs | 6 |
| | 4 |
|
| Payments for asset retirement obligations | (134 | ) | | (112 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | (38 | ) | | 102 |
|
| Receivables | 343 |
| | 139 |
|
| Inventory | 155 |
| | 89 |
|
| Other current assets | 16 |
| | 13 |
|
| Increase (decrease) in | | | |
| Accounts payable | (463 | ) | | (210 | ) |
| Taxes accrued | (28 | ) | | 40 |
|
| Other current liabilities | (478 | ) | | (81 | ) |
| Other assets | (40 | ) | | 45 |
|
| Other liabilities | 2 |
| | (102 | ) |
| Net cash provided by operating activities | 1,289 |
| | 1,682 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (2,160 | ) | | (1,645 | ) |
| Contributions to equity method investments | (175 | ) | | (59 | ) |
| Purchases of available-for-sale securities | (1,386 | ) | | (1,347 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 1,405 |
| | 1,362 |
|
| Change in restricted cash | (34 | ) | | (32 | ) |
| Other | (49 | ) | | (37 | ) |
| Net cash used in investing activities | (2,399 | ) | | (1,758 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the: | | | |
| Issuance of long-term debt | 1,563 |
| | 1,140 |
|
| Issuance of common stock related to employee benefit plans | — |
| | 7 |
|
| Payments for the redemption of long-term debt | (408 | ) | | (389 | ) |
| Proceeds from the issuance of short-term debt with original maturities greater than 90 days | 25 |
| | — |
|
| Payments for the redemption of short-term debt with original maturities greater than 90 days | (7 | ) | | (92 | ) |
| Notes payable and commercial paper | 1,045 |
| | (66 | ) |
| Change in bank overdrafts | 5 |
| | — |
|
| Dividends paid | (600 | ) | | (570 | ) |
| Other | (27 | ) | | (33 | ) |
| Net cash provided by (used in) financing activities | 1,596 |
| | (3 | ) |
| Changes in cash and cash equivalents associated with assets held for sale | — |
| | 30 |
|
| Net increase (decrease) in cash and cash equivalents | 486 |
| | (49 | ) |
| Cash and cash equivalents at beginning of period | 392 |
| | 383 |
|
| Cash and cash equivalents at end of period | $ | 878 |
| | $ | 334 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 575 |
| | $ | 576 |
|
DUKE ENERGY CORPORATION
Condensed Consolidated Statements of Changes in Equity
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | | | | | | | | | | | | | Net Unrealized |
| | | | Total |
| | | | |
| | | | | | | | | | Foreign |
| | Net |
| | (Losses) Gains |
| | | | Duke Energy |
| | | | |
| | Common |
| | | | Additional |
| | | | Currency |
| | Losses on |
| | on Available- |
| | Pension and |
| | Corporation |
| | | | |
| | Stock |
| | Common |
| | Paid-in |
| | Retained |
| | Translation |
| | Cash Flow |
| | for-Sale- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
| (in millions) | Shares |
| | Stock |
| | Capital |
| | Earnings |
| | Adjustments |
| | Hedges |
| | Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
| Balance at December 31, 2015 | 688 |
| | $ | 1 |
| | $ | 37,968 |
| | $ | 2,564 |
| | $ | (692 | ) | | $ | (50 | ) | | $ | (3 | ) | | $ | (61 | ) | | $ | 39,727 |
| | $ | 44 |
| | $ | 39,771 |
|
| Net income | — |
| | — |
| | — |
| | 694 |
| | — |
| | — |
| | — |
| | — |
| | 694 |
| | 5 |
| | 699 |
|
| Other comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | 48 |
| | (12 | ) | | 4 |
| | — |
| | 40 |
| | 1 |
| | 41 |
|
| Common stock issuances, including dividend reinvestment and employee benefits | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
| Common stock dividends | — |
| | — |
| | — |
| | (570 | ) | | — |
| | — |
| | — |
| | — |
| | (570 | ) | | — |
| | (570 | ) |
| Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
| Balance at March 31, 2016 | 689 |
| | $ | 1 |
|
| $ | 37,969 |
|
| $ | 2,688 |
|
| $ | (644 | ) |
| $ | (62 | ) |
| $ | 1 |
|
| $ | (61 | ) |
| $ | 39,892 |
|
| $ | 49 |
|
| $ | 39,941 |
|
| | | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | 700 |
| | $ | 1 |
| | $ | 38,741 |
| | $ | 2,384 |
| | $ | — |
| | $ | (20 | ) | | $ | (1 | ) | | $ | (72 | ) | | $ | 41,033 |
| | $ | 8 |
| | $ | 41,041 |
|
| Net income | — |
| | — |
| | — |
| | 716 |
| | — |
| | — |
| | — |
| | — |
| | 716 |
| | 1 |
| | 717 |
|
| Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 3 |
| | 4 |
| | 1 |
| | 8 |
| | — |
| | 8 |
|
| Common stock issuances, including dividend reinvestment and employee benefits | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
|
| Common stock dividends | — |
| | — |
| | — |
| | (600 | ) | | — |
| | — |
| | — |
| | — |
| | (600 | ) | | — |
| | (600 | ) |
| Distributions to noncontrolling interest in subsidiaries | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) | | (2 | ) |
Other(a) | — |
| | — |
| | — |
| �� | 21 |
| | — |
| | — |
| | — |
| | — |
| | 21 |
| | — |
| | 21 |
|
| Balance at March 31, 2017 | 700 |
|
| $ | 1 |
|
| $ | 38,742 |
|
| $ | 2,521 |
|
| $ | — |
|
| $ | (17 | ) |
| $ | 3 |
|
| $ | (71 | ) |
| $ | 41,179 |
|
| $ | 7 |
|
| $ | 41,186 |
|
| |
| (a) | Cumulative-effect adjustment due to implementation of a new accounting standard related to stock-based compensation and the periods presented, Duke Energy's condensed consolidated financial information does not include the results of Piedmont. Also, the Duke Energy Registrants, as defined above, do not include Piedmont, unless otherwise noted.associated income taxes. See Note 1 for more information. |
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 1,716 |
| | $ | 1,740 |
|
| Operating Expenses | | | |
| Fuel used in electric generation and purchased power | 428 |
| | 421 |
|
| Operation, maintenance and other | 482 |
| | 512 |
|
| Depreciation and amortization | 254 |
| | 259 |
|
| Property and other taxes | 68 |
| | 67 |
|
| Total operating expenses | 1,232 |
| | 1,259 |
|
| Operating Income | 484 |
| | 481 |
|
| Other Income and Expenses, net | 37 |
| | 37 |
|
| Interest Expense | 103 |
| | 107 |
|
| Income Before Income Taxes | 418 |
| | 411 |
|
| Income Tax Expense | 148 |
| | 140 |
|
| Net Income | $ | 270 |
| | $ | 271 |
|
| Other Comprehensive Income, net of tax | | | |
| Reclassification into earnings from cash flow hedges | — |
| | 1 |
|
| Comprehensive Income | $ | 270 |
| | $ | 272 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 11 |
| | $ | 14 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 166 |
| | 160 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016) | 563 |
| | 645 |
|
| Receivables from affiliated companies | 109 |
| | 163 |
|
| Notes receivable from affiliated companies | — |
| | 66 |
|
| Inventory | 1,051 |
| | 1,055 |
|
| Regulatory assets | 233 |
| | 238 |
|
| Other | 65 |
| | 37 |
|
| Total current assets | 2,198 |
| | 2,378 |
|
| Property, Plant and Equipment | | | |
| Cost | 41,600 |
| | 41,127 |
|
| Accumulated depreciation and amortization | (14,649 | ) | | (14,365 | ) |
| Net property, plant and equipment | 26,951 |
| | 26,762 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 3,098 |
| | 3,159 |
|
| Nuclear decommissioning trust funds | 3,406 |
| | 3,273 |
|
| Other | 926 |
| | 943 |
|
| Total other noncurrent assets | 7,430 |
| | 7,375 |
|
| Total Assets | $ | 36,579 |
| | $ | 36,515 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 602 |
| | $ | 833 |
|
| Accounts payable to affiliated companies | 250 |
| | 247 |
|
| Notes payable to affiliated companies | 337 |
| | — |
|
| Taxes accrued | 90 |
| | 143 |
|
| Interest accrued | 134 |
| | 102 |
|
| Current maturities of long-term debt | 404 |
| | 116 |
|
| Asset retirement obligations | 224 |
| | 222 |
|
| Regulatory liabilities | 118 |
| | 161 |
|
| Other | 345 |
| | 468 |
|
| Total current liabilities | 2,504 |
|
| 2,292 |
|
| Long-Term Debt | 8,787 |
| | 9,187 |
|
| Long-Term Debt Payable to Affiliated Companies | 300 |
| | 300 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 6,668 |
| | 6,544 |
|
| Asset retirement obligations | 3,658 |
| | 3,673 |
|
| Regulatory liabilities | 2,860 |
| | 2,840 |
|
| Accrued pension and other post-retirement benefit costs | 103 |
| | 97 |
|
| Investment tax credits | 237 |
| | 203 |
|
| Other | 595 |
| | 607 |
|
| Total other noncurrent liabilities | 14,121 |
| | 13,964 |
|
| Commitments and Contingencies |
|
| |
|
|
| Equity | | | |
| Member's equity | 10,876 |
| | 10,781 |
|
| Accumulated other comprehensive loss | (9 | ) | | (9 | ) |
| Total equity | 10,867 |
| | 10,772 |
|
| Total Liabilities and Equity | $ | 36,579 |
| | $ | 36,515 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 270 |
| | $ | 271 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 339 |
| | 330 |
|
| Equity component of AFUDC | (30 | ) | | (23 | ) |
| Deferred income taxes | 162 |
| | 145 |
|
| Accrued pension and other post-retirement benefit costs | — |
| | 1 |
|
| Payments for asset retirement obligations | (65 | ) | | (52 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 3 |
| | 3 |
|
| Receivables | 66 |
| | 2 |
|
| Receivables from affiliated companies | 54 |
| | 33 |
|
| Inventory | 4 |
| | 40 |
|
| Other current assets | (26 | ) | | 102 |
|
| Increase (decrease) in | | | |
| Accounts payable | (131 | ) | | (165 | ) |
| Accounts payable to affiliated companies | 3 |
| | 21 |
|
| Taxes accrued | (53 | ) | | 52 |
|
| Other current liabilities | (125 | ) | | 21 |
|
| Other assets | (3 | ) | | 26 |
|
| Other liabilities | (2 | ) | | (26 | ) |
| Net cash provided by operating activities | 466 |
| | 781 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (563 | ) | | (459 | ) |
| Purchases of available-for-sale securities | (722 | ) | | (785 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 722 |
| | 785 |
|
| Notes receivable from affiliated companies | 66 |
| | (691 | ) |
| Other | (20 | ) | | (18 | ) |
| Net cash used in investing activities | (517 | ) | | (1,168 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — |
| | 992 |
|
| Payments for the redemption of long-term debt | (113 | ) | | (1 | ) |
| Notes payable to affiliated companies | 337 |
| | — |
|
| Distributions to parent | (175 | ) | | (600 | ) |
| Other | (1 | ) | | — |
|
| Net cash provided by financing activities | 48 |
| | 391 |
|
| Net (decrease) increase in cash and cash equivalents | (3 | ) | | 4 |
|
| Cash and cash equivalents at beginning of period | 14 |
| | 13 |
|
| Cash and cash equivalents at end of period | $ | 11 |
| | $ | 17 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 164 |
| | $ | 179 |
|
DUKE ENERGY CAROLINAS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | |
| | | | Accumulated Other | | |
| | | | Comprehensive | | |
| | | | Loss | | |
| | | | Net Losses on |
| | |
| | Member's |
| | Cash Flow |
| | Total |
|
| (in millions) | Equity |
| | Hedges |
| | Equity |
|
| Balance at December 31, 2015 | $ | 11,617 |
| | $ | (11 | ) | | $ | 11,606 |
|
| Net income | 271 |
| | — |
| | 271 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
|
| Distributions to parent | (600 | ) | | — |
| | (600 | ) |
| Balance at March 31, 2016 | $ | 11,288 |
| | $ | (10 | ) | | $ | 11,278 |
|
| | | | | | |
| Balance at December 31, 2016 | $ | 10,781 |
| | $ | (9 | ) | | $ | 10,772 |
|
| Net income | 270 |
| | — |
| | 270 |
|
| Distributions to parent | (175 | ) | | — |
| | (175 | ) |
| Balance at March 31, 2017 | $ | 10,876 |
| | $ | (9 | ) | | $ | 10,867 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 2,179 |
| | $ | 2,332 |
|
| Operating Expenses | | | |
| Fuel used in electric generation and purchased power | 726 |
| | 860 |
|
| Operation, maintenance and other | 544 |
| | 592 |
|
| Depreciation and amortization | 313 |
| | 290 |
|
| Property and other taxes | 117 |
| | 119 |
|
| Impairment charges | — |
| | 2 |
|
| Total operating expenses | 1,700 |
| | 1,863 |
|
| Gains on Sales of Other Assets and Other, net | 8 |
| | 6 |
|
| Operating Income | 487 |
| | 475 |
|
| Other Income and Expenses, net | 24 |
| | 20 |
|
| Interest Expense | 206 |
| | 160 |
|
| Income Before Income Taxes | 305 |
| | 335 |
|
| Income Tax Expense | 104 |
| | 123 |
|
| Net Income | 201 |
| | 212 |
|
| Less: Net Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
|
| Net Income Attributable to Parent | $ | 199 |
| | $ | 209 |
|
| | | | |
| Net Income | $ | 201 |
| | $ | 212 |
|
| Other Comprehensive Income, net of tax | | | |
| Pension and OPEB adjustments | 1 |
| | 1 |
|
| Reclassification into earnings from cash flow hedges | 1 |
| | 1 |
|
| Unrealized gains on available-for-sale securities | 1 |
| | 1 |
|
| Other Comprehensive Income, net of tax | 3 |
|
| 3 |
|
| Comprehensive Income | 204 |
| | 215 |
|
| Less: Comprehensive Income Attributable to Noncontrolling Interests | 2 |
| | 3 |
|
| Comprehensive Income Attributable to Parent | $ | 202 |
|
| $ | 212 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 38 |
| | $ | 46 |
|
| Receivables (net of allowance for doubtful accounts of $3 at 2017 and $6 at 2016) | 80 |
| | 114 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $7 at 2017 and 2016) | 612 |
| | 692 |
|
| Receivables from affiliated companies | 2 |
| | 106 |
|
| Notes receivable from affiliated companies | 184 |
| | 80 |
|
| Inventory | 1,652 |
| | 1,717 |
|
| Regulatory assets (includes $53 at 2017 and $50 at 2016 related to VIEs) | 447 |
| | 401 |
|
| Other | 252 |
| | 148 |
|
| Total current assets | 3,267 |
| | 3,304 |
|
| Property, Plant and Equipment | | | |
| Cost | 45,902 |
| | 44,864 |
|
| Accumulated depreciation and amortization | (15,618 | ) | | (15,212 | ) |
| Generation facilities to be retired, net | 508 |
| | 529 |
|
| Net property, plant and equipment | 30,792 |
| | 30,181 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 3,655 |
| | 3,655 |
|
| Regulatory assets (includes $1,131 at 2017 and $1,142 at 2016 related to VIEs) | 5,815 |
| | 5,722 |
|
| Nuclear decommissioning trust funds | 3,041 |
| | 2,932 |
|
| Other | 851 |
| | 856 |
|
| Total other noncurrent assets | 13,362 |
| | 13,165 |
|
| Total Assets | $ | 47,421 |
| | $ | 46,650 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 678 |
| | $ | 1,003 |
|
| Accounts payable to affiliated companies | 316 |
| | 348 |
|
| Notes payable to affiliated companies | 866 |
| | 729 |
|
| Taxes accrued | 96 |
| | 83 |
|
| Interest accrued | 224 |
| | 201 |
|
| Current maturities of long-term debt (includes $55 at 2017 and $62 at 2016 related to VIEs) | 521 |
| | 778 |
|
| Asset retirement obligations | 180 |
| | 189 |
|
| Regulatory liabilities | 157 |
| | 189 |
|
| Other | 627 |
| | 745 |
|
| Total current liabilities | 3,665 |
| | 4,265 |
|
| Long-Term Debt (includes $1,713 at 2017 and $1,741 at 2016 related to VIEs) | 16,454 |
| | 15,590 |
|
| Long-Term Debt Payable to Affiliated Companies | 1,173 |
| | 1,173 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 5,484 |
| | 5,246 |
|
| Asset retirement obligations | 5,289 |
| | 5,286 |
|
| Regulatory liabilities | 2,472 |
| | 2,395 |
|
| Accrued pension and other post-retirement benefit costs | 540 |
| | 547 |
|
| Other | 332 |
| | 341 |
|
| Total other noncurrent liabilities | 14,117 |
| | 13,815 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, $0.01 par value, 100 shares authorized and outstanding at 2017 and 2016 | — |
| | — |
|
| Additional paid-in capital | 8,094 |
| | 8,094 |
|
| Retained earnings | 3,963 |
| | 3,764 |
|
| Accumulated other comprehensive loss | (35 | ) | | (38 | ) |
| Total Progress Energy, Inc. stockholders' equity | 12,022 |
| | 11,820 |
|
| Noncontrolling interests | (10 | ) | | (13 | ) |
| Total equity | 12,012 |
| | 11,807 |
|
| Total Liabilities and Equity | $ | 47,421 |
| | $ | 46,650 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 201 |
| | $ | 212 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion (including amortization of nuclear fuel) | 365 |
| | 342 |
|
| Equity component of AFUDC | (24 | ) | | (14 | ) |
| Gains on sales of other assets | (9 | ) | | (7 | ) |
| Impairment charges | — |
| | 2 |
|
| Deferred income taxes | 220 |
| | 182 |
|
| Accrued pension and other post-retirement benefit costs | (3 | ) | | (6 | ) |
| Payments for asset retirement obligations | (60 | ) | | (54 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | (2 | ) | | 6 |
|
| Receivables | 115 |
| | 70 |
|
| Receivables from affiliated companies | 100 |
| | 295 |
|
| Inventory | 65 |
| | 3 |
|
| Other current assets | (173 | ) | | (76 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (228 | ) | | 9 |
|
| Accounts payable to affiliated companies | (32 | ) | | (55 | ) |
| Taxes accrued | 12 |
| | 42 |
|
| Other current liabilities | (121 | ) | | (64 | ) |
| Other assets | (53 | ) | | (46 | ) |
| Other liabilities | (14 | ) | | (7 | ) |
| Net cash provided by operating activities | 359 |
| | 834 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (1,011 | ) | | (750 | ) |
| Purchases of available-for-sale securities | (629 | ) | | (533 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 635 |
| | 548 |
|
| Proceeds from insurance | 4 |
| | 43 |
|
| Notes receivable from affiliated companies | (104 | ) | | — |
|
| Change in restricted cash | 5 |
| | — |
|
| Other | (4 | ) | | (15 | ) |
| Net cash used in investing activities | (1,104 | ) | | (707 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 892 |
| | 53 |
|
| Payments for the redemption of long-term debt | (288 | ) | | (310 | ) |
| Notes payable to affiliated companies | 137 |
| | 128 |
|
| Distributions to noncontrolling interests | (1 | ) | | (1 | ) |
| Other | (3 | ) | | — |
|
| Net cash provided by (used in) financing activities | 737 |
| | (130 | ) |
| Net decrease in cash and cash equivalents | (8 | ) | | (3 | ) |
| Cash and cash equivalents at beginning of period | 46 |
| | 44 |
|
| Cash and cash equivalents at end of period | $ | 38 |
| | $ | 41 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 219 |
| | $ | 228 |
|
PROGRESS ENERGY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Accumulated Other Comprehensive Loss | | | | | | |
| | | | | | Net (Losses) |
| | Net Unrealized |
| | | | Total Progress |
| | | | |
| | Additional |
| | | | Gains on |
| | Gains on |
| | Pension and |
| | Energy, Inc. |
| | | | |
| | Paid-in |
| | Retained |
| | Cash Flow |
| | Available-for- |
| | OPEB |
| | Stockholders' |
| | Noncontrolling |
| | Total |
|
| (in millions) | Capital |
| | Earnings |
| | Hedges |
| | Sale Securities |
| | Adjustments |
| | Equity |
| | Interests |
| | Equity |
|
| Balance at December 31, 2015 | $ | 8,092 |
| | $ | 4,831 |
| | $ | (31 | ) | | $ | — |
| | $ | (17 | ) | | $ | 12,875 |
| | $ | (22 | ) | | $ | 12,853 |
|
| Net income | — |
| | 209 |
| | — |
| | — |
| | — |
| | 209 |
| | 3 |
| | 212 |
|
| Other comprehensive income | — |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 3 |
| | — |
| | 3 |
|
| Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
| Balance at March 31, 2016 | $ | 8,092 |
|
| $ | 5,040 |
|
| $ | (30 | ) |
| $ | 1 |
|
| $ | (16 | ) |
| $ | 13,087 |
|
| $ | (20 | ) |
| $ | 13,067 |
|
| | | | | | | | | | | | | | | | |
| Balance at December 31, 2016 | $ | 8,094 |
| | $ | 3,764 |
| | $ | (23 | ) | | $ | 1 |
| | $ | (16 | ) | | $ | 11,820 |
| | $ | (13 | ) | | $ | 11,807 |
|
| Net income | — |
| | 199 |
| | — |
| | — |
| | — |
| | 199 |
| | 2 |
| | 201 |
|
| Other comprehensive income | — |
| | — |
| | 1 |
| | 1 |
| | 1 |
| | 3 |
| | — |
| | 3 |
|
| Other | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | 1 |
|
| Balance at March 31, 2017 | $ | 8,094 |
|
| $ | 3,963 |
|
| $ | (22 | ) |
| $ | 2 |
|
| $ | (15 | ) |
| $ | 12,022 |
|
| $ | (10 | ) |
| $ | 12,012 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 1,219 |
| | $ | 1,307 |
|
| Operating Expenses | | | |
| Fuel used in electric generation and purchased power | 364 |
| | 448 |
|
| Operation, maintenance and other | 350 |
| | 386 |
|
| Depreciation and amortization | 181 |
| | 175 |
|
| Property and other taxes | 40 |
| | 41 |
|
| Total operating expenses | 935 |
| | 1,050 |
|
| Gains on Sales of Other Assets and Other, net | 2 |
| | 1 |
|
| Operating Income | 286 |
| | 258 |
|
| Other Income and Expenses, net | 19 |
| | 17 |
|
| Interest Expense | 82 |
| | 63 |
|
| Income Before Income Taxes | 223 |
| | 212 |
|
| Income Tax Expense | 76 |
| | 75 |
|
| Net Income and Comprehensive Income | $ | 147 |
| | $ | 137 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 11 |
| | $ | 11 |
|
| Receivables (net of allowance for doubtful accounts of $1 at 2017 and $4 at 2016) | 28 |
| | 51 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $5 at 2017 and 2016) | 364 |
| | 404 |
|
| Receivables from affiliated companies | 6 |
| | 5 |
|
| Notes receivable from affiliated companies | — |
| | 165 |
|
| Inventory | 1,053 |
| | 1,076 |
|
| Regulatory assets | 187 |
| | 188 |
|
| Other | 102 |
| | 57 |
|
| Total current assets | 1,751 |
| | 1,957 |
|
| Property, Plant and Equipment | | | |
| Cost | 28,769 |
| | 28,419 |
|
| Accumulated depreciation and amortization | (10,716 | ) | | (10,561 | ) |
| Generation facilities to be retired, net | 508 |
| | 529 |
|
| Net property, plant and equipment | 18,561 |
| | 18,387 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 3,338 |
| | 3,243 |
|
| Nuclear decommissioning trust funds | 2,315 |
| | 2,217 |
|
| Other | 535 |
| | 525 |
|
| Total other noncurrent assets | 6,188 |
| | 5,985 |
|
| Total Assets | $ | 26,500 |
| | $ | 26,329 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 317 |
| | $ | 589 |
|
| Accounts payable to affiliated companies | 244 |
| | 227 |
|
| Notes payable to affiliated companies | 502 |
| | — |
|
| Taxes accrued | 35 |
| | 104 |
|
| Interest accrued | 90 |
| | 102 |
|
| Current maturities of long-term debt | 202 |
| | 452 |
|
| Asset retirement obligations | 180 |
| | 189 |
|
| Regulatory liabilities | 149 |
| | 158 |
|
| Other | 294 |
| | 365 |
|
| Total current liabilities | 2,013 |
| | 2,186 |
|
| Long-Term Debt | 6,409 |
| | 6,409 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 3,453 |
| | 3,323 |
|
| Asset retirement obligations | 4,516 |
| | 4,508 |
|
| Regulatory liabilities | 2,012 |
| | 1,946 |
|
| Accrued pension and other post-retirement benefit costs | 247 |
| | 252 |
|
| Investment tax credits | 146 |
| | 146 |
|
| Other | 49 |
| | 51 |
|
| Total other noncurrent liabilities | 10,423 |
| | 10,226 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's Equity | 7,505 |
| | 7,358 |
|
| Total Liabilities and Equity | $ | 26,500 |
| | $ | 26,329 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 147 |
| | $ | 137 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization (including amortization of nuclear fuel) | 228 |
| | 223 |
|
| Equity component of AFUDC | (13 | ) | | (10 | ) |
| Gains on sales of other assets | (3 | ) | | (2 | ) |
| Deferred income taxes | 120 |
| | 100 |
|
| Accrued pension and other post-retirement benefit costs | (5 | ) | | (8 | ) |
| Payments for asset retirement obligations | (47 | ) | | (42 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | (2 | ) | | (1 | ) |
| Receivables | 65 |
| | 18 |
|
| Receivables from affiliated companies | (1 | ) | | 10 |
|
| Inventory | 23 |
| | 15 |
|
| Other current assets | (60 | ) | | 83 |
|
| Increase (decrease) in | | | |
| Accounts payable | (192 | ) | | (16 | ) |
| Accounts payable to affiliated companies | 17 |
| | (14 | ) |
| Taxes accrued | (68 | ) | | 18 |
|
| Other current liabilities | (81 | ) | | (39 | ) |
| Other assets | (44 | ) | | (17 | ) |
| Other liabilities | (10 | ) | | (4 | ) |
| Net cash provided by operating activities | 74 |
| | 451 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (474 | ) | | (379 | ) |
| Purchases of available-for-sale securities | (476 | ) | | (390 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 470 |
| | 384 |
|
| Notes receivable from affiliated companies | 165 |
| | — |
|
| Other | (9 | ) | | (13 | ) |
| Net cash used in investing activities | (324 | ) | | (398 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | — |
| | 53 |
|
| Payments for the redemption of long-term debt | (250 | ) | | (8 | ) |
| Notes payable to affiliated companies | 502 |
| | (101 | ) |
| Other | (2 | ) | | (1 | ) |
| Net cash provided by (used in) financing activities | 250 |
| | (57 | ) |
| Net decrease in cash and cash equivalents | — |
| | (4 | ) |
| Cash and cash equivalents at beginning of period | 11 |
| | 15 |
|
| Cash and cash equivalents at end of period | $ | 11 |
| | $ | 11 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 66 |
| | $ | 55 |
|
DUKE ENERGY PROGRESS, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | |
| | Member's |
| (in millions) | Equity |
| Balance at December 31, 2015 | $ | 7,059 |
|
| Net income | 137 |
|
| Balance at March 31, 2016 | $ | 7,196 |
|
| | |
| Balance at December 31, 2016 | $ | 7,358 |
|
| Net income | 147 |
|
| Balance at March 31, 2017 | $ | 7,505 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 959 |
| | $ | 1,024 |
|
| Operating Expenses | | | |
| Fuel used in electric generation and purchased power | 362 |
| | 412 |
|
| Operation, maintenance and other | 191 |
| | 205 |
|
| Depreciation and amortization | 132 |
| | 114 |
|
| Property and other taxes | 77 |
| | 78 |
|
| Impairment charges | 1 |
| | 2 |
|
| Total operating expenses | 763 |
| | 811 |
|
| Operating Income | 196 |
| | 213 |
|
| Other Income and Expenses, net | 16 |
| | 5 |
|
| Interest Expense | 70 |
| | 41 |
|
| Income Before Income Taxes | 142 |
| | 177 |
|
| Income Tax Expense | 52 |
| | 67 |
|
| Net Income | $ | 90 |
| | $ | 110 |
|
| Other Comprehensive Income, net of tax |
| |
|
| Unrealized gains on available-for-sale securities | 1 |
| | 1 |
|
| Comprehensive Income | $ | 91 |
| | $ | 111 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 7 |
| | $ | 16 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 50 |
| | 61 |
|
| Receivables of VIEs (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 248 |
| | 288 |
|
| Receivables from affiliated companies | 2 |
| | 5 |
|
| Notes receivable from affiliated companies | 293 |
| | — |
|
| Inventory | 599 |
| | 641 |
|
| Regulatory assets (includes $53 at 2017 and $50 at 2016 related to VIEs) | 260 |
| | 213 |
|
| Other (includes $14 at 2017 and $53 at 2016 related to VIEs) | 104 |
| | 125 |
|
| Total current assets | 1,563 |
| | 1,349 |
|
| Property, Plant and Equipment | | | |
| Cost | 17,122 |
| | 16,434 |
|
| Accumulated depreciation and amortization | (4,894 | ) | | (4,644 | ) |
| Net property, plant and equipment | 12,228 |
| | 11,790 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets (includes $1,131 at 2017 and $1,142 at 2016 related to VIEs) | 2,476 |
| | 2,480 |
|
| Nuclear decommissioning trust funds | 726 |
| | 715 |
|
| Other | 268 |
| | 278 |
|
| Total other noncurrent assets | 3,470 |
| | 3,473 |
|
| Total Assets | $ | 17,261 |
| | $ | 16,612 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 361 |
| | $ | 413 |
|
| Accounts payable to affiliated companies | 77 |
| | 125 |
|
| Notes payable to affiliated companies | — |
| | 297 |
|
| Taxes accrued | 62 |
| | 33 |
|
| Interest accrued | 76 |
| | 49 |
|
| Current maturities of long-term debt (includes $55 at 2017 and $62 at 2016 related to VIEs) | 319 |
| | 326 |
|
| Regulatory liabilities | 7 |
| | 31 |
|
| Other | 309 |
| | 352 |
|
| Total current liabilities | 1,211 |
| | 1,626 |
|
| Long-Term Debt (includes $1,414 at 2017 and $1,442 at 2016 related to VIEs) | 6,662 |
| | 5,799 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 2,800 |
| | 2,694 |
|
| Asset retirement obligations | 773 |
| | 778 |
|
| Regulatory liabilities | 459 |
| | 448 |
|
| Accrued pension and other post-retirement benefit costs | 261 |
| | 262 |
|
| Other | 104 |
| | 105 |
|
| Total other noncurrent liabilities | 4,397 |
| | 4,287 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's equity | 4,989 |
| | 4,899 |
|
| Accumulated other comprehensive income | 2 |
| | 1 |
|
| Total equity | 4,991 |
| | 4,900 |
|
| Total Liabilities and Equity | $ | 17,261 |
| | $ | 16,612 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 90 |
| | $ | 110 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 134 |
| | 116 |
|
| Equity component of AFUDC | (11 | ) | | (4 | ) |
| Impairment charges | 1 |
| | 2 |
|
| Deferred income taxes | 100 |
| | 83 |
|
| Accrued pension and other post-retirement benefit costs | 1 |
| | 1 |
|
| Payments for asset retirement obligations | (14 | ) | | (12 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | — |
| | 7 |
|
| Receivables | 51 |
| | 52 |
|
| Receivables from affiliated companies | (1 | ) | | 14 |
|
| Inventory | 42 |
| | (12 | ) |
| Other current assets | (33 | ) | | (44 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (35 | ) | | 25 |
|
| Accounts payable to affiliated companies | (48 | ) | | (40 | ) |
| Taxes accrued | 29 |
| | (70 | ) |
| Other current liabilities | (47 | ) | | (14 | ) |
| Other assets | (13 | ) | | (30 | ) |
| Other liabilities | (5 | ) | | (6 | ) |
| Net cash provided by operating activities | 241 |
| | 178 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (538 | ) | | (370 | ) |
| Purchases of available-for-sale securities | (153 | ) | | (143 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 165 |
| | 164 |
|
| Proceeds from insurance | 4 |
| | 43 |
|
| Notes receivable from affiliated companies | (293 | ) | | — |
|
| Other | 9 |
| | (1 | ) |
| Net cash used in investing activities | (806 | ) | | (307 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 892 |
| | — |
|
| Payments for the redemption of long-term debt | (38 | ) | | (2 | ) |
| Notes payable to affiliated companies | (297 | ) | | 135 |
|
| Other | (1 | ) | | — |
|
| Net cash provided by financing activities | 556 |
| | 133 |
|
| Net (decrease) increase in cash and cash equivalents | (9 | ) | | 4 |
|
| Cash and cash equivalents at beginning of period | 16 |
| | 8 |
|
| Cash and cash equivalents at end of period | $ | 7 |
| | $ | 12 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 153 |
| | $ | 173 |
|
DUKE ENERGY FLORIDA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | |
| | | | Accumulated | | |
| | | | Other | | |
| | | | Comprehensive | | |
| | | | Income | | |
| | | | Net Unrealized |
| | |
| | | | Gains on |
| | |
| | Member's |
| | Available-for-Sale |
| | Total |
|
| (in millions) | Equity |
| | Securities |
| | Equity |
|
| Balance at December 31, 2015 | $ | 5,121 |
| | $ | — |
| | $ | 5,121 |
|
| Net income | 110 |
| | — |
| | 110 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
|
| Balance at March 31, 2016 | $ | 5,231 |
| | $ | 1 |
| | $ | 5,232 |
|
| | | | | | |
| Balance at December 31, 2016 | $ | 4,899 |
| | $ | 1 |
| | $ | 4,900 |
|
| Net income | 90 |
| | — |
| | 90 |
|
| Other comprehensive income | — |
| | 1 |
| | 1 |
|
| Balance at March 31, 2017 | $ | 4,989 |
| | $ | 2 |
| | $ | 4,991 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Operating Revenues | | | |
| Regulated electric | $ | 337 |
| | $ | 340 |
|
| Regulated natural gas | 170 |
| | 170 |
|
| Nonregulated electric and other | 11 |
| | 6 |
|
| Total operating revenues | 518 |
| | 516 |
|
| Operating Expenses | | | |
| Fuel used in electric generation and purchased power – regulated | 97 |
| | 111 |
|
| Fuel used in electric generation and purchased power – nonregulated | 15 |
| | 10 |
|
| Cost of natural gas | 54 |
| | 49 |
|
| Operation, maintenance and other | 130 |
| | 119 |
|
| Depreciation and amortization | 67 |
| | 61 |
|
| Property and other taxes | 72 |
| | 71 |
|
| Total operating expenses | 435 |
| | 421 |
|
| Gains on Sales of Other Assets and Other, net | — |
| | 1 |
|
| Operating Income | 83 |
| | 96 |
|
| Other Income and Expenses, net | 4 |
| | 2 |
|
| Interest Expense | 22 |
| | 20 |
|
| Income From Continuing Operations Before Income Taxes | 65 |
| | 78 |
|
| Income Tax Expense From Continuing Operations | 23 |
| | 21 |
|
| Income From Continuing Operations | 42 |
| | 57 |
|
| Income From Discontinued Operations, net of tax | — |
| | 2 |
|
| Net Income and Comprehensive Income | $ | 42 |
| | $ | 59 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 13 |
| | $ | 13 |
|
| Receivables (net of allowance for doubtful accounts of $2 at 2017 and 2016) | 63 |
| | 71 |
|
| Receivables from affiliated companies | 88 |
| | 129 |
|
| Notes receivable from affiliated companies | 179 |
| | 94 |
|
| Inventory | 118 |
| | 137 |
|
| Regulatory assets | 21 |
| | 37 |
|
| Other | 34 |
| | 37 |
|
| Total current assets | 516 |
| | 518 |
|
| Property, Plant and Equipment | | | |
| Cost | 8,236 |
| | 8,126 |
|
| Accumulated depreciation and amortization | (2,611 | ) | | (2,579 | ) |
| Net property, plant and equipment | 5,625 |
| | 5,547 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 920 |
| | 920 |
|
| Regulatory assets | 525 |
| | 520 |
|
| Other | 23 |
| | 23 |
|
| Total other noncurrent assets | 1,468 |
| | 1,463 |
|
| Total Assets | $ | 7,609 |
| | $ | 7,528 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 252 |
| | $ | 282 |
|
| Accounts payable to affiliated companies | 64 |
| | 63 |
|
| Notes payable to affiliated companies | 8 |
| | 16 |
|
| Taxes accrued | 127 |
| | 178 |
|
| Interest accrued | 33 |
| | 19 |
|
| Current maturities of long-term debt | 1 |
| | 1 |
|
| Regulatory liabilities | 21 |
| | 21 |
|
| Other | 83 |
| | 91 |
|
| Total current liabilities | 589 |
| | 671 |
|
| Long-Term Debt | 1,951 |
| | 1,858 |
|
| Long-Term Debt Payable to Affiliated Companies | 25 |
| | 25 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,472 |
| | 1,443 |
|
| Asset retirement obligations | 76 |
| | 77 |
|
| Regulatory liabilities | 236 |
| | 236 |
|
| Accrued pension and other post-retirement benefit costs | 56 |
| | 56 |
|
| Other | 166 |
| | 166 |
|
| Total other noncurrent liabilities | 2,006 |
| | 1,978 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, $8.50 par value, 120,000,000 shares authorized; 89,663,086 shares outstanding at 2017 and 2016 | 762 |
| | 762 |
|
| Additional paid-in capital | 2,695 |
| | 2,695 |
|
| Accumulated deficit | (419 | ) | | (461 | ) |
| Total equity | 3,038 |
| | 2,996 |
|
| Total Liabilities and Equity | $ | 7,609 |
| | $ | 7,528 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 42 |
| | $ | 59 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 68 |
| | 62 |
|
| Equity component of AFUDC | (2 | ) | | (1 | ) |
| Gains on sales of other assets | — |
| | (1 | ) |
| Deferred income taxes | 30 |
| | 11 |
|
| Accrued pension and other post-retirement benefit costs | 1 |
| | 1 |
|
| Payments for asset retirement obligations | (2 | ) | | (1 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | 1 |
| | 2 |
|
| Receivables | 7 |
| | (18 | ) |
| Receivables from affiliated companies | 41 |
| | (9 | ) |
| Inventory | 19 |
| | 1 |
|
| Other current assets | 9 |
| | 78 |
|
| Increase (decrease) in | | | |
| Accounts payable | (10 | ) | | (1 | ) |
| Accounts payable to affiliated companies | 1 |
| | — |
|
| Taxes accrued | (52 | ) | | (31 | ) |
| Other current liabilities | 9 |
| | 14 |
|
| Other assets | (6 | ) | | (2 | ) |
| Other liabilities | (3 | ) | | — |
|
| Net cash provided by operating activities | 153 |
| | 164 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (143 | ) | | (85 | ) |
| Notes receivable from affiliated companies | (85 | ) | | (19 | ) |
| Other | (8 | ) | | (4 | ) |
| Net cash used in investing activities | (236 | ) | | (108 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of long-term debt | 93 |
| | 95 |
|
| Payments for the redemption of long-term debt | (1 | ) | | (51 | ) |
| Notes payable to affiliated companies | (8 | ) | | (95 | ) |
| Other | (1 | ) | | — |
|
| Net cash provided by (used in) financing activities | 83 |
| | (51 | ) |
| Net increase in cash and cash equivalents | — |
| | 5 |
|
| Cash and cash equivalents at beginning of period | 13 |
| | 14 |
|
| Cash and cash equivalents at end of period | $ | 13 |
| | $ | 19 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 57 |
| | $ | 31 |
|
DUKE ENERGY OHIO, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | | | Additional |
| | | | |
| | Common |
| | Paid-in |
| | Accumulated |
| | Total |
|
| (in millions) | Stock |
| | Capital |
| | Deficit |
| | Equity |
|
| Balance at December 31, 2015 | $ | 762 |
| | $ | 2,720 |
| | $ | (698 | ) | | $ | 2,784 |
|
| Net income | — |
| | — |
| | 59 |
| | 59 |
|
| Balance at March 31, 2016 | $ | 762 |
| | $ | 2,720 |
| | $ | (639 | ) | | $ | 2,843 |
|
| | | | | | | | |
| Balance at December 31, 2016 | $ | 762 |
| | $ | 2,695 |
| | $ | (461 | ) | | $ | 2,996 |
|
| Net income | — |
| | — |
| | 42 |
| | 42 |
|
| Balance at March 31, 2017 | $ | 762 |
|
| $ | 2,695 |
|
| $ | (419 | ) |
| $ | 3,038 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Operating Revenues | $ | 758 |
| | $ | 714 |
|
| Operating Expenses | | | |
| Fuel used in electric generation and purchased power | 251 |
| | 228 |
|
| Operation, maintenance and other | 174 |
| | 162 |
|
| Depreciation and amortization | 125 |
| | 125 |
|
| Property and other taxes | 22 |
| | 23 |
|
| Total operating expenses | 572 |
| | 538 |
|
| Operating Income | 186 |
| | 176 |
|
| Other Income and Expenses, net | 8 |
| | 4 |
|
| Interest Expense | 44 |
| | 44 |
|
| Income Before Income Taxes | 150 |
| | 136 |
|
| Income Tax Expense | 59 |
| | 41 |
|
| Net Income | $ | 91 |
| | $ | 95 |
|
| Other Comprehensive Loss, net of tax | | | |
| Reclassification into earnings from cash flow hedges | — |
| | (1 | ) |
| Comprehensive Income | $ | 91 |
| | $ | 94 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 |
| | December 31, 2016 |
|
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 15 |
| | $ | 17 |
|
| Receivables (net of allowance for doubtful accounts of $1 at 2017 and 2016) | 72 |
| | 105 |
|
| Receivables from affiliated companies | 88 |
| | 114 |
|
| Notes receivable from affiliated companies | 199 |
| | 86 |
|
| Inventory | 478 |
| | 504 |
|
| Regulatory assets | 156 |
| | 149 |
|
| Other | 35 |
| | 45 |
|
| Total current assets | 1,043 |
| | 1,020 |
|
| Property, Plant and Equipment | | | |
| Cost | 14,411 |
| | 14,241 |
|
| Accumulated depreciation and amortization | (4,426 | ) | | (4,317 | ) |
| Net property, plant and equipment | 9,985 |
| | 9,924 |
|
| Other Noncurrent Assets | | | |
| Regulatory assets | 1,066 |
| | 1,073 |
|
| Other | 156 |
| | 147 |
|
| Total other noncurrent assets | 1,222 |
| | 1,220 |
|
| Total Assets | $ | 12,250 |
| | $ | 12,164 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 210 |
| | $ | 263 |
|
| Accounts payable to affiliated companies | 75 |
| | 74 |
|
| Taxes accrued | 72 |
| | 31 |
|
| Interest accrued | 52 |
| | 61 |
|
| Current maturities of long-term debt | 3 |
| | 3 |
|
| Regulatory liabilities | 44 |
| | 40 |
|
| Other | 75 |
| | 93 |
|
| Total current liabilities | 531 |
| | 565 |
|
| Long-Term Debt | 3,631 |
| | 3,633 |
|
| Long-Term Debt Payable to Affiliated Companies | 150 |
| | 150 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 1,921 |
| | 1,900 |
|
| Asset retirement obligations | 867 |
| | 866 |
|
| Regulatory liabilities | 743 |
| | 748 |
|
| Accrued pension and other post-retirement benefit costs | 77 |
| | 71 |
|
| Investment tax credits | 148 |
| | 137 |
|
| Other | 24 |
| | 27 |
|
| Total other noncurrent liabilities | 3,780 |
| | 3,749 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Member's Equity | 4,158 |
| | 4,067 |
|
| Total Liabilities and Equity | $ | 12,250 |
| | $ | 12,164 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 91 |
| | $ | 95 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation, amortization and accretion | 126 |
| | 127 |
|
| Equity component of AFUDC | (6 | ) | | (3 | ) |
| Deferred income taxes | 37 |
| | (16 | ) |
| Accrued pension and other post-retirement benefit costs | 1 |
| | 2 |
|
| Payments for asset retirement obligations | (7 | ) | | (5 | ) |
| (Increase) decrease in | | | |
| Receivables | 44 |
| | 16 |
|
| Receivables from affiliated companies | 26 |
| | 7 |
|
| Inventory | 26 |
| | 45 |
|
| Other current assets | (2 | ) | | (19 | ) |
| Increase (decrease) in | | | |
| Accounts payable | (32 | ) | | (44 | ) |
| Accounts payable to affiliated companies | 1 |
| | (22 | ) |
| Taxes accrued | 41 |
| | 30 |
|
| Other current liabilities | (15 | ) | | (18 | ) |
| Other assets | (11 | ) | | (4 | ) |
| Other liabilities | (3 | ) | | (11 | ) |
| Net cash provided by operating activities | 317 |
| | 180 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (189 | ) | | (151 | ) |
| Purchases of available-for-sale securities | (4 | ) | | (5 | ) |
| Proceeds from sales and maturities of available-for-sale securities | 2 |
| | 4 |
|
| Notes receivable from affiliated companies | (113 | ) | | (19 | ) |
| Other | (12 | ) | | (1 | ) |
| Net cash used in investing activities | (316 | ) | | (172 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Payments for the redemption of long-term debt | (2 | ) | | — |
|
| Other | (1 | ) | | — |
|
| Net cash used in financing activities | (3 | ) | | — |
|
| Net (decrease) increase in cash and cash equivalents | (2 | ) |
| 8 |
|
| Cash and cash equivalents at beginning of period | 17 |
| | 9 |
|
| Cash and cash equivalents at end of period | $ | 15 |
| | $ | 17 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 84 |
| | $ | 42 |
|
DUKE ENERGY INDIANA, LLC
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | 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 | — |
| | — |
| | — |
| | 95 |
| | — |
| | 95 |
|
| Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | (1 | ) | | (1 | ) |
| Transfer to Member's Equity | (1 | ) | | (1,384 | ) | | (2,450 | ) | | 3,835 |
| | — |
| | — |
|
| Balance at March 31, 2016 | $ | — |
| | $ | — |
| | $ | — |
|
| $ | 3,930 |
| | $ | — |
| | $ | 3,930 |
|
| | | | | | | | | | | | |
| Balance at December 31, 2016 | $ | — |
| | $ | — |
| | $ | — |
| | $ | 4,067 |
| | $ | — |
| | $ | 4,067 |
|
| Net income | — |
| | — |
| | — |
| | 91 |
| | — |
| | 91 |
|
| Balance at March 31, 2017 | $ | — |
| | $ | — |
| | $ | — |
|
| $ | 4,158 |
| | $ | — |
| | $ | 4,158 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| | 2017 |
| | 2016 |
|
| Operating Revenues | | | |
| Regulated natural gas | $ | 498 |
| | $ | 481 |
|
| Nonregulated natural gas and other | 2 |
| | 2 |
|
| Total operating revenues | 500 |
| | 483 |
|
| Operating Expenses | | | |
| Cost of natural gas | 205 |
| | 197 |
|
| Operation, maintenance and other | 77 |
| | 74 |
|
| Depreciation and amortization | 35 |
| | 34 |
|
| Property and other taxes | 13 |
| | 11 |
|
| Total operating expenses | 330 |
| | 316 |
|
| Operating Income | 170 |
| | 167 |
|
| Equity in Earnings of Unconsolidated Affiliates | 3 |
| | 16 |
|
| Interest Expense | 20 |
| | 17 |
|
| Income Before Income Taxes | 153 |
| | 166 |
|
| Income Tax Expense | 58 |
| | 63 |
|
| Net Income and Comprehensive Income | $ | 95 |
| | $ | 103 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 | | December 31, 2016 |
| ASSETS | | | |
| Current Assets | | | |
| Cash and cash equivalents | $ | 15 |
| | $ | 25 |
|
| Receivables (net of allowance for doubtful accounts of $5 at 2017 and $3 at 2016) | 193 |
| | 232 |
|
| Receivables from affiliated companies | 7 |
| | 7 |
|
| Inventory | 29 |
| | 66 |
|
| Regulatory assets | 98 |
| | 124 |
|
| Other | 21 |
| | 21 |
|
| Total current assets | 363 |
| | 475 |
|
| Property, Plant and Equipment | | | |
| Cost | 6,297 |
| | 6,174 |
|
| Accumulated depreciation and amortization | (1,390 | ) | | (1,360 | ) |
| Net property, plant and equipment | 4,907 |
| | 4,814 |
|
| Other Noncurrent Assets | | | |
| Goodwill | 49 |
| | 49 |
|
| Regulatory assets | 350 |
| | 373 |
|
| Investments in equity method unconsolidated affiliates | 225 |
| | 212 |
|
| Other | 19 |
| | 21 |
|
| Total other noncurrent assets | 643 |
| | 655 |
|
| Total Assets | $ | 5,913 |
| | $ | 5,944 |
|
| LIABILITIES AND EQUITY | | | |
| Current Liabilities | | | |
| Accounts payable | $ | 104 |
| | $ | 155 |
|
| Accounts payable to affiliated companies | 3 |
| | 8 |
|
| Notes payable and commercial paper | — |
| | 330 |
|
| Notes payable to affiliated companies | 261 |
| | — |
|
| Taxes accrued | 69 |
| | 67 |
|
| Interest accrued | 27 |
| | 33 |
|
| Current maturities of long-term debt | 35 |
| | 35 |
|
| Other | 70 |
| | 102 |
|
| Total current liabilities | 569 |
| | 730 |
|
| Long-Term Debt | 1,786 |
| | 1,786 |
|
| Other Noncurrent Liabilities | | | |
| Deferred income taxes | 981 |
| | 931 |
|
| Asset retirement obligations | 14 |
| | 14 |
|
| Regulatory liabilities | 613 |
| | 608 |
|
| Accrued pension and other post-retirement benefit costs | 14 |
| | 14 |
|
| Other | 169 |
| | 189 |
|
| Total other noncurrent liabilities | 1,791 |
| | 1,756 |
|
| Commitments and Contingencies |
| |
|
| Equity | | | |
| Common stock, no par value: 100 shares authorized and outstanding at 2017 and 2016 | 860 |
| | 860 |
|
| Retained earnings | 907 |
| | 812 |
|
| Total equity | 1,767 |
| | 1,672 |
|
| Total Liabilities and Equity | $ | 5,913 |
| | $ | 5,944 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| CASH FLOWS FROM OPERATING ACTIVITIES | | | |
| Net income | $ | 95 |
| | $ | 103 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | |
| Depreciation and amortization | 37 |
| | 37 |
|
| Deferred income taxes | 50 |
| | 68 |
|
| Equity in earnings from unconsolidated affiliates | (3 | ) | | (16 | ) |
| Accrued pension and other post-retirement benefit costs | 3 |
| | 1 |
|
| Payments for asset retirement obligations | — |
| | (1 | ) |
| (Increase) decrease in | | | |
| Net realized and unrealized mark-to-market and hedging transactions | (41 | ) | | — |
|
| Receivables | 40 |
| | (14 | ) |
| Inventory | 37 |
| | 49 |
|
| Other current assets | 24 |
| | 20 |
|
| Increase (decrease) in | | | |
| Accounts payable | (31 | ) | | (21 | ) |
| Accounts payable to affiliated companies | (5 | ) | | — |
|
| Taxes accrued | 2 |
| | 3 |
|
| Other current liabilities | (17 | ) | | (9 | ) |
| Other assets | 25 |
| | 23 |
|
| Other liabilities | (1 | ) | | (20 | ) |
| Net cash provided by operating activities | 215 |
| | 223 |
|
| CASH FLOWS FROM INVESTING ACTIVITIES | | | |
| Capital expenditures | (141 | ) | | (132 | ) |
| Contributions to equity method investments | (12 | ) | | (9 | ) |
| Other | (3 | ) | | (1 | ) |
| Net cash used in investing activities | (156 | ) | | (142 | ) |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | |
| Proceeds from the issuance of common stock | — |
| | 7 |
|
| Notes payable and commercial paper | (330 | ) | | (80 | ) |
| Notes payable to affiliated companies | 261 |
| | — |
|
| Dividends paid | — |
| | (27 | ) |
| Net cash used in financing activities | (69 | ) | | (100 | ) |
| Net decrease in cash and cash equivalents | (10 | ) | | (19 | ) |
| Cash and cash equivalents at beginning of period | 25 |
| | 33 |
|
| Cash and cash equivalents at end of period | $ | 15 |
| | $ | 14 |
|
| Supplemental Disclosures: | | | |
| Significant non-cash transactions: | | | |
| Accrued capital expenditures | $ | 24 |
| | $ | 43 |
|
PIEDMONT NATURAL GAS COMPANY, INC.
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
|
| | | | | | | | | | | | | | | |
| | | | | | Accumulated | | |
| | | | | | Other | | |
| | | | | | Comprehensive | | |
| | | | | | Income | | |
| | | | | | Net Loss on |
| | |
| | | | | | Hedging Activities |
| | |
| | Common |
| | Retained |
| | of Unconsolidated |
| | Total |
|
| (in millions) | Stock |
| | Earnings |
| | Affiliates |
| | Equity |
|
| Balance at December 31, 2015 | $ | 728 |
| | $ | 731 |
| | $ | (1 | ) | | $ | 1,458 |
|
| Net income | — |
| | 103 |
| | — |
| | 103 |
|
| Common stock issuances, including dividend reinvestments and employee benefits | 7 |
| | — |
| | — |
| | 7 |
|
| Common stock dividends | — |
| | (27 | ) | | — |
| | (27 | ) |
| Balance at March 31, 2016 | $ | 735 |
| | $ | 807 |
| | $ | (1 | ) | | $ | 1,541 |
|
| | | | | | | | |
| Balance at December 31, 2016 | $ | 860 |
| | $ | 812 |
| | $ | — |
| | $ | 1,672 |
|
| Net income | — |
| | 95 |
| | — |
| | 95 |
|
| Balance at March 31, 2017 | $ | 860 |
| | $ | 907 |
| | $ | — |
| | $ | 1,767 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited)
Index to Combined Notes to Condensed Consolidated Financial Statements
The unaudited notes to the condensed consolidated financial statements that follow are a combined presentation. The following list indicates the registrants to which the footnotes apply. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Applicable Notes |
| Registrant | 1 | | 2 | | 3 | | 4 | | 5 | | 6 | | 7 | | 8 | | 9 | | 10 | | 11 | | 12 | | 13 | | 14 | | 15 | | 16 | | 17 |
| Duke Energy Corporation | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • |
| Duke Energy Carolinas, LLC | • | | | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Progress Energy, Inc. | • | | | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Progress, LLC | • | | | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Florida, LLC | • | | | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Duke Energy Ohio, Inc. | • | | | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | | | | | • | | • | | • |
| Duke Energy Indiana, LLC | • | | | | • | | • | | • | | • | | | | • | | • | | • | | • | | • | | | | | | • | | • | | • |
| Piedmont Natural Gas Company, Inc. | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | • | | | | • | | • | | • | | • |
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, (ii) subsidiaries that are not registrants but included in the consolidated Duke Energy balances and (iii) the Piedmont registrant not included in the consolidated Duke Energy results for the three months ended March 31, 2016, as Piedmont results were not consolidated by Duke Energy until after the acquisition date of October 3, 2016.
1. ORGANIZATION AND BASIS OF PRESENTATION
NATURE OF OPERATIONS AND BASIS OF CONSOLIDATION
Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) is an energy company headquartered in Charlotte, North Carolina, subject to regulation by the Federal Energy Regulatory Commission (FERC). Duke Energy operates in the United States (U.S.) primarily through its direct and indirect subsidiaries. Certain Duke Energy subsidiaries are also subsidiary registrants, including Duke Energy Carolinas, LLC (Duke Energy Carolinas); Progress Energy, Inc. (Progress Energy); Duke Energy Progress, LLC (Duke Energy Progress); Duke Energy Florida, LLC (Duke Energy Florida); Duke Energy Ohio, Inc. (Duke Energy Ohio), Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont). When discussing Duke Energy’s consolidated financial information, it necessarily includes the results of its separate subsidiary registrants (collectively referred to as the Subsidiary Registrants), which, along with Duke Energy, are collectively referred to as the Duke Energy Registrants.
On October 3, 2016, Duke Energy completed the acquisition of Piedmont. Piedmont's results of operations and cash flows are included in the accompanying condensed consolidated financial statements of Duke Energy for the three months ended March 31, 2017, but not for the three months ended March 31, 2016, as Piedmont's earnings and cash flows are only included in Duke Energy's consolidated results subsequent to the acquisition date. See Note 2 for additional information regarding the acquisition.
In December 2016, Duke Energy completed an exit of the Latin American market to focus on its domestic regulated business, which was further bolstered by the acquisition of Piedmont. The sale of the International Energy business segment, excluding an equity method investment in National Methanol Company (NMC), was completed through two transactions including a sale of assets in Brazil to China Three Gorges (Luxembourg) Energy S.à.r.l. (China Three Gorges) and a sale of Duke Energy's remaining Latin American assets in Peru, Chile, Ecuador, Guatemala, El Salvador and Argentina to ISQ Enerlam Aggregator, L.P. and Enerlam (UK) Holding Ltd. (I Squared Capital) (collectively, the International Disposal Group). See Note 2 for additional information on the sale of International Energy.
The results of operations of the International Disposal Group have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these Condensed Consolidated Financial Statements exclude amounts related to discontinued operations. See Note 2 for additional information.
These Condensed Consolidated Financial Statements include, after eliminating intercompany transactions and balances, the accounts of the Duke Energy Registrants and subsidiaries where the respective Duke Energy Registrants have control. These Condensed Consolidated Financial Statements also reflect the Duke Energy Registrants’ proportionate share of certain jointly owned generation and transmission facilities. Substantially all of the Subsidiary Registrants' operations qualify for regulatory accounting.
Duke Energy Carolinas is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Carolinas is subject to the regulatory provisions of the North Carolina Utilities Commission (NCUC), Public Service Commission of South Carolina (PSCSC), U.S. Nuclear Regulatory Commission (NRC) and FERC.
Progress Energy is a public utility holding company headquartered in Raleigh, North Carolina, subject to regulation by FERC. Progress Energy conducts operations through its wholly owned subsidiaries, Duke Energy Progress and Duke Energy Florida.
Duke Energy Progress is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of North Carolina and South Carolina. Duke Energy Progress is subject to the regulatory provisions of the NCUC, PSCSC, NRC and FERC.
Duke Energy Florida is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Duke Energy Florida is subject to the regulatory provisions of the Florida Public Service Commission (FPSC), NRC and FERC.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Ohio is a regulated public utility primarily engaged in the transmission and distribution of electricity in portions of Ohio and Kentucky, the generation and sale of electricity in portions of Kentucky and the transportation and sale of natural gas in portions of Ohio and Kentucky. Duke Energy Ohio conducts competitive auctions for retail electricity supply in Ohio whereby the energy price is recovered from retail customers and recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Operations in Kentucky are conducted through its wholly owned subsidiary, Duke Energy Kentucky, Inc. (Duke Energy Kentucky). References herein to Duke Energy Ohio collectively include Duke Energy Ohio and its subsidiaries, unless otherwise noted. Duke Energy Ohio is subject to the regulatory provisions of the Public Utilities Commission of Ohio (PUCO), Kentucky Public Service Commission (KPSC) and FERC.
Duke Energy Indiana is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Indiana. Duke Energy Indiana is subject to the regulatory provisions of the Indiana Utility Regulatory Commission (IURC) and FERC.
Piedmont is a regulated public utility primarily engaged in the distribution of natural gas in portions of North Carolina, South Carolina and Tennessee. Piedmont is also invested in joint venture, energy-related businesses, including regulated interstate natural gas transportation and storage and intrastate natural gas transportation businesses. Piedmont is subject to the regulatory provisions of the NCUC, PSCSC, Tennessee Public Utility Commission (formerly the Tennessee Regulatory Authority) (TPUC) and FERC.
BASIS OF PRESENTATION
Duke Energy completed the sale of Duke Energy Ohio's nonregulated Midwest generation business and Duke Energy Retail Sales (collectively, the Midwest Generation Disposal Group), a retail sales business owned by Duke Energy, to Dynegy on April 2, 2015. The results of operations of these businesses prior to the date of sale have been classified as Discontinued Operations on the Condensed Consolidated Statements of Operations. Duke Energy has elected to present cash flows of discontinued operations combined with cash flows of continuing operations. Unless otherwise noted, the notes to these Condensed Consolidated Financial Statements exclude amounts related to discontinued operations. See Note 2 for additional information.
These Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these Condensed Consolidated Financial Statements do not include all information and notes required by GAAP in the U.S. for annual financial statements. Since the interim Condensed Consolidated Financial Statements and Notes do not include all information and notes required by GAAP in the U.S. for annual financial statements, the Condensed Consolidated Financial Statements and other information included in this quarterly report should be read in conjunction with the Consolidated Financial Statements and Notes in the Duke Energy Registrants’ combined Annual Report on Form 10-K for the year ended December 31, 2015.2016, and the Consolidated Financial Statements and Notes in the Piedmont Annual Report on Form 10-K for the year ended October 31, 2016.
Effective November 1, 2016, Piedmont's fiscal year-end was changed from October 31 to December 31, the year-end of Duke Energy. A transition report was filed on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016 to December 31, 2016.
The information in these combined notes relates to each of the Duke Energy Registrants as noted in the Index to Combined Notes to Condensed Consolidated Financial Statements. However, none of the registrants make any representations as to information related solely to Duke Energy or the subsidiaries of Duke Energy other than itself.
These Condensed Consolidated Financial Statements, in the opinion of the respective companies’ management, reflect all normal recurring adjustments necessary to fairly present the financial position and results of operations of each of the Duke Energy Registrants. Amounts reported in Duke Energy’s interim Condensed Consolidated Statements of Operations and each of the Subsidiary Registrants’ interim Condensed Consolidated Statements of Operations and Comprehensive Income are not necessarily indicative of amounts expected for the respective annual periods due to effects of seasonal temperature variations on energy consumption, regulatory rulings, timing of maintenance on electric generating units, changes in mark-to-market valuations, changing commodity prices and other factors.
In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Certain prior year amounts have been reclassified to conform to the current year presentation.
UNBILLED REVENUE
Revenues on sales of electricity and natural gas are recognized when service is provided or the product is delivered. Unbilled revenues are recognized by applying customer billing rates to the estimated volumes of energy and natural gas delivered but not yet billed. Unbilled revenues can vary significantly from period to period as a result of seasonality, weather, customer usage patterns, customer mix, average price in effect for customer classes, timing of rendering customer bills, and meter reading schedules.schedules, and the impact of weather normalization or margin decoupling mechanisms.
Unbilled revenues which are included within Receivables and Receivables of variable interest entities (VIEs) on the Condensed Consolidated Balance Sheets are presentedas shown in the following table. | | | (in millions) | September 30, 2016 |
| | December 31, 2015 |
| March 31, 2017 |
| | December 31, 2016 |
|
| Duke Energy | $ | 800 |
| | $ | 748 |
| $ | 724 |
| | $ | 831 |
|
| Duke Energy Carolinas | 318 |
| | 283 |
| 296 |
| | 313 |
|
| Progress Energy | 195 |
| | 172 |
| 151 |
| | 161 |
|
| Duke Energy Progress | 96 |
| | 102 |
| 84 |
| | 102 |
|
| Duke Energy Florida | 99 |
| | 70 |
| 67 |
| | 59 |
|
| Duke Energy Ohio | 2 |
| | 3 |
| 2 |
| | 2 |
|
| Duke Energy Indiana | 36 |
| | 31 |
| 27 |
| | 32 |
|
| Piedmont | | 38 |
| | 77 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Additionally, Duke Energy Ohio and Duke Energy Indiana sell nearly all of their retail accounts receivable to an affiliate, Cinergy Receivables Company, LLC (CRC), on a revolving basis. These transfers of receivables are accounted for as sales and include receivables for unbilled revenues. Accordingly, the receivables sold are not reflected on the Condensed Consolidated Balance Sheets of Duke Energy Ohio and Duke Energy Indiana. See Note 1312 for further information. These receivables for unbilled revenues are shown in the table below. |
| | | | | | | |
| (in millions) | September 30, 2016 |
| | December 31, 2015 |
|
| Duke Energy Ohio | $ | 72 |
| | $ | 71 |
|
| Duke Energy Indiana | 109 |
| | 97 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
|
| | | | | | | |
| (in millions) | March 31, 2017 |
| | December 31, 2016 |
|
| Duke Energy Ohio | $ | 69 |
| | $ | 97 |
|
| Duke Energy Indiana | 106 |
| | 123 |
|
AMOUNTS ATTRIBUTABLE TO CONTROLLING INTERESTS
Duke Energy's amount of Income (Loss) from Discontinued Operations, net of tax presented on the respective Condensed Consolidated Statements of Operations for the three months ended March 31, 2016, includes amounts attributable to noncontrolling interest. The following table presents Net Income Attributable to Duke Energy Corporation for continuing operations and Progress Energy is attributable only to controlling interests for all periods presented.discontinued operations. |
| | | |
| | Three Months Ended |
| (in millions) | March 31, 2016 |
| Income from Continuing Operations | $ | 577 |
|
| Income from Continuing Operations Attributable to Noncontrolling Interests | 3 |
|
| Income from Continuing Operations Attributable to Duke Energy Corporation | $ | 574 |
|
| Income from Discontinued Operations, net of tax | $ | 122 |
|
| Income from Discontinued Operations Attributable to Noncontrolling Interests, net of tax | 2 |
|
| Income from Discontinued Operations Attributable to Duke Energy Corporation, net of tax | $ | 120 |
|
| Net Income | $ | 699 |
|
| Net Income Attributable to Noncontrolling Interests | 5 |
|
| Net Income Attributable to Duke Energy Corporation | $ | 694 |
|
INVENTORY
Inventory is used for operations and is recorded primarily using the average cost method. Inventory related to regulated operations is valued at historical cost. Inventory related to nonregulated operations is valued at the lower of cost or market. Materials and supplies are recorded as inventory when purchased and subsequently charged to expense or capitalized to property, plant and equipment when installed. Reserves are establishedInventory, including excess or obsolete inventory, is written-down to the lower of cost or market value. Once inventory has been written-down, it creates a new cost basis for excess and obsolete inventory. Inventory reservesthe inventory that is not subsequently written-up. Provisions for inventory write-offs were not material at September 30, 2016for the three months ended March 31, 2017 and December 31, 2015.2016. The components of inventory are presented in the tables below. | | | | September 30, 2016 | March 31, 2017 |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Materials and supplies | $ | 2,312 |
| | $ | 760 |
| | $ | 1,139 |
| | $ | 781 |
| | $ | 358 |
| | $ | 85 |
| | $ | 236 |
| $ | 2,328 |
| | $ | 766 |
| | $ | 1,122 |
| | $ | 780 |
| | $ | 341 |
| | $ | 85 |
| | $ | 315 |
| | $ | 2 |
|
| Coal held for electric generation | 743 |
| | 256 |
| | 277 |
| | 101 |
| | 177 |
| | 18 |
| | 186 |
| |
| Oil, gas and other fuel held for electric generation | 296 |
| | 37 |
| | 237 |
| | 116 |
| | 121 |
| | 7 |
| | 2 |
| |
| Coal | | 724 |
| | 248 |
| | 297 |
| | 162 |
| | 135 |
| | 17 |
| | 161 |
| | — |
|
| Natural gas, oil and other fuel | | 314 |
| | 37 |
| | 233 |
| | 111 |
| | 123 |
| | 16 |
| | 2 |
| | 27 |
|
| Total inventory | $ | 3,351 |
| | $ | 1,053 |
| | $ | 1,653 |
| | $ | 998 |
| | $ | 656 |
| | $ | 110 |
| | $ | 424 |
| $ | 3,366 |
| | $ | 1,051 |
| | $ | 1,652 |
| | $ | 1,053 |
| | $ | 599 |
| | $ | 118 |
| | $ | 478 |
| | $ | 29 |
|
| | | | December 31, 2015 | December 31, 2016 | | |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Materials and supplies | $ | 2,389 |
| | $ | 785 |
| | $ | 1,133 |
| | $ | 776 |
| | $ | 357 |
| | $ | 81 |
| | $ | 301 |
| $ | 2,374 |
| | $ | 767 |
| | $ | 1,167 |
| | $ | 813 |
| | $ | 354 |
| | $ | 84 |
| | $ | 312 |
| | $ | 1 |
|
| Coal held for electric generation | 1,114 |
| | 451 |
| | 370 |
| | 192 |
| | 178 |
| | 16 |
| | 267 |
| |
| Oil, gas and other fuel held for electric generation | 307 |
| | 40 |
| | 248 |
| | 120 |
| | 128 |
| | 8 |
| | 2 |
| |
| Coal | | 774 |
| | 251 |
| | 314 |
| | 148 |
| | 166 |
| | 19 |
| | 190 |
| | — |
|
| Natural gas, oil and other fuel | | 374 |
| | 37 |
| | 236 |
| | 115 |
| | 121 |
| | 34 |
| | 2 |
| | 65 |
|
| Total inventory | $ | 3,810 |
| | $ | 1,276 |
| | $ | 1,751 |
| | $ | 1,088 |
| | $ | 663 |
| | $ | 105 |
| | $ | 570 |
| $ | 3,522 |
| | $ | 1,055 |
| | $ | 1,717 |
| | $ | 1,076 |
| | $ | 641 |
| | $ | 137 |
| | $ | 504 |
| | $ | 66 |
|
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, excise taxes are accounted for net.
Excise taxes accounted for on a gross basis as both operating revenues and property and other taxes on the Condensed Consolidated Statements of Operations were as follows. |
| | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
|
| Duke Energy | $ | 107 |
|
| $ | 109 |
|
| $ | 285 |
|
| $ | 308 |
|
| Duke Energy Carolinas | 6 |
| | 9 |
| | 21 |
| | 27 |
|
| Progress Energy | 65 |
| | 67 |
| | 161 |
| | 174 |
|
| Duke Energy Progress | 4 |
| | 4 |
| | 13 |
| | 12 |
|
| Duke Energy Florida | 61 |
| | 63 |
| | 148 |
| | 162 |
|
| Duke Energy Ohio | 26 |
| | 24 |
| | 77 |
| | 80 |
|
| Duke Energy Indiana | 10 |
| | 9 |
| | 26 |
| | 27 |
|
NEW ACCOUNTING STANDARDS
The new accounting standards adopted for 2016 and 2015 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by Duke Energy, as of September 30, 2016.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Revenue from Contracts with Customers.Excise taxes accounted for on a gross basis as both operating revenues and property and other taxes on the Condensed Consolidated Statements of Operations were as follows. |
| | | | | | | |
| | Three Months Ended March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Duke Energy | $ | 91 |
|
| $ | 91 |
|
| Duke Energy Carolinas | 9 |
| | 8 |
|
| Progress Energy | 46 |
| | 47 |
|
| Duke Energy Progress | 5 |
| | 5 |
|
| Duke Energy Florida | 41 |
| | 42 |
|
| Duke Energy Ohio | 28 |
| | 28 |
|
| Duke Energy Indiana | 7 |
| | 8 |
|
| Piedmont | 1 |
| | 1 |
|
NEW ACCOUNTING STANDARDS
The new accounting standards adopted for 2017 and 2016 had no material impact on the presentation or results of operations, cash flows or financial position of the Duke Energy Registrants. While immaterial, adoption of the following accounting standard had the most significant impact on the Duke Energy results of operations, cash flows and financial position for the three months ended March 31, 2017.
Stock-Based Compensation and Income Taxes. In May 2014, theMarch 2017, Duke Energy adopted Financial Accounting Standards Board (FASB) guidance, which revised the accounting for stock-based compensation and the associated income taxes. The adopted guidance changes certain aspects of accounting for stock-based payment awards to employees including the accounting for income taxes and classification on the Condensed Consolidated Statements of Cash Flows. The primary impact to Duke Energy as a result of implementing this guidance was a cumulative-effect adjustment to retained earnings for tax benefits not previously recognized and higher income tax expense for the three months ended March 31, 2017. See the Duke Energy Condensed Consolidated Statements of Changes in Equity and Note 16 for further information.
The following new Accounting Standards Updates (ASUs) have been issued, but have not yet been adopted by Duke Energy, as of March 31, 2017.
Retirement Benefits. In March 2017, the FASB issued revised accounting guidance for the presentation of net periodic costs related to benefit plans. Current GAAP permits the aggregation of all the components of net periodic costs on the income statement and does not require the disclosure of the location of net periodic costs on the Condensed Consolidated Statement of Operations. Under the amended guidance, the service cost component of net periodic costs must be included within Operating income within the same line as other compensation expenses. All other components of net periodic costs must be outside of Operating income. In addition, the updated guidance permits only the service cost component of net periodic costs to be capitalized to Inventory or Property, Plant and Equipment. This represents a change from current GAAP, which permits all components of net periodic costs to be capitalized. The guidance allows for a practical expedient that permits a company to use amounts disclosed in prior-period financial statements as the estimation basis for applying the retrospective presentation requirements.
For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2018. These amendments should be applied retrospectively for the presentation of the various components of net periodic costs and prospectively for the change in eligible costs to be capitalized. Duke Energy currently presents all of the components of net periodic costs that are not capitalized within Operation, maintenance and other on the Condensed Consolidated Statement of Operations. Under this updated guidance, Duke Energy will retrospectively move all the components of net periodic costs except for the service cost component to below Operating income. However, Duke Energy will continue to present the service cost component not capitalized within Operation, maintenance and other as this line item includes other compensation expense. Duke Energy is currently evaluating the financial statement impact, if any, of adopting this standard and whether or not the practical expedient will be utilized.
Goodwill Impairment. In January 2017, the FASB issued revised guidance for subsequent measurement of goodwill. Under the guidance, a company will recognize an impairment to goodwill for the amount by which a reporting unit's carrying value exceeds the reporting unit's fair value, not to exceed the amount of goodwill allocated to that reporting unit. For Duke Energy, this guidance is effective for interim and annual periods beginning January 1, 2020. However, Duke Energy expects to early adopt this guidance on a prospective basis for the next interim or annual goodwill impairment test. Duke Energy does not expect adopting this guidance will have a material impact to its results of operations or financial position.
Revenue from Contracts with Customers. In May 2014, the FASB issued revised accounting guidance for revenue recognition from contracts with customers. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this update also require disclosure of sufficient information to allow users to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Most of Duke Energy’s revenue is expected to be in scope of the new guidance. The majority of our sales, including energy provided to residential customers, are from tariff offerings that provide natural gas or electricity without a defined contractual term (‘at-will’). For such arrangements, Duke Energy Registrants intendexpects that the revenue from contracts with customers will be equivalent to adopt the revisedelectricity or natural gas supplied and billed in that period (including estimated billings). As such, Duke Energy does not expect that there will be a significant shift in the timing or pattern of revenue recognition for such sales. The evaluation of other revenue streams is ongoing, including long-term contracts with industrial customers and long-term purchase power agreements (PPA).
Duke Energy continues to evaluate what information would be most useful for users of the financial statements, including information already provided in disclosures outside of the financial statement footnotes. These additional disclosures could include the disaggregation of revenues by geographic location, type of service, customer class or by duration of contract (‘at-will’ versus contracted revenue). Revenues from contracts with customers, revenue recognized under regulated operations accounting guidanceand revenue from lease accounting will also be disclosed.
Duke Energy intends to use the modified retrospective method of adoption effective for interim and annual periods beginning January 1, 2018. The guidance canThis method results in a cumulative-effect adjustment that will be applied retrospectivelyrecorded to all prior reporting periods presented or retrospectively with a cumulative effectretained earnings as of January 1, 2018, as if the initial datestandard had always been in effect. Disclosures for 2018 will include a comparison to what would have been reported for 2018 under the current revenue recognition rules in order to assist financial statement users in understanding how revenue recognition has changed as a result of application. Duke Energy is currently evaluatingthis standard and to facilitate comparability with prior year reported results, which are not restated under the requirements. The ultimate impact of the new standard has not yet been determined.modified retrospective approach.
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 the Duke Energy, Registrants, this guidance is effective for interim and annual periods beginning January 1, 2019, although it can be early adopted. The guidance is applied using a modified retrospective approach. Duke Energy is currently evaluating the requirements.financial statement impact of adopting this standard. Other than an expected increase in assets and liabilities, the ultimate impact of the new standard has not yet been determined. Significant system enhancements may be required to facilitate the identification, tracking and reporting of potential leases based upon requirements of the new lease standard.
Stock-Based Compensation and Income Taxes.Statement of Cash Flows. In MarchNovember 2016, the FASB issued revised accounting guidance for stock-based compensation and the associated income taxes. This standard changes certain aspects of accounting for stock-based payment awards to employees including the accounting for income taxes, statutory tax withholding requirements, as well as classification on the Condensed Consolidated Statements of Cash Flows. The primary future impact to the Duke Energy Registrants is expected to be an increase in the volatility of income tax expense. This guidance will be adopted for the period beginning January 1, 2017.
Cash Flow Statement. In August 2016, the FASB issued revised accounting guidance for classification of certain cash receipts and payments. Stakeholders indicatedreduce diversity in practice in how certainfor the presentation and classification of restricted cash receiptson the statement of cash flows. Under the updated guidance, restricted cash and restricted cash equivalents will be included within beginning-of-period and end-of-period cash and cash payments are presented and classified inequivalents on the statement of cash flows.
For the Duke Energy, Registrants, this guidance is effective for the interim and annual periods beginning January 1, 2018, although it can be early adopted. The guidance iswill be applied using a retrospective transition method to each period presented, if practical.presented. Upon adoption by Duke Energy, is currently evaluating the requirements. The ultimate impactrevised guidance will result in a change to the amount of cash and cash equivalents and restricted cash explained when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Prior to adoption, the Duke Energy Registrants reflect changes in restricted cash within Cash Flows from Investing Activities on the Condensed Consolidated Statement of Cash Flows.
Financial Instruments Classification and Measurement. In January 2016, the FASB issued revised accounting guidance for the classification and measurement of financial instruments. Changes in the fair value of all equity securities will be required to be recorded in net income. Current GAAP allows some changes in fair value for available-for-sale equity securities to be recorded in Accumulated other comprehensive income (AOCI). Additional disclosures will be required to present separately the financial assets and financial liabilities by measurement category and form of financial asset. An entity's equity investments that are accounted for under the equity method of accounting are not included within the scope of the new standard has not yet been determined.guidance.
For Duke Energy, the revised accounting guidance is effective for interim and annual periods beginning January 1, 2018, by recording a cumulative-effect adjustment to retained earnings as of January 1, 2018. This guidance is expected to have minimal impact on the Duke Energy Registrant's Condensed Consolidated Statements of Operations and Comprehensive Income as changes in the fair value of most of the Duke Energy Registrants' available-for-sale equity securities are deferred as regulatory assets or liabilities pursuant to accounting guidance for regulated operations.
2. ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
The Duke Energy Registrants consolidate assets and liabilities from acquisitions as of the purchase date, and include earnings from acquisitions in consolidated earnings after the purchase date.
Acquisition of Piedmont Natural Gas
Piedmont Natural Gas is a North Carolina corporation primarily engaged in regulated natural gas distribution to residential, commercial, industrial and power generation customers in portions of North Carolina, South Carolina and Tennessee. On October 3, 2016, Duke Energy completed the acquisition contemplated by the Agreement and Planacquired all outstanding common stock of Merger (Merger Agreement) with Piedmont for a total cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $5.0 billion.$2.0 billion at the time of the acquisition. The acquisition provides a foundation for establishingDuke Energy to establish a broader, long-term strategic natural gas infrastructure platform within Duke Energy to complement theits existing natural gas pipeline investments and regulated natural gas business in the Midwest. As a resultIn connection with the closing of the acquisition, Piedmont became a wholly owned subsidiary of Duke Energy.
Preliminary Purchase Price Allocation
The preliminary purchase price allocation of the Piedmont acquisition is estimated as follows: |
| | | |
| (in millions) | |
| Current assets | $ | 500 |
|
| Property, plant and equipment, net | 4,710 |
|
| Goodwill | 3,380 |
|
| Other long-term assets | 810 |
|
| Total assets | 9,400 |
|
| Current liabilities, including current maturities of long-term debt | 590 |
|
| Long-term liabilities | 1,810 |
|
| Long-term debt | 2,000 |
|
| Total liabilities | 4,400 |
|
| Total purchase price | $ | 5,000 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Purchase Price Allocation
The estimatedpurchase price allocation of the Piedmont acquisition is as follows: |
| | | |
| (in millions) | |
| Current assets | $ | 497 |
|
| Property, plant and equipment, net | 4,714 |
|
| Goodwill | 3,353 |
|
| Other long-term assets | 804 |
|
| Total assets | 9,368 |
|
| Current liabilities, including current maturities of long-term debt | 576 |
|
| Long-term liabilities | 1,790 |
|
| Long-term debt | 2,002 |
|
| Total liabilities | 4,368 |
|
| Total purchase price | $ | 5,000 |
|
The fair value of Piedmont's assets acquired and liabilities assumed are considered preliminary as a result of the short time period between the consummation of the merger and the filing of this Form 10-Q. The fair values were determined based on significant estimates and assumptions that are judgmental in nature, including projected future cash flows (including timing);, discount rates reflecting risk inherent in the future cash flows and market prices of long-term debt. The preliminary amounts are subject to revision until the valuations are completed and to the extent that additional information is obtained about the facts and circumstances that existed as of the acquisition date.
The majority of Piedmont’s operations are subject to the rate-setting authority of the NCUC, the PSCSC and the Tennessee Regulatory AuthorityTPUC and are accounted for pursuant to accounting guidance for regulated operations. The rate-setting and cost recovery provisions currently in place for Piedmont’s regulated operations provide revenues derived from costs, including a return on investment of assets and liabilities included in rate base. Thus, the fair value of Piedmont's assets and liabilities subject to these rate–settingrate-setting provisions approximate theirapproximates the pre-acquisition carrying valuesvalue and dodoes not reflect any net valuation adjustments.
The significant assets and liabilities for which preliminary valuation adjustments are being determined are expected towere reflected within the purchase price allocation include the acquired equity method investments and long-term debt. The difference between the preliminary fair value and the pre-mergerpre-acquisition carrying amounts forvalue of long-term debt for regulated operations are expected to bewas recorded as Regulatory assets.a regulatory asset.
The excess of the purchase price over the estimated fair value of Piedmont's assets and liabilities on the acquisition date will bewas recorded as goodwill. The goodwill reflects the value paid by Duke Energy primarily for establishing a broader, long-term strategic natural gas infrastructure platform, an improved risk profile and expected synergies resulting from the combined entities. The allocation of estimated goodwill
Under Securities and Exchange Commission (SEC) regulations, Duke Energy elected not to Duke Energy’s reporting units has not yet been completed as a result ofapply push down accounting to the short time between the closing of the merger and the filing of this Form 10-Q. None of the goodwill recognized will be deductible for income tax purposes. Accordingly, no deferred taxes will be recorded related to goodwill.stand-alone Piedmont financial statements.
Accounting Charges Related to the Acquisition
Duke Energy incurred pretax nonrecurring transaction and integration costs associated with the acquisition of $14$16 million and $22$101 million for the three and nine months ended September 30,March 31, 2017 and 2016, respectively, substantially allrespectively. The 2016 amount includes $100 million of Interest Expense, which were recorded within Operation, maintenance and other in Duke Energy’s Condensed Consolidated Statementswas driven by $93 million of Operations. Additionally, Duke Energy recorded interest expense of $51 million and $234 million for the three and nine months ended September 30, 2016, respectively, related to the acquisition financing. The interest expense includes realizedunrealized losses on forward-starting interest rate swaps of $22 million and $190 million forrelated to the three and nine months ended September 30, 2016, respectively.acquisition financing. See Note 109 for additional information on the swaps.
Acquisition Related Financings and Other Matters
Duke Energy financed the Piedmont acquisition with a combination of debt, equity issuances and other cash sources.
In August 2016, Duke Energy issued $3.75 billion of long-term debt to finance a portion of the Piedmont acquisition. On September 30, 2016, Duke Energy borrowed $750 million under the $1.5 billion short-term loan facility (Term Loan Facility) to partially fund the acquisition. The $4.9 billion senior unsecured bridge financing facility (Bridge Facility) with Barclays Capital, Inc. (Barclays) was terminated following the issuance of the long-term debt. See Note 6 for additional information related to the debt issuance and Term Loan Facility.
In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into equity forward sale agreements (the Equity Forwards) with Barclays. On October 5, 2016, Duke Energy settled the Equity Forwards for approximately $723 million in net cash proceeds to finance a portion of the Piedmont acquisition. For additional information regarding the Equity Forwards, see Note 14.
See Note 4 for additional information regarding Duke Energy and Piedmont's joint investment in Atlantic Coast Pipeline, LLC (ACP).
Pro Forma Financial Information
The following unaudited pro forma financial information reflects the combined results of operations of Duke Energy and Piedmont.Piedmont as if the merger had occurred as of January 1, 2016. The unaudited pro forma financial information excludes potential cost savings, intercompany revenues, Piedmont’s earnings from the equity method investment in SouthStar sold immediately prior to the merger, and after-tax nonrecurring transaction and integration costs incurred by Duke Energy and Piedmont of $63 million. See Note 3 for additional information on Piedmont's sale of SouthStar.
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. This information is preliminary in nature and subject to change. |
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| (in millions) | 2016 | 2015 | | 2016 | 2015 |
| Revenues | $ | 6,958 |
| $ | 6,627 |
| | $ | 18,688 |
| $ | 19,021 |
|
| Net income attributable to Duke Energy Corporation | 1,180 |
| 897 |
| | 2,552 |
| 2,352 |
|
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 merger or non-recurring transaction and integration costs incurred by Duke Energy and Piedmont. The after-tax non-recurring transaction and integration costs incurred by Duke Energy and Piedmont were $41 million and $161 million for the three and nine months ended September 30, 2016, respectively. |
| | | |
| | Three Months Ended |
| (in millions) | March 31, 2016 |
| Operating Revenues | $ | 5,840 |
|
| Net Income Attributable to Duke Energy Corporation | 832 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Purchase of NCEMPA's Generation
On July 31, 2015, Duke Energy Progress completed the purchase of North Carolina Eastern Municipal Power Agency’s (NCEMPA) ownership interests in certain generating assets, fuel and spare parts inventory jointly owned with and operated by Duke Energy Progress for approximately $1.25 billion. This purchase was accounted for as an asset acquisition. The purchase resulted in the acquisition of a total of approximately 700 megawatts (MW) of generating capacity at Brunswick Nuclear Plant, Shearon Harris Nuclear Plant, Mayo Steam Plant and Roxboro Steam Plant. In connection with this transaction, Duke Energy Progress and NCEMPA entered into a 30-year wholesale power agreement, whereby Duke Energy Progress will sell power to NCEMPA to continue to meet the needs of NCEMPA customers.
The purchase price exceeded the historical carrying value of the acquired assets by $350 million, which was recognized as an acquisition adjustment and recorded in property, plant and equipment. Duke Energy Progress established a rider in North Carolina to recover the costs to acquire, operate and maintain interests in the assets purchased as allocated to its North Carolina retail operations, including the purchase acquisition adjustment, and included the purchase acquisition adjustment in wholesale power formula rates.
Duke Energy Progress received an order from the PSCSC to defer recovery of the South Carolina retail allocated costs of the asset purchased until Duke Energy Progress' next general rate case, which was filed in July 2016. In October 2016, Duke Energy Progress, the Office of Regulatory Staff (ORS) and intervenors entered into a settlement agreement that provides for recovery of the historical carrying value of the South Carolina allocated purchased costs of the transaction. The settlement agreement was filed with the PSCSC on the same day but has yet to be ruled upon by the PSCSC. See Note 4 for additional information on the South Carolina rate case.
DISPOSITIONS
Sale of International Energy
In OctoberDecember 2016, certain indirect subsidiaries of Duke Energy entered into two separate purchase and sale agreements (PSA) whereby Duke Energy will divest thesold its International Energy business segment,businesses, excluding the equity method investment in National Methanol Company (NMC).
BrazilianNMC (the International Disposal Group
Group), in two separate transactions. Duke Energy will sellsold its indirect ownership interest in Duke Energy International Brazil Holdings S.à.r.l. (the Brazil Subsidiary), which includes 2,090 MW of owned hydroelectric generation capacity in Brazil (the Brazilian Disposal Group),business to China Three Gorges (Luxembourg) Energy S.à.r.l. (CTG), a subsidiary of China Three Gorges Corporation, pursuant to a PSA dated as of October 10, 2016 (the Brazil PSA).
CTG will purchase the Brazil Subsidiary for an enterprise value of approximately $1.2 billion. Closingbillion, including the assumption of the transaction is subjectdebt, and its remaining Central and South American businesses to various conditions, including receipt of required regulatory approvals and the absence of any injunction or other orders preventing closing of the transaction. The sale of the Brazilian Disposal Group is expected to close by early 2017.
The Brazil PSA contains certain termination rights and provides that CTG may be required to pay a termination fee of approximately $49 million to Duke Energy upon termination of the Brazil PSA under certain specified circumstances.
Latin American Disposal Group
Duke Energy will sell its indirect ownership interest in Duke Energy International Group S.à.r.l., Duke Energy International España Holdings SL and Duke Energy International Investments No. 2 Ltd (collectively, the Latin America Subsidiaries), which includes 2,230 MW of owned hydroelectric and natural gas generation capacity, transmission infrastructure and natural gas processing facilities in Argentina, Chile, Ecuador, El Salvador, Guatemala and Peru (the Latin American Disposal Group) to ISQ Enerlam Aggregator, L.P. and Enerlam (UK) Holdings Ltd. (collectively, I Squared), entities controlled by a consortium of investors led by I Squared Capital pursuant toin a PSA dated as of October 10, 2016 (the Latin America PSA).
I Squared will purchase the Latin America Subsidiaries for an enterprise value ofdeal also valued at approximately $1.2 billion. Closing of the transaction is subject to various conditions,billion, including the absenceassumption of any injunction or other orders preventing closing of the transaction and the completion of certain internal restructuringdebt. The transactions by subsidiaries of Duke Energy. The sale of the Latin American Disposal Group is expected to close by early 2017.
I Squared provided irrevocable letters of credit with an undrawn face value of $89 million. In the event of a termination of the Latin America PSA under certain circumstances, Duke Energy can draw on the letters of credit as a termination fee.
Other Sale Related Matters
Including the impact of debt to be assumed by the buyers, working capital and other adjustments as well as local in-country taxes, Duke Energy expects the transactions to generate availablegenerated cash proceeds of between $1.7$1.9 billion and $1.9 billion,, excluding transaction costs. The proceeds are expected to becosts, which were primarily used to reduce Duke Energy holding company debt. Existing favorable tax attributes will result in no immediate U.S. federal-level tax impacts.
As a resultThe following table presents the results of the transactions, both the Brazilian Disposal Group and the Latin American Disposal Group (together, the International Disposal Group) will be classified as held for sale and asGroup, which are included in Income from Discontinued Operations, net of tax in Duke Energy's Condensed Consolidated Statements of Operations. Interest expense directly associated with the International Disposal Group was allocated to discontinued operations. No interest from corporate level debt was allocated to discontinued operations. |
| | | |
| | Three Months Ended |
| (in millions) | March 31, 2016 |
| Operating Revenues | $ | 246 |
|
| Fuel used in electric generation and purchased power | 47 |
|
| Cost of natural gas | 11 |
|
| Operation, maintenance and other | 71 |
|
| Depreciation and amortization | 22 |
|
| Property and other taxes | 3 |
|
| Other Income and Expenses, net | 10 |
|
| Interest Expense | 22 |
|
| Income before income taxes | 80 |
|
Income tax benefit(a) | (39 | ) |
| Income from discontinued operations of the International Disposal Group | 119 |
|
| Income from discontinued operations of other businesses | 3 |
|
| Income from Discontinued Operations, net of tax | $ | 122 |
|
| |
| (a) | Includes an income tax benefit of $95 million related to historical undistributed foreign earnings. See Note 16 for additional information. |
Duke Energy has elected not to separately disclose discontinued operations beginningon the Condensed Consolidated Statements of Cash Flows. The following table summarizes Duke Energy's cash flows from discontinued operations related to the International Disposal Group. |
| | | |
| | Three Months Ended |
| (in millions) | March 31, 2016 |
| Cash flows provided by (used in): | |
| Operating activities | $ | 85 |
|
| Investing activities | (9 | ) |
Other Sale Related Matters
Duke Energy will provide certain transition services to China Three Gorges and I Squared Capital for a period not to extend beyond November 2017 and December 2017, respectively. Cash flows related to providing the transition services are not material. In addition, Duke Energy will reimburse China Three Gorges and I Squared Capital for all tax obligations arising from the period preceding consummation on the transactions, totaling approximately $78 million. Duke Energy has not recorded any other liabilities, contingent liabilities or indemnifications related to the International Disposal Group.
3. BUSINESS SEGMENTS
Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business. Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Products and services are sold between affiliate companies and reportable segments of Duke Energy at cost.
Duke Energy
Due to the Piedmont acquisition and the sale of International Energy in the fourth quarter of 2016. Upon classification of2016, Duke Energy's segment structure has been realigned to include the International Disposal Group as held for sale, Duke Energy expectsfollowing segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. Prior period information has been recast to record an estimated pretax impairment charge of approximately $325 million to $375 million, primarily dueconform to the cumulative foreign currency translation losses classified as accumulated other comprehensive loss.current segment structure. See Note 2 for further information on the Piedmont and International Energy transactions.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Second Quarter Asset Impairment
In conjunction with the advancements of marketing efforts during 2016,The Electric Utilities and Infrastructure segment includes Duke Energy performed recoverability tests of the long-lived asset groups of International Energy. As a result,Energy's regulated electric utilities in the second quarter of 2016, 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 is included within Impairment Charges on the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2016, and represents the excess of carrying value over the estimated fair value of the assets. The fair value of the assets 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.
Midwest Generation Exit
Duke Energy, through indirect subsidiaries, completed the sale of the Midwest Generation Disposal Group to a subsidiary of Dynegy on April 2, 2015, for approximately $2.8 billion in cash. The nonregulated Midwest generation business included generation facilities with approximately 5,900 MW of owned capacity located in Ohio, Pennsylvania and Illinois. On April 1, 2015, prior to the sale, Duke Energy Ohio distributed its indirect ownership interest in the nonregulated Midwest generation business to a subsidiary of Duke Energy Corporation.
Commercial Portfolio utilized a revolving credit agreement (RCA) to support the operations of the nonregulated Midwest generation business. Interest expense associated with the RCA was allocated to discontinued operations. No other interest expense related to corporate level debt was allocated to discontinued operations. Duke Energy Ohio had a power purchase agreement with the Midwest Generation Disposal Group for a portion of its standard service offer (SSO) supply requirement. The agreementCarolinas, Florida and the SSO expired in May 2015.
Midwest. The Midwest Generation Disposal Group's results ofregulated electric utilities conduct operations are classified as discontinued operations inthrough the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. The following table presents the results of discontinued operations for the three and nine months ended September 30, 2015. |
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2015 | | September 30, 2015 |
| | | | Duke |
| | | | Duke |
|
| | Duke |
| | Energy |
| | Duke |
| | Energy |
|
| (in millions) | Energy |
| | Ohio |
| | Energy |
| | Ohio |
|
| Operating Revenues | $ | — |
| | $ | — |
| | $ | 543 |
| | $ | 412 |
|
| Loss on disposition | (5 | ) | | (4 | ) | | (42 | ) | | (48 | ) |
| | | | | | | | |
(Loss) Income before income taxes(a) | $ | (5 | ) | | $ | (4 | ) | | $ | 62 |
| | $ | 48 |
|
| Income tax (benefit) expense | (1 | ) | | (2 | ) | | 29 |
| | 25 |
|
| (Loss) Income from discontinued operations of the Midwest Generation Disposal Group | (4 | ) | | (2 | ) | | 33 |
| | 23 |
|
Other, net of tax(b) | (1 | ) | | — |
| | (4 | ) | | — |
|
| (Loss) Income From Discontinued Operations, net of tax | $ | (5 | ) | | $ | (2 | ) | | $ | 29 |
| | $ | 23 |
|
| |
(a) | The (Loss) Income before income taxes includes the pretax impact of an $81 million charge for the agreement in principle reached in a lawsuit related to the Midwest Generation Disposal Group for the nine months ended September 30, 2015. Refer to Note 5 for further information related to the lawsuit. |
| |
(b) | Relates to discontinued operations of businesses not related to the Midwest Generation Disposal Group and includes indemnifications provided for certain legal, tax and environmental matters, and foreign currency translation adjustments. |
Duke Energy and Duke Energy Ohio recognized an income tax benefit of $122 million and $34 million, respectively, for the three and nine months ended September 30, 2016, within Income From Discontinued Operations, net on the Condensed Consolidated Statements of Operations. The income tax benefit resulted from immaterial out of period deferred tax liability adjustments related to the Midwest Generation Disposal Group and another previously sold business.
3. BUSINESS SEGMENTS
Duke Energy evaluates segment performance based on segment income. Segment income is defined as income from continuing operations net of income attributable to noncontrolling interests. Segment income, as discussed below, includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Certain governance costs are allocated to each segment. In addition, direct interest expense and income taxes are included in segment income.
Operating segments are determined based on information used by the chief operating decision-maker in deciding how to allocate resources and evaluate the performance of the business. During the first quarter of 2016, the Duke Energy chief operating decision-maker began to evaluate interim period segment performance based on financial information that includes the impact of income tax levelization within segment income. This represents a change from the previous measure, where the interim period impacts of income tax levelization were included within Other, and therefore excluded from segment income. As a result, prior period segment results presented have been recast to conform to this change.
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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
DUKE ENERGY
Duke Energy has the following reportable operating segments: Regulated Utilities, International Energy and Commercial Portfolio.
RegulatedUtilities conducts electric and natural gas operationsSubsidiary Registrants that are substantially all regulated and, accordingly, qualify for regulatory accounting treatment. TheseElectric Utilities and Infrastructure also includes Duke Energy's 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 mid-stream pipeline investments. Gas Utilities and Infrastructure's operations are primarily conducted through the Subsidiary Registrantssubstantially all regulated and, are subject to the rules and regulations of the FERC, NRC, NCUC, PSCSC, FPSC, PUCO, IURC and KPSC.
International Energy operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas and natural gas liquids outside the U.S. Its activities principally target power generation in Latin America. Additionally, International Energy owns a 25 percent interest in NMC, a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accountedaccordingly, qualify for under the equity method of accounting. See Note 2 for information related to the planned divestiture of International Energy, excluding the investment in NMC.regulatory accounting treatment.
Commercial Portfolio builds, develops and operatesRenewables is primarily comprised of nonregulated utility scale wind and solar renewable generation and storage and energy transmission projectsassets located throughout the U.S. For periods subsequent to the sale of the Midwest Generation Disposal Group, beginning in the second quarter of 2015, certain immaterial results of operations and related assets previously presented in the Commercial Portfolio segment are presented in Regulated Utilities and Other.
Theremainder of Duke Energy’s operations is presented as Other, which is primarily comprised of unallocated corporate interest expense, unallocated corporate costs, contributions to the Duke Energy Foundation and the operations of Duke Energy’s wholly owned captive insurance subsidiary, Bison Insurance Company Limited (Bison). Other also includes Duke Energy's 25 percent interest in NMC, a large regional producer of methyl tertiary butyl ether (MTBE) located in Saudi Arabia. The investment in NMC is accounted for under the equity method of accounting.
Business segment information is presented in the following tables. Segment assets presented exclude intercompany assets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2017 |
| | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 4,939 |
| | $ | 648 |
| | $ | 128 |
| | $ | 5,715 |
| | $ | 14 |
| | $ | — |
| | $ | 5,729 |
|
| Intersegment revenues | 8 |
| | 22 |
| | — |
| | 30 |
| | 19 |
| | (49 | ) | | — |
|
| Total revenues | $ | 4,947 |
| | $ | 670 |
| | $ | 128 |
| | $ | 5,745 |
| | $ | 33 |
| | $ | (49 | ) | | $ | 5,729 |
|
| Segment income (loss) | $ | 635 |
| | $ | 133 |
| | $ | 25 |
| | $ | 793 |
| | $ | (77 | ) | | $ | — |
| | $ | 716 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 1 |
|
| Net income | | | | | | | | | | | | | $ | 717 |
|
| Segment assets | $ | 115,766 |
| | $ | 10,866 |
| | $ | 4,400 |
| | $ | 131,032 |
| | $ | 2,898 |
| | $ | 178 |
| | $ | 134,108 |
|
| | | | Three Months Ended September 30, 2016 | Three Months Ended March 31, 2016 |
| | | | | | | | Total |
| | | | | | | Electric |
| | Gas |
| | | | Total |
| | | | | | |
| | Regulated |
| | International |
| | Commercial |
| | Reportable |
| | | | | | | Utilities and |
| | Utilities and |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Utilities |
| | Energy |
| | Portfolio |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
| Infrastructure |
| | Infrastructure |
| | Renewables |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 6,421 |
| | $ | 245 |
| | $ | 140 |
| | $ | 6,806 |
| | $ | 15 |
| | $ | — |
| | $ | 6,821 |
| $ | 5,081 |
| | $ | 169 |
| | $ | 114 |
| | $ | 5,364 |
| | $ | 13 |
| | $ | — |
| | $ | 5,377 |
|
| Intersegment revenues | 9 |
| | — |
| | — |
| | 9 |
| | 17 |
| | (26 | ) | | — |
| 8 |
| | 1 |
| | — |
| | 9 |
| | 16 |
| | (25 | ) | | — |
|
| Total revenues | $ | 6,430 |
| | $ | 245 |
| | $ | 140 |
| | $ | 6,815 |
| | $ | 32 |
| | $ | (26 | ) | | $ | 6,821 |
| $ | 5,089 |
| | $ | 170 |
| | $ | 114 |
| | $ | 5,373 |
| | $ | 29 |
| | $ | (25 | ) | | $ | 5,377 |
|
Segment income (loss)(b)(a) | $ | 1,200 |
| | $ | 64 |
| | $ | (21 | ) | | $ | 1,243 |
| | $ | (189 | ) | | $ | — |
| | $ | 1,054 |
| $ | 664 |
| | $ | 32 |
| | $ | 26 |
| | $ | 722 |
| | $ | (148 | ) | | $ | — |
| | $ | 574 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 5 |
| | | | | | | | | | | | | 3 |
|
Income from discontinued operations, net of tax(c) | | | | | | | | | | | | | 122 |
| | | | | | | | | | | | | 122 |
|
| Net income | | | | | | | | | | | | | $ | 1,181 |
| | | | | | | | | | | | | $ | 699 |
|
| Segment assets | $ | 114,707 |
| | $ | 3,153 |
| | $ | 4,414 |
| | $ | 122,274 |
| | $ | 7,228 |
| | $ | 184 |
| | $ | 129,686 |
| |
| |
| (a) | Other includes after-tax charges for costs to achieve mergers of $52 million, primarily due to interest expense related to the Piedmont acquisition financing, and cost savings initiatives of $12 million primarily due to severance costs. |
| |
(b) | Commercial Portfolio includes an after-tax impairment of $45 million related to certain equity method investments in renewable energy projects. See Note 13, Variable Interest Entities, for additional information. |
| |
(c) | Represents an income tax benefit resulting from deferred tax liability adjustments related to previously sold businesses. See Note 2, Acquisitions and Dispositions, for further information. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2015 |
| | | | | | | | Total |
| | | | | | |
| | Regulated |
| | International |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Utilities |
| | Energy |
| | Portfolio |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 6,138 |
| | $ | 281 |
| | $ | 66 |
| | $ | 6,485 |
| | $ | (2 | ) | | $ | — |
| | $ | 6,483 |
|
| Intersegment revenues | 9 |
| | — |
| | — |
| | 9 |
| | 19 |
| | (28 | ) | | — |
|
| Total revenues | $ | 6,147 |
| | $ | 281 |
| | $ | 66 |
| | $ | 6,494 |
| | $ | 17 |
| | $ | (28 | ) | | $ | 6,483 |
|
Segment income (loss)(a)(b) | $ | 905 |
| | $ | 69 |
| | $ | 8 |
| | $ | 982 |
| | $ | (45 | ) | | $ | — |
| | $ | 937 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 3 |
|
| Loss from discontinued operations, net of tax | | | | | | | | | | | | | (5 | ) |
| Net income | | | | | | | | | | | | | $ | 935 |
|
| |
(a) | Regulated Utilities includes an after-tax charge of $56 million related to the Edwardsport settlement. See Note 4 for further information. |
| |
(b) | Other includes $15$74 million of after-tax costs to achieve mergers, including losses on forward-starting interest rate swaps related to the 2012 Progress Energy merger.Piedmont acquisition financing. See Note 9 for additional information. |
Duke Energy Ohio
Duke Energy Ohio has two reportable operating segments, Electric Utilities and Infrastructure and Gas Utilities and Infrastructure.
Electric Utilities and Infrastructure transmits and distributes electricity in portions of Ohio and generates, distributes and sells electricity in portions of Kentucky. Gas Utilities and Infrastructure transports and sells natural gas in portions of Ohio and northern Kentucky. It conducts operations primarily through Duke Energy Ohio and its wholly owned subsidiary, Duke Energy Kentucky.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Other is primarily comprised of governance costs allocated by its parent, Duke Energy, and revenues and expenses related to Duke Energy Ohio's contractual arrangement to buy power from the Ohio Valley Electric Corporation's (OVEC) power plants. See Note 8 for additional information on related party transactions. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2017 |
| | Electric |
| | Gas |
| | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Total revenues | $ | 337 |
| | $ | 170 |
| | $ | 507 |
| | $ | 11 |
| | $ | — |
| | $ | 518 |
|
| Segment income (loss)/Net Income | 24 |
| | 26 |
| | 50 |
| | (8 | ) | | — |
| | 42 |
|
| Segment assets | 4,856 |
| | 2,696 |
| | 7,552 |
| | 71 |
| | (14 | ) | | 7,609 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2016 |
| | Electric |
| | Gas |
| | Total |
| | | | | | |
| | Utilities and |
| | Utilities and |
| | Reportable |
| | | | | | |
| (in millions) | Infrastructure |
| | Infrastructure |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Total revenues | $ | 340 |
| | $ | 170 |
| | $ | 510 |
| | $ | 6 |
| | $ | — |
| | $ | 516 |
|
| Segment income (loss) | $ | 36 |
| | $ | 31 |
| | $ | 67 |
| | $ | (9 | ) | | $ | (1 | ) | | $ | 57 |
|
| Income from discontinued operations, net of tax | | | | | | | | | | | 2 |
|
| Net income | | | | | | | | | | | $ | 59 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | | | | | | | Total |
| | | | | | |
| | Regulated |
| | International |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Utilities |
| | Energy |
| | Portfolio |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 16,761 |
| | $ | 761 |
| | $ | 366 |
| | $ | 17,888 |
| | $ | 39 |
| | $ | — |
| | $ | 17,927 |
|
| Intersegment revenues | 27 |
| | — |
| | — |
| | 27 |
| | 52 |
| | (79 | ) | | — |
|
| Total revenues | $ | 16,788 |
| | $ | 761 |
| | $ | 366 |
| | $ | 17,915 |
| | $ | 91 |
| | $ | (79 | ) | | $ | 17,927 |
|
Segment income (loss)(a)(b)(c) | $ | 2,613 |
| | $ | 85 |
| | $ | 20 |
| | $ | 2,718 |
| | $ | (463 | ) | | $ | — |
| | $ | 2,255 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 13 |
|
Income from discontinued operations, net of tax(d) | | | | | | | | | | | | | 124 |
|
| Net income | | | | | | | | | | | | | $ | 2,392 |
|
| |
(a) | Other includes after-tax charges for costs to achieve mergers of $195 million, primarily due to losses on forward-starting interest rate swaps related to the Piedmont acquisition, and cost savings initiatives of $39 million primarily due to severance costs. See Note 10 for additional information related to the swaps. |
| |
(b) | International Energy includes an after-tax impairment charge of $145 million. See Note 2 for additional information. |
| |
(c) | Commercial Portfolio includes an after-tax impairment of $45 million related to certain equity method investments in renewable energy projects. See Note 13, Variable Interest Entities, for additional information. |
| |
(d) | Includes income tax benefit of $122 million resulting from deferred tax liability adjustments related to previously sold businesses. See Note 2 for further information. |
DUKE ENERGY CAROLINAS, PROGRESS ENERGY, DUKE ENERGY PROGRESS, DUKE ENERGY FLORIDA, DUKE ENERGY INDIANA AND PIEDMONT |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2015 |
| | | | | | | | Total |
| | | | | | |
| | Regulated |
| | International |
| | Commercial |
| | Reportable |
| | | | | | |
| (in millions) | Utilities |
| | Energy |
| | Portfolio |
| | Segments |
| | Other |
| | Eliminations |
| | Consolidated |
|
| Unaffiliated revenues | $ | 17,062 |
| | $ | 841 |
| | $ | 214 |
| | $ | 18,117 |
| | $ | 20 |
| | $ | — |
| | $ | 18,137 |
|
| Intersegment revenues | 28 |
| | — |
| | — |
| | 28 |
| | 58 |
| | (86 | ) | | — |
|
| Total revenues | $ | 17,090 |
| | $ | 841 |
| | $ | 214 |
| | $ | 18,145 |
| | $ | 78 |
| | $ | (86 | ) | | $ | 18,137 |
|
Segment income (loss)(a)(b)(c) | $ | 2,311 |
| | $ | 157 |
| | $ | (15 | ) | | $ | 2,453 |
| | $ | (139 | ) | | $ | (4 | ) | | $ | 2,310 |
|
| Add back noncontrolling interests | | | | | | | | | | | | | 10 |
|
Income from discontinued operations, net of tax(d) | | | | | | | | | | | | | 29 |
|
| Net income | | | | | | | | | | | | | $ | 2,349 |
|
| |
(a) | Regulated Utilities includes an after-tax charge of $56 million related to the Edwardsport settlement. Refer to Note 4 for further information. |
(b)Piedmont has one reportable segment, Gas Utilities and Infrastructure, which transports and sells natural gas. The remainder of Piedmont's operations is classified as Other. While not considered a reportable segment, Other includes $42 millionprimarily consists of after-taxcertain unallocated corporate costs, including acquisition-related expenses, and Piedmont's equity method investment in SouthStar Energy Services, LLC (SouthStar) prior to achieveits sale. Piedmont sold its 15 percent membership interest in SouthStar on October 3, 2016. Piedmont's income, net of tax, from SouthStar for the 2012 Progress Energy merger.
| |
(c) | Commercial Portfolio includes state tax expense of $41 million, resulting from changes to state apportionment factors due to the sale of the Midwest Generation Disposal Group, that does not qualify for discontinued operations. Refer to Note 2 for further information related to the sale. |
| |
(d) | Includes after-tax impact of $53 million for the settlement agreement reached in a lawsuit related to the Midwest Generation Disposal Group. Refer to Note 5 for further information related to the lawsuit. |
SUBSIDIARY REGISTRANTSthree months ended March 31, 2016 was $7 million.
The remaining Subsidiary Registrants each have one reportable operating segment, RegulatedElectric Utilities and Infrastructure, which generates, transmits, distributes and sells electricity, and for Duke Energy Ohio, also transports and sells natural gas.electricity. The remainder of each company's operations is primarily comprised of unallocated corporate costs and classified as Other. While not considered a reportable segment for any of these companies, Other consists of certain unallocated corporate costs. Other for Progress Energy also includes interest expense on corporate debt instruments of $55 million and $56 million for the three months ended March 31, 2017 and 2016, respectively. The following table providessummarizes the amountnet loss of Other net expense.for each of these entities. |
| | | | | | | | | | | | | | |
| | Three Months Ended | Nine Months Ended |
| | September 30, | September 30, |
| (in millions) | 2016 |
| | 2015 |
| 2016 |
| | 2015 |
|
| Duke Energy Carolinas | $ | (16 | ) | | $ | (10 | ) | $ | (50 | ) | | $ | (28 | ) |
Progress Energy(a) | (45 | ) | | (3 | ) | (139 | ) | | (87 | ) |
| Duke Energy Progress | (10 | ) | | (4 | ) | (26 | ) | | (12 | ) |
| Duke Energy Florida | (5 | ) | | (3 | ) | (14 | ) | | (9 | ) |
| Duke Energy Ohio | (10 | ) | | (12 | ) | (29 | ) | | (20 | ) |
| Duke Energy Indiana | (3 | ) | | (2 | ) | (10 | ) | | (6 | ) |
| |
(a) | Other for Progress Energy also includes interest expense on corporate debt instruments of $55 million and $166 million for the three and nine months ended September 30, 2016, respectively, and $61 million and $180 million for the three and nine months ended September 30, 2015, respectively. |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
|
| | | | | | | |
| | Three Months Ended |
| | March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Duke Energy Carolinas | $ | (6 | ) | | $ | (17 | ) |
| Progress Energy | (43 | ) | | (49 | ) |
| Duke Energy Progress | (3 | ) | | (8 | ) |
| Duke Energy Florida | (2 | ) | | (4 | ) |
| Duke Energy Indiana | (2 | ) | | (2 | ) |
| Piedmont | (4 | ) | | 6 |
|
The assets of the Subsidiary Registrantsat Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana are substantially all included within the Regulated Utilities segment at September 30, 2016.
Duke Energy Ohio
Duke Energy Ohio had two reportable operating segments, Regulated Utilities and Commercial Portfolio, during 2015 prior to the sale of the nonregulated Midwest generation business. Duke Energy Ohio's Commercial Portfolio segment had total revenues of $14 million and segment loss of $9 million for the nine months ended September 30, 2015. As a result of the sale discussed in Note 2, Commercial Portfolio no longer qualifies as a Duke Energy Ohio reportable operating segment. Therefore, beginning in the second quarter of 2015, all of the remaining assets and related results of operations previously presented in Commercial Portfolio are presented in Regulated Utilities and Other.
FUTURE OPERATING SEGMENTS
Due to the Piedmont acquisition and the agreements to sell the International Disposal Group, the chief operating decision maker changed how the business will be managed beginning in the fourth quarter of 2016. The financial reporting structure has been realigned to include the following segments: Electric Utilities and Infrastructure segment at March 31, 2017. The assets at Piedmont are substantially all included within the Gas Utilities and Infrastructure and Commercial Renewables.
Electric Utilities and Infrastructure will be comprised of the regulated electric utilities in the Carolinas, Florida and the Midwest. This segment will also include the commercial transmission infrastructure investments.
Gas Utilities and Infrastructure will contain Piedmont, Duke Energy's local distribution companies in Ohio and Kentucky, and gas storage and pipeline investments.
Commercial Renewables will primarily include the company's non-regulated utility scale wind and solar generation assets.
International Energy will remain a segment until the divestiture is complete, although results of the equity method investment in NMC will be recast to Other in the fourth quarter of 2016.
See Note 2 for further information on the Piedmont and International Energy transactions.at March 31, 2017.
4. REGULATORY MATTERS
RATE RELATED INFORMATION
The NCUC, PSCSC, FPSC, IURC, PUCO, TPUC and KPSC approve rates for retail electric and natural gas services within their states. The FERC approves rates for electric sales to wholesale customers served under cost-based rates (excluding Ohio Kentucky and Indiana), as well as sales of transmission service. The FERC also regulates certification and siting of new interstate natural gas pipeline projects.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Carolinas and Duke Energy Progress
Ash Basin Closure Costs Deferral
On July 13,December 30, 2016, in response to a joint petition of Duke Energy Carolinas and Duke Energy Progress filed a joint petition with the PSCSC issuedNCUC seeking an accounting order for the deferment into a regulatory accountauthorizing deferral of certain costs incurred in connection with federal and state environmental remediation requirements related to the permanent closure of ash basins and other ash storage units at coal-fired generating facilities that have provided or are providing generation to customers located in SouthNorth Carolina. The decision allows for ash basin closure expenses to be partially offset with excess regulatory liability amounts from the deferral of nuclear decommissioning costs that are collected from South Carolina retail customersInitial comments were received in March 2017, and for Duke Energy Progress to offset incurred ash basin closure costs with costs of removal amounts collected from customers. The PSCSC's ruling does not change retail rates or the tariff amounts and in no way limits the PSCSC's ability to challenge the reasonableness of expenditures in subsequent proceedings.
FERC Transmission Returnreply comments were filed on Equity Complaints
On January 7, 2016, a group of transmission service customers filed a complaint with FERC that the rate of return on equity of 10.2 percent in Duke Energy Carolinas' transmission formula rates is excessive and should be reduced to no higher than 8.49 percent, effective upon the complaint date. On the same date, a similar complaint was filed with FERC claiming that the rate of return on equity of 10.8 percent in Duke Energy Progress' transmission formula rates is excessive and should be reduced to no higher than 8.49 percent, effective upon the complaint date. On April 21, 2016, FERC issued an order which consolidated the cases, set a refund effective date of January 7, 2016, and set the consolidated case for settlement and hearing. On June 14, 2016,19, 2017. Duke Energy Carolinas and Duke Energy Progress reached a settlement agreement in principle to reducecannot predict the return on equity for both companies to 10 percent. On August 19, 2016, Duke Energy Carolinas and Duke Energy Progress filed for FERC approvaloutcome of the settlement agreement. Duke Energy Carolinas and Duke Energy Progress do not expect the potential impact on results of operations, cash flows or financial position to be material.this matter.
Duke Energy Carolinas
Advanced Metering Infrastructure Deferral
On July 12, 2016, the PSCSC issued an accounting order for Duke Energy Carolinas to defer the financial effects of depreciation expense incurred for the installation of advanced metering infrastructure (AMI) meters, the carrying costs on the investment at its weighted average cost of capital and the carrying costs on the deferred costs at its weighted average cost of capital not to exceed $45 million. The decision also allows Duke Energy Carolinas to continue to depreciate the non-AMI meters to be replaced. Current retail rates will not change as a result of the decision and the PSCSC's ability to challenge the reasonableness of expenditures in subsequent proceedings is not limited.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
William States Lee Combined Cycle Facility
On April 9, 2014, the PSCSC granted Duke Energy Carolinas and North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN) for the construction and operation of a 750 MW750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and estimates a cost to build of $600 million for its share of the facility, including allowance for funds used during construction (AFUDC).AFUDC. The project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Appeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. Duke Energy Carolinas filed its response on June 13, 2016, and SCCL and SACE filed a reply on June 23, 2016. On September 6, 2016, the Small Business Chamber of Commerce filed a motion for permission to file a brief supporting the environmental intervenors’ position. On September 22, 2016,March 24, 2017, the South Carolina Supreme Court granted permissiondenied the request for review, thus concluding the brief, and allowedmatter.
William States Lee III Nuclear Station
In December 2007, Duke Energy Carolinas an opportunityapplied to filethe NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed William States Lee III Nuclear Station to be located at a response, which was filed on October 3, 2016.site in Cherokee County, South Carolina. The NCUC and PSCSC have concurred with the prudency of Duke Energy Carolinas cannot predictdecisions to incur certain project development and preconstruction costs through several separately issued orders, although full cost recovery is not guaranteed. In December 2016, the outcomeNRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of this matter.the COLs being issued.
On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Duke Energy Carolinas is monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of nuclear plants.
Duke Energy Progress
South Carolina Rate CaseStorm Cost Deferral Filing
On July 1,December 16, 2016, Duke Energy Progress filed an applicationa petition with the PSCSCNCUC requesting an average 14.5 percent increaseaccounting order to defer certain costs incurred in retail revenues. The requested rate change would increase annual revenues by approximately $79 million,connection with a rate of return on equity of 10.75 percent. The increase is designedresponse to recover the cost of investmentHurricane Matthew and other significant storms in new generation infrastructure, environmental expenditures including allocated historical ash basin closure costs and increased nuclear operating costs.2016. Duke Energy Progress hasproposed in the filing to true-up the total costs quarterly through August 2017. The current estimate of incremental operation and maintenance and capital costs is $116 million. On March 15, 2017, the Public Staff filed comments supporting deferral of a portion of Duke Energy Progress’ requested new rates to be effective January 1, 2017. On October 19, 2016,amount. Duke Energy Progress the ORS and intervenors entered into a settlement agreement that was filed with the PSCSCreply comments on the same day. Terms of the settlement agreement include an approximate $56 million increase in revenues over a two-year period. An increase of approximately $38 million in revenues would be effective January 1, 2017, and an increase of approximately $18.5 million in revenues would be effective January 1, 2018. Duke Energy Progress will amortize approximately $18.5 million from the cost of removal reserve inApril 12, 2017. Other settlement terms include a rate of return on equity of 10.1 percent, agreement to implement nuclear levelization accounting in South Carolina, 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. A hearing was held on October 31, 2016. Duke Energy Progress cannot predict the outcome of this matter.
Western Carolinas Modernization Plan
On November 4, 2015, in response to community feedback, Duke Energy Progress announced a revised Western Carolinas Modernization Plan, with an estimated cost of $1.1 billion. The revised plan includeswhich included retirement of the existing Asheville coal-fired plant, the construction of two 280 280‑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 revised plan includesalso included upgrades to existing transmission lines and substations, but eliminates the need for a new transmission line and a new substation associated with the project in South Carolina. The revised plan has the same overall project cost as the original plan and the plans to installinstallation of solar generation remain unchanged. Duke Energy Progress has also proposed to addand 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. The plan requires various approvals including regulatory approvals in North Carolina.
Duke Energy Progress filed for a Certificate of Public Convenience and Necessity (CPCN) with the NCUC for the new natural gas units on January 15, 2016. On March 28, 2016, the NCUC issued an order approving the CPCNa Certificate of Public Convenience and Necessity (CPCN) for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, 2017, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are underway and construction of these plants is scheduled to begin in early 2017. The plants arefall 2017, with an expected to bein-service date in service by late 2019. Duke Energy Progress plans to file for future approvals related to the proposed solar generation and pilot battery storage project.
On May 27, 2016, N.C. Waste Awareness and Reduction Network (NC WARN) and The Climate Times filed a notice of appeal from the CPCN order to the N.C. Court of Appeals. On May 31, 2016, Duke Energy Progress filed a motion to dismiss the notice of appeal with the NCUC due to NC WARN's and The Climate Times' failure to post a required appeal bond. After a series of filings, an NCUC order, petitions to the N.C. Court of Appeals and an evidentiary hearing, on July 8, 2016, the NCUC issued an order setting NC WARN's and The Climate Times' appeal bond at $98 million. On July 28, 2016, NC WARN and The Climate Times filed a notice of appeal and exceptions from the NCUC's July 8, 2016, appeal bond order. On August 2, 2016, the NCUC granted Duke Energy Progress' motion to dismiss NC WARN's and The Climate Times' notice of appeal from the CPCN order due to failure to post the requisite bond. On August 18, 2016, NC WARN and The Climate Times filed a petition with the N.C. Court of Appeals seeking appellate review of the NCUC’s CPCN order, the July 8, 2016, appeal bond order and the August 2, 2016, order dismissing their notice of appeal, which the N.C. Court of Appeals denied on September 6, 2016. On September 19, 2016, the NCUC granted Duke Energy Progress' motion to dismiss NC WARN's and The Climate Times' subsequent appeal of the second bond order dated July 28, 2016, and NC WARN's and The Climate Times' subsequent appeal of the CPCN order and dismissal order dated August 18, 2016. On October 17, 2016, NC WARN and The Climate Times filed another petition for review with the N.C. Court of Appeals asking the court to reverse the CPCN order, the second bond order and the dismissal of their first and second notices of appeal as to the CPCN order. Duke Energy Progress cannot predict the outcome of this matter.
The carrying value of the 376 MW376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $562$471 million and $548$492 million are included in Generation facilities to be retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheet as of September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Duke Energy Florida
Hines Chiller Uprate Project
On May 20, 2016,February 2, 2017, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirement for a Chiller Uprate Project (Uprate Project) at the Hines station.Energy Complex. The Uprate Project was placed into service in March 2017 at a cost of approximately $150 million. The retail revenue requirement is approximately $19 million. On March 28, 2017, the FPSC issued an order approving the revenue requirement which were included in base rates for the first billing cycle of April 2017.
Levy Nuclear Project
On July 28, 2008, Duke Energy Florida proposedapplied to complete the Uprate Project inNRC for COLs for two phases: Phase one to include work on Hines Units 1-3 and common equipment, to be placed in service during October 2016; and Phase two work on Hines Unit 4 to be placed in service during January 2017. The final combined construction cost estimate for both phases of approximately $150 million is belowWestinghouse AP1000 reactors at Levy. In 2008, the cost estimate provided during the need determination proceeding.FPSC granted Duke Energy Florida estimatedFlorida’s petition for an annual retail revenue requirement for Phase oneaffirmative Determination of Need and Phase two of approximately $17 millionrelated orders requesting cost recovery under Florida’s nuclear cost-recovery rule, together with the associated facilities, including transmission lines and $3 million, respectively. On August 29,substation facilities. In October 2016, the FPSC approvedNRC issued COLs for the Phase one revenue requirement to be effective in customer rates in November 2016. However, Duke Energy Florida made filings with the FPSC in October 2016 to remove the Uprate Project from customer rates because a portion of the common equipment required for either phase to be considered in-service will not be completed as expected.proposed Levy Nuclear Plant Units 1 and 2. Duke Energy Florida is evaluatingnot required to build the potential impact to cost estimates related to the delaynuclear reactors as a result of the project.COLs being issued.
On January 28, 2014, Duke Energy Florida will fileterminated the Levy engineering, procurement and construction agreement (EPC). Duke Energy Florida may be required to pay for recoverywork performed under the EPC. Duke Energy Florida recorded an exit obligation in 2014 for the termination of the EPC. This liability was recorded within Other in Deferred Credits and Other Liabilities with an offset primarily to Regulatory assets on the Condensed Consolidated Balance Sheets. Duke Energy Florida is allowed to recover reasonable and prudent EPC cancellation costs associatedfrom its retail customers. On May 1, 2017, Duke Energy Florida filed a request with the UprateFPSC to recover approximately $82 million of Levy Nuclear Project at a later date.costs from retail customers in 2018. A hearing is scheduled in August 2017. Duke Energy Florida cannot predict the outcome of this matter.
PurchaseOn March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Osprey Energy Center
In December 2014,New York. Duke Energy Florida and Osprey Energy Center, LLC, a wholly owned subsidiaryis monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of Calpine Corporation (Calpine), entered into an Asset Purchase and Sale Agreement for the purchase of a 599 MW combined-cycle natural gas plant in Auburndale, Florida (Osprey Plant acquisition) for approximately $166 million. In July 2015, the FERC and the FPSC issued separate orders of approval for the Osprey Plant acquisition. The Hart-Scott-Rodino waiting period expired on May 2, 2016. Closing of the acquisition is expected to occur in January 2017, upon the expiration of an existing Power Purchase Agreement between Calpine and Duke Energy Florida. In anticipation of closing, on August 29, 2016, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirements for the Osprey Plant acquisition to be included in customer bills beginning in February 2017. Duke Energy Florida estimates the retail revenue requirements for the Osprey acquisition to be approximately $48 million. On November 1, 2016, the FPSC approved the Osprey Plant acquisition and the petition to include the revenue requirements in base rates.
Crystal River Unit 3 Regulatory Asset
In June 2015, the governor of Florida signed legislation to allow utilities to issue nuclear asset-recovery bonds to finance the recovery of certain retired nuclear generation assets, with approval of the FPSC. In November 2015, the FPSC issued a financing order approving Duke Energy Florida’s request to issue nuclear asset-recovery bonds to finance its unrecovered regulatory asset related to Crystal River Unit 3 (Crystal River 3) through a wholly owned special purpose entity. Nuclear asset-recovery bonds replace the base rate recovery methodology authorized by the 2013 Revised and Restated Stipulation and Settlement Agreement (2013 Agreement) and result in a lower rate impact to customers with a recovery period of approximately 20 years.
Pursuant to provisions in Florida Statutes and the FPSC financing order, in 2016, Duke Energy Florida formed Duke Energy Florida Project Finance, LLC (DEFPF), a wholly owned, bankruptcy remote special purpose subsidiary for the purpose of issuing nuclear asset-recovery bonds. In June 2016, DEFPF issued $1,294 million aggregate principal amount of senior secured bonds (nuclear asset-recovery bonds) to finance the recovery of Duke Energy Florida's Crystal River 3 regulatory asset.
In connection with this financing, net proceeds to DEFPF of approximately $1,287 million, after underwriting costs, were used to acquire nuclear asset-recovery property from Duke Energy Florida and to pay transaction related expenses. The nuclear asset-recovery property includes the right to impose, bill, collect and adjust a non-bypassable nuclear asset-recovery charge, to be collected on a per kilowatt-hour basis from all Duke Energy Florida retail customers until the bonds are paid in full. Duke Energy Florida began collecting the nuclear asset-recovery charge on behalf of DEFPF in customer rates in July 2016.
See Notes 6 and 13 for additional information.plants.
Duke Energy Ohio
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR) to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. The PUCO approved Rider PSR, but set it at zero dollars in connection with the most recent electric security plan. The application seeks to adjust Rider PSR as of April 1, 2017. Duke Energy Ohio is seeking deferral authority for net costs incurred from April 1, 2017, until the new rates under Rider PSR are put into effect. See Note 12 for additional discussion of Duke Energy Ohio's ownership interest in OVEC. Duke Energy Ohio cannot predict the outcome of this proceeding.
East Bend Coal Ash Basin Filing
On December 2, 2016, Duke Energy Kentucky filed with the KPSC a request for a CPCN for construction projects necessary to close and repurpose an ash basin at the East Bend facility as a result of current and proposed U.S. Environmental Protection Agency (EPA) regulations. Duke Energy Kentucky estimated a total cost of approximately $93 million in the filing and expects in-service date in the fourth quarter of 2018. Duke Energy Kentucky expects the KPSC to issue an order in the second quarter of 2017.
Base Rate Case
In connection with Duke Energy Ohio’s deployment of SmartGrid network, consisting of investments in AMI and distribution automation, a rider was established to recover these investments and return expected savings to customers. A stipulation in establishing this rider was approved by the PUCO in 2012, whereby Duke Energy Ohio committed to filing a basefiled with the PUCO an electric distribution base rate case within one year of full deployment of SmartGrid. On October 22, 2015, PUCO staff concluded that full deployment had occurred thereby, absent relief by the PUCO,application and supporting testimony in March 2017. Duke Energy Ohio would be requiredhas requested an estimated annual increase of approximately $15 million and a return on equity of 10.4 percent. The application also includes requests to file a base electric rate case proceeding no later than October 22, 2016. A number of proceedings have been initiated by the PUCOcontinue certain current riders and establish new riders related to continued development of retail markets in Ohio including questions related to demand-side management, time-differentiated pricingLED Outdoor Lighting Service and AMI that would impact such a base rate filing. On September 15, 2016, Duke Energy Ohio requested the PUCO approve a waiver of the condition in the 2012 stipulation to file a base rate case. On September 22, 2016, the Office of the Ohio Consumers' Counsel filed an objection to the waiver request and, on October 12, 2016, PUCO Staff filed a reply proposing a filing date no later than July 21, 2017.regulatory mandates. Duke Energy Ohio cannot predict the outcome of this matter.
Natural Gas Pipeline Extension
Duke Energy Ohio is proposing to install a new natural gas pipeline in its Ohio service territory to increase system reliability and enable the retirement of older infrastructure. The proposed project involves the installation of a natural gas line and is estimated to cost between $86 million and $110 million, excluding AFUDC. On September 13, 2016,January 20, 2017, Duke Energy Ohio filed an amended application with the Ohio Power Siting Board for approval of one of two proposed routes. If approved, construction of the pipeline extension is expected to be completed by early 2019.before the 2019/2020 winter season. A public hearing is scheduled for June 15, 2017, and an adjudicatory hearing is scheduled to begin July 12, 2017. The proposed project involves the installation of a natural gas line and is estimated to cost between $86 million and $110 million, excluding AFUDC.
Advanced Metering Infrastructure
On April 25, 2016, Duke Energy Kentucky filed with the KPSC an application for approval of a CPCN for the construction of advanced metering infrastructure. Duke Energy Kentucky estimates the $49 million project, if approved, will take two years to complete. Duke Energy Kentucky also requested approval to establish a regulatory asset of approximately $10 million for the remaining book value of existing meter equipment and inventory to be replaced. Duke Energy Kentucky and the Kentucky Attorney General entered into a stipulation to settle matters related to the application. An evidentiary hearing on the application and stipulation was held on December 8, 2016. Duke Energy Kentucky cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Advanced Metering Infrastructure
On April 25, 2016, Duke Energy Kentucky filed with the KPSC an application for approval of a CPCN for the construction of AMI. Duke Energy Kentucky anticipates that the estimated $49 million project, if approved, will take about two years to complete. Duke Energy Kentucky also requested approval to establish a regulatory asset of approximately $10 million for the remaining book value of existing meter equipment and inventory that will be replaced. On July 20, 2016, the Kentucky Attorney General, the only intervenor in the proceeding, moved to dismiss the application. Duke Energy Kentucky filed its opposition to the Kentucky Attorney General's motion to dismiss on July 27, 2016. On September 28, 2016, the KPSC denied the Kentucky Attorney General's motion to dismiss and granted Duke Energy Kentucky's motion to file rebuttal testimony. An evidentiary hearing is scheduled for December 1, 2016. Duke Energy Kentucky cannot predict the outcome of this matter.
Accelerated Natural Gas Service Line Replacement Rider
On January 20, 2015, Duke Energy Ohio filed an application for approval of an accelerated natural gas service line replacement program (ASRP). Under the ASRP, Duke Energy Ohio proposed to replace certain natural gas service lines on an accelerated basis over a 10-year period. Duke Energy Ohio also proposed to complete preliminary survey and investigation work related to natural gas service lines that are customer owned and for which it does not have valid records and, further, to relocate interior natural gas meters to suitable exterior locations where such relocation can be accomplished. Duke Energy Ohio's current projected total capital and operations and maintenance expenditures under the ASRP isare approximately $240 million. The filing also sought approval of Rider ASRPa rider mechanism (Rider ASRP) to recover related expenditures. Duke Energy Ohio proposed to update Rider ASRP on an annual basis. Intervenors opposed the ASRP, primarily because they believe the program is neither required nor necessary under federal pipeline regulation. On October 26, 2016, the PUCO issued an order denying the proposed ASRP. The PUCO did, however, encourage Duke Energy Ohio to work with the PUCO Staff and intervenors to identify a reasonable solution for the risks attributed to service line leaks caused by corrosion.intervenors. Duke Energy Ohio is currently evaluatingfiled an application for rehearing of the order.PUCO decision. In December 2016, the PUCO granted the request for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.
Energy Efficiency Cost Recovery
On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. After a comment period, theThe 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 toupon 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 July 8, 2015.intervenor. On January 6, 2016, Duke Energy Ohio and the PUCO Staff entered into a stipulation, pending PUCOthe PUCO's approval, resolving theto resolve issues related to among other things, performance incentives and the PUCO Staff audit of 2013 costs. Based oncosts, among other issues. In December 2015, based upon the stipulation, in December 2015, Duke Energy Ohio re-established approximately $20 million of the revenues that had been reversed in the second quarter of 2015.previously reversed. On October 26, 2016, the PUCO issued an order approving the stipulation without modification. Intervenors requested a rehearing of the PUCO decision. In December 2016, the PUCO granted a rehearing for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.
2012 Natural Gas Rate Case/Manufactured Gas Plant Cost Recovery
On November 13, 2013, the PUCO issued an order (PUCO order) approving a settlement of Duke Energy Ohio’s natural gas base rate case and authorizing the recovery of costs incurred between 2008 and 2012 for environmental investigation and remediation of two former manufactured gas plant (MGP) sites. The PUCO order also authorized Duke Energy Ohio to continue deferring MGP environmental investigation and remediation costs incurred subsequent to 2012 and to submit annual filings to adjust the MGP rider for future costs. Intervening parties appealed this decision to the Ohio Supreme Court and that appeal remains pending. Oral argument is scheduled forwas heard on February 28, 2017. InvestigationIncurred and projected investigation and remediation expenses at these MGP sites that have not been collected through the MGP rider are approximately $101$100 million and are recorded as Regulatory assets on Duke Energy Ohio's Condensed Consolidated Balance Sheet as of September 30, 2016.
The PUCO order also contained deadlines for completing the MGP environmental investigation and remediation costs at the MGP sites. For the property known as the East End site the PUCO order established a deadline of DecemberMarch 31, 2016. As of September 30, 2016, $46 million of the regulatory asset represents future remediation cost expected to be incurred at the East End site after 2016. The PUCO order authorized Duke Energy Ohio to seek to extend these deadlines due to certain circumstances. On May 16, 2016, Duke Energy Ohio filed an application to extend the deadline for cost recovery applicable to the East End site. The PUCO set a procedural schedule for filing comments on the application and associated replies for November 23, 2016, and December 2, 2016, respectively.
2017. Duke Energy Ohio cannot predict the outcome of this matter.
Regional Transmission Organization Realignment
Duke Energy Ohio, including Duke Energy Kentucky, transferred control of its transmission assets from Midcontinent Independent System Operator, Inc. (MISO) to PJM Interconnection, LLC (PJM), effective December 31, 2011. The PUCO approved a settlement related to Duke Energy Ohio’s recovery of certain costs of the Regional Transmission Organization (RTO) realignment via a non-bypassable rider. Duke Energy Ohio is allowed to recover all MISO Transmission Expansion Planning (MTEP) costs, including but not limited to Multi Value Project (MVP) costs, directly or indirectly charged to Ohio customers. Duke Energy Ohio also agreed to vigorously defend against any charges for MVP projects from MISO. The KPSC also approved a request to effect the RTO realignment, subject to a commitment not to seek double recovery in a future rate case of the transmission expansion fees that may be charged by MISO and PJM in the same period or overlapping periods.
Duke Energy Ohio had a recorded liability for its exit obligation and share of MTEP costs, excluding MVP, of $91$90 million and $92 million, respectively, at September 30, 2016March 31, 2017, and December 31, 2015,2016, recorded within Other in Current liabilities and Other in Deferred credits and other liabilitiesOther Noncurrent Liabilities on Duke Energy Ohio’sthe Condensed Consolidated Balance Sheets. The retail portions of MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider. As of September 30, 2016March 31, 2017, and December 31, 2015,2016, Duke Energy Ohio had $72$71 million recorded in Regulatory assets on the Condensed Consolidated Balance Sheets.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
MVP. MISO approved 17 MVP proposals prior to Duke Energy Ohio’s exit from MISO on December 31, 2011. Construction of these projects is expected to continue through 2020. Costs of these projects, including operating and maintenance costs, property and income taxes, depreciation and an allowed return, are allocated and billed to MISO transmission owners.
On December 29, 2011, MISO filed a tariff with the FERC providing for the allocation of MVP costs to a withdrawing owner based on monthly energy usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation methodology to transmission owners who withdrew from MISO prior to January 1, 2012, is consistent with the tariff at the time of their withdrawal from MISO and, (ii) if not, what the amount of and methodology for calculating any MVP cost responsibility should be. In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. On July 16, 2013, a FERC Administrative Law Judge (ALJ) issued an Initial Decision.initial decision. Under this Initial Decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio filed exceptions to the Initial Decision,initial decision, requesting FERC to overturn the ALJ’s decision.
On October 29, 2015, the FERC issued an order reversing the ALJ's decision. The FERC ruled the cost allocation methodology is not consistent with the MISO tariff and that Duke Energy Ohio has no liability for MVP costs after its withdrawal from MISO. On May 19, 2016, the FERC denied the request for rehearing filed by MISO and the MISO Transmission Owners. On July 15, 2016, the MISO Transmission Owners filed a petition for review with the U.S. Court of Appeals for the Sixth Circuit. Duke Energy Ohio cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Indiana
Coal Combustion Residual Plan
On March 17, 2016, Duke Energy Indiana filed with the IURC a request for approval of its first group of federally mandated Coal Combustion Residual (CCR) rule compliance projects (Phase I CCR Compliance Projects) to comply with the U.S. Environmental Protection Agency's (EPA)EPA's CCR rule. The projects in this Phase I filing are CCR compliance projects, including the conversion of Cayuga and Gibson Stationsstations to dry bottom ash handling and related water treatment. Duke Energy Indiana has requested timely recovery of approximately $380 million in retail capital costs and incremental operating and maintenance costs, including AFUDC, under a federal mandate tracker whichthat provides for timely recovery of 80 percent of such costs and deferral with carrying costs of 20 percent of such costs for recovery in a subsequent retail base rate case. On January 24, 2017, Duke Energy Indiana and various Intervenors filed a settlement agreement with the IURC. Terms of the settlement include recovery of 60 percent of the estimated CCR compliance construction project capital costs through existing rider mechanisms and deferral of 40 percent of these costs until Duke Energy Indiana's next general retail rate case. The deferred costs will earn a return based on Duke Energy Indiana's long-term debt rate of 4.73 percent until costs are included in retail rates, at which time the deferred costs will earn a full return. Costs are to be capped at $365 million, plus actual AFUDC. Costs above the cap may be recoverable in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring. The settlement is subject to approval by the IURC. An evidentiary hearing is scheduled forwas held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017. Duke Energy Indiana cannot predict the outcome of this matter.
Edwardsport Integrated Gasification Combined Cycle Plant
On November 20, 2007, the IURC granted Duke Energy Indiana a CPCN for the construction of the Edwardsport Integrated Gasification Combined Cycle (IGCC) Plant. The Citizens Action Coalition of Indiana, Inc., Sierra Club, Inc., Save the Valley, Inc., and Valley Watch, Inc. (collectively, the Joint Intervenors) were intervenors in several matters related to the Edwardsport IGCC Plant. The Edwardsport IGCC Plant was placed in commercial operation in June 2013. Costs for the Edwardsport IGCC Plant are recovered from retail electric customers via a tracking mechanism (IGCC rider).
The ninth semi-annual IGCC rider order was appealed by the Joint Intervenors. The proceeding has been remanded to the IURC for further proceedings and additional findings on the tax in-service issue. An evidentiary hearing was held on September 13, 2016, and an order is expected by early 2017. Duke Energy Indiana cannot predict the outcome of this matter.
The 11th through 15th semi-annual IGCC riders and a subdocket to Duke Energy Indiana's fuel adjustment clause were approved by the IURC as part of an August 2016 settlement agreement. Issues in these filings included the determination whether the IGCC plant was properly declared in-service for ratemaking purposes in June 2013 and a review of the operational performance of the plant. On September 17, 2015, Duke Energy Indiana, the Office of Utility Consumer Counselor, the Industrial Group and Nucor Steel Indiana reached a settlement agreement to resolve these pending issues. On January 15, 2016, The Citizens Action Coalition of Indiana, Inc., Sierra Club, Save the Valley and Valley Watch joined a revised settlement (IGCC settlement). The IGCC settlement resulted in customers not being billed for previously incurred operating costs of $87.5 million, and for additional Duke Energy Indiana payments and commitments of $5.5 million for attorneys’ fees and amounts to fund consumer programs. Attorneys’ fees and expenses for the new settling parties will be addressed in a separate proceeding. Duke Energy Indiana recognized pretax impairment and related charges of $93 million in 2015. Additionally, under the IGCC settlement, the recovery of operating and maintenance expenses and ongoing maintenance capital at the plant are subject to certain caps during the years of 2016 and 2017. The IGCC settlement also includes a commitment to either retire or stop burning coal by December 31, 2022, at the Gallagher Station. Pursuant to the IGCC settlement, the in-service date used for accounting and ratemaking will remain as June 2013. Remaining deferred costs will be recovered over eight years and not earn a carrying cost. On August 24, 2016, the IURC approved the settlement in full with no changes or conditions. The order was not appealed and the proceeding is concluded. As of September 30, 2016, deferred costs related to the project are approximately $184 million. Under the IGCC settlement, future IGCC riders will be filed annually, rather than every six months, with the next filing scheduled for first quarter 2017.
FERC Transmission Return on Equity ComplaintComplaints
Customer groups have filed with the FERC complaints against MISO and its transmission-owning members, including Duke Energy Indiana, alleging, among other things, that the current base rate of return on equity earned by MISO transmission owners of 12.38 percent is unjust and unreasonable. The latest complaint, filed on February 12, 2015, claimscomplaints, among other things, claim that the current base rate of return on equity earned by MISO transmission owners should be reduced to 8.67 percent and requests a consolidation of complaints. The motion to consolidate complaints was denied.percent. On January 5, 2015, the FERC issued an order accepting the MISO transmission owners' adder of 0.50 percent adder to the base rate of return on equity based on participation in an RTO subject to it being applied to a return on equity that is shown to be just and reasonable in the pending return on equity complaints. A hearing in the base return on equity proceeding was held in August 2015. On December 22, 2015, the presiding FERC ALJ in the first complaint issued an Initial Decision in which he set 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.FERC, but is subject to rehearing requests. On June 30, 2016, the presiding FERC ALJ in the second complaint issued an Initial Decision setting the base rate of return on equity at 9.70 percent. The Initial Decision in the second complaint is pending FERC review. On April 14, 2017, the U.S. Court of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. This decision may affect the outcome of the complaints against Duke Energy Indiana. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.
Piedmont
PART INorth Carolina Integrity Management Rider Filings
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined NotesIn October 2016, Piedmont filed a petition with the NCUC under the integrity management rider (IMR) mechanism seeking authority to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Grid Infrastructure Improvement Plancollect an additional $8 million in annual revenues, effective December 2016, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending September 30, 2016. In November 2016, the NCUC approved the request.
On August 29, 2014, pursuant to a new statute, Duke Energy IndianaMay 1, 2017, Piedmont filed a seven-year grid infrastructure improvement planpetition with the IURC withNCUC under the IMR mechanism to collect an estimated cost of $1.9 billion, focusingadditional $11.6 million in annual revenues, effective June 2017, based on the reliability,eligible capital investments closed to integrity and modernization ofsafety projects over the transmission and distribution system. The plan also provided for cost recovery through a transmission and distribution rider (T&D Rider). six-month period ending March 31, 2017. A ruling from the NCUC is pending.
Tennessee IMR Filings
In May 2015,November 2016, Piedmont filed an annual report with the IURC deniedTPUC under the original proposal dueIMR mechanism seeking authority to collect an insufficient level of detailed projects and cost estimatesadditional $1.7 million in the plan. On December 7, 2015, Duke Energy Indiana filed a revised infrastructure improvement plan with an estimated cost of $1.8 billion in response to guidance from IURC orders and the Indiana Court of Appeals decisions related to this new statute. The revised plan uses a combination of advanced technology and infrastructure upgrades to improve service to customers and provide them with better information about their energy use. It also provides for cost recovery through a T&D Rider. In March 2016, Duke Energy Indiana entered into a settlement with all parties to the proceeding except the Citizens Action Coalition of Indiana, Inc. The settlement agreement decreasedannual revenues effective January 2017, based on the capital expenditures eligible for timely recovery of costsinvestments in integrity and safety projects over the seven-year plan to approximately $1.4 billion, including the removal of an AMI project. Under the settlement, the return on equity to be used in the T&D Rider is 10 percent.12-month period ending October 31, 2016. The IURCTPUC approved the settlement and issuedrequest at a final orderhearing on June 29, 2016. The order was not appealed, and the proceeding is concluded.April 10, 2017.
The settlement also provided for deferral accounting for depreciation and post-in-service carrying costs for AMI projects outside the seven-year plan. Duke Energy Indiana withdrew its request for a regulatory asset for current meters and will retain any savings associated with future AMI installation until the next retail base rate case, which is required to be filed prior to the end of the seven-year plan. During the third quarter of 2016, Duke Energy Indiana decided to implement the AMI project. This decision resulted in a pretax impairment charge related to existing or non-AMI meters of approximately $8 million for the three and nine months ended September 30, 2016, based in part on the requirement to file a base rate case in 2022 under the approved T&D Rider plan. As of September 30, 2016, Duke Energy Indiana's remaining net book value of non-AMI meters is approximately $48 million and will be depreciated through 2022. In the event that Duke Energy Indiana were to file a base rate case earlier than 2022, it may result in additional impairment charges.
OTHER REGULATORY MATTERS
Atlantic Coast Pipeline
On September 2, 2014, Duke Energy, Dominion Resources (Dominion), Piedmont and Southern Company Gas formerly AGL Resources Inc., announced the formation of a company, ACP,Atlantic Coast Pipeline, LLC (ACP) to build and own the proposed Atlantic Coast Pipeline (the(ACP pipeline), a 564-milean approximately 600-mile interstate natural gas pipeline.pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet the needs identified in requests for proposalsRFPs by Duke Energy Carolinas, Duke Energy Progress and Piedmont. The ACP pipeline development costs are estimated between $5.0 billion to $5.5 billion. Dominion will build and operate the ACP pipeline and originally owned a 45 percent ownership percentage in ACP. Duke Energy owned a 40 percent ownership interest in ACP through its Commercial Portfolio segment. Piedmont owned 10 percent and the remaining share was owned by Southern Company Gas.
On October 3, 2016, Duke Energy and Piedmont completed a merger transaction that resulted in Piedmont becoming a wholly owned subsidiary of Duke Energy. In connection with this transaction, and pursuant to terms of the ACP partnership agreement, Piedmont transferred 3 percent of its interest in ACP to Dominion in exchange for approximately $14 million. As a result of this transfer, Dominion maintainsholds a leading ownership percentage in ACP of 48 percent andpercent. Duke Energy hasowns a combined ownership percentage of 47 percent.percent interest through its Gas Utilities and Infrastructure segment. Southern Company Gas maintains a 5 percent interest. See Note 212 for additional information related to Duke Energy's acquisition of Piedmont.ownership interest.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Carolinas, and Duke Energy Progress and Piedmont, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. In October 2014, the NCUC and PSCSC approved the Duke Energy Carolinas and Duke Energy Progress requests to enter into certain affiliate agreements, pay compensation to ACP and to grant a waiver of certain Code of Conduct provisions relating to contractual and jurisdictional matters. On September 18, 2015, ACP filed an application with the FERC requesting a CPCN authorizing ACP to construct the pipeline. ACP executed a construction agreement in September 2016. ACP also requested approval of an open access tariff and the precedent agreements it entered into with future pipeline customers. In AugustDecember 2016, FERC issued a Notice of Schedule indicating a finaldraft Environmental Impact Statement (EIS) will be issued by June 30,indicating that the proposed pipeline would not cause significant harm to the environment or protected populations. The draft EIS comment period ended in April 2017, and ACP is working to resolve items identified through the comment process. The final EIS is expected in summer 2017. FERC approval of the application is expected within 90 days of the issuance of the final EIS. Construction is projected to begin once FERC approval is receivedin the second-half of 2017, with a targeted in-service date in the second half of 2019. ACP executed a construction agreement in September 2016 and is working with various agencies to develop the final pipeline route. ACP also requested approval of an open access tariff and the precedent agreements it entered into with future pipeline customers, including Duke Energy Carolinas and Duke Energy Progress.
Sabal Trail Transmission, LLC Pipeline
On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail Transmission, LLC (Sabal Trail) from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in the proposed 500-mile Sabal Trail natural gas pipeline. Spectra Energy will continue to own 59.5 percent of the Sabal Trail pipeline and NextEra Energy will own the remaining 33 percent.has a 42.5 percent ownership interest. Sabal Trail is a joint venture that is constructing 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 will traverse Alabama, Georgia and Florida to meet rapidly growing demand for natural gas in those states.Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the Sabal Trail pipeline. On September 7, 2016, FERC denied the intervenors' rehearing requests. On September 21, 2016, intervenors filed an appeal of FERC's CPCN orders to the U.S. Court of Appeals for the District of Columbia Circuit. Oral argument on the appeal was held on April 18, 2017, and a decision is expected in the summer of 2017. The Sabal Trail pipeline has received other required regulatory approvals and initiated construction began in the summer of the pipeline2016, with an expected in-service date in mid-2017. See Note 12 for additional information related to Duke Energy's ownership interest.
ProgressConstitution Pipeline
Duke Energy Merger FERC Mitigationowns a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution). Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc.
On April 22, 2016, the New York State Department of Environmental Conservation (NYSDEC) denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed legal actions in the U.S. District Court for the Northern District of New York and 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. Both courts granted Constitution's motions to expedite the schedules for the legal actions. On November 16, 2016, oral arguments were heard in the U.S. Court of Appeals. On March 16, 2017, the U.S. District Court for the Northern District of New York dismissed without prejudice Constitution’s claim that New York State permits were preempted by the federal permitting process. The ruling on oral arguments made in the U.S. Court of Appeals regarding NYSDEC's denial of the water quality certification is currently expected in mid-2017.
Constitution remains steadfastly committed to pursuing the project and intends to pursue all available options to challenge the NYSDEC's decision. In light of the denial of the certification, Constitution revised its target in-service date of the project to be as early as the second half of 2018, assuming that the challenge process is satisfactorily and promptly concluded.
In June 2012,July 2016, Constitution requested, and the FERC approved, an extension of the mergerconstruction period and in-service deadline of the project to December 2018. Also in July, the FERC denied the New York Attorney General's (NYAG) complaint and request for a stay of the certificate order authorizing the project on the grounds that Constitution had improperly cut trees along the proposed route. The FERC found the complaint procedurally deficient and that there was no justification for a stay; it did find the filing constituted a valid request for investigation and thus referred the matter to FERC staff for further examination as may be appropriate. On November 22, 2016, the FERC denied the NYAG's request for reconsideration of this order.
Since April 2016, with Progress Energy, includingthe actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. As a result, Duke Energy evaluated the investment in the Constitution project for other-than-temporary impairments (OTTIs). At this time, no OTTI has been determined and Progress Energy’s revised market power mitigation plan,therefore no impairment charge to reduce the Joint Dispatch Agreement (JDA)carrying value of the investment has been recorded. However, to the extent that the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the joint Open Access Transmission Tariff. The revised market power mitigation plan providedproject is not viable or does not go forward as legal and regulatory actions progress, the conclusions with respect to OTTIs could change and may require that an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, be recorded. Duke Energy will continue to monitor and update the OTTI analysis as required. Different assumptions could affect the timing and amount of any charge recorded in a period.
Pending the outcome of the matters described above, and when construction proceeds, Duke Energy remains committed to fund an amount in proportion to its ownership interest for the acceleration of one transmission projectdevelopment and the completion of seven other transmission projects (Long-Term FERC Mitigation) and interim firm power sale agreements during the completionconstruction of the transmission projects (Interim FERC Mitigation). The Long-Term FERC Mitigation was expectednew pipeline. Duke Energy's total anticipated contributions are approximately $229 million.
See Note 12 for additional information related to increase power imported intoownership interest and carrying value of the Duke Energy Carolinas and Duke Energy Progress service areas and enhance competitive power supply options in the service areas. All of these projects were completed in or before 2014.investment.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Following the closing of the merger, outside counsel reviewed Duke Energy’s mitigation plan and discovered a technical error in the calculations. On December 6, 2013, Duke Energy submitted a filing to FERC disclosing the error and arguing that no additional mitigation is necessary. The city of New Bern filed a protest and requested that FERC order additional mitigation. On October 29, 2014, FERC ordered that the amount of the stub mitigation be increased from 25 MW to 129 MW. The stub mitigation is Duke Energy’s commitment to set aside for third parties a certain quantity of firm transmission capacity from Duke Energy Carolinas to Duke Energy Progress during summer off-peak hours. The FERC also ordered that Duke Energy operate certain phase shifters to create additional import capability and that such operation be monitored by an independent monitor. The costs to comply with this order are not material. FERC also referred Duke Energy’s failure to expressly designate the phase shifter reactivation as a mitigation project in the original mitigation plan filing in March 2012 to the FERC Office of Enforcement for further inquiry. In response, and since December 2014, the FERC Office of Enforcement has been conducting a nonpublic investigation of Duke Energy's market power analyses included in the Progress merger filings submitted to FERC. Duke Energy cannot predict the outcome of this investigation.
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to 20 years), and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in North Carolina, Florida and Indiana earlier than their current estimated useful lives primarily because these facilities do not have the requisite emission control equipment primarily to meet EPA regulations recently approved or proposed.
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 Condensed Consolidated Balance Sheets as of September 30, 2016.March 31, 2017, and exclude capitalized asset retirement costs. | | | | | | Remaining Net |
| | | Remaining Net |
|
| | Capacity |
| | Book Value(a) |
| Capacity |
| | Book Value |
|
| | (in MW) |
| | (in millions) |
| (in MW) |
| | (in millions) |
|
| Duke Energy Carolinas | | | | |
Allen Steam Station Units 1-3(a) | | 585 |
| | $ | 167 |
|
| Progress Energy and Duke Energy Florida | | | | | | |
| Crystal River Units 1 and 2 | 873 |
| | 123 |
| |
Crystal River Units 1 and 2(b) | | 873 |
| | 117 |
|
| Duke Energy Indiana | | | | | | |
Wabash River Unit 6(b) | 318 |
| | 33 |
| |
Gallagher Units 2 and 4(c) | 280 |
| | 137 |
| 280 |
| | 135 |
|
| Total Duke Energy | 1,471 |
| | 293 |
| 1,738 |
| | $ | 419 |
|
| |
| (a) | Remaining net book value amounts exclude any capitalized asset retirement costs.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. |
| |
| (b) | In April 2016, Wabash River 6 terminated coal burning operations and is targeted for retirement by the end of 2016. The total net book value of $90 million for the retail portion of Wabash River Unit 6 and the retail portion of capitalized asset retirement costs for Wabash River Units 2 through 6 is classified as Generation facilities to be retired, net on Duke Energy Indiana's Condensed Consolidated Balance Sheet at September 30, 2016.Florida will likely retire these coal units by 2018 to comply with environmental regulations. |
| |
| (c) | Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the settlement of Edwardsport IGCC matters. |
On October 23, 2015, the EPA published in the Federal Register the final Clean Power Plan (CPP) rule regulating carbon dioxide (CO2) emissions from existing fossil fuel-fired electric generating units. The CPP establishes CO2 emission rates and mass cap goals that apply to existing fossil fuel-fired electric generation units. Under the CPP, states were required to develop and submit a final compliance plan, or an initial plan with an extension request, to the EPA by September 6, 2016. States that receive an extension must submit a final completed plan to the EPA by September 6, 2018. These state plans are subject to EPA approval, with a federal plan applied to states that fail to submit a plan to the EPA or if a state plan is not approved. Legal challenges to the final CPP have been filed by stakeholders. On February 9, 2016, the U.S. Supreme Court issued a stay of the final CPP rule, halting implementation until legal challenges are resolved. Final resolution of these legal challenges could take several years. Compliance with CPP could cause the industry to replace coal generation with natural gas and renewables, especially in states that have significant CO2 reduction targets under the rule. Costs to operate coal-fired generation plants continue to grow due to increasing environmental compliance requirements, including ash management costs unrelated to CPP, which may result in the retirement of coal-fired generation plants earlier than the current end of useful lives. Duke Energy continues to evaluate the need to retire generating facilities and plans to seek regulatory recovery, where appropriate, for amounts that have not been recovered upon asset retirements. However, recovery is subject to future regulatory approval, including the recovery of carrying costs on remaining book values, and therefore cannot be assured.
Refer to the “Western"Western Carolinas Modernization Plan”Plan" discussion above for details of Duke Energy Progress' planned retirements.
5. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
The Duke Energy is subject to international, federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. The Subsidiary Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following environmental matters impact all of the Duke Energy Registrants.
Remediation Activities
In addition to Asset Retirement Obligationsasset retirement obligations (AROs) recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based upon site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other in the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Deferred Credits and Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. | | | | Nine Months Ended September 30, 2016 | Three Months Ended March 31, 2017 |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 97 |
| | $ | 10 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 54 |
| | $ | 12 |
| $ | 98 |
| | $ | 10 |
| | $ | 18 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 10 |
| | $ | 1 |
|
| Provisions/adjustments | 34 |
| | 5 |
| | 5 |
| | 2 |
| | 3 |
| | 6 |
| | 20 |
| 6 |
| | 1 |
| | — |
| | — |
| | 1 |
| | 4 |
| | (1 | ) | | 1 |
|
| Cash reductions | (12 | ) | | (4 | ) | | (6 | ) | | (2 | ) | | (4 | ) | | (1 | ) | | (2 | ) | (6 | ) | | — |
| | (1 | ) | | — |
| | (1 | ) | | (4 | ) | | — |
| | — |
|
| Balance at end of period | $ | 119 |
| | $ | 11 |
| | $ | 16 |
| | $ | 3 |
| | $ | 13 |
| | $ | 59 |
| | $ | 30 |
| $ | 98 |
| | $ | 11 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 9 |
| | $ | 2 |
|
| | | | Nine Months Ended September 30, 2015 | Three Months Ended March 31, 2016 |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 97 |
| | $ | 10 |
| | $ | 17 |
| | $ | 5 |
| | $ | 12 |
| | $ | 54 |
| | $ | 10 |
| $ | 94 |
| | $ | 10 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 54 |
| | $ | 12 |
| | $ | 1 |
|
| Provisions/adjustments | 4 |
| | — |
| | 3 |
| | — |
| | 3 |
| | 1 |
| | 3 |
| 10 |
| | 2 |
| | 1 |
| | — |
| | 1 |
| | — |
| | 6 |
| | — |
|
| Cash reductions | (4 | ) | | — |
| | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | (1 | ) | (3 | ) | | (1 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
|
| Balance at end of period | $ | 97 |
| | $ | 10 |
| | $ | 18 |
| | $ | 4 |
| | $ | 14 |
| | $ | 54 |
| | $ | 12 |
| $ | 101 |
| | $ | 11 |
| | $ | 16 |
| | $ | 2 |
| | $ | 14 |
| | $ | 54 |
| | $ | 18 |
| | $ | 1 |
|
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. | | | (in millions) | | |
| Duke Energy | $ | 69 |
| $ | 71 |
|
| Duke Energy Carolinas | 22 |
| 22 |
|
| Duke Energy Ohio | 36 |
| 36 |
|
| Duke Energy Indiana | 7 |
| 7 |
|
| Piedmont | | 2 |
|
North Carolina and South Carolina Ash Basins
OnIn February 2, 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. On February 8, 2014, a permanent plug was installed in the stormwater pipe, stopping the release of materials into the river. Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. Future costs related to the Dan River release, including pending or future state or federal civil enforcement proceedings, future regulatory directives, natural resources damages, additional pending litigation, future claims or litigation and long-term environmental impact costs, cannot be reasonably estimated at this time.
The North Carolina Department of Environmental Quality (NCDEQ) has historically assessed Duke Energy Carolinas and Duke Energy Progress with NoticesNotice of Violations (NOV) for violations that were most often resolved through satisfactory corrective actions and minor, if any, fines or penalties. Subsequent to the Dan River ash release, Duke Energy Carolinas and Duke Energy Progress have been served with a higher level of NOVs, including assessed penalties for violations at L.V. Sutton Combined Cycle Plant (Sutton) and Dan River Steam Station. These assessed penalties were unprecedented and inconsistent with historic enforcement practices of the NCDEQ. Based on historic practices, the expected liability of any existing NOVs would not be material. Duke Energy Carolinas and Duke Energy Progress cannot predict whether the NCDEQ will assess future penalties related to existing unresolved NOVs and if such penalties would be material.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
See "NCDEQ Notices of Violation" section below for additional discussion.
LITIGATION
Duke Energy Carolinas and Duke Energy Progress
Ash Basin Shareholder Derivative LitigationClosure Costs Deferral
Five shareholder derivative lawsuits were filed in Delaware Chancery Court relating to the release at Dan River and to the management of Duke Energy’s ash basins. On October 31, 2014, the five lawsuits were consolidated in a single proceeding titled In Re Duke Energy Corporation Coal Ash Derivative Litigation. On December 2, 2014, plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The Consolidated Complaint names as defendants several current and former Duke Energy officers and directors (Duke Energy Defendants). Duke Energy is named as a nominal defendant.
The Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties by failing to adequately oversee Duke Energy’s ash basins and that these breaches of fiduciary duty may have contributed to the incident at Dan River and continued thereafter. The lawsuit also asserts claims against the Duke Energy Defendants for corporate waste (relating to the money Duke Energy has spent and will spend as a result of the fines, penalties and coal ash removal) and unjust enrichment (relating to the compensation and director remuneration that was received despite these alleged breaches of fiduciary duty). The lawsuit seeks both injunctive relief against Duke Energy and restitution from the Duke Energy Defendants. On January 21, 2015, the Duke Energy Defendants filed a Motion to Stay and an alternative Motion to Dismiss. On August 31, 2015, the court issued an order staying the case which was lifted on March 24, 2016. On April 22,30, 2016, plaintiffs filed an Amended Verified Consolidated Shareholder Derivative Complaint (Amended Complaint) making the same allegations as in the Consolidated Complaint. The Duke Energy Defendants filed a motion to dismiss the Amended Complaint on June 21, 2016.
On March 5, 2015, shareholder Judy Mesirov filed a shareholder derivative complaint (Mesirov Complaint) in North Carolina state court. The lawsuit, styled Mesirov v. Good, is similar to the consolidated derivative action pending in Delaware Chancery Court and was filed against the same current directors and former directors and officers as the Delaware litigation. Duke Energy Corporation, Duke Energy Progress and Duke Energy Carolinas are named as nominal defendants. The Mesirov Complaint alleges that the Duke Energy Board of Directors was aware of Clean Water Act (CWA) compliance issues and failures to maintain structures in ash basins, but that the Board of Directors did not require Duke Energy Carolinas and Duke Energy Progress to take action to remedy deficiencies. The Mesirov Complaint further alleges that the Board of Directors sanctioned activities to avoid compliancefiled a joint petition with the law by allowing improper influenceNCUC seeking an accounting order authorizing deferral of certain costs incurred in connection with federal and state environmental remediation requirements related to the NCDEQ to minimize regulation and by opposing previously anticipated citizen suit litigation. The Mesirov Complaint seeks corporate governance reforms and damages relating to costs associated with the Dan River release, remediationpermanent closure of ash basins and other ash storage units at coal-fired generating facilities that have provided or are outproviding generation to customers located in North Carolina. Initial comments were received in March 2017, and reply comments were filed on April 19, 2017. Duke Energy Carolinas and Duke Energy Progress cannot predict the outcome of compliance withthis matter.
Duke Energy Carolinas
William States Lee Combined Cycle Facility
On April 9, 2014, the CWAPSCSC granted Duke Energy Carolinas and defendingNorth Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and paymentPublic Convenience and Necessity (CECPCN) for the construction and operation of fines, penaltiesa 750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and settlements relatingestimates a cost to criminal and civil investigations and lawsuits.build of $600 million for its share of the facility, including AFUDC. The case was stayed until July 1, 2016.project is expected to be commercially available in late 2017. NCEMC will own approximately 13 percent of the project. On July 5, 2016,3, 2014, the plaintiffSouth Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Voluntary Dismissal Without Prejudice, closing thisAppeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. On March 24, 2017, the South Carolina Supreme Court denied the request for review, thus concluding the matter.
William States Lee III Nuclear Station
In additionDecember 2007, Duke Energy Carolinas applied to the above derivative complaints,NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (Westinghouse) AP1000 reactors for the proposed William States Lee III Nuclear Station to be located at a site in 2014,Cherokee County, South Carolina. The NCUC and PSCSC have concurred with the prudency of Duke Energy also received two shareholder litigation demand letters. The letters alleged thatCarolinas decisions to incur certain project development and preconstruction costs through several separately issued orders, although full cost recovery is not guaranteed. In December 2016, the membersNRC issued a COL for each reactor. Duke Energy Carolinas is not required to build the nuclear reactors as a result of the Board of Directors and certain officers breached their fiduciary duties by allowing the company to illegally dispose of and store coal ash pollutants. One of the letters also alleged a breach of fiduciary duty in the decision-making relating to the leadership changes following the close of the Progress Energy merger in July 2012.
By letter dated September 4, 2015, attorneys for the shareholders were informed that, on the recommendation of the Demand Review Committee formed to consider such matters, the Board of Directors concluded not to pursue potential claims against individuals. One of the shareholders, Mitchell Pinsly, sent a formal demand for records and Duke Energy responded to this request.COLs being issued.
On October 30, 2015, shareholder Saul BresalierMarch 29, 2017, Westinghouse filed a shareholder derivative complaint (Bresalier Complaint)for voluntary Chapter 11 bankruptcy in the U.S. DistrictBankruptcy Court for the Southern District of Delaware. The lawsuit alleges that several current and formerNew York. Duke Energy officers and directors (Bresalier Defendants) breached their fiduciary dutiesCarolinas is monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of nuclear plants.
Duke Energy Progress
Storm Cost Deferral Filing
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 coal ash environmental issues, the post-merger changeresponse to Hurricane Matthew and other significant storms in Chief Executive Officer (CEO) and oversight of political contributions.2016. Duke Energy Progress proposed in the filing to true-up the total costs quarterly through August 2017. The current estimate of incremental operation and maintenance and capital costs is named as a nominal defendant. The Bresalier Complaint contends that$116 million. On March 15, 2017, the Demand Review Committee failed to appropriately consider the shareholder’s earlier demand for litigation and improperly decided not to pursue claims against the Bresalier Defendants. The Bresalier DefendantsPublic Staff filed a Motion to Dismiss the Bresalier litigation on January 15, 2016. In lieucomments supporting deferral of a responseportion of Duke Energy Progress’ requested amount. Duke Energy Progress filed reply comments on April 12, 2017. Duke Energy Progress cannot predict the outcome of this matter.
Western Carolinas Modernization Plan
On November 4, 2015, Duke Energy Progress announced a Western Carolinas Modernization Plan, which included retirement of the existing Asheville coal-fired plant, the construction of two 280‑MW combined-cycle natural gas plants having dual fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The plan also included upgrades to existing transmission lines and substations, installation of solar generation and a pilot battery storage project. These investments will be made within the next seven years. Duke Energy Progress is also working with the local natural gas distribution company to upgrade an existing natural gas pipeline to serve the natural gas plant.
On March 28, 2016, the NCUC issued an order approving a Certificate of Public Convenience and Necessity (CPCN) for the new combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, 2017, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are underway and construction of these plants is scheduled to begin in fall 2017, with an expected in-service date in late 2019. Duke Energy Progress plans to file for future approvals related to the Motionproposed solar generation and pilot battery storage project.
The carrying value of the 376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $471 million and $492 million are included in Generation facilities to Dismiss, the plaintiff filed a Motion to Convert the Bresalier Defendants' Motion to Dismiss into a Motion for Summary Judgment and also for limited discovery. Following a hearingbe retired, net on June 15, 2016, the court denied the plaintiff's Motion to Convert and is requiring the parties to complete briefing on the Bresalier Defendants' Motion to Dismiss. On July 29, 2016, the Bresalier Defendants filed an Amended Motion to Dismiss. As discussed below, an agreement-in-principle has been reached to settle the merger related claims in the Bresalier Complaint.
It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with these matters.
Progress Energy Merger Shareholder Litigation
On MayProgress' Condensed Consolidated Balance Sheet as of March 31, 2013, the Delaware Chancery Court consolidated four shareholder derivative lawsuits filed in 2012. The Court also appointed a lead plaintiff2017 and counsel for plaintiffs and designated the case as In Re Duke Energy Corporation Derivative Litigation (Merger Chancery Litigation). The lawsuit names as defendants the 11 members of the Board of Directors who were also members of the pre-merger Board of Directors (Legacy Duke Energy Directors). Duke Energy is named as a nominal defendant. The case alleges claims for breach of fiduciary duties of loyalty and care in connection with the post-merger change in CEO.
Two shareholder Derivative Complaints, filed in 2012 in federal district court in Delaware, were consolidated as Tansey v. Rogers, et al. The case alleges claims against the Legacy Duke Energy Directors for breach of fiduciary duty and waste of corporate assets, as well as claims under Section 14(a) and 20(a) of the Exchange Act. Duke Energy is named as a nominal defendant. On December 21, 2015, Plaintiff filed a Consolidated Amended Complaint asserting the same claims contained in the original complaints.31, 2016, respectively.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Florida
Hines Chiller Uprate Project
On February 2, 2017, Duke Energy Florida filed a petition seeking approval to include in base rates the revenue requirement for a Chiller Uprate Project (Uprate Project) at the Hines Energy Complex. The Uprate Project was placed into service in March 2017 at a cost of approximately $150 million. The retail revenue requirement is approximately $19 million. On March 28, 2017, the FPSC issued an order approving the revenue requirement which were included in base rates for the first billing cycle of April 2017.
Levy Nuclear Project
On July 28, 2008, Duke Energy Florida applied to the NRC for COLs for two Westinghouse AP1000 reactors at Levy. In 2008, the FPSC granted Duke Energy Florida’s petition for an affirmative Determination of Need and related orders requesting cost recovery under Florida’s nuclear cost-recovery rule, together with the associated facilities, including transmission lines and substation facilities. In October 2016, the NRC issued COLs for the proposed Levy Nuclear Plant Units 1 and 2. Duke Energy Florida is not required to build the nuclear reactors as a result of the COLs being issued.
On January 28, 2014, Duke Energy Florida terminated the Levy engineering, procurement and construction agreement (EPC). Duke Energy Florida may be required to pay for work performed under the EPC. Duke Energy Florida recorded an exit obligation in 2014 for the termination of the EPC. This liability was recorded within Other in Deferred Credits and Other Liabilities with an offset primarily to Regulatory assets on the Condensed Consolidated Balance Sheets. Duke Energy Florida is allowed to recover reasonable and prudent EPC cancellation costs from its retail customers. On May 1, 2017, Duke Energy Florida filed a request with the FPSC to recover approximately $82 million of Levy Nuclear Project costs from retail customers in 2018. A hearing is scheduled in August 2017. Duke Energy Florida cannot predict the outcome of this matter.
On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Duke Energy Florida is monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of nuclear plants.
Duke Energy Ohio
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR) to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. The PUCO approved Rider PSR, but set it at zero dollars in connection with the most recent electric security plan. The application seeks to adjust Rider PSR as of April 1, 2017. Duke Energy Ohio is seeking deferral authority for net costs incurred from April 1, 2017, until the new rates under Rider PSR are put into effect. See Note 12 for additional discussion of Duke Energy Ohio's ownership interest in OVEC. Duke Energy Ohio cannot predict the outcome of this proceeding.
East Bend Coal Ash Basin Filing
On December 2, 2016, Duke Energy Kentucky filed with the KPSC a request for a CPCN for construction projects necessary to close and repurpose an ash basin at the East Bend facility as a result of current and proposed U.S. Environmental Protection Agency (EPA) regulations. Duke Energy Kentucky estimated a total cost of approximately $93 million in the filing and expects in-service date in the fourth quarter of 2018. Duke Energy Kentucky expects the KPSC to issue an order in the second quarter of 2017.
Base Rate Case
Duke Energy Ohio filed with the PUCO an electric distribution base rate case application and supporting testimony in March 2017. Duke Energy Ohio has requested an estimated annual increase of approximately $15 million and a return on equity of 10.4 percent. The application also includes requests to continue certain current riders and establish new riders related to LED Outdoor Lighting Service and regulatory mandates. Duke Energy Ohio cannot predict the outcome of this matter.
Natural Gas Pipeline Extension
Duke Energy Ohio is proposing to install a new natural gas pipeline in its Ohio service territory to increase system reliability and enable the retirement of older infrastructure. On January 20, 2017, Duke Energy Ohio filed an amended application with the Ohio Power Siting Board for approval of one of two proposed routes. If approved, construction of the pipeline extension is expected to be completed before the 2019/2020 winter season. A public hearing is scheduled for June 15, 2017, and an adjudicatory hearing is scheduled to begin July 12, 2017. The proposed project involves the installation of a natural gas line and is estimated to cost between $86 million and $110 million, excluding AFUDC.
Advanced Metering Infrastructure
On April 25, 2016, Duke Energy Kentucky filed with the KPSC an application for approval of a CPCN for the construction of advanced metering infrastructure. Duke Energy Kentucky estimates the $49 million project, if approved, will take two years to complete. Duke Energy Kentucky also requested approval to establish a regulatory asset of approximately $10 million for the remaining book value of existing meter equipment and inventory to be replaced. Duke Energy Kentucky and the Kentucky Attorney General entered into a stipulation to settle matters related to the application. An evidentiary hearing on the application and stipulation was held on December 8, 2016. Duke Energy Kentucky cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Accelerated Natural Gas Service Line Replacement Rider
On January 20, 2015, Duke Energy Ohio filed an application for approval of an accelerated natural gas service line replacement program (ASRP). Under the ASRP, Duke Energy Ohio proposed to replace certain natural gas service lines on an accelerated basis over a 10-year period. Duke Energy Ohio also proposed to complete preliminary survey and investigation work related to natural gas service lines that are customer owned and for which it does not have valid records and, further, to relocate interior natural gas meters to suitable exterior locations where such relocation can be accomplished. Duke Energy Ohio's current projected total capital and operations and maintenance expenditures under the ASRP are approximately $240 million. The filing also sought approval of a rider mechanism (Rider ASRP) to recover related expenditures. Duke Energy Ohio proposed to update Rider ASRP on an annual basis. Intervenors opposed the ASRP, primarily because they believe the program is neither required nor necessary under federal pipeline regulation. On October 26, 2016, the PUCO issued an order denying the proposed ASRP. The PUCO did, however, encourage Duke Energy Ohio to work with the PUCO Staff and intervenors. Duke Energy Ohio filed an application for rehearing of the PUCO decision. In December 2016, the PUCO granted the request for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.
Energy Efficiency Cost Recovery
On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. The PUCO 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 approving the stipulation without modification. Intervenors requested a rehearing of the PUCO decision. In December 2016, the PUCO granted a rehearing for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.
2012 Natural Gas Rate Case/Manufactured Gas Plant Cost Recovery
On November 13, 2013, the PUCO issued an order approving a settlement of Duke Energy Ohio’s natural gas base rate case and authorizing the recovery of costs incurred between 2008 and 2012 for environmental investigation and remediation of two former manufactured gas plant (MGP) sites. The PUCO order also authorized Duke Energy Ohio to continue deferring MGP environmental investigation and remediation costs incurred subsequent to 2012 and to submit annual filings to adjust the MGP rider for future costs. Intervening parties appealed this decision to the Ohio Supreme Court and that appeal remains pending. Oral argument was heard on February 28, 2017. Incurred and projected investigation and remediation expenses at these MGP sites that have not been collected through the MGP rider are approximately $100 million and are recorded as Regulatory assets on Duke Energy Ohio's Condensed Consolidated Balance Sheet as of March 31, 2017. Duke Energy Ohio cannot predict the outcome of this matter.
Regional Transmission Organization Realignment
Duke Energy Ohio, including Duke Energy Kentucky, transferred control of its transmission assets from Midcontinent Independent System Operator, Inc. (MISO) to PJM Interconnection, LLC (PJM), effective December 31, 2011. The PUCO approved a settlement related to Duke Energy Ohio’s recovery of certain costs of the Regional Transmission Organization (RTO) realignment via a non-bypassable rider. Duke Energy Ohio is allowed to recover all MISO Transmission Expansion Planning (MTEP) costs, including but not limited to Multi Value Project (MVP) costs, directly or indirectly charged to Ohio customers. Duke Energy Ohio also agreed to vigorously defend against any charges for MVP projects from MISO. The KPSC also approved a request to effect the RTO realignment, subject to a commitment not to seek double recovery in a future rate case of the transmission expansion fees that may be charged by MISO and PJM in the same period or overlapping periods.
Duke Energy Ohio had a recorded liability for its exit obligation and share of MTEP costs, excluding MVP, of $90 million at March 31, 2017, and December 31, 2016, recorded within Other in Current liabilities and Other in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The retail portions of MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider. As of March 31, 2017, and December 31, 2016, Duke Energy Ohio had $71 million recorded in Regulatory assets on the Condensed Consolidated Balance Sheets.
MVP. MISO approved 17 MVP proposals prior to Duke Energy Ohio’s exit from MISO on December 31, 2011. Construction of these projects is expected to continue through 2020. Costs of these projects, including operating and maintenance costs, property and income taxes, depreciation and an allowed return, are allocated and billed to MISO transmission owners.
On December 29, 2011, MISO filed a tariff with the FERC providing for the allocation of MVP costs to a withdrawing owner based on monthly energy usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation methodology to transmission owners who withdrew from MISO prior to January 1, 2012, is consistent with the tariff at the time of their withdrawal from MISO and, (ii) if not, what the amount of and methodology for calculating any MVP cost responsibility should be. In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. On July 16, 2013, a FERC Administrative Law Judge (ALJ) issued an initial decision. Under this Initial Decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio filed exceptions to the initial decision, requesting FERC to overturn the ALJ’s decision.
On October 29, 2015, the FERC issued an order reversing the ALJ's decision. The FERC ruled the cost allocation methodology is not consistent with the MISO tariff and that Duke Energy Ohio has no liability for MVP costs after its withdrawal from MISO. On May 19, 2016, the FERC denied the request for rehearing filed by MISO and the MISO Transmission Owners. On July 15, 2016, the MISO Transmission Owners filed a petition for review with the U.S. Court of Appeals for the Sixth Circuit. Duke Energy Ohio cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Indiana
Coal Combustion Residual Plan
On March 17, 2016, Duke Energy Indiana filed with the IURC a request for approval of its first group of federally mandated Coal Combustion Residual (CCR) rule compliance projects (Phase I CCR Compliance Projects) to comply with the EPA's CCR rule. The projects in this Phase I filing are CCR compliance projects, including the conversion of Cayuga and Gibson stations to dry bottom ash handling and related water treatment. Duke Energy Indiana has requested timely recovery of approximately $380 million in retail capital costs and incremental operating and maintenance costs, including AFUDC, under a federal mandate tracker that provides for timely recovery of 80 percent of such costs and deferral with carrying costs of 20 percent of such costs for recovery in a subsequent retail base rate case. On January 24, 2017, Duke Energy Indiana and various Intervenors filed a settlement agreement with the IURC. Terms of the settlement include recovery of 60 percent of the estimated CCR compliance construction project capital costs through existing rider mechanisms and deferral of 40 percent of these costs until Duke Energy Indiana's next general retail rate case. The deferred costs will earn a return based on Duke Energy Indiana's long-term debt rate of 4.73 percent until costs are included in retail rates, at which time the deferred costs will earn a full return. Costs are to be capped at $365 million, plus actual AFUDC. Costs above the cap may be recoverable in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring. The settlement is subject to approval by the IURC. An evidentiary hearing was held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017. Duke Energy Indiana cannot predict the outcome of this matter.
FERC Transmission Return on Equity Complaints
Customer groups have filed with the FERC complaints against MISO and its transmission-owning members, including Duke Energy Indiana, alleging, among other things, that the current base rate of return on equity earned by MISO transmission owners of 12.38 percent is unjust and unreasonable. The complaints, among other things, claim that the current base rate of return on equity earned by MISO transmission owners should be reduced to 8.67 percent. On January 5, 2015, the FERC issued an order accepting the MISO transmission owners' adder of 0.50 percent to the base rate of return on equity based on participation in an RTO subject to it being applied to a return on equity that is shown to be just and reasonable in the pending return on equity complaints. On December 22, 2015, the presiding FERC ALJ in the first complaint issued an Initial Decision in which the base rate of return on equity was set at 10.32 percent. On September 28, 2016, the Initial Decision in the first complaint was affirmed by FERC, but is subject to rehearing requests. On June 30, 2016, the presiding FERC ALJ in the second complaint issued an Initial Decision setting the base rate of return on equity at 9.70 percent. The Initial Decision in the second complaint is pending FERC review. On April 14, 2017, the U.S. Court of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. This decision may affect the outcome of the complaints against Duke Energy Indiana. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.
Piedmont
North Carolina Integrity Management Rider Filings
In October 2016, Piedmont filed a petition with the NCUC under the integrity management rider (IMR) mechanism seeking authority to collect an additional $8 million in annual revenues, effective December 2016, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending September 30, 2016. In November 2016, the NCUC approved the request.
On May 1, 2017, Piedmont filed a petition with the NCUC under the IMR mechanism to collect an additional $11.6 million in annual revenues, effective June 2017, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2017. A ruling from the NCUC is pending.
Tennessee IMR Filings
In November 2016, Piedmont filed an annual report with the TPUC under the IMR mechanism seeking authority to collect an additional $1.7 million in annual revenues effective January 2017, based on the capital investments in integrity and safety projects over the 12-month period ending October 31, 2016. The TPUC approved the request at a hearing on April 10, 2017.
OTHER REGULATORY MATTERS
Atlantic Coast Pipeline
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), an approximately 600-mile interstate natural gas pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet the needs identified in RFPs by Duke Energy Carolinas, Duke Energy Progress and Piedmont. The ACP pipeline development costs are estimated between $5.0 billion to $5.5 billion. Dominion will build and operate the ACP pipeline and holds a leading ownership percentage in ACP of 48 percent. Duke Energy owns a 47 percent interest through its Gas Utilities and Infrastructure segment. Southern Company Gas maintains a 5 percent interest. See Note 12 for additional information related to Duke Energy's ownership interest.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. On September 18, 2015, ACP filed an application with the FERC requesting a CPCN authorizing ACP to construct the pipeline. ACP executed a construction agreement in September 2016. ACP also requested approval of an open access tariff and the precedent agreements it entered into with future pipeline customers. In December 2016, FERC issued a draft Environmental Impact Statement (EIS) indicating that the proposed pipeline would not cause significant harm to the environment or protected populations. The draft EIS comment period ended in April 2017, and ACP is working to resolve items identified through the comment process. The final EIS is expected in summer 2017. FERC approval of the application is expected within 90 days of the issuance of the final EIS. Construction is projected to begin in the second-half of 2017, with a targeted in-service date in the second half of 2019.
Sabal Trail Transmission, LLC Pipeline
On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail Transmission, LLC (Sabal Trail) from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture that is constructing 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 will traverse Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. On September 7, 2016, FERC denied the intervenors' rehearing requests. On September 21, 2016, intervenors filed an appeal of FERC's CPCN orders to the U.S. Court of Appeals for the District of Columbia Circuit. Oral argument on the appeal was held on April 18, 2017, and a decision is expected in the summer of 2017. The Sabal Trail pipeline has received other required regulatory approvals and construction began in the summer of 2016, with an expected in-service date in mid-2017. See Note 12 for additional information related to Duke Energy's ownership interest.
Constitution Pipeline
Duke Energy owns a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution). Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc.
On April 22, 2016, the New York State Department of Environmental Conservation (NYSDEC) denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed legal actions in the U.S. District Court for the Northern District of New York and 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. Both courts granted Constitution's motions to expedite the schedules for the legal actions. On November 16, 2016, oral arguments were heard in the U.S. Court of Appeals. On March 16, 2017, the U.S. District Court for the Northern District of New York dismissed without prejudice Constitution’s claim that New York State permits were preempted by the federal permitting process. The ruling on oral arguments made in the U.S. Court of Appeals regarding NYSDEC's denial of the water quality certification is currently expected in mid-2017.
Constitution remains steadfastly committed to pursuing the project and intends to pursue all available options to challenge the NYSDEC's decision. In light of the denial of the certification, Constitution revised its target in-service date of the project to be as early as the second half of 2018, assuming that the challenge process is satisfactorily and promptly concluded.
In July 2016, Constitution requested, and the FERC approved, an extension of the construction period and in-service deadline of the project to December 2018. Also in July, the FERC denied the New York Attorney General's (NYAG) complaint and request for a stay of the certificate order authorizing the project on the grounds that Constitution had improperly cut trees along the proposed route. The FERC found the complaint procedurally deficient and that there was no justification for a stay; it did find the filing constituted a valid request for investigation and thus referred the matter to FERC staff for further examination as may be appropriate. On November 22, 2016, the FERC denied the NYAG's request for reconsideration of this order.
Since April 2016, with the actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. As a result, Duke Energy evaluated the investment in the Constitution project for other-than-temporary impairments (OTTIs). At this time, no OTTI has been determined and therefore no impairment charge to reduce the carrying value of the investment has been recorded. However, to the extent that the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward as legal and regulatory actions progress, the conclusions with respect to OTTIs could change and may require that an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, be recorded. Duke Energy will continue to monitor and update the OTTI analysis as required. Different assumptions could affect the timing and amount of any charge recorded in a period.
Pending the outcome of the matters described above, and when construction proceeds, Duke Energy remains committed to fund an amount in proportion to its ownership interest for the development and construction of the new pipeline. Duke Energy's total anticipated contributions are approximately $229 million.
See Note 12 for additional information related to ownership interest and carrying value of the investment.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to 20 years) and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in North Carolina, Florida and Indiana earlier than their current estimated useful lives primarily because facilities do not have the requisite emission control equipment to meet EPA regulations recently approved or proposed.
The table below contains the net carrying value of generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of March 31, 2017, 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 |
| | $ | 167 |
|
| Progress Energy and Duke Energy Florida | | | |
Crystal River Units 1 and 2(b) | 873 |
| | 117 |
|
| Duke Energy Indiana | | | |
Gallagher Units 2 and 4(c) | 280 |
| | 135 |
|
| Total Duke Energy | 1,738 |
| | $ | 419 |
|
| |
| (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. |
| |
| (b) | Duke Energy Florida will likely retire these coal units by 2018 to comply with environmental regulations. |
| |
| (c) | Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the settlement of Edwardsport IGCC matters. |
Refer to the "Western Carolinas Modernization Plan" discussion above for details of Duke Energy Progress' planned retirements.
5. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all of the Duke Energy Registrants.
Remediation Activities
In addition to asset retirement obligations (AROs) recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based upon site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other in the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The Legacy Duke Energy Directorsfollowing tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 98 |
| | $ | 10 |
| | $ | 18 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 10 |
| | $ | 1 |
|
| Provisions/adjustments | 6 |
| | 1 |
| | — |
| | — |
| | 1 |
| | 4 |
| | (1 | ) | | 1 |
|
| Cash reductions | (6 | ) | | — |
| | (1 | ) | | — |
| | (1 | ) | | (4 | ) | | — |
| | — |
|
| Balance at end of period | $ | 98 |
| | $ | 11 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 9 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 94 |
| | $ | 10 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 54 |
| | $ | 12 |
| | $ | 1 |
|
| Provisions/adjustments | 10 |
| | 2 |
| | 1 |
| | — |
| | 1 |
| | — |
| | 6 |
| | — |
|
| Cash reductions | (3 | ) | | (1 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
|
| Balance at end of period | $ | 101 |
| | $ | 11 |
| | $ | 16 |
| | $ | 2 |
| | $ | 14 |
| | $ | 54 |
| | $ | 18 |
| | $ | 1 |
|
Additional losses in excess of recorded reserves that could be incurred for the stages of investigation, remediation and monitoring for environmental sites that have reached an agreement-in-principle to settle the Merger Chancery Litigation, conditioned on dismissalbeen evaluated at this time are not material except as well of the Tansey v. Rogers, et al case and the merger related claimspresented in the Bresalier Complaint discussed above, for a total of $27 million. The entire settlement amount is to be funded by insurance. The settlement amount, less court-approved attorney fees, will be payable to Duke Energy. The settlement is subject to the execution of definitive settlement documentstable below. |
| | | |
| (in millions) | |
| Duke Energy | $ | 71 |
|
| Duke Energy Carolinas | 22 |
|
| Duke Energy Ohio | 36 |
|
| Duke Energy Indiana | 7 |
|
| Piedmont | 2 |
|
North Carolina and court approval.
Price Reporting Cases
Duke Energy Trading and Marketing, LLC (DETM), a non-operating Duke Energy affiliate, was a defendant, along with numerous other energy companies, in four class action lawsuits and a fifth single-plaintiff lawsuit pending in a consolidated federal court proceeding in Nevada. Each of these lawsuits contains similar claims that defendants allegedly manipulated natural gas markets by various means, including providing false information to natural gas trade publications and entering into unlawful arrangements and agreements in violation of the antitrust laws of the respective states. Plaintiffs seek damages in unspecified amounts.South Carolina Ash Basins
In February 2016, DETM reached agreements2014, a break in principle to settle all of the pending lawsuits. Settlement of the single-plaintiff settlement was finalized and paid in March 2016. Settlement of the class action lawsuits are currently being finalized and will be subject to court approval. The settlement amounts are not material to Duke Energy.
Brazil Expansion Lawsuit
On August 9, 2011, the State of São Paulo sueda stormwater pipe beneath an ash basin at Duke Energy International Geracao Paranapenema S.A. (DEIGP) in BrazilianCarolinas’ retired Dan River Steam Station caused a release of ash basin water and ash into the Dan River. Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. Future costs related to the Dan River release, including future state court. or federal civil enforcement proceedings, future regulatory directives, natural resources damages, future claims or litigation and long-term environmental impact costs, cannot be reasonably estimated at this time.
The lawsuit claims DEIGP is underNorth Carolina Department of Environmental Quality (NCDEQ) has historically assessed Duke Energy Carolinas and Duke Energy Progress with Notice of Violations (NOV) for violations that were most often resolved through satisfactory corrective actions and minor, if any, fines or penalties. Subsequent to the Dan River ash release, Duke Energy Carolinas and Duke Energy Progress have been served with a continuing obligation to expand installed generation capacity in the Statehigher level of São Paulo by 15 percent pursuant to a stock purchase agreement under which DEIGP purchased generation assets from the state. On August 10, 2011, a judge granted an injunction ordering DEIGP to present a detailed expansion plan in satisfaction of the 15 percent obligation. DEIGP has previously taken a position that the expansion obligation is no longer viable given changes that have occurred in the electric energy sector since privatization. DEIGP submitted its proposed expansion plan on November 11, 2011, but reserved objections regarding enforceability. In January 2013, DEIGP filed appeals in the federal courts, which are still pending, regarding various procedural issues. A decision on the merits in the first instance court is also pending. It is not possible toNOVs, including assessed penalties for violations at L.V. Sutton Combined Cycle Plant (Sutton) and Dan River Steam Station. Duke Energy Carolinas and Duke Energy Progress cannot predict whether Duke Energythe NCDEQ will incur any liability orassess future penalties related to estimate the damages,existing unresolved NOVs and if any, it might incur in connection with this matter.
In February 2008, a groupsuch penalties would be material. See "NCDEQ Notices of individual plaintiffs filed suit against DEIGP, the State of São Paulo and the Brazilian electricity regulatory agency claiming that DEIGP failed to comply with its alleged obligation to expand installed generation capacity in the state of São Paulo by 15 percent. The lawsuit was dismissed as procedurally defective by the first instance federal court in São Paulo. On December 15, 2010, plaintiffs filed an appeal of the first instance court dismissal order. On September 23, 2016, in a split decision, three appellate court judges voted to reverse the first instance court decision. Due to the split decision, a review by an expanded five-judge panel has been scheduled for November 10, 2016. If the first instance court decision is reversed, the case will be remanded for continuation of the originally filed proceedings. It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with this matter.
Pursuant to the Brazil PSA, Duke Energy will not retain any liability for this matter after the closing of the sale. See Note 2Violation" section below for additional information regarding the Brazil PSA.discussion.
Brazil Generation
Record drought conditions in Brazil during 2014 and 2015 negatively impacted DEIGP. A number of electric generators have filed lawsuits seeking relief in the Brazilian courts to mitigate hydrological exposure and diminishing dispatch levels. Some courts have granted injunction orders to limit the financial exposure of certain generators. The implication of these orders is that other electricity market participants not covered by the injunctions may be required to compensate for the financial impact of the liability limitations. The Independent Power Producer Association (APINE) filed one such lawsuit on behalf of DEIGP and other hydroelectric generators against the Brazilian electric regulatory agency (ANEEL). On July 2, 2015, an injunction was granted in favor of APINE limiting the financial exposure of DEIGP and the other plaintiff generators, until the merits of the lawsuit are determined. ANEEL's appeal of the injunction was denied on December 18, 2015. The outcome of these lawsuits is uncertain. It is not possible to predict the impact to Duke Energy from the outcome of these matters.
Pursuant to the Brazil PSA, Duke Energy will not retain any liability for this matter after the closing of the sale. See Note 2 for additional information regarding the Brazil PSA.
Duke Energy Carolinas and Duke Energy Progress
NCDEQ Notices of Violation
In August 2014, the NCDEQ issued an NOV for alleged groundwater violations at Duke Energy Progress' L.V. Sutton Plant. On March 10, 2015, the NCDEQ issued a civil penalty of approximately $25 million to Duke Energy Progress for environmental damages related to the groundwater contamination at the L.V. Sutton Plant. On April 9, 2015, Duke Energy Progress filed a Petition for Contested Case hearing in the Office of Administrative Hearings. In February 2015, the NCDEQ issued an NOV for alleged groundwater violations at Duke Energy Progress' Asheville Plant. Duke Energy Progress responded to the NCDEQ regarding this NOV.Ash Basin Closure Costs Deferral
On September 29, 2015, Duke Energy Progress and Duke Energy Carolinas entered into a settlement agreement with the NCDEQ resolving all former, current and future groundwater penalties at allDecember 30, 2016, Duke Energy Carolinas and Duke Energy Progress coalfiled a joint petition with the NCUC seeking an accounting order authorizing deferral of certain costs incurred in connection with federal and state environmental remediation requirements related to the permanent closure of ash basins and other ash storage units at coal-fired generating facilities that have provided or are providing generation to customers located in North Carolina. Under the agreement,Initial comments were received in March 2017, and reply comments were filed on April 19, 2017. Duke Energy Carolinas and Duke Energy Progress paid approximately $6 million andcannot predict the outcome of this matter.
Duke Energy Carolinas
William States Lee Combined Cycle Facility
On April 9, 2014, the PSCSC granted Duke Energy Carolinas paidand North Carolina Electric Membership Corporation (NCEMC) a Certificate of Environmental Compatibility and Public Convenience and Necessity (CECPCN) for the construction and operation of a 750-MW combined-cycle natural gas-fired generating plant at Duke Energy Carolinas' existing William States Lee Generating Station in Anderson, South Carolina. Duke Energy Carolinas began construction in July 2015 and estimates a cost to build of $600 million for its share of the facility, including AFUDC. The project is expected to be commercially available in late 2017. NCEMC will own approximately $1 million. 13 percent of the project. On July 3, 2014, the South Carolina Coastal Conservation League (SCCL) and Southern Alliance for Clean Energy (SACE) jointly filed a Notice of Appeal with the Court of Appeals of South Carolina (S.C. Court of Appeals) seeking the court's review of the PSCSC's decision, claiming the PSCSC did not properly consider a request related to a proposed solar facility prior to granting approval of the CECPCN. The S.C. Court of Appeals affirmed the PSCSC's decision on February 10, 2016, and on March 24, 2016, denied a request for rehearing filed by SCCL and SACE. On April 21, 2016, SCCL and SACE petitioned the South Carolina Supreme Court for review of the S.C. Court of Appeals decision. On March 24, 2017, the South Carolina Supreme Court denied the request for review, thus concluding the matter.
William States Lee III Nuclear Station
In additionDecember 2007, Duke Energy Carolinas applied to these payments,the NRC for combined operating licenses (COLs) for two Westinghouse Electric Company (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 have concurred with the prudency of Duke Energy Carolinas decisions to incur 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.
On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Duke Energy Carolinas is monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of nuclear plants.
Duke Energy Progress
Storm Cost Deferral Filing
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. Duke Energy Progress proposed in the filing to true-up the total costs quarterly through August 2017. The current estimate of incremental operation and maintenance and capital costs is $116 million. On March 15, 2017, the Public Staff filed comments supporting deferral of a portion of Duke Energy Progress’ requested amount. Duke Energy Progress filed reply comments on April 12, 2017. Duke Energy Progress cannot predict the outcome of this matter.
Western Carolinas Modernization Plan
On November 4, 2015, Duke Energy Progress announced a Western Carolinas Modernization Plan, which included retirement of the existing Asheville coal-fired plant, the construction of two 280‑MW combined-cycle natural gas plants having dual fuel capability, with the option to build a third natural gas simple cycle unit in 2023 based upon the outcome of initiatives to reduce the region's power demand. The plan also included upgrades to existing transmission lines and substations, installation of solar generation and a pilot battery storage project. These investments will accelerate remediation actions atbe made within the Sutton, Asheville, Belews Creeknext 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 Certificate of Public Convenience and H.F. Lee plants. The ALJ entered a consent order resolvingNecessity (CPCN) for the contested case relatingnew combined-cycle natural gas plants, but denying the CPCN for the contingent simple cycle unit without prejudice to Duke Energy Progress to refile for approval in the future. On March 28, 2017, Duke Energy Progress filed an annual progress report for the construction of the combined-cycle plants with the NCUC, with an estimated cost of $893 million. Site preparation activities for the combined-cycle plants are underway and construction of these plants is scheduled to begin in fall 2017, with an expected in-service date in late 2019. Duke Energy Progress plans to file for future approvals related to the Sutton Plantproposed solar generation and pilot battery storage project.
The carrying value of the NCDEQ rescinded the NOVs relating376-MW Asheville coal-fired plant, including associated ash basin closure costs, of $471 million and $492 million are included in Generation facilities to alleged groundwater violations at both the Suttonbe retired, net on Duke Energy Progress' Condensed Consolidated Balance Sheet as of March 31, 2017 and Asheville plants.December 31, 2016, respectively.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Duke Energy Florida
Hines Chiller Uprate Project
On October 13, 2015, the Southern Environmental Law Center (SELC), representing multiple conservation groups,February 2, 2017, Duke Energy Florida filed a lawsuitpetition seeking approval to include in North Carolina Superior Court seeking judicial reviewbase rates the revenue requirement for a Chiller Uprate Project (Uprate Project) at the Hines Energy Complex. The Uprate Project was placed into service in March 2017 at a cost of approximately $150 million. The retail revenue requirement is approximately $19 million. On March 28, 2017, the FPSC issued an order approving the revenue requirement which were included in base rates for the first billing cycle of April 2017.
Levy Nuclear Project
On July 28, 2008, Duke Energy Florida applied to the NRC for COLs for two Westinghouse AP1000 reactors at Levy. In 2008, the FPSC granted Duke Energy Florida’s petition for an affirmative Determination of Need and related orders requesting cost recovery under Florida’s nuclear cost-recovery rule, together with the associated facilities, including transmission lines and substation facilities. In October 2016, the NRC issued COLs for the proposed Levy Nuclear Plant Units 1 and 2. Duke Energy Florida is not required to build the nuclear reactors as a result of the COLs being issued.
On January 28, 2014, Duke Energy Florida terminated the Levy engineering, procurement and construction agreement (EPC). Duke Energy Florida may be required to pay for work performed under the EPC. Duke Energy Florida recorded an exit obligation in 2014 for the termination of the EPC. This liability was recorded within Other in Deferred Credits and Other Liabilities with an offset primarily to Regulatory assets on the Condensed Consolidated Balance Sheets. Duke Energy Florida is allowed to recover reasonable and prudent EPC cancellation costs from its retail customers. On May 1, 2017, Duke Energy Florida filed a request with the FPSC to recover approximately $82 million of Levy Nuclear Project costs from retail customers in 2018. A hearing is scheduled in August 2017. Duke Energy Florida cannot predict the outcome of this matter.
On March 29, 2017, Westinghouse filed for voluntary Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York. Duke Energy Florida is monitoring the bankruptcy proceedings to assess the impact it will have on the future construction of nuclear plants.
Duke Energy Ohio
Ohio Valley Electric Corporation
On March 31, 2017, Duke Energy Ohio filed for approval to adjust its existing price stabilization rider (Rider PSR) to pass through net costs related to its contractual entitlement to capacity and energy from the generating assets owned by OVEC. The PUCO approved Rider PSR, but set it at zero dollars in connection with the most recent electric security plan. The application seeks to adjust Rider PSR as of April 1, 2017. Duke Energy Ohio is seeking deferral authority for net costs incurred from April 1, 2017, until the new rates under Rider PSR are put into effect. See Note 12 for additional discussion of Duke Energy Ohio's ownership interest in OVEC. Duke Energy Ohio cannot predict the outcome of this proceeding.
East Bend Coal Ash Basin Filing
On December 2, 2016, Duke Energy Kentucky filed with the KPSC a request for a CPCN for construction projects necessary to close and repurpose an ash basin at the East Bend facility as a result of current and proposed U.S. Environmental Protection Agency (EPA) regulations. Duke Energy Kentucky estimated a total cost of approximately $93 million in the filing and expects in-service date in the fourth quarter of 2018. Duke Energy Kentucky expects the KPSC to issue an order in the second quarter of 2017.
Base Rate Case
Duke Energy Ohio filed with the PUCO an electric distribution base rate case application and supporting testimony in March 2017. Duke Energy Ohio has requested an estimated annual increase of approximately $15 million and a return on equity of 10.4 percent. The application also includes requests to continue certain current riders and establish new riders related to LED Outdoor Lighting Service and regulatory mandates. Duke Energy Ohio cannot predict the outcome of this matter.
Natural Gas Pipeline Extension
Duke Energy Ohio is proposing to install a new natural gas pipeline in its Ohio service territory to increase system reliability and enable the retirement of older infrastructure. On January 20, 2017, Duke Energy Ohio filed an amended application with the Ohio Power Siting Board for approval of one of two proposed routes. If approved, construction of the pipeline extension is expected to be completed before the 2019/2020 winter season. A public hearing is scheduled for June 15, 2017, and an adjudicatory hearing is scheduled to begin July 12, 2017. The proposed project involves the installation of a natural gas line and is estimated to cost between $86 million and $110 million, excluding AFUDC.
Advanced Metering Infrastructure
On April 25, 2016, Duke Energy Kentucky filed with the KPSC an application for approval of a CPCN for the construction of advanced metering infrastructure. Duke Energy Kentucky estimates the $49 million project, if approved, will take two years to complete. Duke Energy Kentucky also requested approval to establish a regulatory asset of approximately $10 million for the remaining book value of existing meter equipment and inventory to be replaced. Duke Energy Kentucky and the Kentucky Attorney General entered into a stipulation to settle matters related to the application. An evidentiary hearing on the application and stipulation was held on December 8, 2016. Duke Energy Kentucky cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Accelerated Natural Gas Service Line Replacement Rider
On January 20, 2015, Duke Energy Ohio filed an application for approval of an accelerated natural gas service line replacement program (ASRP). Under the ASRP, Duke Energy Ohio proposed to replace certain natural gas service lines on an accelerated basis over a 10-year period. Duke Energy Ohio also proposed to complete preliminary survey and investigation work related to natural gas service lines that are customer owned and for which it does not have valid records and, further, to relocate interior natural gas meters to suitable exterior locations where such relocation can be accomplished. Duke Energy Ohio's current projected total capital and operations and maintenance expenditures under the ASRP are approximately $240 million. The filing also sought approval of a rider mechanism (Rider ASRP) to recover related expenditures. Duke Energy Ohio proposed to update Rider ASRP on an annual basis. Intervenors opposed the ASRP, primarily because they believe the program is neither required nor necessary under federal pipeline regulation. On October 26, 2016, the PUCO issued an order denying the proposed ASRP. The PUCO did, however, encourage Duke Energy Ohio to work with the PUCO Staff and intervenors. Duke Energy Ohio filed an application for rehearing of the PUCO decision. In December 2016, the PUCO granted the request for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.
Energy Efficiency Cost Recovery
On March 28, 2014, Duke Energy Ohio filed an application for recovery of program costs, lost distribution revenue and performance incentives related to its energy efficiency and peak demand reduction programs. These programs are undertaken to comply with environmental mandates set forth in Ohio law. The PUCO 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 approving the stipulation without modification. Intervenors requested a rehearing of the PUCO decision. In December 2016, the PUCO granted a rehearing for the purpose of further review. Duke Energy Ohio cannot predict the outcome of this matter.
2012 Natural Gas Rate Case/Manufactured Gas Plant Cost Recovery
On November 13, 2013, the PUCO issued an order approving a settlement of Duke Energy Ohio’s natural gas base rate case and authorizing the recovery of costs incurred between 2008 and 2012 for environmental investigation and remediation of two former manufactured gas plant (MGP) sites. The PUCO order also authorized Duke Energy Ohio to continue deferring MGP environmental investigation and remediation costs incurred subsequent to 2012 and to submit annual filings to adjust the MGP rider for future costs. Intervening parties appealed this decision to the Ohio Supreme Court and that appeal remains pending. Oral argument was heard on February 28, 2017. Incurred and projected investigation and remediation expenses at these MGP sites that have not been collected through the MGP rider are approximately $100 million and are recorded as Regulatory assets on Duke Energy Ohio's Condensed Consolidated Balance Sheet as of March 31, 2017. Duke Energy Ohio cannot predict the outcome of this matter.
Regional Transmission Organization Realignment
Duke Energy Ohio, including Duke Energy Kentucky, transferred control of its transmission assets from Midcontinent Independent System Operator, Inc. (MISO) to PJM Interconnection, LLC (PJM), effective December 31, 2011. The PUCO approved a settlement related to Duke Energy Ohio’s recovery of certain costs of the Regional Transmission Organization (RTO) realignment via a non-bypassable rider. Duke Energy Ohio is allowed to recover all MISO Transmission Expansion Planning (MTEP) costs, including but not limited to Multi Value Project (MVP) costs, directly or indirectly charged to Ohio customers. Duke Energy Ohio also agreed to vigorously defend against any charges for MVP projects from MISO. The KPSC also approved a request to effect the RTO realignment, subject to a commitment not to seek double recovery in a future rate case of the transmission expansion fees that may be charged by MISO and PJM in the same period or overlapping periods.
Duke Energy Ohio had a recorded liability for its exit obligation and share of MTEP costs, excluding MVP, of $90 million at March 31, 2017, and December 31, 2016, recorded within Other in Current liabilities and Other in Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. The retail portions of MTEP costs billed by MISO are recovered by Duke Energy Ohio through a non-bypassable rider. As of March 31, 2017, and December 31, 2016, Duke Energy Ohio had $71 million recorded in Regulatory assets on the Condensed Consolidated Balance Sheets.
MVP. MISO approved 17 MVP proposals prior to Duke Energy Ohio’s exit from MISO on December 31, 2011. Construction of these projects is expected to continue through 2020. Costs of these projects, including operating and maintenance costs, property and income taxes, depreciation and an allowed return, are allocated and billed to MISO transmission owners.
On December 29, 2011, MISO filed a tariff with the FERC providing for the allocation of MVP costs to a withdrawing owner based on monthly energy usage. The FERC set for hearing (i) whether MISO’s proposed cost allocation methodology to transmission owners who withdrew from MISO prior to January 1, 2012, is consistent with the tariff at the time of their withdrawal from MISO and, (ii) if not, what the amount of and methodology for calculating any MVP cost responsibility should be. In 2012, MISO estimated Duke Energy Ohio’s MVP obligation over the period from 2012 to 2071 at $2.7 billion, on an undiscounted basis. On July 16, 2013, a FERC Administrative Law Judge (ALJ) issued an initial decision. Under this Initial Decision, Duke Energy Ohio would be liable for MVP costs. Duke Energy Ohio filed exceptions to the initial decision, requesting FERC to overturn the ALJ’s decision.
On October 29, 2015, the FERC issued an order reversing the ALJ's decision. The FERC ruled the cost allocation methodology is not consistent with the MISO tariff and that Duke Energy Ohio has no liability for MVP costs after its withdrawal from MISO. On May 19, 2016, the FERC denied the request for rehearing filed by MISO and the MISO Transmission Owners. On July 15, 2016, the MISO Transmission Owners filed a petition for review with the U.S. Court of Appeals for the Sixth Circuit. Duke Energy Ohio cannot predict the outcome of this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Indiana
Coal Combustion Residual Plan
On March 17, 2016, Duke Energy Indiana filed with the IURC a request for approval of its first group of federally mandated Coal Combustion Residual (CCR) rule compliance projects (Phase I CCR Compliance Projects) to comply with the EPA's CCR rule. The projects in this Phase I filing are CCR compliance projects, including the conversion of Cayuga and Gibson stations to dry bottom ash handling and related water treatment. Duke Energy Indiana has requested timely recovery of approximately $380 million in retail capital costs and incremental operating and maintenance costs, including AFUDC, under a federal mandate tracker that provides for timely recovery of 80 percent of such costs and deferral with carrying costs of 20 percent of such costs for recovery in a subsequent retail base rate case. On January 24, 2017, Duke Energy Indiana and various Intervenors filed a settlement agreement with the NCDEQ.IURC. Terms of the settlement include recovery of 60 percent of the estimated CCR compliance construction project capital costs through existing rider mechanisms and deferral of 40 percent of these costs until Duke Energy Indiana's next general retail rate case. The conservationdeferred costs will earn a return based on Duke Energy Indiana's long-term debt rate of 4.73 percent until costs are included in retail rates, at which time the deferred costs will earn a full return. Costs are to be capped at $365 million, plus actual AFUDC. Costs above the cap may be recoverable in the next rate case. Terms of the settlement agreement also require Duke Energy Indiana to perform certain reporting and groundwater monitoring. The settlement is subject to approval by the IURC. An evidentiary hearing was held on February 23, 2017, and Duke Energy Indiana filed a proposed order with the IURC on March 30, 2017. Duke Energy Indiana cannot predict the outcome of this matter.
FERC Transmission Return on Equity Complaints
Customer groups contendhave filed with the FERC complaints against MISO and its transmission-owning members, including Duke Energy Indiana, alleging, among other things, that the ALJ exceeded his statutory authoritycurrent base rate of return on equity earned by MISO transmission owners of 12.38 percent is unjust and unreasonable. The complaints, among other things, claim that the current base rate of return on equity earned by MISO transmission owners should be reduced to 8.67 percent. On January 5, 2015, the FERC issued an order accepting the MISO transmission owners' adder of 0.50 percent to the base rate of return on equity based on participation in approvingan RTO subject to it being applied to a settlementreturn on equity that provided for past, present,is shown to be just and future resolution of groundwater issues at facilities which were not at issuereasonable in the penalty appeal.pending return on equity complaints. On December 22, 2015, the presiding FERC ALJ in the first complaint issued an Initial Decision in which the base rate of return on equity was set at 10.32 percent. On September 28, 2016, the Initial Decision in the first complaint was affirmed by FERC, but is subject to rehearing requests. On June 30, 2016, the presiding FERC ALJ in the second complaint issued an Initial Decision setting the base rate of return on equity at 9.70 percent. The Initial Decision in the second complaint is pending FERC review. On April 14, 2017, the U.S. Court of Appeals for the District of Columbia Circuit, in Emera Maine v. FERC, reversed and remanded certain aspects of the methodology employed by FERC to establish rates of return on equity. This decision may affect the outcome of the complaints against Duke Energy Indiana. Duke Energy Indiana currently believes these matters will not have a material impact on its results of operations, cash flows and financial position.
Piedmont
North Carolina Integrity Management Rider Filings
In October 2016, Piedmont filed a petition with the NCUC under the integrity management rider (IMR) mechanism seeking authority to collect an additional $8 million in annual revenues, effective December 2016, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending September 30, 2016. In November 2016, the NCUC approved the request.
On May 1, 2017, Piedmont filed a petition with the NCUC under the IMR mechanism to collect an additional $11.6 million in annual revenues, effective June 2017, based on the eligible capital investments closed to integrity and safety projects over the six-month period ending March 31, 2017. A ruling from the NCUC is pending.
Tennessee IMR Filings
In November 2016, Piedmont filed an annual report with the TPUC under the IMR mechanism seeking authority to collect an additional $1.7 million in annual revenues effective January 2017, based on the capital investments in integrity and safety projects over the 12-month period ending October 31, 2016. The TPUC approved the request at a hearing on April 10, 2017.
OTHER REGULATORY MATTERS
Atlantic Coast Pipeline
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), an approximately 600-mile interstate natural gas pipeline running from West Virginia to North Carolina. The ACP pipeline is designed to meet the needs identified in RFPs by Duke Energy Carolinas, Duke Energy Progress and Piedmont. The ACP pipeline development costs are estimated between $5.0 billion to $5.5 billion. Dominion will build and operate the ACP pipeline and holds a leading ownership percentage in ACP of 48 percent. Duke Energy owns a 47 percent interest through its Gas Utilities and Infrastructure segment. Southern Company Gas maintains a 5 percent interest. See Note 12 for additional information related to Duke Energy's ownership interest.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Duke Energy Carolinas, Duke Energy Progress and Piedmont, among others, will be customers of the pipeline. Purchases will be made under several 20-year supply contracts, subject to state regulatory approval. On September 18, 2015, ACP filed an application with the FERC requesting a CPCN authorizing ACP to construct the pipeline. ACP executed a construction agreement in September 2016. ACP also requested approval of an open access tariff and the precedent agreements it entered into with future pipeline customers. In December 2016, FERC issued a draft Environmental Impact Statement (EIS) indicating that the proposed pipeline would not cause significant harm to the environment or protected populations. The draft EIS comment period ended in April 2017, and ACP is working to resolve items identified through the comment process. The final EIS is expected in summer 2017. FERC approval of the application is expected within 90 days of the issuance of the final EIS. Construction is projected to begin in the second-half of 2017, with a targeted in-service date in the second half of 2019.
Sabal Trail Transmission, LLC Pipeline
On May 4, 2015, Duke Energy acquired a 7.5 percent ownership interest in Sabal Trail Transmission, LLC (Sabal Trail) from Spectra Energy Partners, LP, a master limited partnership, formed by Enbridge Inc. (formerly Spectra Energy Corp.). Spectra Energy Partners, LP holds a 50 percent ownership interest in Sabal Trail and NextEra Energy has a 42.5 percent ownership interest. Sabal Trail is a joint venture that is constructing 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 will traverse Alabama, Georgia and Florida. The primary customers of the Sabal Trail pipeline, Duke Energy Florida and Florida Power & Light Company (FP&L), have each contracted to buy pipeline capacity for 25-year initial terms. On February 3, 2016, the FERC issued an order granting the request for a CPCN to construct and operate the pipeline. On September 7, 2016, FERC denied the intervenors' rehearing requests. On September 21, 2016, intervenors filed an appeal of FERC's CPCN orders to the U.S. Court of Appeals for the District of Columbia Circuit. Oral argument on the appeal was held on April 18, 2017, and a decision is expected in the summer of 2017. The Sabal Trail pipeline has received other required regulatory approvals and construction began in the summer of 2016, with an expected in-service date in mid-2017. See Note 12 for additional information related to Duke Energy's ownership interest.
Constitution Pipeline
Duke Energy owns a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution). Constitution is a natural gas pipeline project slated to transport natural gas supplies from the Marcellus supply region in northern Pennsylvania to major northeastern markets. The pipeline will be constructed and operated by Williams Partners L.P., which has a 41 percent ownership share. The remaining interest is held by Cabot Oil and Gas Corporation and WGL Holdings, Inc.
On April 22, 2016, the New York State Department of Environmental Conservation (NYSDEC) denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution filed legal actions in the U.S. District Court for the Northern District of New York and 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. Both courts granted Constitution's motions to expedite the schedules for the legal actions. On November 16, 2016, oral arguments were heard in the U.S. Court of Appeals. On March 16, 2017, the U.S. District Court for the Northern District of New York dismissed without prejudice Constitution’s claim that New York State permits were preempted by the federal permitting process. The ruling on oral arguments made in the U.S. Court of Appeals regarding NYSDEC's denial of the water quality certification is currently expected in mid-2017.
Constitution remains steadfastly committed to pursuing the project and intends to pursue all available options to challenge the NYSDEC's decision. In light of the denial of the certification, Constitution revised its target in-service date of the project to be as early as the second half of 2018, assuming that the challenge process is satisfactorily and promptly concluded.
In July 2016, Constitution requested, and the FERC approved, an extension of the construction period and in-service deadline of the project to December 2018. Also in July, the FERC denied the New York Attorney General's (NYAG) complaint and request for a stay of the certificate order authorizing the project on the grounds that Constitution had improperly cut trees along the proposed route. The FERC found the complaint procedurally deficient and that there was no justification for a stay; it did find the filing constituted a valid request for investigation and thus referred the matter to FERC staff for further examination as may be appropriate. On November 22, 2016, the FERC denied the NYAG's request for reconsideration of this order.
Since April 2016, with the actions of the NYSDEC, Constitution stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. As a result, Duke Energy evaluated the investment in the Constitution project for other-than-temporary impairments (OTTIs). At this time, no OTTI has been determined and therefore no impairment charge to reduce the carrying value of the investment has been recorded. However, to the extent that the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward as legal and regulatory actions progress, the conclusions with respect to OTTIs could change and may require that an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, be recorded. Duke Energy will continue to monitor and update the OTTI analysis as required. Different assumptions could affect the timing and amount of any charge recorded in a period.
Pending the outcome of the matters described above, and when construction proceeds, Duke Energy remains committed to fund an amount in proportion to its ownership interest for the development and construction of the new pipeline. Duke Energy's total anticipated contributions are approximately $229 million.
See Note 12 for additional information related to ownership interest and carrying value of the investment.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Potential Coal Plant Retirements
The Subsidiary Registrants periodically file Integrated Resource Plans (IRP) with their state regulatory commissions. The IRPs provide a view of forecasted energy needs over a long term (10 to 20 years) and options being considered to meet those needs. Recent IRPs filed by the Subsidiary Registrants included planning assumptions to potentially retire certain coal-fired generating facilities in North Carolina, Florida and Indiana earlier than their current estimated useful lives primarily because facilities do not have the requisite emission control equipment to meet EPA regulations recently approved or proposed.
The table below contains the net carrying value of generating facilities planned for retirement or included in recent IRPs as evaluated for potential retirement. Dollar amounts in the table below are included in Net property, plant and equipment on the Condensed Consolidated Balance Sheets as of March 31, 2017, 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 |
| | $ | 167 |
|
| Progress Energy and Duke Energy Florida | | | |
Crystal River Units 1 and 2(b) | 873 |
| | 117 |
|
| Duke Energy Indiana | | | |
Gallagher Units 2 and 4(c) | 280 |
| | 135 |
|
| Total Duke Energy | 1,738 |
| | $ | 419 |
|
| |
| (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. |
| |
| (b) | Duke Energy Florida will likely retire these coal units by 2018 to comply with environmental regulations. |
| |
| (c) | Duke Energy Indiana committed to either retire or stop burning coal at Gallagher Units 2 and 4 by December 31, 2022, as part of the settlement of Edwardsport IGCC matters. |
Refer to the "Western Carolinas Modernization Plan" discussion above for details of Duke Energy Progress' planned retirements.
5. COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL
The Duke Energy Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time, imposing new obligations on the Duke Energy Registrants. The following environmental matters impact all of the Duke Energy Registrants.
Remediation Activities
In addition to asset retirement obligations (AROs) recorded as a result of various environmental regulations, the Duke Energy Registrants are responsible for environmental remediation at various sites. These include certain properties that are part of ongoing operations and sites formerly owned or used by Duke Energy entities. These sites are in various stages of investigation, remediation and monitoring. Managed in conjunction with relevant federal, state and local agencies, remediation activities vary based upon site conditions and location, remediation requirements, complexity and sharing of responsibility. If remediation activities involve joint and several liability provisions, strict liability, or cost recovery or contribution actions, the Duke Energy Registrants could potentially be held responsible for environmental impacts caused by other potentially responsible parties and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. Liabilities are recorded when losses become probable and are reasonably estimable. The total costs that may be incurred cannot be estimated because the extent of environmental impact, allocation among potentially responsible parties, remediation alternatives and/or regulatory decisions have not yet been determined at all sites. Additional costs associated with remediation activities are likely to be incurred in the future and could be significant. Costs are typically expensed as Operation, maintenance and other in the Condensed Consolidated Statements of Operations unless regulatory recovery of the costs is deemed probable.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The following tables contain information regarding reserves for probable and estimable costs related to the various environmental sites. These reserves are recorded in Other within Other Noncurrent Liabilities on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 98 |
| | $ | 10 |
| | $ | 18 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 10 |
| | $ | 1 |
|
| Provisions/adjustments | 6 |
| | 1 |
| | — |
| | — |
| | 1 |
| | 4 |
| | (1 | ) | | 1 |
|
| Cash reductions | (6 | ) | | — |
| | (1 | ) | | — |
| | (1 | ) | | (4 | ) | | — |
| | — |
|
| Balance at end of period | $ | 98 |
| | $ | 11 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 59 |
| | $ | 9 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Balance at beginning of period | $ | 94 |
| | $ | 10 |
| | $ | 17 |
| | $ | 3 |
| | $ | 14 |
| | $ | 54 |
| | $ | 12 |
| | $ | 1 |
|
| Provisions/adjustments | 10 |
| | 2 |
| | 1 |
| | — |
| | 1 |
| | — |
| | 6 |
| | — |
|
| Cash reductions | (3 | ) | | (1 | ) | | (2 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
|
| Balance at end of period | $ | 101 |
| | $ | 11 |
| | $ | 16 |
| | $ | 2 |
| | $ | 14 |
| | $ | 54 |
| | $ | 18 |
| | $ | 1 |
|
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. |
| | | |
| (in millions) | |
| Duke Energy | $ | 71 |
|
| Duke Energy Carolinas | 22 |
|
| Duke Energy Ohio | 36 |
|
| Duke Energy Indiana | 7 |
|
| Piedmont | 2 |
|
North Carolina and South Carolina Ash Basins
In February 2014, a break in a stormwater pipe beneath an ash basin at Duke Energy Carolinas’ retired Dan River Steam Station caused a release of ash basin water and ash into the Dan River. Duke Energy Carolinas estimates 30,000 to 39,000 tons of ash and 24 million to 27 million gallons of basin water were released into the river. In July 2014, Duke Energy completed remediation work identified by the EPA and continues to cooperate with the EPA's civil enforcement process. Future costs related to the Dan River release, including future state or federal civil enforcement proceedings, future regulatory directives, natural resources damages, future claims or litigation and long-term environmental impact costs, cannot be reasonably estimated at this time.
The North Carolina Department of Environmental Quality (NCDEQ) has historically assessed Duke Energy Carolinas and Duke Energy Progress with Notice of Violations (NOV) for violations that were most often resolved through satisfactory corrective actions and minor, if any, fines or penalties. Subsequent to the Dan River ash release, Duke Energy Carolinas and Duke Energy Progress have been served with a higher level of NOVs, including assessed penalties for violations at L.V. Sutton Combined Cycle Plant (Sutton) and Dan River Steam Station. Duke Energy Carolinas and Duke Energy Progress cannot predict whether the NCDEQ will assess future penalties related to existing unresolved NOVs and if such penalties would be material. See "NCDEQ Notices of Violation" section below for additional discussion.
LITIGATION
Duke Energy
Duke Energy no longer has exposure to litigation matters related to the International Energy Disposal Group as a result of the divestiture of the business in December 2016. See Note 2 for additional information related to the sale of International Energy.
Ash Basin Shareholder Derivative Litigation
Five shareholder derivative lawsuits were filed in Delaware Chancery Court relating to the release at Dan River and to the management of Duke Energy’s ash basins. On October 31, 2014, the five lawsuits were consolidated in a single proceeding titled In Re Duke Energy Corporation Coal Ash Derivative Litigation. On December 2, 2014, plaintiffs filed a Corrected Verified Consolidated Shareholder Derivative Complaint (Consolidated Complaint). The Consolidated Complaint names as defendants several current and former Duke Energy officers and directors (collectively, the Duke Energy Defendants). Duke Energy is named as a nominal defendant.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The Consolidated Complaint alleges the Duke Energy Defendants breached their fiduciary duties by failing to adequately oversee Duke Energy’s ash basins and that these breaches of fiduciary duty may have contributed to the incident at Dan River and continued thereafter. The lawsuit also asserts claims against the Duke Energy Defendants for corporate waste (relating to the money Duke Energy has spent and will spend as a result of the fines, penalties and coal ash removal) and unjust enrichment (relating to the compensation and director remuneration that was received despite these alleged breaches of fiduciary duty). The lawsuit seeks both injunctive relief against Duke Energy and restitution from the Duke Energy Defendants. On April 22, 2016, plaintiffs filed an Amended Verified Consolidated Shareholder Derivative Complaint (Amended Complaint) making the same allegations as in the Consolidated Complaint. The Duke Energy Defendants filed a motion to dismiss the Amended Complaint on June 21, 2016. On December 14, 2016, the Delaware Chancery Court entered an order dismissing the Amended Complaint. Plaintiffs filed an appeal to the Delaware Supreme Court on January 9, 2017. The parties have completed briefing in the case and a date for oral argument has not been set.
On October 30, 2015, shareholder Saul Bresalier filed a shareholder derivative complaint (Bresalier Complaint) in the U.S. District Court for the District of Delaware. The lawsuit alleges that several current and former Duke Energy officers and directors (Bresalier Defendants) breached their fiduciary duties in connection with coal ash environmental issues, the post-merger change in Chief Executive Officer (CEO) and oversight of political contributions. Duke Energy is named as a nominal defendant. The Bresalier Complaint contends that the appointed Demand Review Committee failed to appropriately consider the shareholder’s earlier demand for litigation and improperly decided not to pursue claims against the Bresalier Defendants. On March 30, 2017, the court granted Defendants’ Motion to Dismiss on the claims relating to coal ash environmental issues and political contributions. A notice of appeal has not been filed. As discussed below, an agreement-in-principle has been reached to settle the merger related claims in the Bresalier Complaint, and those claims were also dismissed subject to that agreement.
It is not possible to predict whether Duke Energy will incur any liability or to estimate the damages, if any, it might incur in connection with these matters.
Progress Energy Merger Shareholder Litigation
On May 31, 2013, the Delaware Chancery Court consolidated four shareholder derivative lawsuits filed in 2012. The Court also appointed a lead plaintiff and counsel for plaintiffs and designated the case as In Re Duke Energy Corporation Derivative Litigation (Merger Chancery Litigation). The lawsuit names as defendants the Legacy Duke Energy Directors. Duke Energy is named as a nominal defendant. The case alleges claims for breach of fiduciary duties of loyalty and care in connection with the post-merger change in CEO.
Two shareholder Derivative Complaints, filed in 2012 in federal district court in Delaware, were consolidated as Tansey v. Rogers, et al. The case alleges claims against the Legacy Duke Energy Directors for breach of fiduciary duty and waste of corporate assets, as well as claims under Section 14(a) and 20(a) of the Exchange Act. Duke Energy is named as a nominal defendant. On December 21, 2015, Plaintiff filed a Consolidated Amended Complaint asserting the same claims contained in the original complaints.
The Legacy Duke Energy Directors have reached an agreement-in-principle to settle the Merger Chancery Litigation, conditioned on dismissal as well, of the Tansey v. Rogers, et al case and the merger related claims in the Bresalier Complaint discussed above, for a total of $27 million. The entire settlement amount is to be funded by insurance. The settlement amount, less court-approved attorney fees, will be payable to Duke Energy. Settlement documents have been submitted to the court for approval and a hearing has been set for July 13, 2017.
Price Reporting Cases
Duke Energy Trading and Marketing, LLC (DETM), a non-operating Duke Energy affiliate, was a defendant, along with numerous other energy companies, in four class-action lawsuits and a fifth single-plaintiff lawsuit in a consolidated federal court proceeding in Nevada. Each of these lawsuits contained similar claims that defendants allegedly manipulated natural gas markets by various means, including providing false information to natural gas trade publications and entering into unlawful arrangements and agreements in violation of the antitrust laws of the respective states. Plaintiffs sought damages in unspecified amounts. In February 2016, DETM reached agreements in principle to settle all of the pending lawsuits. Settlement of the single-plaintiff settlement was finalized and paid in March 2016. The proposed settlement of the class action lawsuits was submitted to the Court and preliminarily approved on January 26, 2017. The Court will consider final approval of the class settlement following notice to the class members. The settlement amounts are not material to Duke Energy.
Duke Energy Carolinas and Duke Energy Progress
Coal Ash Insurance Coverage Litigation
In March 2017, Duke Energy Carolinas and Duke Energy Progress filed a Motion to Dismisscivil action in North Carolina Superior Court against various insurance providers. The lawsuit seeks payment for coal ash related liabilities covered by third-party liability insurance policies. The insurance policies were issued between 1971 and 1986 and provide third-party liability insurance for property damage. The civil action seeks damages for breach of contract and indemnification for costs arising from the complaint. On February 12, 2016,North Carolina Coal Ash Management Act of 2014, as amended, (Coal Ash Act) and the ALJ entered a new order clarifying that the dismissal of the contested case only applied to the specific issues before the ALJEPA CCR rule at 15 coal-fired plants in the Petition for Contested Case. On March 10, 2016, the court dismissed the SELC lawsuit based on the ALJ's entry of the new order.
On February 8, 2016, the NCDEQ assessed a penalty of approximately $6.8 million, including enforcement costs, againstNorth Carolina and South Carolina. Duke Energy Carolinas related to storm water pipes and associated discharges at the Dan River Steam Station. Duke Energy Carolinas recorded a charge in December 2015 for this penalty. In March 2016, Duke Energy Carolinas filed an appealProgress cannot predict the outcome of this penalty. On September 23, 2016, Duke Energy Carolinas entered into a settlement agreement with the NCDEQ, without admission of liability, under which Duke Energy Carolinas agreed to a payment of $6 million to resolve allegations underlying the asserted civil penalty related to the Dan River coal ash release and a March 4, 2016, NOV alleging unpermitted discharges at the facility.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 of their coal-fired power plants in North Carolina. The NCDEQ filed enforcement actions 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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
On August 16, 2013, the NCDEQ filed an enforcement action against Duke Energy Carolinas and Duke Energy Progress related to their remaining plants in North Carolina, alleging violations of the CWA and violations of the North Carolina groundwater standards. Both of these cases have been assigned to the judge handling the enforcement actions discussed above. SELC is representing several environmental groups who have been permitted to intervene in these cases.
On July 10, 2015, Duke Energy Carolinas and Duke Energy Progress filed two MotionsThe court issued orders in 2016 granting Motions' for Partial Summary Judgment in the case on the basis that there is no longer either a genuine controversy or disputed material facts about the relief for seven of the 14 North Carolina plants with coal ash basins. On September 14, 2015,named in the court granted the Motions for Partial Summary Judgment pending court approval of the terms through an order. On April 4, 2016, the court issued an order granting Duke Energy Progress' Motion for Partial Summary Judgment for cases involving the H.F. Lee, Cape Fear and Weatherspoon plants. On June 1, 2016, the court issued an order granting Duke Energy Carolinas' and Duke Energy Progress' Motion for Partial Summary Judgment for cases involving the Asheville, Dan River, Riverbend and Sutton plants.enforcement actions. The litigation is concluded for these seven plants. Litigation continues for the remaining seven plants. In response to a motion for partial summary judgment on the groundwater claims filed by the environmental groups, on October 17, 2016, Duke Energy Carolinas and Duke Energy Progress filed a cross-motion for partial summary judgment on the groundwater claims. On February 13, 2017, the court issued an order denying both the environmental groups' motion for partial summary judgment and Duke Energy Carolinas and Duke Energy Progress' cross-motion for partial summary judgment. On March 15, 2017, Duke Energy Carolinas and Duke Energy Progress filed a Notice of Appeal to challenge the trial court’s denial of their cross-motion for partial summary judgment. The parties were unable to reach an agreement at mediation on April 18, 2017.
It is not possible to predict any liability or estimate any damages Duke Energy Carolinas or Duke Energy Progress might incur in connection with these matters.
Federal Citizens Suits
There are currently three cases filed in various North Carolina federal courts related to the Sutton, Buck and Mayo plants. Three other previously filed cases involving the Riverbend, Cape Fear and H.F. Lee plants were dismissed on June 7, 2016.
On September 12, 2013, Cape Fear River Watch, Inc., Sierra Club and Waterkeeper Alliance filed a citizen suit in the Federal District Court for the Eastern District of North Carolina. The lawsuit alleges unpermitted discharges to surface water and groundwater violations at the Sutton Plant. On June 9, 2014, the court granted Duke Energy Progress' request to dismiss the groundwater claims but rejected its request to dismiss the surface water claims. In response to a motion filed by the SELC on August 1, 2014, the court modified the original order to dismiss only the plaintiff's federal law claim based on hydrologic connections at Sutton Lake. The claims related to the alleged state court violations of the permits are back in the case. On August 26, 2015, the court suspended the proceedings until further order from the court. The proceedings remain stayed as the parties negotiate a settlement with SELC subsequent to the court granting summary judgment in the state enforcement litigation.
On September 3, 2014, three citizen suits were filed by various environmental groups: (i) a citizen suit in the United States Court for the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Cape Fear Plant; (ii) in the United States Court for the Eastern District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the H.F. Lee Plant; and (iii) in the United States Court for the Middle District of North Carolina alleging unpermitted discharges to surface water and groundwater violations at the Buck Steam Station. Motions to Stay or Dismiss the proceedings were filed in each of the three cases. The proceedings related to Cape Fear and H.F. Lee were dismissed on June 8, 2016, closing these matters. On October 20, 2015, the court issued an order denying the motions to stay or dismiss in the Buck proceedings. Duke Energy Carolinas' motion seeking appellate review of the District Court's decision relating to Buck was denied on January 29, 2016. Based on Duke Energy’s announcement that it will beneficially recycle ash at the Buck Steam Station, Duke Energy Carolinas reached an agreement with the environmental groups to settle the Buck Steam Station proceeding on September 28, 2016.
On June 13, 2016, the Roanoke River Basin Association 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 DismissDismiss. On April 26, 2017, the complaint.court entered an order dismissing four of the claims in the federal citizen suit. Two claims relating to alleged violations of National Pollutant Discharge Elimination System permit provisions survived the motion to dismiss, and Duke Energy Progress’ response is due on May 10, 2017.
On March 16, 2017, the Roanoke River Basin Association served Duke Energy Progress with a 60-day notice of intent to bring suit pursuant to the citizen suit provision of the CWA for alleged violations of effluent standards and limitations at the Roxboro Plant.
It is not possible to predict whether Duke Energy Carolinas or Duke Energy Progress will incur any liability or to estimate the damages, if any, theyit might incur in connection with these matters.this matter.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Five previously filed cases involving the Riverbend, Cape Fear, H.F. Lee, Sutton and Buck plants were dismissed or settled in 2016.
Potential Groundwater Contamination Claims
Beginning in May 2015, a number of residents living in the vicinity of the North Carolina facilities with ash basins received letters from the NCDEQ advising them not to drink water from the private wells on their land tested by the NCDEQ as the samples were found to have certain substances at levels higher than the criteria set by the North Carolina Department of Health and Human Services (DHHS). The criteria, in some cases, are considerably more stringent than federal drinking water standards established to protect human health and welfare. The North Carolina Coal Ash Management Act of 2014, as amended, (Coal Ash Act) requires additional groundwater monitoring and assessments for each of the 14 coal-fired plants in North Carolina, including sampling of private water supply wells. The data gathered through these Comprehensive Site Assessments (CSAs) will be used by the NCDEQ to determine whether the water quality of these private water supply wells has been adversely impacted by the ash basins. Duke Energy has submitted CSAs documenting the results of extensive groundwater monitoring around coal ash basins at all 14 of the plants with coal ash basins. Generally, the data gathered through the installation of new monitoring wells and soil and water samples across the state have been consistent with historical data provided to state regulators over many years. The DHHS and the 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 impoundments,basins, as well as some municipal water supplies, contain similar levels of vanadium and hexavalent chromium, which leads investigators to believe these constituents are naturally occurring. In March 2016, DHHS rescinded the advisories.
Duke Energy Carolinas and Duke Energy Progress have received formal demand letters from residents near Duke Energy Carolinas' and Duke Energy Progress' coal ash basins. The residents claim damages for nuisance and diminution in property value, among other things. The parties have agreedheld three days of mediation discussions that ended at impasse. On January 6, 2017, Duke Energy Carolinas and Duke Energy Progress received the plaintiffs' notice of their intent to file suits should the matter not settle. The NCDEQ preliminarily approved Duke Energy’s permanent water solution plans on January 13, 2017, and as a result shortly thereafter, Duke Energy issued a press release, providing additional details regarding the homeowner compensation package. This package consists of three components: (i) a $5,000 goodwill payment to each eligible well owner to support the transition to a two-phased mediation.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 first phase took placeProperty Value Protection Plan is a program offered by Duke Energy designed to guarantee eligible plant neighbors the fair market value of their residential property should they decide to sell their property during the time that the plan is offered. Duke Energy received a letter from Plaintiffs' counsel indicating their intent to file suit on October 26, 2016, withFebruary 2, 2017, should a settlement not be reached by that date. Plaintiff’s counsel did not file suit upon the second phase scheduled for November 17, 2016.expiration of the tolling agreement on February 2, 2017, and no suit has been filed to date. Duke Energy Carolinas and Duke Energy Progress have recognized reserves of $18 million and $4 million, respectively.
It is not possible to estimate the maximum exposure of loss, if any, that may occur in connection with the claims, which might be made by these residents.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Asbestos-related Injuries and Damages Claims
Duke Energy Carolinas has experienced numerous claims for indemnification and medical cost reimbursement related to asbestos exposure. These claims relate to damages for bodily injuries alleged to have arisen from exposure to or use of asbestos in connection with construction and maintenance activities conducted on its electric generation plants prior to 1985. As of September 30, 2016,March 31, 2017, there were 120111 asserted claims for non-malignant cases with the cumulative relief sought of up to $32$29 million, and 7858 asserted claims for malignant cases with the cumulative relief sought of up to $14$16 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 $512$506 million at September 30, 2016March 31, 2017 and $536$512 million at December 31, 2015.2016. These reserves are classified in Other within Deferred Credits and Other Noncurrent Liabilities and Other within Current Liabilities on the Condensed Consolidated Balance Sheets. These reserves are based upon the minimum amount of the range of loss for current and future asbestos claims through 2033,2036, are recorded on an undiscounted basis and incorporate anticipated inflation. 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 20332036 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 $814 million in excess of the self-insured retention. Receivables for insurance recoveries were $567$587 million at September 30, 2016March 31, 2017 and $599 million at December 31, 2015.2016. These amounts are classified in Other within Investments and Other Noncurrent Assets and Receivables on the Condensed Consolidated Balance Sheets. Duke Energy Carolinas is not aware of any uncertainties regarding the legal sufficiency of insurance claims. Duke Energy Carolinas believes the insurance recovery asset is probable of recovery as the insurance carrier continues to have a strong financial strength rating.
Duke Energy Florida
Class Action Lawsuit
On February 22, 2016, a lawsuit was filed in the U.S. District Court for the Southern District of Florida on behalf of a putative class of Duke Energy Florida and FP&L’s customers in Florida. The suit alleges the State of Florida’s nuclear power plant cost recovery statutes (NCRS) are unconstitutional and pre-empted by federal law. Plaintiffs claim they are entitled to repayment of all money paid by customers of Duke Energy Florida and FP&L as a result of the NCRS, as well as an injunction against any future charges under those statutes. The constitutionality of the NCRS has been challenged unsuccessfully in a number of prior cases on alternative grounds. Duke Energy Florida and FP&L filed motions to dismiss the complaint on May 5, 2016. On September 21, 2016, the Court granted the motions to dismiss with prejudice. Plaintiffs filed a motion for reconsideration. Followingreconsideration, which was denied. On January 4, 2017, plaintiffs filed a rulingnotice of appeal. Plaintiffs filed an appellate brief on March 16, 2017, and Duke Energy Florida filed responses on April 17, 2017. Duke Energy Florida cannot predict the motion for reconsideration, the plaintiffs will have 30 days to file anoutcome of this appeal.
Westinghouse Contract Litigation
On March 28, 2014, Duke Energy Florida filed a lawsuit against Westinghouse in 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 the terminated Engineering, Procurement and Construction agreement (EPC)an EPC for Levy as well as a determination by the court of the amounts due to Westinghouse as a result of the termination of the EPC. Duke Energy Florida recognized an exit obligation as a result of the termination of the EPC contract.EPC.
On March 31, 2014, Westinghouse filed a lawsuit against Duke Energy Florida in U.S. District Court for the Western District of Pennsylvania. The Pennsylvania lawsuit alleged damages under the EPC in excess of $510 million for engineering and design work, costs to end supplier contracts and an alleged termination fee.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
On June 9, 2014, the judge in the North Carolina case ruled that the litigation will proceed in the Western District of North Carolina. In November 2014, Westinghouse filed a Motion for Partial Judgment on the pleadings, which was denied on March 30, 2015. On July 11, 2016, Duke Energy Florida and Westinghouse filed separate Motions for Summary Judgment. On September 29, 2016, the court issued its ruling on the parties' respective Motions for Summary Judgment. The court ruledJudgment, ruling in favor of Westinghouse on a $30 million termination fee claim. The court dismissedclaim and dismissing Duke Energy Florida's $54 million refund claim, however the court statedbut stating that Duke Energy Florida could use the refund claim to offset any damages for termination costs. Westinghouse's claim for termination costs iswas unaffected by this ruling and continuescontinued to trial. On October 11, 2016, in a pre-trial filing,At trial, Westinghouse reduced its claim for termination costs from $482 million to $424 million. TheFollowing a trial concluded on October 21, 2016, andthe matter, the court will issue aissued its final order in December 2016 denying Westinghouse’s claim for termination costs and re-affirming its earlier ruling following the parties submitting post-trial briefs. There is no set timetable for the court to issue a decisionin favor of Westinghouse on the merits$30 million termination fee and Duke Energy Florida’s refund claim. Judgment was entered against Duke Energy Florida in the amount of approximately $34 million, which includes prejudgment interest. Westinghouse has appealed the case.trial court's order and Duke Energy Florida has cross-appealed.
It is not possible to predict the ultimate outcome of the litigation, whether Duke Energy Florida will ultimately have any liability for terminatingappeal of the EPC contract or to estimate the damages, if any, it might incur in connection with these matters.trial court's order. Ultimate resolution of these matters could have a material effect on the results of operations, financial position or cash flows of Duke Energy Florida. However, appropriate regulatory recovery will be pursued for the retail portion of any costs incurred in connection with such resolution.
On March 29, 2017, Westinghouse filed Chapter 11 bankruptcy in the Southern District of New York, which could delay the timing of the appeal. Additional impacts, if any, of this bankruptcy filing on the resolution of the pending appeal and cross-appeal are unknown at this time.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
MGP Cost Recovery Action
On December 30, 2011, Duke Energy Ohio
Antitrust Lawsuit
Florida filed a lawsuit against FirstEnergy Corp. (FirstEnergy) to recover investigation and remediation costs incurred by Duke Energy Florida in connection with the restoration of two former MGP sites in Florida. Duke Energy Florida alleged that FirstEnergy, as the successor to Associated Gas & Electric Co., owes past and future contribution and response costs of up to $43 million for the investigation and remediation of MGP sites. On December 6, 2016, the trial court entered judgment against Duke Energy Florida in the case. In January 2008, four plaintiffs, including individual, industrial and nonprofit customers,2017, Duke Energy Florida appealed the decision to the U.S. Court of Appeals for the 6th Circuit. Duke Energy Florida cannot predict the outcome of this appeal.
Duke Energy Indiana
Benton County Wind Farm Dispute
On December 16, 2013, Benton County Wind Farm LLC (BCWF) filed a lawsuit against Duke Energy Ohio in federal court in the Southern District of Ohio. Plaintiffs allegedIndiana seeking damages for past generation losses totaling approximately $16 million alleging Duke Energy Ohio conspiredIndiana violated its obligations under a 2006 PPA by refusing to provide inequitable and unfair price advantages for certain large business consumers by entering into nonpublic option agreements in exchange for their withdrawal of challengesoffer 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 Ohio’s Rate Stabilization Plan implementedIndiana 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 early 2005. In March 2014, a federal judge certified this matter as a class action. Plaintiffs alleged claims of antitrust violations underorder to balance customer needs against BCWF's need to run. BCWF contends Duke Energy Indiana must bid at the federal Robinson Patman Act as well as fraudlowest 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 conspiracy allegations underthat is has reasonably balanced the federal Racketeer Influenced and Corrupt Organizations statute and the Ohio Corrupt Practices Act.
Duringparties' interests. On July 6, 2015, the parties received preliminary court approval of a settlement agreement. Duke Energy Ohio included a litigation reserve of $81 million in Other within Current Liabilities on the Consolidated Balance Sheet at December 31, 2015. Duke Energy Ohio recognized a pretax charge of $81 million in (Loss) Income from Discontinued Operations, net of tax in the Condensed Consolidated Statements of Operations and Comprehensive Income for the nine months ended September 30, 2015. The settlement agreement was approved at a federal court hearing on April 19, 2016.
W.C. Beckjord Fuel Release
On August 18, 2014, approximately 9,000 gallons of fuel oil were inadvertently discharged into the Ohio River during a fuel oil transfer at the W.C. Beckjord generating station. The Ohio Environmental Protection Agency (Ohio EPA) issued a NOV related to the discharge. Duke Energy Ohio is cooperating with the Ohio EPA, the EPA and the U.S. AttorneyDistrict Court for the Southern District of Ohio. No NOVIndiana entered judgment against BCWF on all claims. BCWF appealed the decision and on December 9, 2016, the appeals court ruled in favor of BCWF. The matter has been issued by the EPA and no penalty has been assessed. Total repair and remediation costs relatedremanded to the release were not material. Other costs relateda lower court to the release, including state or federal civil or criminal enforcement proceedings, are not expected to be material todetermine damages. A settlement conference is scheduled on May 31, 2017. Duke Energy Ohio.Indiana cannot predict the outcome of this matter. Ultimate resolution of this matter could have a material effect on the results of operations, financial position or cash flows of Duke Energy Indiana. However, appropriate regulatory recovery will be pursued for the retail portion of any costs incurred in connection with such resolution.
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.
The table below presents recorded reserves based on management’s best estimate of probable loss for legal matters, excluding asbestos relatedasbestos-related reserves and the exit obligation discussed above related to the termination of an EPC contract. Reserves are classified on the Condensed Consolidated Balance Sheets in Other within Deferred Credits and Other Noncurrent Liabilities and Accounts payable and Other within Current Liabilities. The reasonably possible range of loss in excess of recorded reserves is not material, other than as described above. | | | (in millions) | September 30, 2016 |
| | December 31, 2015 |
| March 31, 2017 |
| | December 31, 2016 |
|
| Reserves for Legal Matters | | | | | | |
| Duke Energy | $ | 110 |
| | $ | 166 |
| $ | 91 |
| | $ | 98 |
|
| Duke Energy Carolinas | 11 |
| | 11 |
| 23 |
| | 23 |
|
| Progress Energy | 54 |
| | 54 |
| 57 |
| | 59 |
|
| Duke Energy Progress | 8 |
| | 6 |
| 13 |
| | 14 |
|
| Duke Energy Florida | 30 |
| | 31 |
| 27 |
| | 28 |
|
| Duke Energy Ohio | 5 |
| | 80 |
| 4 |
| | 4 |
|
| Piedmont | | 2 |
| | 2 |
|
OTHER COMMITMENTS AND CONTINGENCIES
General
As part of their normal business, the Duke Energy Registrants are party to various financial guarantees, performance guarantees and other contractual commitments to extend guarantees of credit and other assistance to various subsidiaries, investees and other third parties. These guarantees involve elements of performance and credit risk, which are not fully recognized on the Condensed Consolidated Balance Sheets and have unlimited 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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
In addition, the Duke Energy Registrants enter into various fixed-price, noncancelable commitments to purchase or sell power or natural gas, take-or-pay arrangements, transportation, or throughput agreements and other contracts that may or may not be recognized on their respective Condensed Consolidated Balance Sheets. Some of these arrangements may be recognized at fair value on their respective Condensed Consolidated Balance Sheets if such contracts meet the definition of a derivative and the normal purchase/normal sale (NPNS) exception does not apply. In most cases, the Duke Energy Registrants’ purchase obligation contracts contain provisions for price adjustments, minimum purchase levels and other financial commitments.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
6. DEBT AND CREDIT FACILITIES
SUMMARY OF SIGNIFICANT DEBT ISSUANCES
Piedmont Acquisition Financing
In August 2016, Duke Energy issued $3.75 billion of senior unsecured notes in three separate series. The net proceeds were used to finance a portion of the Piedmont acquisition. The $4.9 billion Bridge Facility was terminated following the issuance of this debt. See Note 2 for additional information on the Piedmont acquisition.
Solar Facilities Financing
In August 2016, Emerald State Solar, LLC, an indirect wholly owned subsidiary of Duke Energy, entered into a portfolio financing of approximately 22 North Carolina Solar facilities. The $333 million term loan facility consists of Tranche A of $228 million secured by substantially all the assets of the solar facilities and Tranche B of $105 million secured by an Equity Contribution Agreement with Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures related to the Emerald State Solar, LLC portfolio. The initial interest rate on the loans was six months London Interbank Offered Rate (LIBOR) plus an applicable margin of 1.75 percent plus a 0.125 percent increase every three years thereafter. In connection with this debt issuance, Emerald State Solar, LLC entered into two interest rate swaps to convert the substantial majority of the loan interest payments from variable rates to fixed rates of approximately 1.81 percent for Tranche A and 1.38 percent for Tranche B, plus the applicable margin. See Note 10 for further information on the notional amounts of the interest rate swaps.
Nuclear Asset-Recovery Bonds
In June 2016, DEFPF issued $1,294 million of nuclear asset-recovery bonds and used the proceeds to acquire nuclear asset-recovery property from its parent, Duke Energy Florida. The nuclear asset-recovery bonds are payable only from and secured by the nuclear asset-recovery property. DEFPF is consolidated for financial reporting purposes; however, the nuclear asset-recovery bonds do not constitute a debt, liability or other legal obligation of, or interest in, Duke Energy Florida or any of its affiliates other than DEFPF. The assets of DEFPF, including the nuclear asset-recovery property, are not available to pay creditors of Duke Energy Florida or any of its affiliates. Duke Energy Florida used the proceeds from the sale to repay short-term borrowings under the intercompany money pool borrowing arrangement and make an equity distribution of $649 million to the ultimate parent, Duke Energy (Parent), which repaid short-term borrowings. See Notes 4 and 13 for additional information.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following table summarizes significant debt issuances (in millions). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Nine Months Ended September 30, 2016 |
| | | | | | | | 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 |
|
| Unsecured | | | | | | | | | | | | | | | | | |
April 2016(a) | April 2023 | | 2.875 | % | | $ | 350 |
| | $ | 350 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| August 2016 | September 2021 | | 1.800 | % | | 750 |
| | 750 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| August 2016 | September 2026 | | 2.650 | % | | 1,500 |
| | 1,500 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| August 2016 | September 2046 | | 3.750 | % | | 1,500 |
| | 1,500 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| First Mortgage Bonds | | | | | | | | | | | | | | | | | |
March 2016(b) | March 2023 |
| 2.500 | % | | 500 |
| | — |
| | 500 |
| | — |
| | — |
| | — |
| | — |
|
March 2016(b) | March 2046 |
| 3.875 | % | | 500 |
| | — |
| | 500 |
| | — |
| | — |
| | — |
| | — |
|
May 2016(c) | May 2046 |
| 3.750 | % |
| 500 |
|
| — |
| | — |
| | — |
| | — |
| | — |
| | 500 |
|
June 2016(b) | June 2046 |
| 3.700 | % |
| 250 |
|
| — |
| | — |
| | — |
| | — |
| | 250 |
| | — |
|
September 2016(d) | October 2046 | | 3.400 | % | | 600 |
| | — |
| | — |
| | — |
| | 600 |
| | — |
| | — |
|
September 2016(b) | October 2046 | | 3.700 | % | | 450 |
| | — |
| | — |
| | 450 |
| | — |
| | — |
| | — |
|
| Secured Debt |
|
|
| |
|
| | | |
|
| | | | | | | | |
June 2016(e) | March 2020 |
| 1.196 | % | | 183 |
| | — |
| | — |
| | — |
| | 183 |
| | — |
| | — |
|
June 2016(e) | September 2022 |
| 1.731 | % |
| 150 |
|
| — |
| | — |
| | — |
| | 150 |
| | — |
| | — |
|
June 2016(e) | September 2029 | | 2.538 | % | | 436 |
| | — |
| | — |
| | — |
| | 436 |
| | — |
| | — |
|
June 2016(e) | March 2033 |
| 2.858 | % | | 250 |
| | — |
| | — |
| | — |
| | 250 |
| | — |
| | — |
|
June 2016(e) | September 2036 |
| 3.112 | % | | 275 |
| | — |
| | — |
| | — |
| | 275 |
| | — |
| | — |
|
| August 2016 | June 2034 | | 2.747 | % | | 228 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| August 2016 | June 2020 | | 2.747 | % | | 105 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total issuances | | | | | $ | 8,527 |
| | $ | 4,100 |
|
| $ | 1,000 |
|
| $ | 450 |
| | $ | 1,894 |
|
| $ | 250 |
|
| $ | 500 |
|
|
| | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, 2017 |
| | | | | | | Duke |
| | Duke |
|
| | Maturity | Interest |
| | Duke |
| | Energy |
| | Energy |
|
| Issuance Date | Date | Rate |
| | Energy |
| | Florida |
| | Ohio |
|
| Secured Debt | | | | | | | | |
February 2017(a) | June 2034 | 4.120 | % | | $ | 587 |
| | $ | — |
| | $ | — |
|
| First Mortgage Bonds | | | | | | | | |
January 2017(b) | January 2020 | 1.850 | % | | 250 |
| | 250 |
| | — |
|
January 2017(b) | January 2027 | 3.200 | % | | 650 |
| | 650 |
| | — |
|
March 2017(c) | June 2046 | 3.700 | % |
| 100 |
|
| — |
| | 100 |
|
| Total issuances | | | | $ | 1,587 |
| | $ | 900 |
|
| $ | 100 |
|
| |
| (a) | Portfolio financing of four Texas and Oklahoma wind facilities. Secured by substantially all of the assets of these wind facilities and nonrecourse to Duke Energy. Proceeds were used to pay down outstanding commercial paperreimburse Duke Energy for a portion of previously funded construction expenditures. |
| |
| (b) | Debt issued to fund capital expenditures for ongoing construction and capital maintenance, to repay at maturity a $250 million aggregate principal amount of bonds due September 2017 and for general corporate purposes. |
| |
(b)(c) | Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance and for general corporate purposes. |
| |
(c) | ProceedsIn April 2017, Duke Energy (Parent) issued $420 million of unsecured notes with a fixed interest rate of 3.364 percent and maturity date of April 2025. The net proceeds were used to repay $325 million of unsecured debt due June 2016, $150 million of first mortgage bonds due July 2016 and for general corporate purposes. |
| |
(d) | Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance, to repay short-term borrowings under the intercompany money pool borrowing arrangement and for general corporate purposes. |
| |
(e) | The nuclear asset-recovery bonds are sequential pay amortizing bonds. The maturity date above represents the scheduled final maturity date for the bonds. |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)refinance $400 million of unsecured debt at maturity and to repay outstanding commercial paper.
(Unaudited)
CURRENT MATURITIES OF LONG-TERM DEBT
The following table shows the significant components of Current maturitiesMaturities of long-term debtLong-Term Debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings. | | | (in millions) | Maturity Date | | Interest Rate |
| | September 30, 2016 |
| Maturity Date | | Interest Rate |
| | March 31, 2017 |
|
| Unsecured Debt | | | | | | | | |
| Duke Energy (Parent) | November 2016 | | 2.150 | % | | $ | 500 |
| August 2017 | | 1.625 | % | | $ | 700 |
|
| Duke Energy (Parent) | April 2017 | | 1.034 | % | | 400 |
| |
Duke Energy(a) | May 2017 | | 15.681 | % | | 56 |
| |
| Duke Energy (Parent) | August 2017 | | 1.625 | % | | 700 |
| |
| Piedmont | | September 2017 | | 8.510 | % | | 35 |
|
| Secured Debt | | | | | | | | |
| Duke Energy | June 2017 | | 2.155 | % | | 45 |
| June 2017 | | 2.605 | % | | 45 |
|
| Duke Energy | | June 2017 | | 2.455 | % | | 34 |
|
| First Mortgage Bonds | | | | | | | | |
| Duke Energy Florida | | September 2017 | | 5.800 | % | | 250 |
|
| Duke Energy Progress | | November 2017 | | 1.252 | % | | 200 |
|
| Duke Energy Carolinas | December 2016 | | 1.750 | % | | 350 |
| January 2018 | | 5.250 | % | | 400 |
|
| Duke Energy Progress | March 2017 | | 1.035 | % | | 250 |
| |
| Duke Energy Florida | September 2017 | | 5.800 | % | | 250 |
| |
| Tax-exempt Bonds | | | | | |
| Duke Energy Carolinas | February 2017 | | 3.600 | % | | 77 |
| |
Other(b) | | | | 573 |
| |
Other(a) | | | | | 313 |
|
| Current maturities of long-term debt | | | | $ | 3,201 |
| | | | $ | 1,977 |
|
| |
(a) | The interest rate includes country-specific risk premiums. |
| |
(b) | Includes capital lease obligations, amortizing debt and small bullet maturities. |
(a) Includes capital lease obligations, amortizing debt and small bullet maturities.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
AVAILABLE CREDIT FACILITIES
Master Credit Facility
In March 2017, Duke Energy has aamended its Master Credit Facility with ato increase its capacity offrom $7.5 billion throughto $8 billion, and to extend the termination date of the facility from January 2020.30, 2020, to March 16, 2022. The amendment also added Piedmont as a borrower within the Master Credit Facility. Piedmont's separate $850 million credit facility was terminated in connection with the amendment. With the amendment, the Duke Energy Registrants, excluding Progress Energy (Parent), have borrowing capacity under the Master Credit Facility up to a specified sublimit for each borrower. Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. The amount available under the Master Credit Facility has been reduced to backstop issuances of commercial paper, certain letters of credit and variable-rate demand tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder. Duke Energy Carolinas and Duke Energy Progress are also required to each maintain $250 million of available capacity under the Master Credit Facility as security to meet obligations under plea agreements reached with the U.S. Department of Justice in 2015 related to violations at North Carolina facilities with ash basins. The table below includes the current borrowing sublimits and available capacity under the Master Credit Facility. | | | | September 30, 2016 | March 31, 2017 | | |
| |
|
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
|
|
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Facility size(a) | $ | 7,500 |
| | $ | 3,400 |
| | $ | 1,100 |
| | $ | 1,000 |
| | $ | 950 |
| | $ | 450 |
| | $ | 600 |
| $ | 8,000 |
| | $ | 3,400 |
| | $ | 1,100 |
| | $ | 1,000 |
| | $ | 950 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
|
| Reduction to backstop issuances | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial paper(b) | (1,652 | ) | | (1,027 | ) | | (300 | ) | | (150 | ) | | — |
| | (25 | ) | | (150 | ) | (3,134 | ) | | (1,822 | ) | | (469 | ) | | (402 | ) | | — |
| | (30 | ) | | (150 | ) | | (261 | ) |
| Outstanding letters of credit | (77 | ) | | (70 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| (71 | ) | | (62 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | (2 | ) |
| Tax-exempt bonds | (116 | ) | | — |
| | (35 | ) | | — |
| | — |
| | — |
| | (81 | ) | (81 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (81 | ) | | — |
|
| Coal ash set-aside | (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| | — |
|
| Available capacity | $ | 5,155 |
|
| $ | 2,303 |
|
| $ | 511 |
|
| $ | 598 |
|
| $ | 949 |
|
| $ | 425 |
|
| $ | 369 |
| $ | 4,214 |
|
| $ | 1,516 |
|
| $ | 377 |
|
| $ | 346 |
|
| $ | 949 |
|
| $ | 420 |
|
| $ | 369 |
| | $ | 237 |
|
| |
| (a) | Represents the sublimit of each borrower. Certain sublimits were reallocated in May 2017 to provide additional liquidity to certain borrowers in light of near-term funding needs. |
| |
| (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 Condensed Consolidated Balance Sheets. |
Term Loan Facility
On February 22, 2016, Duke Energy (Parent) entered into a six-month term loan facility with commitments totaling $1.0 billion (the Term Loan). On August 1, 2016, Duke Energy (Parent) and each of the lenders amended and restated certain terms of this facility, resulting in aggregate commitments of $1.5 billion and extending the maturity date to July 31, 2017. As of September 30, 2016, $850 million has been drawn under the amended and restated term loan, including $750 million used to fund a portion of the Piedmont acquisition.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
On October 28, 2016, Duke Energy (Parent) drew the remaining $650 million available under the $1.5 billion Term Loan and used the proceeds to manage short-term liquidity and for general corporate purposes. The terms and conditions of the Term Loan are generally consistent with those governing Duke Energy’s Master Credit Facility.
7. 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.
The following table presents the AROs recorded on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
Decommissioning of Nuclear Power Facilities(a) | $ | 5,163 |
| | $ | 1,808 |
| | $ | 3,153 |
| | $ | 2,428 |
| | $ | 725 |
| | $ | — |
| | $ | — |
|
| Closure of Ash Impoundments | 5,411 |
| | 2,089 |
| | 2,418 |
| | 2,398 |
| | 20 |
| | 77 |
| | 828 |
|
| Other | 256 |
| | 28 |
| | 86 |
| | 33 |
| | 53 |
| | 31 |
| | 19 |
|
| Total asset retirement obligation | $ | 10,830 |
| | $ | 3,925 |
| | $ | 5,657 |
| | $ | 4,859 |
| | $ | 798 |
| | $ | 108 |
| | $ | 847 |
|
| Less: current portion | 539 |
| | 303 |
| | 236 |
| | 236 |
| | — |
| | — |
| | — |
|
| Total noncurrent asset retirement obligation | $ | 10,291 |
|
| $ | 3,622 |
|
| $ | 5,421 |
|
| $ | 4,623 |
|
| $ | 798 |
|
| $ | 108 |
|
| $ | 847 |
|
(a) The Duke Energy amount includes purchase accounting adjustments related to the merger with Progress Energy.
North Carolina and South Carolina Ash Basins
Asset retirement obligations recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at September 30, 2016, and December 31, 2015, 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. In January 2016, the NCDEQ published draft proposed risk classifications for sites not specifically delineated by the Coal Ash Act as high priority. These risk rankings were generally determined based on three primary criteria: structural integrity of the impoundments and impacts to both surface and groundwater. The NCDEQ's draft proposed classifications categorized 12 basins at four sites as intermediate risk and four basins at three sites as low risk. Basins at high priority sites (Dan River, Riverbend, Asheville and Sutton) require closure through excavation including a combination of transferring the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of high-priority basins is required to be completed no later than August 1, 2019, except for Asheville which is required to be completed no later than August 1, 2022. Intermediate risk basins require closure through excavation including a combination of converting the basin to a lined industrial landfill, transferring of the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of intermediate risk basins is required to be completed no later than December 31, 2024. Low risk basins require closure through either the combination of the installation and maintenance of a cap system and groundwater monitoring system designed to minimize infiltration and erosion or other closure options available to intermediate risk basins. Closure of low risk basins is required to be completed no later than December 31, 2029. The NCDEQ's draft proposed classifications also categorized nine basins at six sites as “low-to-intermediate” risk, thereby not assigning a definitive risk ranking at that time. On May 18, 2016, the NCDEQ issued new proposed risk classifications, proposing to rank all originally proposed low risk and "low-intermediate" risk sites as intermediate.
On July 14, 2016, the governor of North Carolina signed legislation which amended the Coal Ash Act and required Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The new legislation also ranks basins at the H.F. Lee, Cape Fear and Weatherspoon stations as intermediate risk consistent with Duke Energy's previously announced plans to excavate those basins. These specific intermediate basins require closure through excavation including a combination of transferring ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of these specific intermediate basins is required to be completed no later than August 1, 2028. Upon satisfactory completion of the dam improvement projects and installation of alternate drinking water sources by October 15, 2018, the legislation requires the NCDEQ to reclassify sites proposed as intermediate risk, excluding H.F. Lee, Cape Fear and Weatherspoon, as low risk.
Additionally, the new legislation requires the installation and operation of three large-scale coal ash beneficiation projects which are expected to produce reprocessed ash for use in the concrete industry. Closure of basins at sites with these beneficiation projects are required to be completed no later than December 31, 2029. On October 5, 2016, Duke Energy announced Buck Steam Station as a first location for one of the beneficiation projects.
Per the Coal Ash Act, final proposed classifications were to be subject to Coal Ash Management Commission (Coal Ash Commission) approval. In March 2016, the Coal Ash Commission created by the Coal Ash Act was disbanded by the Governor of North Carolina based on a North Carolina Supreme Court ruling regarding the constitutionality of the body. The new legislation eliminates the Coal Ash Commission and transfers responsibility for ash basin closure oversight to the NCDEQ.
Estimated asset retirement obligations have been recognized based on the assigned risk categories or a probability weighting of potential closure methods. Costs incurred have been deferred as regulatory assets and recovery 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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
ARO Liability Rollforward
In April 2015, the EPA published a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation classifies CCR as nonhazardous waste and allows for beneficial use of CCR with some restrictions. Federal CCR reporting procedures require Duke Energy to make certain closure plans available to the public during the fourth quarter of 2016. In conjunction with preparing these closure plans, the Duke Energy Registrants updated coal ash ARO liability estimates based on additional site specific information about the related costs, methods and timing of work to be performed. Actual closure costs incurred could be materially different from current estimates that form the basis of the recorded asset retirement obligations.
The following table presents the change in liability associated with asset retirement obligations for Duke Energy and the Subsidiary Registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | 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(a) | $ | 10,264 |
| | $ | 3,918 |
| | $ | 5,369 |
| | $ | 4,567 |
| | $ | 802 |
| | $ | 125 |
| | $ | 525 |
|
Accretion expense(b) | 290 |
| | 141 |
| | 171 |
| | 144 |
| | 28 |
| | 4 |
| | 16 |
|
Liabilities settled(c) | (443 | ) | | (204 | ) | | (203 | ) | | (163 | ) | | (41 | ) | | (4 | ) | | (31 | ) |
| Liabilities incurred in the current year | 13 |
| | — |
| | 3 |
| | 3 |
| | — |
| | — |
| | — |
|
| Revisions in estimates of cash flows | 706 |
| | 70 |
| | 317 |
| | 308 |
| | 9 |
| | (17 | ) | | 337 |
|
| Balance at September 30, 2016 | $ | 10,830 |
| | $ | 3,925 |
| | $ | 5,657 |
| | $ | 4,859 |
| | $ | 798 |
| | $ | 108 |
| | $ | 847 |
|
| |
(a) | Primarily relates to decommissioning nuclear power facilities, closure of ash basins, asbestos removal, closure of landfills at fossil generation facilities, retirement of natural gas mains and removal of renewable energy generation assets. |
| |
(b) | For the nine months ended September 30, 2016, substantially all accretion expense relates to Duke Energy's regulated electric operations and has been deferred in accordance with regulatory accounting treatment. |
| |
(c) | Primarily relates to ash impoundment closures and nuclear decommissioning of Crystal River Unit 3. |
Asset retirement costs associated with the asset retirement obligations for operating plants and retired plants are included in Net property, plant and equipment, and Regulatory assets, respectively, on the Condensed Consolidated Balance Sheets.
8. GOODWILL AND INTANGIBLE ASSETS
GOODWILL
Duke Energy
The following table presents the goodwill by reportable operating segment foron Duke Energy.
Duke EnergyEnergy's Condensed Consolidated Balance Sheets at March 31, 2017 and December 31, 2016. |
| | | | | | | | | | | | | | | |
| | Regulated |
| | International |
| | Commercial |
| | |
| (in millions) | Utilities |
| | Energy |
| | Portfolio |
| | Total |
|
| Goodwill at December 31, 2015 | $ | 15,950 |
| | $ | 271 |
| | $ | 122 |
| | $ | 16,343 |
|
| Foreign exchange changes | — |
| | 11 |
| | — |
| | 11 |
|
| Goodwill at September 30, 2016 | $ | 15,950 |
| | $ | 282 |
| | $ | 122 |
| | $ | 16,354 |
|
|
| | | | | | | | | | | | | | | |
| | Electric Utilities |
| | Gas Utilities |
| | Commercial |
| | |
| (in millions) | and Infrastructure |
| | and Infrastructure |
| | Renewables |
| | Total |
|
| Goodwill | $ | 17,379 |
| | $ | 1,924 |
| | $ | 122 |
| | $ | 19,425 |
|
Duke Energy Ohio
Duke Energy Ohio's Goodwill balance of $920 million, is included in the Regulatedallocated $596 million to Electric Utilities operating segment and Infrastructure and $324 million to Gas Utilities and Infrastructure, is presented net of accumulated impairment charges of $216 million on the Condensed Consolidated Balance Sheets at September 30, 2016March 31, 2017 and December 31, 2015.2016.
Progress Energy
Progress Energy's Goodwill is included in the RegulatedElectric Utilities and Infrastructure operating segment and there are no accumulated impairment charges.
Impairment TestingPiedmont
Duke Energy, Duke Energy OhioPiedmont's Goodwill is included in the Gas Utilities and Progress EnergyInfrastructure operating segment and there are requiredno accumulated impairment charges. Effective November 1, 2016, Piedmont's fiscal year was changed from October 31 to perform an annual goodwill impairment test asDecember 31. Effective with this change, Piedmont changed the date of the same date each year and, accordingly, perform their annual impairment testing of goodwill as offrom October 31 to August 31.31 to align with the other Duke Energy Duke Energy Ohio and Progress Energy 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. As the fair value of Duke Energy, Duke Energy Ohio and Progress Energy's reporting units exceed their respective carrying values at the date of the annual impairment analysis, no impairment charges were recorded in the third quarter of 2016.Registrants.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
9.8. RELATED PARTY TRANSACTIONS
The Subsidiary Registrants engage in related party transactions in accordance with applicable state and federal commission regulations. Refer to the Condensed Consolidated Balance Sheets of the Subsidiary Registrants for balances due to or due from related parties. Material amounts related to transactions with related parties included in the Condensed Consolidated Statements of Operations and Comprehensive Income are presented in the following table. | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| 2017 |
| | 2016 |
|
| Duke Energy Carolinas | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 204 |
| | $ | 211 |
| | $ | 620 |
| | $ | 632 |
| $ | 199 |
| | $ | 217 |
|
Indemnification coverages(b) | 5 |
| | 6 |
| | 16 |
| | 18 |
| 6 |
| | 5 |
|
JDA revenue(c) | 10 |
| | 7 |
| | 21 |
| | 47 |
| 16 |
| | 9 |
|
JDA expense(c) | 36 |
| | 48 |
| | 127 |
| | 143 |
| 31 |
| | 41 |
|
Intercompany natural gas purchases(d) | | 1 |
| | — |
|
| Progress Energy | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 182 |
| | $ | 184 |
| | $ | 515 |
| | $ | 523 |
| $ | 169 |
| | $ | 174 |
|
Indemnification coverages(b) | 9 |
| | 10 |
| | 25 |
| | 29 |
| 10 |
| | 9 |
|
JDA revenue(c) | 36 |
| | 48 |
| | 127 |
| | 143 |
| 31 |
| | 41 |
|
JDA expense(c) | 10 |
| | 7 |
| | 21 |
| | 47 |
| 16 |
| | 9 |
|
Intercompany natural gas purchases(d) | | 19 |
| | — |
|
| Duke Energy Progress | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 103 |
| | $ | 101 |
| | $ | 292 |
| | $ | 296 |
| $ | 103 |
| | $ | 100 |
|
Indemnification coverages(b) | 4 |
| | 4 |
| | 10 |
| | 12 |
| 4 |
| | 4 |
|
JDA revenue(c) | 36 |
| | 48 |
| | 127 |
| | 143 |
| 31 |
| | 41 |
|
JDA expense(c) | 10 |
| | 7 |
| | 21 |
| | 47 |
| 16 |
| | 9 |
|
Intercompany natural gas purchases(d) | | 19 |
| | — |
|
| Duke Energy Florida | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 79 |
| | $ | 83 |
| | $ | 223 |
| | $ | 227 |
| $ | 66 |
| | $ | 74 |
|
Indemnification coverages(b) | 5 |
| | 6 |
| | 15 |
| | 17 |
| 6 |
| | 5 |
|
| Duke Energy Ohio | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 89 |
| | $ | 88 |
| | $ | 261 |
| | $ | 276 |
| $ | 90 |
| | $ | 85 |
|
Indemnification coverages(b) | 1 |
| | 1 |
| | 4 |
| | 5 |
| 1 |
| | 1 |
|
| Duke Energy Indiana | | | | | | | | | | |
Corporate governance and shared service expenses(a) | $ | 96 |
| | $ | 87 |
| | $ | 279 |
| | $ | 259 |
| $ | 90 |
| | $ | 94 |
|
Indemnification coverages(b) | 2 |
| | 2 |
| | 6 |
| | 6 |
| 2 |
| | 2 |
|
| Piedmont | | | | |
Corporate governance and shared service expenses(a) | | $ | 6 |
| | $ | — |
|
Indemnification coverages(b) | | 1 |
| | — |
|
Intercompany natural gas sales(d) | | 20 |
| | — |
|
| |
| (a) | The Subsidiary Registrants are charged their proportionate share of corporate governance and other shared services costs, primarily related to human resources, and employee benefits, information technology, legal and accounting fees, as well as other third-party costs. These amounts are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
| (b) | The Subsidiary Registrants incur expenses related to certain indemnification coverages through Bison, Duke Energy’s wholly owned captive insurance subsidiary. These expenses are recorded in Operation, maintenance and other on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
| (c) | Duke Energy Carolinas and Duke Energy Progress participate in a JDA, which allows the collective dispatch of power plants between the service territories to reduce customer rates. Revenues from the sale of power under the JDA are recorded in Operating Revenues on the Condensed Consolidated Statements of Operations and Comprehensive Income. Expenses from the purchase of power under the JDA are recorded in Fuel used in electric generation and purchased power on the Condensed Consolidated Statements of Operations and Comprehensive Income. |
| |
| (d) | Piedmont provides long-term natural gas delivery service to Duke Energy Carolinas and Duke Energy Progress' natural gas-fired generation facilities. Piedmont recorded the sales in Operating Revenues – Regulated natural gas, and Duke Energy Carolinas and Duke Energy Progress recorded the related purchases in Operating Expenses – Cost of natural gas on their Condensed Consolidated Statements of Operations and Comprehensive Income. The amounts are not eliminated in accordance with rate-based accounting regulations. For the three months ended March 31, 2016, which was prior to the Piedmont acquisition, Piedmont recorded $19 million and $1 million of natural gas sales with Duke Energy Progress and Duke Energy Carolinas, respectively. |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
In addition to the amounts presented above, the Subsidiary Registrants record the impact on net income of 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 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2016 for more information regarding money pool. The net impact of these transactions was not material for the three and nine months ended September 30,March 31, 2017 and 2016, and 2015 for the Subsidiary Registrants.
As discussed in Note 1312, 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 also include a subordinated note from the affiliate for a portion of the purchase price.
Equity Method Investments
Duke Energy Ohio's nonregulated indirect subsidiary, Duke Energy Commercial Asset Management (DECAM), owned generating plantsPiedmont has related party transactions as a customer of its equity method investments in natural gas storage and transportation facilities. Below are expenses for the three months ended March 31, 2017 and 2016, which are included in the Midwest Generation Disposal Group soldOperating Expenses – Cost of natural gas on Piedmont's Condensed Consolidated Statement of Operations and Comprehensive Income. |
| | | | | | | |
| | | Three Months Ended March 31, |
| (in millions) | Type of expense | 2017 | 2016 |
| Cardinal | Transportation Costs | $ | 2 |
| $ | 2 |
|
| Pine Needle | Gas Storage Costs | 2 |
| 3 |
|
| Hardy Storage | Gas Storage Costs | 2 |
| 2 |
|
| Total | | $ | 6 |
| $ | 7 |
|
In association with these transactions, Piedmont has accounts payable to Dynegy on April 2, 2015. On April 1, 2015, Duke Energy Ohio distributed its indirect ownership interestequity method investments of $2 million at March 31, 2017, and December 31, 2016. These amounts are included in DECAM to a Duke Energy subsidiary and non-cash settled DECAM's intercompany loanAccounts payable of $294 million. Refer to Note 2 for further information on the sale of the Midwest Generation Disposal Group.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)Balance Sheets.
(Unaudited)
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 |
| Duke |
| | Duke |
| Duke |
| Duke |
| Duke |
| |
| | Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| Energy |
| Progress |
| Energy |
| Energy |
| Energy |
| Energy |
| |
| (in millions) | Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Carolinas |
| Energy |
| Progress |
| Florida |
| Ohio |
| Indiana |
| Piedmont |
|
| September 30, 2016 | | |
| March 31, 2017 | | |
| Intercompany income tax receivable | $ | — |
| $ | 113 |
| $ | 56 |
| $ | — |
| $ | — |
| $ | 67 |
| $ | 19 |
| $ | 139 |
| $ | 47 |
| $ | 48 |
| $ | 8 |
| $ | — |
| $ | — |
|
| Intercompany income tax payable | 64 |
| — |
| — |
| 65 |
| 27 |
| — |
| — |
| — |
| — |
| — |
| — |
| 23 |
| 44 |
|
| | | |
| December 31, 2015 | | |
| December 31, 2016 | | |
| Intercompany income tax receivable | $ | 122 |
| $ | 120 |
| $ | 104 |
| $ | — |
| $ | 54 |
| $ | — |
| $ | 1 |
| $ | — |
| $ | — |
| $ | 37 |
| $ | — |
| $ | — |
| $ | — |
|
| Intercompany income tax payable | — |
| — |
| — |
| 96 |
| — |
| 47 |
| — |
| 37 |
| 90 |
| — |
| 1 |
| 3 |
| 38 |
|
10.9. 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 gas supply contracts to provide diversification, reliability and gas cost benefits to their customers. Interest rate swaps are used to manage interest rate risk associated with borrowings.
All derivative instruments not identified as NPNS are recorded at fair value as assets or liabilities on the Condensed Consolidated Balance Sheets. Cash collateral related to derivative instruments executed under master netting arrangements is offset against the collateralized derivatives on the Condensed Consolidated Balance Sheets. The cash impacts of settled derivatives are recorded as operating activities on the Condensed Consolidated Statements of Cash Flows.
INTEREST RATE RISK
The Duke Energy Registrants are exposed to changes in interest rates as a result of their issuance or anticipated issuance of variable-rate and fixed-rate debt and commercial paper. Interest rate risk is managed by limiting variable-rate exposures to a percentage of total debt and by monitoring changes in interest rates. To manage risk associated with changes in interest rates, the Duke Energy Registrants may enter into interest rate swaps, U.S. Treasury lock agreements and other financial contracts. In anticipation of certain fixed-rate debt issuances, a series of forward-starting interest rate swaps 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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Cash Flow Hedges
For a derivative designated as hedging the exposure to variable cash flows of a future transaction, referred to as a cash flow hedge, the effective portion of the derivative's gain or loss is initially reported as a component of other comprehensive income and subsequently reclassified into earnings once the future transaction affectsimpacts 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 Accumulated other comprehensive income (AOCI)AOCI for the three and nine months ended September 30, 2016,March 31, 2017, were not material. Duke Energy's interest rate derivatives designated as hedges include interest rate swaps used to hedge existing debt within the International Energy and Renewables' businesses.Commercial Renewables business.
Undesignated Contracts
Undesignated contracts include contracts not designated as a hedge because they are accounted for under regulatory accounting and contracts that do not qualify for hedge accounting.
Duke Energy’s interest rate swaps for its Regulated Utilitiesregulated operations employ regulatory accounting. With regulatory accounting, the mark-to-market gains or losses on the swaps are deferred as regulatory liabilities or regulatory assets, respectively. Regulatory assets and liabilities are amortized consistent with the treatment of the related costs in the ratemaking process. The accrual of interest on the swaps is recorded as Interest Expense.
In AugustAs of March 31, 2016, Duke Energy unwoundentered into $1.4 billion of forward-starting interest rate swaps associated withto manage interest rate exposure related to the Piedmont acquisition financing described in Note 6, Debt and Credit Facilities.financing. The swaps were considered undesignated as they did not qualify for hedge accounting. Lossesaccounting and were marked-to-market, with any gains or losses included within earnings. For the three months ended March 31, 2016, unrealized losses on the swaps of $22$93 million and $190 million arewere included within Interest Expense on theDuke Energy's Condensed Consolidated Statements of Operations forOperations. The swaps were unwound in August 2016 in conjunction with the three and nine months ended September 30, 2016, respectively.acquisition financing. See Note 2 for additional information related to the Piedmont acquisition.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
The following table shows notional amounts of outstanding derivatives related to interest rate risk.risk as of March 31, 2017 and December 31, 2016. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
|
Cash flow hedges(a) | $ | 990 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Undesignated contracts | 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
|
| Total notional amount | $ | 1,917 |
|
| $ | 400 |
|
| $ | 500 |
|
| $ | 250 |
|
| $ | 250 |
|
| $ | 27 |
|
| | | | December 31, 2015 | | | | | | | | | | | | | |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
|
Cash flow hedges(a) | $ | 700 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 750 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Undesignated contracts | 1,827 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
| 927 |
| | 400 |
| | 500 |
| | 250 |
| | 250 |
| | 27 |
|
| Total notional amount | $ | 2,527 |
| | $ | 400 |
| | $ | 500 |
| | $ | 250 |
| | $ | 250 |
| | $ | 27 |
| $ | 1,677 |
|
| $ | 400 |
|
| $ | 500 |
|
| $ | 250 |
|
| $ | 250 |
|
| $ | 27 |
|
(a) Duke Energy includes amounts related to consolidated VIEs of $750 million as of March 31, 2017 and December 31, 2016. | |
(a) |
Duke Energy includes amounts related to consolidated VIEs of $789 million and $497 million as of September 30, 2016 and December 31, 2015, respectively. In August 2016, Duke Energy entered into $326 million of interest rate swaps related to the solar facilities financing described in Note 6, including $103 million of 4-year swaps and $223 million of 18-year swaps. |
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.purchases, including Piedmont's 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. For the Subsidiary Registrants, bulk power electricity and coal and natural gas purchases flow through fuel adjustment clauses, formula based contracts or other cost sharing mechanisms. Differences between the costs included in rates and the incurred costs, including undesignated derivative contracts, are largely deferred as regulatory assets or regulatory liabilities. Piedmont policies allow for the use of financial instruments to hedge commodity price risks. The strategy and objective of these hedging programs are to use the financial instruments to reduce gas costs volatility for customers.
Volumes
The tables below showinclude volumes of outstanding commodity derivatives. Amounts disclosed represent the absolute value of notional volumes of commodity contracts excluding NPNS. The Duke Energy Registrants have netted contractual amounts where offsetting purchase and sale contracts exist with identical delivery locations and times of delivery. Where all commodity positions are perfectly offset, no quantities are shown. | | | | September 30, 2016 | March 31, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
|
| Electricity (gigawatt-hours) | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 2 |
| 184 |
| | — |
| | — |
| | — |
| | — |
| | 184 |
| | — |
|
| Natural gas (millions of decatherms) | 375 |
| | 83 |
| | 292 |
| | 116 |
| | 176 |
| | — |
| | — |
| |
| Natural gas (millions of dekatherms) | | 817 |
| | 85 |
| | 228 |
| | 105 |
| | 123 |
| | — |
| | 504 |
|
| | | | December 31, 2015 | December 31, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Indiana |
| | Piedmont |
|
| Electricity (gigawatt-hours) | 70 |
| | — |
| | — |
| | — |
| | — |
| | 34 |
| | 36 |
| 147 |
| | — |
| | — |
| | — |
| | — |
| | 147 |
| | — |
|
| Natural gas (millions of decatherms) | 398 |
| | 66 |
| | 332 |
| | 117 |
| | 215 |
| | — |
| | — |
| |
| Natural gas (millions of dekatherms) | | 890 |
| | 91 |
| | 269 |
| | 118 |
| | 151 |
| | 1 |
| | 529 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
LOCATION AND FAIR VALUE OF DERIVATIVE ASSETS AND LIABILITIES RECOGNIZED IN THE CONDENSED CONSOLIDATED BALANCE SHEETS
The following tables show the fair value and balance sheet location of derivative instruments. Although derivatives subject to master netting arrangements are netted on the Condensed Consolidated Balance Sheets, the fair values presented below are shown gross and cash collateral on the derivatives has not been netted against the fair values shown. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | March 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 | | $ | 58 |
| | $ | 16 |
| | $ | 30 |
| | $ | 19 |
| | $ | 11 |
| | $ | — |
| | $ | 9 |
| | $ | 2 |
|
| Noncurrent | | 5 |
| | 1 |
| | 2 |
| | 1 |
| | 1 |
| | 1 |
| | — |
| | — |
|
| Total Derivative Assets – Commodity Contracts | | $ | 63 |
| | $ | 17 |
| | $ | 32 |
| | $ | 20 |
| | $ | 12 |
| | $ | 1 |
| | $ | 9 |
| | $ | 2 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Noncurrent | | $ | 18 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | 2 |
| | — |
| | 2 |
| | — |
| | 2 |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 20 |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 83 |
|
| $ | 17 |
|
| $ | 34 |
|
| $ | 20 |
|
| $ | 14 |
|
| $ | 1 |
|
| $ | 9 |
| | $ | 2 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | September 30, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Commodity Contracts | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | |
| Current | | $ | 40 |
| | $ | 5 |
| | $ | 12 |
| | $ | 7 |
| | $ | 5 |
| | $ | 3 |
| | $ | 20 |
|
| Noncurrent | | 13 |
| | 5 |
| | 8 |
| | 4 |
| | 4 |
| | — |
| | — |
|
| Total Derivative Assets – Commodity Contracts | | $ | 53 |
| | $ | 10 |
| | $ | 20 |
| | $ | 11 |
| | $ | 9 |
| | $ | 3 |
| | $ | 20 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | |
| Noncurrent | | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | |
| Current | | 4 |
| | — |
| | 4 |
| | 1 |
| | 3 |
| | — |
| | — |
|
| Noncurrent | | 7 |
| | — |
| | 7 |
| | 3 |
| | 4 |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 13 |
| | $ | — |
| | $ | 11 |
| | $ | 4 |
| | $ | 7 |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 66 |
|
| $ | 10 |
|
| $ | 31 |
|
| $ | 15 |
|
| $ | 16 |
|
| $ | 3 |
|
| $ | 20 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | September 30, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Commodity Contracts | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | |
| Current | | $ | 67 |
| | $ | 5 |
| | $ | 62 |
| | $ | 9 |
| | $ | 53 |
| | $ | — |
| | $ | — |
|
| Noncurrent | | 21 |
| | 2 |
| | 19 |
| | 3 |
| | 11 |
| | — |
| | — |
|
| Total Derivative Liabilities – Commodity Contracts | | $ | 88 |
| | $ | 7 |
| | $ | 81 |
| | $ | 12 |
| | $ | 64 |
| | $ | — |
| | $ | — |
|
| Interest Rate Contracts | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | |
| Current | | $ | 12 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | 46 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | |
| Current | | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
|
| Noncurrent | | 99 |
| | 92 |
| | — |
| | — |
| | — |
| | 7 |
| | — |
|
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 158 |
| | $ | 92 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 8 |
| | $ | — |
|
| Total Derivative Liabilities | | $ | 246 |
|
| $ | 99 |
|
| $ | 81 |
|
| $ | 12 |
|
| $ | 64 |
|
| $ | 8 |
|
| $ | — |
|
| | | Derivative Assets | | December 31, 2015 | |
| Derivative Liabilities | | | March 31, 2017 |
| | | | | 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 |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 12 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | 3 |
| | $ | 7 |
| | $ | 32 |
| | $ | — |
| | $ | 17 |
| | $ | 1 |
| | $ | 17 |
| | $ | — |
| | $ | — |
| | $ | 14 |
|
| Noncurrent | | 4 |
| | — |
| | 4 |
| | — |
| | 4 |
| | — |
| | — |
| | 145 |
| | 4 |
| | 11 |
| | 4 |
| | 1 |
| | — |
| | — |
| | 131 |
|
| Total Derivative Assets – Commodity Contracts | | $ | 16 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 5 |
| | $ | 3 |
| | $ | 7 |
| |
| Total Derivative Liabilities – Commodity Contracts | | | $ | 177 |
| | $ | 4 |
| | $ | 28 |
| | $ | 5 |
| | $ | 18 |
| | $ | — |
| | $ | — |
| | $ | 145 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | | $ | 8 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | 9 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | 6 |
| | — |
| | 6 |
| | 2 |
| | 2 |
| | — |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 10 |
| | $ | — |
| | $ | 6 |
| | $ | 2 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| |
| Total Derivative Assets | | $ | 26 |
| | $ | — |
| | $ | 11 |
| | $ | 2 |
| | $ | 7 |
| | $ | 3 |
| | $ | 7 |
| |
| Noncurrent | | | 21 |
| | 10 |
| | 6 |
| | 5 |
| | 1 |
| | 4 |
| | — |
| | — |
|
| Total Derivative Liabilities – Interest Rate Contracts | | | $ | 39 |
| | $ | 10 |
| | $ | 6 |
| | $ | 5 |
| | $ | 1 |
| | $ | 5 |
| | $ | — |
| | $ | — |
|
| Total Derivative Liabilities | | | $ | 216 |
|
| $ | 14 |
|
| $ | 34 |
|
| $ | 10 |
|
| $ | 19 |
|
| $ | 5 |
|
| $ | — |
| | $ | 145 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | $ | 108 |
| | $ | 23 |
| | $ | 61 |
| | $ | 35 |
| | $ | 26 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
|
| Noncurrent | | 32 |
| | 10 |
| | 21 |
| | 10 |
| | 11 |
| | 1 |
| | — |
| | — |
|
| Total Derivative Assets – Commodity Contracts | | $ | 140 |
| | $ | 33 |
| | $ | 82 |
| | $ | 45 |
| | $ | 37 |
| | $ | 5 |
| | $ | 16 |
| | $ | 3 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Noncurrent | | $ | 19 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | |
| Current | | 3 |
| | — |
| | 3 |
| | 1 |
| | 2 |
| | — |
| | — |
| | — |
|
| Total Derivative Assets – Interest Rate Contracts | | $ | 22 |
| | $ | — |
| | $ | 3 |
| | $ | 1 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Total Derivative Assets | | $ | 162 |
| | $ | 33 |
| | $ | 85 |
| | $ | 46 |
| | $ | 39 |
| | $ | 5 |
| | $ | 16 |
| | $ | 3 |
|
| | | Derivative Liabilities | | December 31, 2015 | | December 31, 2016 |
| | | | | 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 |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Commodity Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 256 |
| | $ | 32 |
| | $ | 222 |
| | $ | 77 |
| | $ | 145 |
| | $ | — |
| | $ | — |
| | $ | 43 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 2 |
| | $ | 35 |
|
| Noncurrent | | 100 |
| | 8 |
| | 92 |
| | 16 |
| | 71 |
| | — |
| | — |
| | 166 |
| | 1 |
| | 7 |
| | 1 |
| | — |
| | — |
| | — |
| | 152 |
|
| Total Derivative Liabilities – Commodity Contracts | | $ | 356 |
| | $ | 40 |
| | $ | 314 |
| | $ | 93 |
| | $ | 216 |
| | $ | — |
| | $ | — |
| | $ | 209 |
| | $ | 1 |
| | $ | 19 |
| | $ | 1 |
| | $ | 12 |
| | $ | — |
| | $ | 2 |
| | $ | 187 |
|
| Interest Rate Contracts | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Current | | $ | 11 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 8 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Noncurrent | | 33 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 8 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Not Designated as Hedging Instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — |
|
| Current | | 4 |
| | — |
| | 3 |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | — |
|
| Noncurrent | | 15 |
| | 5 |
| | 5 |
| | 5 |
| | — |
| | 6 |
| | — |
| | 26 |
| | 15 |
| | 6 |
| | 6 |
| | — |
| | 5 |
| | — |
| | — |
|
| Total Derivative Liabilities – Interest Rate Contracts | | $ | 63 |
| | $ | 5 |
| | $ | 8 |
| | $ | 5 |
| | $ | — |
| | $ | 7 |
| | $ | — |
| | $ | 43 |
| | $ | 15 |
| | $ | 6 |
| | $ | 6 |
| | $ | — |
| | $ | 6 |
| | $ | — |
| | $ | — |
|
| Total Derivative Liabilities | | $ | 419 |
| | $ | 45 |
| | $ | 322 |
| | $ | 98 |
| | $ | 216 |
| | $ | 7 |
| | $ | — |
| | $ | 252 |
| | $ | 16 |
| | $ | 25 |
| | $ | 7 |
| | $ | 12 |
| | $ | 6 |
| | $ | 2 |
| | $ | 187 |
|
OFFSETTING ASSETS AND LIABILITIES
The following tables present the line items on the Condensed Consolidated Balance Sheets where derivatives are reported. Substantially all of Duke Energy's outstanding derivative contracts are subject to enforceable master netting arrangements. The 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 | | September 30, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Current | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 44 |
| | $ | 5 |
| | $ | 16 |
| | $ | 8 |
| | $ | 8 |
| | $ | 3 |
| | $ | 20 |
|
| Gross amounts offset | | (10 | ) | | (3 | ) | | (7 | ) | | (4 | ) | | (3 | ) | | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 34 |
| | $ | 2 |
| | $ | 9 |
| | $ | 4 |
| | $ | 5 |
| | $ | 3 |
| | $ | 20 |
|
| Noncurrent | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 22 |
| | $ | 5 |
| | $ | 15 |
| | $ | 7 |
| | $ | 8 |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (7 | ) | | (2 | ) | | (5 | ) | | (2 | ) | | (3 | ) | | — |
| | — |
|
| Net amounts presented in Investments and Other Assets: Other | | $ | 15 |
| | $ | 3 |
| | $ | 10 |
| | $ | 5 |
| | $ | 5 |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | September 30, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Current | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 80 |
| | $ | 5 |
| | $ | 62 |
| | $ | 9 |
| | $ | 53 |
| | $ | 1 |
| | $ | — |
|
| Gross amounts offset | | (10 | ) | | (3 | ) | | (7 | ) | | (4 | ) | | (3 | ) | | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 70 |
| | $ | 2 |
| | $ | 55 |
| | $ | 5 |
| | $ | 50 |
| | $ | 1 |
| | $ | — |
|
| Noncurrent | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 166 |
| | $ | 94 |
| | $ | 19 |
| | $ | 3 |
| | $ | 11 |
| | $ | 7 |
| | $ | — |
|
| Gross amounts offset | | (7 | ) | | (2 | ) | | (5 | ) | | (2 | ) | | (3 | ) | | — |
| | — |
|
| Net amounts presented in Deferred Credits and Other Liabilities: Other | | $ | 159 |
| | $ | 92 |
| | $ | 14 |
| | $ | 1 |
| | $ | 8 |
| | $ | 7 |
| | $ | — |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | March 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 | | $ | 60 |
| | $ | 16 |
| | $ | 32 |
| | $ | 19 |
| | $ | 13 |
| | $ | — |
| | $ | 9 |
| | $ | 2 |
|
| Gross amounts offset | | (7 | ) | | — |
| | (7 | ) | | (1 | ) | | (6 | ) | | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 53 |
| | $ | 16 |
| | $ | 25 |
| | $ | 18 |
| | $ | 7 |
| | $ | — |
| | $ | 9 |
| | $ | 2 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 23 |
| | $ | 1 |
| | $ | 2 |
| | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 21 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Liabilities | | March 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 | | $ | 41 |
| | $ | — |
| | $ | 17 |
| | $ | 1 |
| | $ | 17 |
| | $ | 1 |
| | $ | — |
| | $ | 14 |
|
| Gross amounts offset | | (7 | ) | | — |
| | (7 | ) | | (1 | ) | | (6 | ) | | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 34 |
| | $ | — |
| | $ | 10 |
| | $ | — |
| | $ | 11 |
| | $ | 1 |
| | $ | — |
| | $ | 14 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 175 |
| | $ | 14 |
| | $ | 17 |
| | $ | 9 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
| | $ | 131 |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Liabilities: Other | | $ | 173 |
| | $ | 13 |
| | $ | 16 |
| | $ | 8 |
| | $ | 2 |
| | $ | 4 |
| | $ | — |
| | $ | 131 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2016 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 111 |
| | $ | 23 |
| | $ | 64 |
| | $ | 36 |
| | $ | 28 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
|
| Gross amounts offset | | (11 | ) | | — |
| | (11 | ) | | — |
| | (11 | ) | | — |
| | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 100 |
| | $ | 23 |
| | $ | 53 |
| | $ | 36 |
| | $ | 17 |
| | $ | 4 |
| | $ | 16 |
| | $ | 3 |
|
| Noncurrent | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 51 |
| | $ | 10 |
| | $ | 21 |
| | $ | 10 |
| | $ | 11 |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Other Noncurrent Assets: Other | | $ | 49 |
| | $ | 9 |
| | $ | 20 |
| | $ | 9 |
| | $ | 11 |
| | $ | 1 |
| | $ | — |
| | $ | — |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative Assets | | December 31, 2015 |
| | | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Current | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 18 |
| | $ | — |
| | $ | 7 |
| | $ | 2 |
| | $ | 3 |
| | $ | 3 |
| | $ | 7 |
|
| Gross amounts offset | | (3 | ) | | — |
| | (2 | ) | | — |
| | (2 | ) | | — |
| | — |
|
| Net amounts presented in Current Assets: Other | | $ | 15 |
| | $ | — |
| | $ | 5 |
| | $ | 2 |
| | $ | 1 |
| | $ | 3 |
| | $ | 7 |
|
| Noncurrent | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 8 |
| | $ | — |
| | $ | 4 |
| | $ | — |
| | $ | 4 |
| | $ | — |
| | $ | — |
|
| Gross amounts offset | | (4 | ) | | — |
| | (4 | ) | | — |
| | (4 | ) | | — |
| | — |
|
| Net amounts presented in Investments and Other Assets: Other | | $ | 4 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| | | Derivative Liabilities | | December 31, 2015 | | December 31, 2016 |
| | | | | 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 |
| | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Current | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 271 |
| | $ | 32 |
| | $ | 225 |
| | $ | 77 |
| | $ | 145 |
| | $ | 1 |
| | $ | — |
| | $ | 52 |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | 12 |
| | $ | 1 |
| | $ | 2 |
| | $ | 35 |
|
| Gross amounts offset | | (22 | ) | | — |
| | (21 | ) | | (1 | ) | | (20 | ) | | — |
| | — |
| | (11 | ) | | — |
| | (11 | ) | | — |
| | (11 | ) | | — |
| | — |
| | — |
|
| Net amounts presented in Current Liabilities: Other | | $ | 249 |
| | $ | 32 |
| | $ | 204 |
| | $ | 76 |
| | $ | 125 |
| | $ | 1 |
| | $ | — |
| | $ | 41 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | 1 |
| | $ | 1 |
| | $ | 2 |
| | $ | 35 |
|
| Noncurrent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Gross amounts recognized | | $ | 148 |
| | $ | 13 |
| | $ | 97 |
| | $ | 21 |
| | $ | 71 |
| | $ | 6 |
| | $ | — |
| | $ | 200 |
| | $ | 16 |
| | $ | 13 |
| | $ | 7 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 152 |
|
| Gross amounts offset | | (16 | ) | | — |
| | (15 | ) | | — |
| | (15 | ) | | — |
| | — |
| | (2 | ) | | (1 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net amounts presented in Deferred Credits and Other Liabilities: Other | | $ | 132 |
| | $ | 13 |
| | $ | 82 |
| | $ | 21 |
| | $ | 56 |
| | $ | 6 |
| | $ | — |
| |
| Net amounts presented in Other Noncurrent Liabilities: Other | | | $ | 198 |
| | $ | 15 |
| | $ | 12 |
| | $ | 6 |
| | $ | — |
| | $ | 5 |
| | $ | — |
| | $ | 152 |
|
OBJECTIVE CREDIT CONTINGENT FEATURES
Certain derivative contracts contain objective credit contingent features. These features include the requirement to post cash collateral or letters of credit if specific events occur, such as a credit rating downgrade below investment grade. The following tables show information with respect to derivative contracts that are in a net liability position and contain objective credit-risk-related payment provisions. Amounts for Duke Energy Ohio, and Duke Energy Indiana and Piedmont were not material. | | | | September 30, 2016 | March 31, 2017 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Aggregate fair value of derivatives in a net liability position | $ | 171 |
| | $ | 99 |
| | $ | 72 |
| | $ | 12 |
| | $ | 60 |
| $ | 40 |
| | $ | 14 |
| | $ | 25 |
| | $ | 9 |
| | $ | 17 |
|
| Fair value of collateral already posted | — |
| | — |
| | — |
| | — |
| | — |
| — |
| | — |
| | — |
| | — |
| | — |
|
| Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 171 |
| | 99 |
| | 72 |
| | 12 |
| | 60 |
| 40 |
| | 14 |
| | 25 |
| | 9 |
| | 17 |
|
| | | | December 31, 2015 | December 31, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Aggregate fair value of derivatives in a net liability position | $ | 334 |
| | $ | 45 |
| | $ | 290 |
| | $ | 93 |
| | $ | 194 |
| $ | 34 |
| | $ | 16 |
| | $ | 18 |
| | $ | 6 |
| | $ | 12 |
|
| Fair value of collateral already posted | 30 |
| | — |
| | 30 |
| | — |
| | 30 |
| — |
| | — |
| | — |
| | — |
| | — |
|
| Additional cash collateral or letters of credit in the event credit-risk-related contingent features were triggered | 304 |
| | 45 |
| | 260 |
| | 93 |
| | 164 |
| 34 |
| | 16 |
| | 18 |
| | 6 |
| | 12 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
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. Amounts disclosed below represent the receivables related to the right to reclaim cash collateral under master netting arrangements. All receivables presented below were offset against net derivative positions on the Condensed Consolidated Balance Sheets. |
| | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| (in millions) | Receivables | | Receivables |
| Duke Energy | $ | — |
| | $ | 30 |
|
| Progress Energy | — |
| | 30 |
|
| Duke Energy Florida | — |
| | 30 |
|
11.10. INVESTMENTS IN DEBT AND EQUITY SECURITIES
The Duke Energy Registrants classify their investments in debt and equity securities as either trading or available-for-sale.
TRADING SECURITIES
Piedmont's investments in debt and equity securities held in rabbi trusts associated with certain deferred compensation plans are classified as trading securities. The fair value of these investments was $5 million as of March 31, 2017 and December 31, 2016.
AVAILABLE-FOR-SALE SECURITIES
All other investments in debt and equity securities are classified as available-for-sale.
Duke Energy’s available-for-sale securities are primarily comprised of investments held in (i) the nuclear decommissioning fund (NDTF) at Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, (ii) grantor trusts at Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana related to Other Post-Retirement Benefit Obligations (OPEB) plans and (iii) Bison.
Duke Energy classifies all other investments in debt and equity securities as long term, unless otherwise noted.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
Investment Trusts
The investments within the NDTF investments and the Duke Energy Progress, Duke Energy Florida and Duke Energy Indiana grantor trusts (Investment Trusts) are managed by independent investment managers with discretion to buy, sell, and invest pursuant to the objectives set forth by the trust agreements. The Duke Energy Registrants have limited oversight of the day-to-day management of these investments. As a result, the ability to hold investments in unrealized loss positions is outside the control of the Duke Energy Registrants. Accordingly, all unrealized losses associated with debt and equity securities within the Investment Trusts are considered other-than-temporary impairmentsOTTIs and are recognized immediately.
Investments within the Investment Trusts generally qualify for regulatory accounting, and accordingly realized and unrealized gains and losses are deferred as a regulatory asset or liability. However, certain investments held in Duke Energy Florida's NDTF, which were acquired in a settlement with Florida Municipal Joint Owners (FMJO), do not qualify for regulatory accounting. Except for other than temporary impairments of unrealized losses, unrealized gains and losses on these assets are included in other comprehensive income until realized. The other than temporary impairments of realized amounts and unrealized losses are included within Other income and expense, net on the Condensed Consolidated Statements of Operations. The value of these assets has not materially changed since the assets were acquired from FMJO. As a result, there is no material impact on earnings of the Duke Energy Registrants.
Other Available-for-Sale Securities
Unrealized gains and losses on all other available-for-sale securities are included in other comprehensive income until realized, unless it is determined the carrying value of an investment is other-than-temporarily impaired. 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. If an other-than-temporary impairmentOTTI exists, the unrealized credit loss is included in earnings. There were no material credit losses as of September 30, 2016March 31, 2017 and December 31, 2015.2016.
DUKE ENERGY
The following table presents the estimated fair value of investments in available-for-sale securities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2017 | | December 31, 2016 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(a) |
| | Value |
| | Gains |
| | Losses(a) |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 114 |
| | $ | — |
| | $ | — |
| | $ | 111 |
|
| Equity securities | 2,250 |
| | 32 |
| | 4,284 |
| | 2,092 |
| | 54 |
| | 4,106 |
|
| Corporate debt securities | 10 |
| | 5 |
| | 576 |
| | 10 |
| | 8 |
| | 528 |
|
| Municipal bonds | 3 |
| | 6 |
| | 336 |
| | 3 |
| | 10 |
| | 331 |
|
| U.S. government bonds | 10 |
| | 8 |
| | 949 |
| | 10 |
| | 8 |
| | 984 |
|
| Other debt securities | — |
| | 3 |
| | 132 |
| | — |
| | 3 |
| | 124 |
|
| Total NDTF | $ | 2,273 |
| | $ | 54 |
| | $ | 6,391 |
| | $ | 2,115 |
| | $ | 83 |
| | $ | 6,184 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 18 |
| | $ | — |
| | $ | — |
| | $ | 25 |
|
| Equity securities | 44 |
| | — |
| | 106 |
| | 38 |
| | — |
| | 104 |
|
| Corporate debt securities | 1 |
| | — |
| | 60 |
| | 1 |
| | 1 |
| | 66 |
|
| Municipal bonds | 2 |
| | 1 |
| | 84 |
| | 2 |
| | 1 |
| | 82 |
|
| U.S. government bonds | — |
| | — |
| | 43 |
| | — |
| | 1 |
| | 51 |
|
| Other debt securities | — |
| | 2 |
| | 42 |
| | — |
| | 2 |
| | 42 |
|
Total Other Investments(b) | $ | 47 |
| | $ | 3 |
| | $ | 353 |
| | $ | 41 |
| | $ | 5 |
| | $ | 370 |
|
| Total Investments | $ | 2,320 |
| | $ | 57 |
| | $ | 6,744 |
| | $ | 2,156 |
| | $ | 88 |
| | $ | 6,554 |
|
| |
| (a) | Substantially all amounts are considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset. |
| |
| (b) | These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. |
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | March 31, 2017 |
|
| Due in one year or less | $ | 82 |
|
| Due after one through five years | 640 |
|
| Due after five through 10 years | 514 |
|
| Due after 10 years | 986 |
|
| Total | $ | 2,222 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
DUKE ENERGY
The following table presents the estimated fair value of investments in available-for-sale securities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(b) |
| | Value |
| | Gains |
| | Losses(b) |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 151 |
| | $ | — |
| | $ | — |
| | $ | 179 |
|
| Equity securities | 1,968 |
| | 55 |
| | 3,949 |
| | 1,823 |
| | 58 |
| | 3,590 |
|
| Corporate debt securities | 25 |
| | 2 |
| | 551 |
| | 7 |
| | 8 |
| | 432 |
|
| Municipal bonds | 9 |
| | 1 |
| | 341 |
| | 5 |
| | 1 |
| | 185 |
|
| U.S. government bonds | 31 |
| | — |
| | 994 |
| | 11 |
| | 5 |
| | 1,254 |
|
| Other debt securities | — |
| | 3 |
| | 132 |
| | — |
| | 4 |
| | 177 |
|
| Total NDTF | $ | 2,033 |
| | $ | 61 |
| | $ | 6,118 |
| | $ | 1,846 |
| | $ | 76 |
| | $ | 5,817 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 24 |
| | $ | — |
| | $ | — |
| | $ | 29 |
|
| Equity securities | 38 |
| | — |
| | 104 |
| | 32 |
| | 1 |
| | 95 |
|
| Corporate debt securities | 2 |
| | 1 |
| | 91 |
| | 1 |
| | 3 |
| | 92 |
|
| Municipal bonds | 5 |
| | 1 |
| | 78 |
| | 3 |
| | 1 |
| | 74 |
|
| U.S. government bonds | 1 |
| | — |
| | 49 |
| | — |
| | — |
| | 45 |
|
| Other debt securities | — |
| | 1 |
| | 55 |
| | — |
| | 2 |
| | 62 |
|
Total Other Investments(a) | $ | 46 |
| | $ | 3 |
| | $ | 401 |
| | $ | 36 |
| | $ | 7 |
| | $ | 397 |
|
| Total Investments | $ | 2,079 |
| | $ | 64 |
| | $ | 6,519 |
| | $ | 1,882 |
| | $ | 83 |
| | $ | 6,214 |
|
(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets.
| |
(b) | Substantially all these amounts are considered other-than-temporary impairments on investments within Investment Trusts that have been recognized immediately as a regulatory asset. |
The table below summarizes the maturity date for debt securities. |
| | | |
| (in millions) | September 30, 2016 |
|
| Due in one year or less | $ | 92 |
|
| Due after one through five years | 655 |
|
| Due after five through 10 years | 529 |
|
| Due after 10 years | 1,015 |
|
| Total | $ | 2,291 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows. | | | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| | September 30, | | September 30, | March 31, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| 2017 |
| | 2016 |
|
| Realized gains | $ | 82 |
| | $ | 30 |
| | $ | 200 |
| | $ | 160 |
| $ | 93 |
| | $ | 54 |
|
| Realized losses | 42 |
| | 28 |
| | 134 |
| | 59 |
| 62 |
| | 50 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
DUKE ENERGY CAROLINAS
The following table presents the estimated fair value of investments in available-for-sale securities. | | | | September 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
| Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
| Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(b) |
| | Value |
| | Gains |
| | Losses(b) |
| | Value |
| Gains |
| | Losses(a) |
| | Value |
| | Gains |
| | Losses(a) |
| | Value |
|
| NDTF | | | | | | | | | | | | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 43 |
| | $ | — |
| | $ | — |
| | $ | 34 |
| $ | — |
| | $ | — |
| | $ | 20 |
| | $ | — |
| | $ | — |
| | $ | 18 |
|
| Equity securities | 1,091 |
| | 29 |
| | 2,170 |
| | 1,021 |
| | 27 |
| | 2,094 |
| 1,229 |
| | 15 |
| | 2,366 |
| | 1,157 |
| | 28 |
| | 2,245 |
|
| Corporate debt securities | 14 |
| | 2 |
| | 374 |
| | 3 |
| | 5 |
| | 292 |
| 5 |
| | 4 |
| | 388 |
| | 5 |
| | 6 |
| | 354 |
|
| Municipal bonds | 2 |
| | — |
| | 66 |
| | 1 |
| | — |
| | 33 |
| 1 |
| | 1 |
| | 67 |
| | 1 |
| | 2 |
| | 67 |
|
| U.S. government bonds | 12 |
| | — |
| | 454 |
| | 3 |
| | 3 |
| | 438 |
| 3 |
| | 5 |
| | 431 |
| | 2 |
| | 5 |
| | 458 |
|
| Other debt securities | — |
| | 3 |
| | 123 |
| | — |
| | 4 |
| | 147 |
| — |
| | 3 |
| | 120 |
| | — |
| | 3 |
| | 116 |
|
| Total NDTF | $ | 1,119 |
| | $ | 34 |
|
| $ | 3,230 |
| | $ | 1,028 |
| | $ | 39 |
| | $ | 3,038 |
| $ | 1,238 |
| | $ | 28 |
|
| $ | 3,392 |
| | $ | 1,165 |
| | $ | 44 |
| | $ | 3,258 |
|
| Other Investments | | | | | | | | | | | | | | | | | | | | | | |
| Other debt securities | $ | — |
| | $ | 1 |
| | $ | 3 |
| | $ | — |
| | $ | 1 |
| | $ | 3 |
| $ | — |
| | $ | 1 |
| | $ | 3 |
| | $ | — |
| | $ | 1 |
| | $ | 3 |
|
Total Other Investments(a)(b) | $ | — |
| | $ | 1 |
| | $ | 3 |
| | $ | — |
| | $ | 1 |
| | $ | 3 |
| $ | — |
| | $ | 1 |
| | $ | 3 |
| | $ | — |
| | $ | 1 |
| | $ | 3 |
|
| Total Investments | $ | 1,119 |
| | $ | 35 |
| | $ | 3,233 |
| | $ | 1,028 |
| | $ | 40 |
| | $ | 3,041 |
| $ | 1,238 |
| | $ | 29 |
| | $ | 3,395 |
| | $ | 1,165 |
| | $ | 45 |
| | $ | 3,261 |
|
| |
| (a) | TheseSubstantially all amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. |
| |
(b) | Substantially all these amounts represent other-than-temporary impairmentsconsidered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset. |
| |
| (b) | These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. |
The table below summarizes the maturity date for debt securities. | | | (in millions) | September 30, 2016 |
| March 31, 2017 |
|
| Due in one year or less | $ | 3 |
| $ | 2 |
|
| Due after one through five years | 206 |
| 221 |
|
| Due after five through 10 years | 268 |
| 269 |
|
| Due after 10 years | 543 |
| 517 |
|
| Total | $ | 1,020 |
| $ | 1,009 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows. | | | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| | September 30, | | September 30, | March 31, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| 2017 |
| | 2016 |
|
| Realized gains | $ | 58 |
| | $ | 25 |
| | $ | 125 |
| | $ | 132 |
| $ | 66 |
| | $ | 34 |
|
| Realized losses | 28 |
| | 24 |
| | 84 |
| | 47 |
| 40 |
| | 37 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
PROGRESS ENERGY
The following table presents the estimated fair value of investments in available-for-sale securities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(b) |
| | Value |
| | Gains |
| | Losses(b) |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 108 |
| | $ | — |
| | $ | — |
| | $ | 145 |
|
| Equity securities | 877 |
| | 26 |
| | 1,779 |
| | 802 |
| | 31 |
| | 1,496 |
|
| Corporate debt securities | 11 |
| | — |
| | 177 |
| | 4 |
| | 3 |
| | 140 |
|
| Municipal bonds | 7 |
| | 1 |
| | 275 |
| | 4 |
| | 1 |
| | 152 |
|
| U.S. government bonds | 19 |
| | — |
| | 540 |
| | 8 |
| | 2 |
| | 816 |
|
| Other debt securities | — |
| | — |
| | 9 |
| | — |
| | — |
| | 30 |
|
| Total NDTF | $ | 914 |
| | $ | 27 |
| | $ | 2,888 |
| | $ | 818 |
| | $ | 37 |
| | $ | 2,779 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 20 |
| | $ | — |
| | $ | — |
| | $ | 18 |
|
| Municipal bonds | 4 |
| | — |
| | 47 |
| | 3 |
| | — |
| | 45 |
|
Total Other Investments(a) | $ | 4 |
| | $ | — |
| | $ | 67 |
| | $ | 3 |
| | $ | — |
| | $ | 63 |
|
| Total Investments | $ | 918 |
| | $ | 27 |
| | $ | 2,955 |
| | $ | 821 |
| | $ | 37 |
| | $ | 2,842 |
|
(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2017 | | December 31, 2016 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(a) |
| | Value |
| | Gains |
| | Losses(a) |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 94 |
| | $ | — |
| | $ | — |
| | $ | 93 |
|
| Equity securities | 1,021 |
| | 17 |
| | 1,918 |
| | 935 |
| | 26 |
| | 1,861 |
|
| Corporate debt securities | 5 |
| | 1 |
| | 188 |
| | 5 |
| | 2 |
| | 174 |
|
| Municipal bonds | 2 |
| | 5 |
| | 269 |
| | 2 |
| | 8 |
| | 264 |
|
| U.S. government bonds | 7 |
| | 3 |
| | 518 |
| | 8 |
| | 3 |
| | 526 |
|
| Other debt securities | — |
| | — |
| | 12 |
| | — |
| | — |
| | 8 |
|
| Total NDTF | $ | 1,035 |
| | $ | 26 |
| | $ | 2,999 |
| | $ | 950 |
| | $ | 39 |
| | $ | 2,926 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 12 |
| | $ | — |
| | $ | — |
| | $ | 21 |
|
| Municipal bonds | 2 |
| | — |
| | 46 |
| | 2 |
| | — |
| | 44 |
|
Total Other Investments(b) | $ | 2 |
| | $ | — |
| | $ | 58 |
| | $ | 2 |
| | $ | — |
| | $ | 65 |
|
| Total Investments | $ | 1,037 |
| | $ | 26 |
| | $ | 3,057 |
| | $ | 952 |
| | $ | 39 |
| | $ | 2,991 |
|
| |
(b)(a) | Substantially all these amounts represent other-than-temporary impairmentsare considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset. |
| |
| (b) | These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. |
The table below summarizes the maturity date for debt securities. | | | (in millions) | September 30, 2016 |
| March 31, 2017 |
|
| Due in one year or less | $ | 67 |
| $ | 72 |
|
| Due after one through five years | 372 |
| 355 |
|
| Due after five through 10 years | 187 |
| 189 |
|
| Due after 10 years | 422 |
| 417 |
|
| Total | $ | 1,048 |
| $ | 1,033 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows. | | | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| | September 30, | | September 30, | March 31, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| 2017 |
| | 2016 |
|
| Realized gains | $ | 21 |
| | $ | 5 |
| | $ | 71 |
| | $ | 26 |
| $ | 27 |
| | $ | 19 |
|
| Realized losses | 13 |
| | 4 |
| | 49 |
| | 10 |
| 21 |
| | 13 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
DUKE ENERGY PROGRESS
The following table presents the estimated fair value of investments in available-for-sale securities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(b) |
| | Value |
| | Gains |
| | Losses(b) |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 56 |
| | $ | — |
| | $ | — |
| | $ | 110 |
|
| Equity securities | 657 |
| | 21 |
| | 1,438 |
| | 596 |
| | 25 |
| | 1,178 |
|
| Corporate debt securities | 8 |
| | — |
| | 123 |
| | 3 |
| | 2 |
| | 96 |
|
| Municipal bonds | 7 |
| | 1 |
| | 275 |
| | 4 |
| | 1 |
| | 150 |
|
| U.S. government bonds | 12 |
| | — |
| | 279 |
| | 6 |
| | 2 |
| | 486 |
|
| Other debt securities | — |
| | — |
| | 6 |
| | — |
| | — |
| | 18 |
|
| Total NDTF | $ | 684 |
| | $ | 22 |
| | $ | 2,177 |
| | $ | 609 |
| | $ | 30 |
| | $ | 2,038 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Total Other Investments(a) | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Total Investments | $ | 684 |
| | $ | 22 |
| | $ | 2,178 |
| | $ | 609 |
| | $ | 30 |
| | $ | 2,039 |
|
(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2017 | | December 31, 2016 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(a) |
| | Value |
| | Gains |
| | Losses(a) |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 43 |
| | $ | — |
| | $ | — |
| | $ | 45 |
|
| Equity securities | 772 |
| | 13 |
| | 1,541 |
| | 704 |
| | 21 |
| | 1,505 |
|
| Corporate debt securities | 4 |
| | 1 |
| | 131 |
| | 4 |
| | 1 |
| | 120 |
|
| Municipal bonds | 2 |
| | 5 |
| | 268 |
| | 2 |
| | 8 |
| | 263 |
|
| U.S. government bonds | 5 |
| | 2 |
| | 284 |
| | 5 |
| | 2 |
| | 275 |
|
| Other debt securities | — |
| | — |
| | 7 |
| | — |
| | — |
| | 5 |
|
| Total NDTF | $ | 783 |
| | $ | 21 |
| | $ | 2,274 |
| | $ | 715 |
| | $ | 32 |
| | $ | 2,213 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
Total Other Investments(b) | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 1 |
|
| Total Investments | $ | 783 |
| | $ | 21 |
| | $ | 2,275 |
| | $ | 715 |
| | $ | 32 |
| | $ | 2,214 |
|
| |
(b)(a) | Substantially all these amounts represent other-than-temporary impairmentsare considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset. |
| |
| (b) | These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. |
The table below summarizes the maturity date for debt securities. | | | (in millions) | September 30, 2016 |
| March 31, 2017 |
|
| Due in one year or less | $ | 21 |
| $ | 17 |
|
| Due after one through five years | 200 |
| 215 |
|
| Due after five through 10 years | 142 |
| 142 |
|
| Due after 10 years | 320 |
| 316 |
|
| Total | $ | 683 |
| $ | 690 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows. | | | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| | September 30, | | September 30, | March 31, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| 2017 |
| | 2016 |
|
| Realized gains | $ | 18 |
| | $ | 4 |
| | $ | 60 |
| | $ | 21 |
| $ | 24 |
| | $ | 15 |
|
| Realized losses | 11 |
| | 3 |
| | 42 |
| | 8 |
| 19 |
| | 11 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
DUKE ENERGY FLORIDA
The following table presents the estimated fair value of investments in available-for-sale securities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(b) |
| | Value |
| | Gains |
| | Losses(b) |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 52 |
| | $ | — |
| | $ | — |
| | $ | 35 |
|
| Equity securities | 220 |
| | 5 |
| | 341 |
| | 206 |
| | 6 |
| | 318 |
|
| Corporate debt securities | 3 |
| | — |
| | 54 |
| | 1 |
| | 1 |
| | 44 |
|
| Municipal bonds | — |
| | — |
| | — |
| | — |
| | — |
| | 2 |
|
| U.S. government bonds | 7 |
| | — |
| | 261 |
| | 2 |
| | — |
| | 330 |
|
| Other debt securities | — |
| | — |
| | 3 |
| | — |
| | — |
| | 12 |
|
Total NDTF (c) | $ | 230 |
| | $ | 5 |
| | $ | 711 |
| | $ | 209 |
| | $ | 7 |
| | $ | 741 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 6 |
|
| Municipal bonds | 4 |
| | — |
| | 47 |
| | 3 |
| | — |
| | 45 |
|
Total Other Investments(a) | $ | 4 |
| | $ | — |
| | $ | 49 |
| | $ | 3 |
| | $ | — |
| | $ | 51 |
|
| Total Investments | $ | 234 |
| | $ | 5 |
| | $ | 760 |
| | $ | 212 |
| | $ | 7 |
| | $ | 792 |
|
(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2017 | | December 31, 2016 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(a) |
| | Value |
| | Gains |
| | Losses(a) |
| | Value |
|
| NDTF | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 51 |
| | $ | — |
| | $ | — |
| | $ | 48 |
|
| Equity securities | 249 |
| | 4 |
| | 377 |
| | 231 |
| | 5 |
| | 356 |
|
| Corporate debt securities | 1 |
| | — |
| | 57 |
| | 1 |
| | 1 |
| | 54 |
|
| Municipal bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
|
| U.S. government bonds | 2 |
| | 1 |
| | 234 |
| | 3 |
| | 1 |
| | 251 |
|
| Other debt securities | — |
| | — |
| | 5 |
| | — |
| | — |
| | 3 |
|
Total NDTF(b) | $ | 252 |
| | $ | 5 |
| | $ | 725 |
| | $ | 235 |
| | $ | 7 |
| | $ | 713 |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | 4 |
|
| Municipal bonds | 2 |
| | — |
| | 46 |
| | 2 |
| | — |
| | 44 |
|
Total Other Investments(c) | $ | 2 |
| | $ | — |
| | $ | 47 |
| | $ | 2 |
| | $ | — |
| | $ | 48 |
|
| Total Investments | $ | 254 |
| | $ | 5 |
| | $ | 772 |
| | $ | 237 |
| | $ | 7 |
| | $ | 761 |
|
| |
(b)(a) | Substantially all these amounts represent other-than-temporary impairmentsare considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset. |
| |
(c)(b) | The decrease in estimated fair value ofDuring the NDTF as of September 30, 2016, is duethree months ended March 31, 2017, Duke Energy Florida continued to receive reimbursements from the NDTF for costs related to ongoing decommissioningcommissioning activity of the Crystal River Unit 3 Nuclear Plant.nuclear plant. |
| |
| (c) | These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. |
The table below summarizes the maturity date for debt securities. | | | (in millions) | September 30, 2016 |
| March 31, 2017 |
|
| Due in one year or less | $ | 46 |
| $ | 55 |
|
| Due after one through five years | 172 |
| 140 |
|
| Due after five through 10 years | 45 |
| 47 |
|
| Due after 10 years | 102 |
| 101 |
|
| Total | $ | 365 |
| $ | 343 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were as follows. | | | | Three Months Ended | | Nine Months Ended | Three Months Ended |
| | September 30, | | September 30, | March 31, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| 2017 |
| | 2016 |
|
| Realized gains | $ | 3 |
| | $ | 1 |
| | $ | 11 |
| | $ | 5 |
| $ | 3 |
| | $ | 4 |
|
| Realized losses | 2 |
| | 1 |
| | 7 |
| | 2 |
| 2 |
| | 2 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
DUKE ENERGY INDIANA
The following table presents the estimated fair value of investments in available-for-sale securities. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 | | December 31, 2015 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(b) |
| | Value |
| | Gains |
| | Losses(b) |
| | Value |
|
| Other Investments | | | | | | | | | | | |
| Cash and cash equivalents | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 2 |
|
| Equity securities | 31 |
| | — |
| | 77 |
| | 27 |
| | — |
| | 71 |
|
| Corporate debt securities | — |
| | — |
| | 2 |
| | — |
| | — |
| | 2 |
|
| Municipal bonds | 1 |
| | 1 |
| | 28 |
| | — |
| | 1 |
| | 26 |
|
Total Other Investments(a) | $ | 32 |
| | $ | 1 |
|
| $ | 107 |
| | $ | 27 |
| | $ | 1 |
| | $ | 101 |
|
| Total Investments | $ | 32 |
| | $ | 1 |
| | $ | 107 |
| | $ | 27 |
| | $ | 1 |
| | $ | 101 |
|
(a) These amounts are recorded in Other within Investments and Other Assets on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2017 | | December 31, 2016 |
| | Gross |
| | Gross |
| | | | Gross |
| | Gross |
| | |
| | Unrealized |
| | Unrealized |
| | Estimated |
| | Unrealized |
| | Unrealized |
| | Estimated |
|
| | Holding |
| | Holding |
| | Fair |
| | Holding |
| | Holding |
| | Fair |
|
| (in millions) | Gains |
| | Losses(a) |
| | Value |
| | Gains |
| | Losses(a) |
| | Value |
|
| Other Investments | | | | | | | | | | | |
| Equity securities | $ | 38 |
| | $ | — |
| | $ | 84 |
| | $ | 33 |
| | $ | — |
| | $ | 79 |
|
| Corporate debt securities | — |
| | — |
| | 2 |
| | — |
| | — |
| | 2 |
|
| Municipal bonds | — |
| | 1 |
| | 28 |
| | — |
| | 1 |
| | 28 |
|
| U.S. government bonds | — |
| | — |
| | 1 |
| | — |
| | — |
| | 1 |
|
Total Other Investments(b) | $ | 38 |
| | $ | 1 |
|
| $ | 115 |
| | $ | 33 |
| | $ | 1 |
| | $ | 110 |
|
| Total Investments | $ | 38 |
| | $ | 1 |
| | $ | 115 |
| | $ | 33 |
| | $ | 1 |
| | $ | 110 |
|
| |
(b)(a) | Substantially all these amounts represent other-than-temporary impairmentsare considered OTTIs on investments within Investment Trusts that have been recognized immediately as a regulatory asset. |
| |
| (b) | These amounts are recorded in Other within Other Noncurrent Assets on the Condensed Consolidated Balance Sheets. |
The table below summarizes the maturity date for debt securities. | | | (in millions) | September 30, 2016 |
| March 31, 2017 |
|
| Due in one year or less | $ | 3 |
| $ | 2 |
|
| Due after one through five years | 9 |
| 15 |
|
| Due after five through 10 years | 13 |
| 9 |
|
| Due after 10 years | 5 |
| 5 |
|
| Total | $ | 30 |
| $ | 31 |
|
Realized gains and losses, which were determined on a specific identification basis, from sales of available-for-sale securities were insignificant for the three and nine months ended September 30, 2016March 31, 2017 and 2015.2016.
12.11. FAIR VALUE MEASUREMENTS
Fair value is the exchange price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date. The fair value definition focuses on an exit price versus the acquisition cost. Fair value measurements use market data or assumptions market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs may be readily observable, corroborated by market data, or generally unobservable. Valuation techniques maximize the use of observable inputs and minimize use of unobservable inputs. A midmarket pricing convention (the midpoint price between bid and ask prices) is permitted for use as a practical expedient.
Fair value measurements are classified in three levels based on the fair value hierarchy:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date. An active market is one in which transactions for an asset or liability occur with sufficient frequency and volume to provide ongoing pricing information.
Level 2 – A fair value measurement utilizing inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly, for an asset or liability. Inputs include (i) quoted prices for similar assets or liabilities in active markets, (ii) quoted prices for identical or similar assets or liabilities in markets that are not active, (iii) and inputs other than quoted market prices that are observable for the asset or liability, such as interest rate curves and yield curves observable at commonly quoted intervals, volatilities and credit spreads. A Level 2 measurement cannot have more than an insignificant portion of its valuation based on unobservable inputs. Instruments in this category include non-exchange-traded derivatives, such as over-the-counter forwards, swaps and options; certain marketable debt securities; and financial instruments traded in less-than-active markets.
Level 3 – Any fair value measurement whichthat includes unobservable inputs for more than an insignificant portion of the valuation. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Level 3 measurements may include longer-term instruments that extend into periods in which observable inputs are not available.
Not Categorized – Certain investments are not categorized within the Fair Value hierarchy. These investments are measured based on the fair value of the underlying investments but may not be readily redeemable at that fair value.
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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Transfers between levels represent assets or liabilities that were previously (i) categorized at a higher level for which the inputs to the estimate became less observable or (ii) classified at a lower level for which the inputs became more observable during the period. The Duke Energy Registrant’s policy is to recognize transfers between levels of the fair value hierarchy at the end of the period. There were no transfers between levels during the three and nine months ended September 30, 2016March 31, 2017 and 2015.2016.
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 Nasdaq Composite (NASDAQ) and New York Stock Exchange (NYSE). and Nasdaq Stock Market. Foreign equity prices are translated from their trading currency using the currency exchange rate in effect at the close of the principal active market. There was no after-hours market activity that was required to be reflected in the reported fair value measurements.
Investments in debt securities
Most investments in debt securities are valued using Level 2 measurements because the valuations use interest rate curves and credit spreads applied to the terms of the debt instrument (maturity and coupon interest rate) and consider the counterparty credit rating. If the market for a particular fixed-income security is relatively inactive or illiquid, the measurement is Level 3.
Commodity derivatives
Commodity derivatives with clearinghouses are classified as Level 1. Other commodity derivatives, including Piedmont's gas supply contracts, are primarily valued using internally developed discounted cash flow models whichthat incorporate forward price, adjustments for liquidity (bid-ask spread) and credit or non-performance risk (after reflecting credit enhancements such 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. 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 whichthat utilize observable inputs for similar instruments and are classified as Level 2. Inputs include forward interest rate curves, notional amounts, interest rates and credit quality of the counterparties.
Other fair value considerations
See Note 2 related to the acquisition of Piedmont in 2016. See Note 11 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016 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 Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by major security type. | | | | September 30, 2016 | March 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
|
| Nuclear decommissioning trust fund equity securities | $ | 3,949 |
| $ | 3,871 |
| $ | — |
| $ | — |
| $ | 78 |
| $ | 4,284 |
| $ | 4,207 |
| $ | — |
| $ | — |
| $ | 77 |
|
| Nuclear decommissioning trust fund debt securities | 2,169 |
| 664 |
| 1,505 |
| — |
| — |
| 2,107 |
| 602 |
| 1,505 |
| — |
| — |
|
| Other available-for-sale equity securities | 104 |
| 104 |
| — |
| — |
| — |
| |
| Other available-for-sale debt securities | 297 |
| 74 |
| 219 |
| 4 |
| — |
| |
| Other trading and available-for-sale equity securities | | 110 |
| 110 |
| — |
| — |
| — |
|
| Other trading and available-for-sale debt securities | | 248 |
| 61 |
| 182 |
| 5 |
| — |
|
| Derivative assets | 66 |
| — |
| 43 |
| 23 |
| — |
| 83 |
| 2 |
| 71 |
| 10 |
| — |
|
| Total assets | 6,585 |
| 4,713 |
| 1,767 |
| 27 |
| 78 |
| 6,832 |
| 4,982 |
| 1,758 |
| 15 |
| 77 |
|
| Derivative liabilities | (246 | ) | — |
| (246 | ) | — |
| — |
| (216 | ) | — |
| (71 | ) | (145 | ) | — |
|
| Net assets | $ | 6,339 |
| $ | 4,713 |
| $ | 1,521 |
| $ | 27 |
| $ | 78 |
| |
| Net assets (liabilities) | | $ | 6,616 |
| $ | 4,982 |
| $ | 1,687 |
| $ | (130 | ) | $ | 77 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
| | | | December 31, 2015 | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
|
| Nuclear decommissioning trust fund equity securities | $ | 3,590 |
| $ | 3,418 |
| $ | — |
| $ | — |
| $ | 172 |
| $ | 4,106 |
| $ | 4,029 |
| $ | — |
| $ | — |
| $ | 77 |
|
| Nuclear decommissioning trust fund debt securities | 2,227 |
| 672 |
| 1,555 |
| — |
| — |
| 2,078 |
| 632 |
| 1,446 |
| — |
| — |
|
| Other available-for-sale equity securities | 95 |
| 95 |
| — |
| — |
| — |
| |
| Other available-for-sale debt securities | 302 |
| 75 |
| 222 |
| 5 |
| — |
| |
| Other trading and available-for-sale equity securities | | 104 |
| 104 |
| — |
| — |
| — |
|
| Other trading and available-for-sale debt securities | | 266 |
| 75 |
| 186 |
| 5 |
| — |
|
| Derivative assets | 26 |
| — |
| 16 |
| 10 |
| — |
| 162 |
| 5 |
| 136 |
| 21 |
| — |
|
| Total assets | 6,240 |
| 4,260 |
| 1,793 |
| 15 |
| 172 |
| 6,716 |
| 4,845 |
| 1,768 |
| 26 |
| 77 |
|
| Derivative liabilities | (419 | ) | — |
| (419 | ) | — |
| — |
| (252 | ) | (2 | ) | (63 | ) | (187 | ) | — |
|
| Net assets | $ | 5,821 |
| $ | 4,260 |
| $ | 1,374 |
| $ | 15 |
| $ | 172 |
| |
| Net assets (liabilities) | | $ | 6,464 |
| $ | 4,843 |
| $ | 1,705 |
| $ | (161 | ) | $ | 77 |
|
The following tables provide reconciliations of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. Amounts included in earnings for derivatives are primarily included in Operating Revenues. |
| | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | 4 |
| | $ | 34 |
| | $ | 38 |
|
| Purchases, sales, issuances and settlements: | | | | |
|
|
| Settlements | — |
| | (9 | ) | | (9 | ) |
| Total losses included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | — |
| | (2 | ) | | (2 | ) |
| Balance at end of period | $ | 4 |
| | $ | 23 |
| | $ | 27 |
|
|
| | | | | | | | | | | |
| | Three Months Ended September 30, 2015 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | 5 |
| | $ | 23 |
| | $ | 28 |
|
| Purchases, sales, issuances and settlements: | | | | |
|
|
| Settlements | — |
| | (6 | ) | | (6 | ) |
| Balance at end of period | $ | 5 |
|
| $ | 17 |
|
| $ | 22 |
|
| | | | Nine Months Ended September 30, 2016 | Three Months Ended March 31, 2017 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
| Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | 5 |
| | $ | 10 |
| | $ | 15 |
| $ | 5 |
| | $ | (166 | ) | | $ | (161 | ) |
| Purchases, sales, issuances and settlements: | | | | | | | | | | |
| Purchases | — |
| | 34 |
| | 34 |
| |
| Sales | (1 | ) | | — |
| | (1 | ) | |
| Settlements | — |
| | (22 | ) | | (22 | ) | — |
| | (9 | ) | | (9 | ) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | — |
| | 1 |
| | 1 |
| |
| Total amount included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | | — |
| | 40 |
| | 40 |
|
| Balance at end of period | $ | 4 |
| | $ | 23 |
| | $ | 27 |
| $ | 5 |
| | $ | (135 | ) | | $ | (130 | ) |
|
| | | | | | | | | | | |
| | Nine Months Ended September 30, 2015 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | 5 |
| | $ | (1 | ) | | $ | 4 |
|
| Total pretax realized or unrealized gains included in earnings | — |
| | 18 |
| | 18 |
|
| Purchases, sales, issuances and settlements: | | | | | |
| Purchases | — |
| | 24 |
| | 24 |
|
| Settlements | — |
| | (28 | ) | | (28 | ) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | — |
| | 4 |
| | 4 |
|
| Balance at end of period | $ | 5 |
| | $ | 17 |
| | $ | 22 |
|
|
| | | | | | | | | | | |
| | Three Months Ended March 31, 2016 |
| (in millions) | Investments |
| | Derivatives (net) |
| | Total |
|
| Balance at beginning of period | $ | 5 |
| | $ | 10 |
| | $ | 15 |
|
| Purchases, sales, issuances and settlements: | | | | | |
| Sales | (1 | ) | | — |
| | (1 | ) |
| Settlements | — |
| | (7 | ) | | (7 | ) |
| Total losses included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | — |
| | (1 | ) | | (1 | ) |
| Balance at end of period | $ | 4 |
| | $ | 2 |
| | $ | 6 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
DUKE ENERGY CAROLINAS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by major security type. | | | | September 30, 2016 | March 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
|
| Nuclear decommissioning trust fund equity securities | $ | 2,170 |
| $ | 2,092 |
| $ | — |
| $ | — |
| $ | 78 |
| $ | 2,366 |
| $ | 2,289 |
| $ | — |
| $ | — |
| $ | 77 |
|
| Nuclear decommissioning trust fund debt securities | 1,060 |
| 184 |
| 876 |
| — |
| — |
| 1,026 |
| 146 |
| 880 |
| — |
| — |
|
| Other available-for-sale debt securities | 3 |
| — |
| — |
| 3 |
| — |
| 3 |
| — |
| — |
| 3 |
| — |
|
| Derivative assets | 10 |
| — |
| 10 |
| — |
| — |
| 17 |
| — |
| 17 |
| — |
| — |
|
| Total assets | 3,243 |
| 2,276 |
| 886 |
| 3 |
| 78 |
| 3,412 |
| 2,435 |
| 897 |
| 3 |
| 77 |
|
| Derivative liabilities | (99 | ) | — |
| (99 | ) | — |
| — |
| (14 | ) | — |
| (14 | ) | — |
| — |
|
| Net assets | $ | 3,144 |
| $ | 2,276 |
| $ | 787 |
| $ | 3 |
| $ | 78 |
| $ | 3,398 |
| $ | 2,435 |
| $ | 883 |
| $ | 3 |
| $ | 77 |
|
| | | | December 31, 2015 | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Not categorized |
|
| Nuclear decommissioning trust fund equity securities | $ | 2,094 |
| $ | 1,922 |
| $ | — |
| $ | — |
| $ | 172 |
| $ | 2,245 |
| $ | 2,168 |
| $ | — |
| $ | — |
| $ | 77 |
|
| Nuclear decommissioning trust fund debt securities | 944 |
| 246 |
| 698 |
| — |
| — |
| 1,013 |
| 178 |
| 835 |
| — |
| — |
|
| Other available-for-sale debt securities | 3 |
| — |
| — |
| 3 |
| — |
| 3 |
| — |
| — |
| 3 |
| — |
|
| Derivative assets | | 33 |
| — |
| 33 |
| — |
| — |
|
| Total assets | 3,041 |
| 2,168 |
| 698 |
| 3 |
| 172 |
| 3,294 |
| 2,346 |
| 868 |
| 3 |
| 77 |
|
| Derivative liabilities | (45 | ) | — |
| (45 | ) | — |
| — |
| (16 | ) | — |
| (16 | ) | — |
| — |
|
| Net assets | $ | 2,996 |
| $ | 2,168 |
| $ | 653 |
| $ | 3 |
| $ | 172 |
| $ | 3,278 |
| $ | 2,346 |
| $ | 852 |
| $ | 3 |
| $ | 77 |
|
There was no change to the Level 3 balance during the three and nine months ended September 30, 2016March 31, 2017 and September 30, 2015.March 31, 2016. PROGRESS ENERGY
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by major security type. | | | | September 30, 2016 | March 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
|
| Nuclear decommissioning trust fund equity securities | $ | 1,779 |
| $ | 1,779 |
| $ | — |
| $ | 1,918 |
| $ | 1,918 |
| $ | — |
|
| Nuclear decommissioning trust fund debt securities | 1,109 |
| 480 |
| 629 |
| 1,081 |
| 456 |
| 625 |
|
| Other available-for-sale debt securities | 67 |
| 20 |
| 47 |
| 58 |
| 12 |
| 46 |
|
| Derivative assets | 31 |
| — |
| 31 |
| 34 |
| — |
| 34 |
|
| Total assets | 2,986 |
| 2,279 |
| 707 |
| 3,091 |
| 2,386 |
| 705 |
|
| Derivative liabilities | (81 | ) | — |
| (81 | ) | (34 | ) | — |
| (34 | ) |
| Net assets | $ | 2,905 |
| $ | 2,279 |
| $ | 626 |
| $ | 3,057 |
| $ | 2,386 |
| $ | 671 |
|
| | | | December 31, 2015 | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
|
| Nuclear decommissioning trust fund equity securities | $ | 1,496 |
| $ | 1,496 |
| $ | — |
| $ | 1,861 |
| $ | 1,861 |
| $ | — |
|
| Nuclear decommissioning trust fund debt securities | 1,283 |
| 426 |
| 857 |
| 1,065 |
| 454 |
| 611 |
|
| Other available-for-sale debt securities | 63 |
| 18 |
| 45 |
| 65 |
| 21 |
| 44 |
|
| Derivative assets | 11 |
| — |
| 11 |
| 85 |
| — |
| 85 |
|
| Total assets | 2,853 |
| 1,940 |
| 913 |
| 3,076 |
| 2,336 |
| 740 |
|
| Derivative liabilities | (322 | ) | — |
| (322 | ) | (25 | ) | — |
| (25 | ) |
| Net assets | $ | 2,531 |
| $ | 1,940 |
| $ | 591 |
| $ | 3,051 |
| $ | 2,336 |
| $ | 715 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
DUKE ENERGY PROGRESS
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by major security type. | | | | September 30, 2016 | March 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
|
| Nuclear decommissioning trust fund equity securities | $ | 1,438 |
| $ | 1,438 |
| $ | — |
| $ | 1,541 |
| $ | 1,541 |
| $ | — |
|
| Nuclear decommissioning trust fund debt securities and other | 739 |
| 220 |
| 519 |
| 733 |
| 221 |
| 512 |
|
| Other available-for-sale debt securities and other | 1 |
| 1 |
| — |
| 1 |
| 1 |
| — |
|
| Derivative assets | 15 |
| — |
| 15 |
| 20 |
| — |
| 20 |
|
| Total assets | 2,193 |
| 1,659 |
| 534 |
| 2,295 |
| 1,763 |
| 532 |
|
| Derivative liabilities | (12 | ) | — |
| (12 | ) | (10 | ) | — |
| (10 | ) |
| Net assets | $ | 2,181 |
| $ | 1,659 |
| $ | 522 |
| $ | 2,285 |
| $ | 1,763 |
| $ | 522 |
|
| | | | December 31, 2015 | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
|
| Nuclear decommissioning trust fund equity securities | $ | 1,178 |
| $ | 1,178 |
| $ | — |
| $ | 1,505 |
| $ | 1,505 |
| $ | — |
|
| Nuclear decommissioning trust fund debt securities and other | 860 |
| 141 |
| 719 |
| 708 |
| 207 |
| 501 |
|
| Other available-for-sale debt securities and other | 1 |
| 1 |
| — |
| 1 |
| 1 |
| — |
|
| Derivative assets | 2 |
| — |
| 2 |
| 46 |
| — |
| 46 |
|
| Total assets | 2,041 |
| 1,320 |
| 721 |
| 2,260 |
| 1,713 |
| 547 |
|
| Derivative liabilities | (98 | ) | — |
| (98 | ) | (7 | ) | — |
| (7 | ) |
| Net assets | $ | 1,943 |
| $ | 1,320 |
| $ | 623 |
| $ | 2,253 |
| $ | 1,713 |
| $ | 540 |
|
DUKE ENERGY FLORIDA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by major security type. | | | | September 30, 2016 | March 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
|
| Nuclear decommissioning trust fund equity securities | $ | 341 |
| $ | 341 |
| $ | — |
| $ | 377 |
| $ | 377 |
| $ | — |
|
| Nuclear decommissioning trust fund debt securities and other | 370 |
| 260 |
| 110 |
| 348 |
| 235 |
| 113 |
|
| Other available-for-sale debt securities and other | 49 |
| 2 |
| 47 |
| 47 |
| 1 |
| 46 |
|
| Derivative assets | 16 |
| — |
| 16 |
| 14 |
| — |
| 14 |
|
| Total assets | 776 |
| 603 |
| 173 |
| 786 |
| 613 |
| 173 |
|
| Derivative liabilities | (64 | ) | — |
| (64 | ) | (19 | ) | — |
| (19 | ) |
| Net assets | $ | 712 |
| $ | 603 |
| $ | 109 |
| $ | 767 |
| $ | 613 |
| $ | 154 |
|
| | | | December 31, 2015 | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Total Fair Value |
| Level 1 |
| Level 2 |
|
| Nuclear decommissioning trust fund equity securities | $ | 318 |
| $ | 318 |
| $ | — |
| $ | 356 |
| $ | 356 |
| $ | — |
|
| Nuclear decommissioning trust fund debt securities and other | 423 |
| 285 |
| 138 |
| 357 |
| 247 |
| 110 |
|
| Other available-for-sale debt securities and other | 51 |
| 6 |
| 45 |
| 48 |
| 4 |
| 44 |
|
| Derivative assets | 7 |
| — |
| 7 |
| 39 |
| — |
| 39 |
|
| Total assets | 799 |
| 609 |
| 190 |
| 800 |
| 607 |
| 193 |
|
| Derivative liabilities | (216 | ) | — |
| (216 | ) | (12 | ) | — |
| (12 | ) |
| Net assets (liabilities) | $ | 583 |
| $ | 609 |
| $ | (26 | ) | |
| Net assets | | $ | 788 |
| $ | 607 |
| $ | 181 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
DUKE ENERGY OHIO
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which are disclosed in Note 10.9. | | | | September 30, 2016 | March 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Derivative assets | $ | 3 |
| $ | — |
| $ | — |
| $ | 3 |
| $ | 1 |
| $ | — |
| $ | — |
| $ | 1 |
|
| Derivative liabilities | (8 | ) | — |
| (8 | ) | — |
| (5 | ) | — |
| (5 | ) | — |
|
| Net (liabilities) assets | $ | (5 | ) | $ | — |
| $ | (8 | ) | $ | 3 |
| $ | (4 | ) | $ | — |
| $ | (5 | ) | $ | 1 |
|
| | | | December 31, 2015 | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Derivative assets | $ | 3 |
| $ | — |
| $ | — |
| $ | 3 |
| $ | 5 |
| $ | — |
| $ | — |
| $ | 5 |
|
| Derivative liabilities | (7 | ) | — |
| (7 | ) | — |
| (6 | ) | — |
| (6 | ) | — |
|
| Net (liabilities) assets | $ | (4 | ) | $ | — |
| $ | (7 | ) | $ | 3 |
| $ | (1 | ) | $ | — |
| $ | (6 | ) | $ | 5 |
|
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | |
| | Derivatives (net) |
| | Three Months Ended September 30, |
| (in millions) | 2016 |
| | 2015 |
|
| Balance at beginning of period | $ | 5 |
| | $ | 5 |
|
| Purchases, sales, issuances and settlements: | | | |
| Purchases | — |
| | 5 |
|
| Sales | — |
| | (5 | ) |
| Settlements | (2 | ) | | (1 | ) |
| Balance at end of period | $ | 3 |
| | $ | 4 |
|
| | | | Derivatives (net) | Derivatives (net) |
| | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| 2017 |
| | 2016 |
|
| Balance at beginning of period | $ | 3 |
| | $ | (18 | ) | $ | 5 |
| | $ | 3 |
|
| Total pretax realized or unrealized gains included in earnings | — |
| | 21 |
| |
| Purchases, sales, issuances and settlements: | | | | | | |
| Purchases | 5 |
| | 5 |
| |
| Settlements | (4 | ) | | (4 | ) | (1 | ) | | (2 | ) |
| Total losses included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | (1 | ) | | — |
| (3 | ) | | (1 | ) |
| Balance at end of period | $ | 3 |
| | $ | 4 |
| $ | 1 |
| | $ | — |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
DUKE ENERGY INDIANA
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. Derivative amounts in the table below exclude cash collateral, which is disclosed in Note 10.9. See Note 1110 for additional information related to investments by major security type. | | | | September 30, 2016 | March 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
| Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Other available-for-sale equity securities | $ | 77 |
| $ | 77 |
| $ | — |
| $ | — |
| $ | 84 |
| $ | 84 |
| $ | — |
| $ | — |
|
| Other available-for-sale debt securities and other | 30 |
| — |
| 30 |
| — |
| 31 |
| — |
| 31 |
| — |
|
| Derivative assets | 20 |
| — |
| — |
| 20 |
| 9 |
| — |
| — |
| 9 |
|
| Net assets | $ | 127 |
| $ | 77 |
| $ | 30 |
| $ | 20 |
| $ | 124 |
| $ | 84 |
| $ | 31 |
| $ | 9 |
|
|
| | | | | | | | | | | | |
| | December 31, 2015 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Other available-for-sale equity securities | $ | 71 |
| $ | 71 |
| $ | — |
| $ | — |
|
| Other available-for-sale debt securities and other | 30 |
| 2 |
| 28 |
| — |
|
| Derivative assets | 7 |
| — |
| — |
| 7 |
|
| Net assets | $ | 108 |
| $ | 73 |
| $ | 28 |
| $ | 7 |
|
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | |
| | Derivatives (net) |
| | Three Months Ended September 30, |
| (in millions) | 2016 |
| | 2015 |
|
| Balance at beginning of period | $ | 29 |
| | $ | 17 |
|
| Purchases, sales, issuances and settlements: |
| | |
| Purchases | — |
| | 1 |
|
| Settlements | (7 | ) | | (6 | ) |
| Total losses included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | (2 | ) | | — |
|
| Balance at end of period | $ | 20 |
| | $ | 12 |
|
|
| | | | | | | |
| | Derivatives (net) |
| | Nine Months Ended September 30, |
| (in millions) | 2016 |
| | 2015 |
|
| Balance at beginning of period | $ | 7 |
| | $ | 14 |
|
| Purchases, sales, issuances and settlements: | | | |
| Purchases | 29 |
| | 19 |
|
| Settlements | (18 | ) | | (25 | ) |
| Total gains included on the Condensed Consolidated Balance Sheet as regulatory assets or liabilities | 2 |
| | 4 |
|
| Balance at end of period | $ | 20 |
| | $ | 12 |
|
|
| | | | | | | | | | | | |
| | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 2 |
| Level 3 |
|
| Other available-for-sale equity securities | $ | 79 |
| $ | 79 |
| $ | — |
| $ | — |
|
| Other available-for-sale debt securities and other | 31 |
| — |
| 31 |
| — |
|
| Derivative assets | 16 |
| — |
| — |
| 16 |
|
| Total assets | 126 |
| 79 |
| 31 |
| 16 |
|
| Derivative liabilities | (2 | ) | (2 | ) | — |
| — |
|
| Net assets | $ | 124 |
| $ | 77 |
| $ | 31 |
| $ | 16 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | |
| | Derivatives (net) |
| | Three Months Ended March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Balance at beginning of period | $ | 16 |
| | $ | 7 |
|
| Purchases, sales, issuances and settlements: | | | |
| Settlements | (7 | ) | | (5 | ) |
| Balance at end of period | $ | 9 |
| | $ | 2 |
|
PIEDMONT
The following tables provide recorded balances for assets and liabilities measured at fair value on a recurring basis on the Condensed Consolidated Balance Sheets. See Note 10 for additional information related to investments. |
| | | | | | | | | |
| | March 31, 2017 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
|
| Other trading equity securities | 4 |
| 4 |
| — |
|
| Other trading debt securities | 1 |
| 1 |
| — |
|
| Derivative assets | 2 |
| 2 |
| — |
|
| Total assets | 7 |
| 7 |
| — |
|
| Derivative liabilities | (145 | ) | — |
| (145 | ) |
| Net (liabilities) assets | $ | (138 | ) | $ | 7 |
| $ | (145 | ) |
|
| | | | | | | | | |
| | December 31, 2016 |
| (in millions) | Total Fair Value |
| Level 1 |
| Level 3 |
|
| Other trading equity securities | $ | 4 |
| $ | 4 |
| $ | — |
|
| Other trading debt securities | 1 |
| 1 |
| — |
|
| Derivative assets | 3 |
| 3 |
| — |
|
| Total assets | 8 |
| 8 |
| — |
|
| Derivative liabilities | (187 | ) | — |
| (187 | ) |
| Net (liabilities) assets | $ | (179 | ) | $ | 8 |
| $ | (187 | ) |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
The following table provides a reconciliation of beginning and ending balances of assets and liabilities measured at fair value using Level 3 measurements. |
| | | | | | | |
| | Derivatives (net) |
| | Three Months Ended March 31, |
| (in millions) | 2017 |
| | 2016 |
|
| Balance at beginning of period | $ | (187 | ) | | $ | (149 | ) |
| Total gains and settlements | 42 |
| | 23 |
|
| Balance at end of period | $ | (145 | ) | | $ | (126 | ) |
QUANTITATIVE INFORMATION ABOUT UNOBSERVABLE INPUTS
The following table includes quantitative information about the Duke Energy Registrants' derivatives classified as Level 3. As of September 30, 2016 and December 31, 2015, all Level 3 derivatives were financial transmission rights (FTRs). | | | | September 30, 2016 | March 31, 2017 |
| | Fair Value of FTRs | | | | | Fair Value | | | | |
| | (in millions) | Valuation Technique | Unobservable Input | Range | |
| Investment Type | | (in millions) | Valuation Technique | Unobservable Input | Range |
| Duke Energy Ohio | | |
| | | | |
| Financial Transmission Rights (FTRs) | | $ | 1 |
| RTO auction pricing | FTR price – per megawatt-hour (MWh) | $ | 0.23 |
| - | $ | 2.02 |
|
| Duke Energy Indiana | | |
| | | | |
| FTRs | | 9 |
| RTO auction pricing | FTR price – per MWh | (1.08 | ) | - | 5.33 |
|
| Piedmont | | | | | | |
| Natural gas contracts | | (145 | ) | Discounted cash flow | Forward natural gas curves – price per million British thermal unit (MMBtu) | 2.08 |
| - | 3.57 |
|
| Duke Energy | $ | 23 |
| RTO auction pricing | FTR price – per Megawatt-Hour (MWh) | $ | (2.59 | ) | - | $ | 8.16 |
| | | | | |
| Duke Energy Ohio | 3 |
| RTO auction pricing | FTR price – per MWh | 0.45 |
| - | 2.01 |
| |
| Duke Energy Indiana | 20 |
| RTO auction pricing | FTR price – per MWh | (2.59 | ) | - | 8.16 |
| |
| Total Level 3 derivatives | | $ | (135 | ) | | | | |
| | | | December 31, 2015 | December 31, 2016 |
| | Fair Value of FTRs | | | | | Fair Value | | | | |
| | (in millions) | Valuation Technique | Unobservable Input | Range | |
| Investment Type | | (in millions) | Valuation Technique | Unobservable Input | Range |
| Duke Energy Ohio | | |
| | | | |
| FTRs | | $ | 5 |
| RTO auction pricing | FTR price – per MWh | $ | 0.77 |
| - | $ | 3.52 |
|
| Duke Energy Indiana | | |
| | | | |
| FTRs | | 16 |
| RTO auction pricing | FTR price – per MWh | (0.83 | ) | - | 9.32 |
|
| Piedmont | | | | | | |
| Natural gas contracts | | (187 | ) | Discounted cash flow | Forward natural gas curves – price per MMBtu | 2.31 |
| - | 4.18 |
|
| Duke Energy | $ | 10 |
| RTO auction pricing | FTR price – per MWh | $ | (0.74 | ) | - | $ | 7.29 |
| | | | | |
| Duke Energy Ohio | 3 |
| RTO auction pricing | FTR price – per MWh | 0.67 |
| - | 2.53 |
| |
| Duke Energy Indiana | 7 |
| RTO auction pricing | FTR price – per MWh | (0.74 | ) | - | 7.29 |
| |
| Total Level 3 derivatives | | $ | (166 | ) | | | | |
OTHER FAIR VALUE DISCLOSURES
The fair value and book value of long-term debt, including current maturities, is summarized in the following table. Estimates determined are not necessarily indicative of amounts that could have been settled in current markets. Fair value of long-term debt uses Level 2 measurements. | | | | September 30, 2016 | | December 31, 2015 | March 31, 2017 | | December 31, 2016 |
| (in millions) | Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
| Book Value |
| | Fair Value |
| | Book Value |
| | Fair Value |
|
| Duke Energy | $ | 47,165 |
| | $ | 50,997 |
| | $ | 39,569 |
| | $ | 42,537 |
| $ | 48,998 |
| | $ | 50,480 |
| | $ | 47,895 |
| | $ | 49,161 |
|
| Duke Energy Carolinas | 9,360 |
| | 10,799 |
| | 8,367 |
| | 9,156 |
| 9,491 |
| | 10,405 |
| | 9,603 |
| | 10,494 |
|
| Progress Energy | 16,520 |
| | 19,060 |
| | 14,464 |
| | 15,856 |
| 18,148 |
| | 19,742 |
| | 17,541 |
| | 19,107 |
|
| Duke Energy Progress | 7,011 |
| | 7,787 |
| | 6,518 |
| | 6,757 |
| 6,761 |
| | 7,103 |
| | 7,011 |
| | 7,357 |
|
| Duke Energy Florida | 6,128 |
| | 7,127 |
| | 4,266 |
| | 4,908 |
| 6,981 |
| | 7,596 |
| | 6,125 |
| | 6,728 |
|
| Duke Energy Ohio | 1,887 |
| | 2,128 |
| | 1,598 |
| | 1,724 |
| 1,977 |
| | 2,122 |
| | 1,884 |
| | 2,020 |
|
| Duke Energy Indiana | 3,787 |
| | 4,538 |
| | 3,768 |
| | 4,219 |
| 3,784 |
| | 4,292 |
| | 3,786 |
| | 4,260 |
|
| Piedmont | | 1,821 |
| | 1,954 |
| | 1,821 |
| | 1,933 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
At both September 30, 2016March 31, 2017 and December 31, 2015,2016, fair value of cash and cash equivalents, accounts and notes receivable, accounts payable, notes payable and commercial paper, and non-recoursenonrecourse notes payable of VIEs are not materially different from their carrying amounts because of the short-term nature of these instruments and/or because the stated rates approximate market rates.
13.12. 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 ninethree months ended September 30, 2016March 31, 2017 and the year ended December 31, 2015,2016, or is expected to be provided in the future, that was not previously contractually required.
Receivables Financing – DERF / DEPR / DEFR
Duke Energy Receivables Finance Company, LLC (DERF), Duke Energy Progress Receivables, LLC (DEPR) and Duke Energy Florida Receivables, LLC (DEFR) are bankruptcy remote, special purpose subsidiaries of Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida, respectively. DERF, DEPR and DEFR are wholly owned limited liability companies 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.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
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. 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 Condensed 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 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. The sole source of funds to satisfy the related debt obligation is cash collections from the receivables. Amounts borrowed under the credit facility are reflected on Duke Energy's Condensed Consolidated Balance Sheets as Long-Term Debt.
The proceeds Duke Energy Ohio and Duke Energy Indiana receive from the sale of receivables to CRC are typically 75 percent cash and 25 percent 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 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 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 described above. Amounts borrowed under the credit facilities are reflected on the |
| | | | | | | | | | | | | | | |
| | Duke Energy |
| | | | Duke Energy |
| | Duke Energy |
| | Duke Energy |
|
| | | | Carolinas |
| | Progress |
| | Florida |
|
| (in millions) | CRC |
| | DERF |
| | DEPR |
| | DEFR |
|
| Expiration date | December 2018 |
| | December 2018 |
| | February 2019 |
| | April 2019 |
|
| Credit facility amount | $ | 325 |
| | $ | 425 |
| | $ | 300 |
| | $ | 225 |
|
| Amounts borrowed at March 31, 2017 | 325 |
| | 425 |
| | 300 |
| | 225 |
|
| Amounts borrowed at December 31, 2016 | 325 |
| | 425 |
| | 300 |
| | 225 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Balance Sheets as Long-Term Debt.Financial Statements – (Unaudited) – (Continued)
|
| | | | | | | | | | | | | | | |
| | Duke Energy |
| | | | Duke Energy |
| | Duke Energy |
| | Duke Energy |
|
| | | | Carolinas |
| | Progress |
| | Florida |
|
| | CRC |
| | DERF |
| | DEPR |
| | DEFR |
|
| Expiration date | December 2018 |
| | December 2018 |
| | February 2019 |
| | April 2019 |
|
| Credit facility amount (in millions) | $ | 325 |
| | $ | 425 |
| | $ | 300 |
| | $ | 225 |
|
| Amounts borrowed at September 30, 2016 | 325 |
| | 425 |
| | 300 |
| | 225 |
|
| Amounts borrowed at December 31, 2015 | 325 |
| | 425 |
| | 254 |
| | 225 |
|
Nuclear Asset-Recovery Bonds – DEFPF
DEFPFDuke Energy Florida Project Finance, LLC (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 June 2016, DEFPF issued $1,294 million of senior secured bonds and used the proceeds to acquire nuclear asset-recovery property from Duke Energy Florida. The nuclear asset-recovery property acquired includes the right to impose, bill, collect and adjust a non-bypassable nuclear asset-recovery charge from all Duke Energy Florida retail customers until the bonds are paid in full and all financing costs have been recovered. The nuclear asset-recovery bonds are secured by the nuclear asset-recovery property, and cash collections from the nuclear asset-recovery charges are the sole source of funds to satisfy the debt obligation. The bondholders have no recourse to Duke Energy Florida. For additional information see NotesNote 4 and 6.
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 Condensed Consolidated Balance Sheets. | | | (in millions) | September 30, 2016 |
| March 31, 2017 |
| December 31, 2016 |
|
| Receivables of VIEs | $ | 7 |
| $ | 4 |
| $ | 6 |
|
| Regulatory Assets: Current | 51 |
| |
| Current Assets: Regulatory assets | | 53 |
| 50 |
|
| Current Assets: Other | 29 |
| 14 |
| 53 |
|
| Regulatory Assets and Deferred Debits: Regulatory assets | 1,156 |
| |
| Interest accrued | 9 |
| |
| Other Noncurrent Assets: Regulatory assets | | 1,131 |
| 1,142 |
|
| Current Liabilities: Other | | 3 |
| 17 |
|
| Current maturities of long-term debt | 62 |
| 55 |
| 62 |
|
| Long-Term Debt | 1,216 |
| 1,189 |
| 1,217 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
Commercial Renewables
Certain of Duke Energy renewable energy facilities are VIEs due to long-term, fixed-price power purchase agreements. These fixed-price agreements effectively transfer commodity price risk to the buyer of the power. Certain other Duke EnergyEnergy’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. For certain VIEs, assetsAssets are restricted and cannot be pledged as collateral or sold to third parties without prior approval of debt holders. The activities that most significantly impact the economic performance of these renewable energy facilities were decisions associated with siting, negotiating purchase power agreements,PPAs, engineering, procurement and construction and decisions associated with ongoing operations and maintenance-related activities. Duke Energy consolidates the entities as it is responsible for all of these decisions.
The table below presents material balances reported on Duke Energy's Condensed Consolidated Balance Sheets related to renewables VIEs. |
| | | | | | |
| (in millions) | September 30, 2016 |
| December 31, 2015 |
|
| Current Assets: Other | $ | 252 |
| $ | 138 |
|
| Property, plant and equipment, cost | 2,583 |
| 2,015 |
|
| Accumulated depreciation and amortization | (400 | ) | (321 | ) |
| Current maturities of long-term debt | 193 |
| 108 |
|
| Long-Term Debt | 1,151 |
| 968 |
|
| Deferred Credits and Other Liabilities: Deferred income taxes | 50 |
| 289 |
|
| Deferred Credits and Other Liabilities: Other | 270 |
| 33 |
|
NON-CONSOLIDATED VIEs
The following tables summarize the impact of non-consolidated VIEs on the Condensed Consolidated Balance Sheets. |
| | | | | | | | | | | | | | | | | | | |
| | September 30, 2016 |
| | Duke Energy | | Duke |
| | Duke |
|
| | | | | | | | Energy |
| | Energy |
|
| (in millions) | Renewables |
| | Other |
| | Total |
| | Ohio |
| | Indiana |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | 50 |
| | $ | 74 |
|
| Investments in equity method unconsolidated affiliates | 168 |
| | 317 |
| | 485 |
| | — |
| | — |
|
| Investments and Other Assets: Other | — |
| | 12 |
| | 12 |
| | — |
| | — |
|
| Total assets | $ | 168 |
| | $ | 329 |
| | $ | 497 |
| | $ | 50 |
| | $ | 74 |
|
| Other current liabilities | — |
| | 2 |
| | 2 |
| | — |
| | — |
|
| Deferred credits and other liabilities | — |
| | 13 |
| | 13 |
| | — |
| | — |
|
| Total liabilities | $ | — |
| | $ | 15 |
| | $ | 15 |
| | $ | — |
| | $ | — |
|
| Net assets | $ | 168 |
| | $ | 314 |
| | $ | 482 |
| | $ | 50 |
| | $ | 74 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | December 31, 2015 |
| | Duke Energy | | Duke |
| | Duke |
|
| | | | | | | | Energy |
| | Energy |
|
| (in millions) | Renewables |
| | Other |
| | Total |
| | Ohio |
| | Indiana |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | 47 |
| | $ | 60 |
|
| Investments in equity method unconsolidated affiliates | 235 |
| | 152 |
| | 387 |
| | — |
| | — |
|
| Total assets | $ | 235 |
| | $ | 152 |
| | $ | 387 |
| | $ | 47 |
| | $ | 60 |
|
| Other current liabilities | — |
| | 3 |
| | 3 |
| | — |
| | — |
|
| Deferred credits and other liabilities | — |
| | 14 |
| | 14 |
| | — |
| | — |
|
| Total liabilities | $ | — |
| | $ | 17 |
| | $ | 17 |
| | $ | — |
| | $ | — |
|
| Net assets | $ | 235 |
| | $ | 135 |
| | $ | 370 |
| | $ | 47 |
| | $ | 60 |
|
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 Ohio Valley Electric Corporation (OVEC), which is discussed below, and various guarantees, reflected in the table above as Deferred credits and other liabilities. For more information on various guarantees, refer to Note 5.
Renewables
Duke Energy has investments in various renewable energy project entities. Some of these entities are VIEs due to long-term fixed-price power purchase agreements. These fixed-price agreements effectively transfer commodity price risk to the buyer of the power. Duke Energy does not consolidate these VIEs because power to direct and control key activities is shared jointly by Duke Energy and other owners. |
| | | | | | |
| (in millions) | March 31, 2017 |
| December 31, 2016 |
|
| Current Assets: Other | $ | 336 |
| $ | 223 |
|
| Property, plant and equipment, cost | 3,671 |
| 3,419 |
|
| Accumulated depreciation and amortization | (448 | ) | (453 | ) |
| Current maturities of long-term debt | 227 |
| 198 |
|
| Long-Term Debt | 1,645 |
| 1,097 |
|
| Deferred income taxes | 321 |
| 275 |
|
| Other Noncurrent Liabilities: Other | 251 |
| 252 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
ImpairmentNON-CONSOLIDATED VIEs
The following tables summarize the impact of Equity Method Investmentsnon-consolidated VIEs on the Condensed Consolidated Balance Sheets. During the three and nine months ended September 30, 2016, |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2017 |
| | Duke Energy | | Duke |
| | Duke |
| | |
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
| | |
| (in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 53 |
| | $ | 69 |
| | $ | — |
|
| Investments in equity method unconsolidated affiliates | 673 |
| | 173 |
| | 92 |
| | 938 |
| | — |
| | — |
| | 152 |
|
| Other noncurrent assets | 12 |
| | — |
| | — |
| | 12 |
| | — |
| | — |
| | — |
|
| Total assets | $ | 685 |
| | $ | 173 |
| | $ | 92 |
| | $ | 950 |
| | $ | 53 |
| | $ | 69 |
| | $ | 152 |
|
Taxes accrued(a) | 23 |
| | — |
| | — |
| | 23 |
| | — |
| | — |
| | (1 | ) |
| Other current liabilities | — |
| | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
|
Deferred income taxes(a) | (7 | ) | | — |
| | — |
| | (7 | ) | | — |
| | — |
| | 4 |
|
| Other noncurrent liabilities | — |
| | — |
| | 13 |
| | 13 |
| | — |
| | — |
| | — |
|
| Total liabilities | $ | 16 |
| | $ | — |
| | $ | 15 |
| | $ | 31 |
| | $ | — |
| | $ | — |
| | $ | 3 |
|
| Net assets | $ | 669 |
| | $ | 173 |
| | $ | 77 |
| | $ | 919 |
| | $ | 53 |
| | $ | 69 |
| | $ | 149 |
|
| |
| (a) | Taxes accrued and Deferred income taxes are netted by jurisdiction on a consolidated basis on the Condensed Consolidated Balance Sheets. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2016 |
| | Duke Energy | | Duke |
| | Duke |
| | |
| | Pipeline |
| | Commercial |
| | Other |
| | | | Energy |
| | Energy |
| | |
| (in millions) | Investments |
| | Renewables |
| | VIEs |
| | Total |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Receivables from affiliated companies | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 82 |
| | $ | 101 |
| | $ | — |
|
| Investments in equity method unconsolidated affiliates | 487 |
| | 174 |
| | 90 |
| | 751 |
| | — |
| | — |
| | 139 |
|
| Other noncurrent assets | 12 |
| | — |
| | — |
| | 12 |
| | — |
| | — |
| | — |
|
| Total assets | $ | 499 |
| | $ | 174 |
| | $ | 90 |
| | $ | 763 |
| | $ | 82 |
| | $ | 101 |
| | $ | 139 |
|
| Other current liabilities | — |
| | — |
| | 3 |
| | 3 |
| | — |
| | — |
| | — |
|
| Other noncurrent liabilities | — |
| | — |
| | 13 |
| | 13 |
| | — |
| | — |
| | 4 |
|
| Total liabilities | $ | — |
| | $ | — |
| | $ | 16 |
| | $ | 16 |
| | $ | — |
| | $ | — |
| | 4 |
|
| Net assets | $ | 499 |
| | $ | 174 |
| | $ | 74 |
| | $ | 747 |
| | $ | 82 |
| | $ | 101 |
| | $ | 135 |
|
The Duke Energy recorded an other than temporary impairmentRegistrants are not aware of certain wind project investments. The $71 million pretax impairment was recorded within Equityany 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, some of which are reflected in earnings (losses)the table above as Other noncurrent liabilities. For more information on various guarantees, refer to Note 5.
Pipeline Investments
Duke Energy has investments in various joint ventures with pipeline projects currently under construction. 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 unconsolidated affiliates on Duke Energy'sthese VIEs and therefore does not consolidate these entities.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements of Operations. – (Unaudited) – (Continued)
The other than temporary declinetable below presents the ownership interest and investment balances in valuethese joint ventures. |
| | | | | | | | | | | | | | | | | | | | | |
| | Duke Energy | | Piedmont |
| | | | Investment Amount (in millions) | | | | Investment Amount (in millions) |
| | Ownership | | March 31, | | December 31, | | Ownership | | March 31, | | December 31, |
| Entity Name | Interest | | 2017 | | 2016 | | Interest(a) | | 2017 | | 2016 |
| ACP | 47 | % | | $ | 403 |
| | $ | 265 |
| | 7 | % | | $ | 59 |
| | $ | 46 |
|
| Sabal Trail | 7.5 | % | | 188 |
| | 140 |
| | | | | | |
Constitution(b) | 24 | % | | 82 |
| | 82 |
| | 24 | % | | 93 |
| | 93 |
|
| Total | | | $ | 673 |
| | $ | 487 |
| | | | $ | 152 |
| | $ | 139 |
|
| |
| (a) | On April 1, 2017, Piedmont transferred its ownership interests in ACP and Constitution to a wholly owned subsidiary of Duke Energy at Piedmont's book value. |
| |
| (b) | Duke Energy's investment amount includes purchase accounting adjustments not recorded at the Piedmont registrant. |
Commercial Renewables
Duke Energy has investments in various renewable energy project entities. Some of these investments was primarily attributableentities are VIEs due to a sustained declineDuke Energy issuing guarantees for debt service and operations and maintenance reserves in market pricing where the wind investments are located, the continued projected net losses for the projectssupport of debt financings. Duke Energy does not consolidate these VIEs because power to direct and a reduction in the projected cash distributions to the class of investment ownedcontrol key activities is shared jointly by Duke Energy.Energy and other owners.
Other VIEs
Duke Energy holds a 50 percent equity interest in Duke-American Transmission Company, LLC (DATC). DATC is considered a VIE due to having insufficient equity at risk to permit DATC to finance itstheir own activities without additional subordinated financial support. The activities that most significantly impact DATC’sDATC's economic performance are the decisions related to investing in existing and 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, andAmerican Transmission Company, LLC, therefore Duke Energy does not consolidate DATC.
Duke Energy hasholds a 40 percent equity interest and a 7.550 percent equity interest in ACP and Sabal TrailPioneer Transmission, LLC (Sabal Trail), respectively. These entities are(Pioneer). Pioneer is considered VIEs as theira VIE due to having insufficient equity is not sufficient to permit the entities to finance their own activities without additional subordinated financial support. The activityactivities that most significantly impacts theimpact Pioneer's economic performance are decisions related to the development of both ACPnew transmission facilities. The power to direct these activities is jointly and Sabal Trail is construction.equally shared by Duke Energy and the other joint venture partner, American Electric Power, therefore Duke Energy does not control these activities and therefore does not consolidate ACP or Sabal Trail. See Note 4, Regulatory Matters, for information related to Duke Energy's additional ownership interest in ACP following the Piedmont acquisition.Pioneer.
OVEC
Duke Energy Ohio’s 9 percent ownership interest in OVEC is considered a non-consolidated VIE. Through its ownership interest in OVEC,VIE due to having insufficient equity to finance their activities without subordinated financial support. As a counterparty to an inter-company power agreement (ICPA), Duke Energy Ohio has a contractual arrangement to buy powerreceive entitlements to capacity and energy from OVEC’s power plants through June 2040. Proceeds from the sale of power by OVEC to2040 commensurate with its power purchase agreement counterparties are designedparticipation ratio, which is equivalent to be sufficient to meet itsDuke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization, and interest expense as well as earn a returnare allocated to counterparties to the ICPA based on equity. Accordingly, thetheir power participation ratio. The value of this contractthe ICPA is subject to variability due to fluctuationsfluctuation in power prices and changes in OVEC’s costsOVEC's cost of business, including costs associated with its 2,256 MW of coal-fired generation capacity. Proposed environmental rulemakingDeterioration in the credit quality, or bankruptcy of one or more parties to the ICPA could increase the costs of OVEC, which would be passed through to Duke Energy Ohio.OVEC. In addition, certain proposed environmental rulemaking could result in future increased cost allocations.
CRC
See discussion under Consolidated VIEs for additional information related to CRC.
Amounts included in Receivables from affiliated companies in the above table for Duke Energy Ohio and Duke Energy Indiana reflect their retained interest in receivables sold to CRC. These subordinated notes held by Duke Energy Ohio and Duke Energy Indiana are stated at fair value. Carrying values of retained interests are determined by allocating carrying value of the receivables between assets sold and interests retained based on relative fair value. The allocated bases of the subordinated notes are not materially different than their face value because (i) the receivables generally turn over in less than two months, (ii) credit losses are reasonably predictable due to the broad customer base and lack of significant concentration, and (iii) the equity in CRC is subordinate to all retained interests and thus would absorb losses first. The hypothetical effect on fair value of the retained interests assuming both a 10 percent and a 20 percent unfavorable variation in credit losses or discount rates is not material due to the short turnover of receivables and historically low credit loss history. Interest accrues to Duke Energy Ohio and Duke Energy Indiana on the retained interests using the acceptable yield method. This method generally approximates the stated rate on the notes since the allocated basis and the face value are nearly equivalent. An impairment charge is recorded against the carrying value of both retained interests and purchased beneficial interest whenever it is determined that an other-than-temporary impairmentOTTI has occurred.
Key assumptions used in estimating fair value are detailed in the following table. |
| | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
|
| Anticipated credit loss ratio | 0.5 | % | | 0.6 | % | | 0.3 | % | | 0.3 | % |
| Discount rate | 1.5 | % | | 1.2 | % | | 1.5 | % | | 1.2 | % |
| Receivable turnover rate | 13.3 | % | | 12.9 | % | | 10.6 | % | | 10.6 | % |
The following table shows the gross and net receivables sold. |
| | | | | | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| (in millions) | September 30, 2016 |
| | December 31, 2015 |
| | September 30, 2016 |
| | December 31, 2015 |
|
| Receivables sold | $ | 217 |
| | $ | 233 |
| | $ | 296 |
| | $ | 260 |
|
| Less: Retained interests | 50 |
| | 47 |
| | 74 |
| | 60 |
|
| Net receivables sold | $ | 167 |
| | $ | 186 |
| | $ | 222 |
| | $ | 200 |
|
|
| | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| | 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Anticipated credit loss ratio | 0.5 | % | | 0.5 | % | | 0.3 | % | | 0.3 | % |
| Discount rate | 1.8 | % | | 1.5 | % | | 1.8 | % | | 1.5 | % |
| Receivable turnover rate | 13.4 | % | | 13.3 | % | | 10.7 | % | | 10.6 | % |
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
The following table shows the gross and net receivables sold. |
| | | | | | | | | | | | | | | |
| | Duke Energy Ohio | | Duke Energy Indiana |
| (in millions) | March 31, 2017 |
| | December 31, 2016 |
| | March 31, 2017 |
| | December 31, 2016 |
|
| Receivables sold | $ | 238 |
| | $ | 267 |
| | $ | 277 |
| | $ | 306 |
|
| Less: Retained interests | 53 |
| | 82 |
| | 69 |
| | 101 |
|
| Net receivables sold | $ | 185 |
| | $ | 185 |
| | $ | 208 |
| | $ | 205 |
|
The following table shows sales and cash flows related to receivables sold. | | | | Duke Energy Ohio | | Duke Energy Indiana | Duke Energy Ohio | | Duke Energy Indiana |
| | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Nine Months Ended | Three Months Ended | | Three Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, | March 31, | | March 31, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| 2017 |
| | 2016 |
| | 2017 |
| | 2016 |
|
| Sales | | | | | | | | | | | | | | | | | | | | | | |
| Receivables sold | $ | 481 |
| | $ | 449 |
| | $ | 1,442 |
| | $ | 1,518 |
| | $ | 722 |
| | $ | 679 |
| | $ | 1,980 |
| | $ | 2,032 |
| $ | 533 |
| | $ | 532 |
| | $ | 664 |
| | $ | 635 |
|
| Loss recognized on sale | 2 |
| | 2 |
| | 7 |
| | 7 |
| | 3 |
| | 3 |
| | 8 |
| | 8 |
| 2 |
| | 3 |
| | 3 |
| | 3 |
|
| Cash flows | | | | | | | | | | | | | | | | | | | | | | |
| Cash proceeds from receivables sold | $ | 468 |
| | $ | 461 |
| | $ | 1,432 |
| | $ | 1,568 |
| | $ | 703 |
| | $ | 692 |
| | $ | 1,958 |
| | $ | 2,074 |
| $ | 559 |
| | $ | 537 |
| | $ | 693 |
| | $ | 643 |
|
| Collection fees received | 1 |
| | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | 1 |
| | 1 |
| |
| Return received on retained interests | 1 |
| | — |
| | 2 |
| | 2 |
| | 2 |
| | 1 |
| | 4 |
| | 4 |
| 1 |
| | 1 |
| | 2 |
| | 1 |
|
Cash flows from sales of receivables are reflected within Operating Activities on Duke Energy Ohio’s and Duke Energy Indiana’s Condensed 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 Condensed 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.
14.13. COMMON STOCK
Basic Earnings Per Share (EPS) is computed by dividing net income attributable to Duke Energy common stockholders, adjusted for distributed and undistributed earnings allocated to participating securities, by the weighted average number of common stockshares outstanding during the period. Diluted EPS is computed by dividing net income attributable to Duke Energy common stockholders, as adjusted for distributed and undistributed earnings allocated to participating securities, by the diluted weighted average number of common stockshares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options and the Equity Forwards,equity forward sale agreements, were exercised or settled. Duke Energy’s participating securities are restricted stock units that are entitled to dividends declared on Duke Energy common stock during the restricted stock unit’s vesting periods.
The following table presents Duke Energy’s basic and diluted EPS calculations and reconciles the weighted average number of common shares outstanding to the diluted weighted average number of common shares outstanding. | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions, except per-share amounts) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| |
| (in millions, except per share amounts) | | 2017 |
| | 2016 |
|
| Income from continuing operations attributable to Duke Energy common stockholders excluding impact of participating securities | $ | 1,053 |
| | $ | 935 |
| | $ | 2,252 |
| | $ | 2,307 |
| $ | 715 |
| | $ | 574 |
|
| Weighted average shares outstanding – basic | 689 |
| | 688 |
| | 689 |
| | 696 |
| 700 |
| | 689 |
|
| Equity Forwards | 2 |
| | — |
| | 1 |
| | — |
| |
| Weighted average shares outstanding – diluted | 691 | | 688 | | 690 | | 696 | 700 | | 689 |
| Earnings per share from continuing operations attributable to Duke Energy common stockholders | | | | | | | | | | |
| Basic | $ | 1.52 |
| | $ | 1.36 |
| | $ | 3.27 |
| | $ | 3.31 |
| $ | 1.02 |
| | $ | 0.83 |
|
| Diluted | $ | 1.52 |
| | $ | 1.36 |
| | $ | 3.26 |
| | $ | 3.31 |
| $ | 1.02 |
| | $ | 0.83 |
|
Potentially dilutive items excluded from the calculation(a) | 2 |
| |
| | 2 | | 2 | 2 | | 2 |
| Dividends declared per common share | $ | 0.855 |
| | $ | 0.825 |
| | $ | 2.505 |
| | $ | 2.42 |
| $ | 0.855 |
| | $ | 0.825 |
|
| |
| (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 Forwards
In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into Equity Forwards with Barclays. The Equity Forwards required Duke Energy to either physically settle the transactions by issuing 10.6 million shares, or net settle in whole or in part through the delivery or receipt of cash or shares. As of September 30, 2016, share dilution resulting from the agreements was determined under the treasury stock method.
On October 5, 2016, following the close of the Piedmont acquisition, Duke Energy physically settled the Equity Forwards in full by delivering 10.6 million shares of common stock in exchange for net cash proceeds of approximately $723 million. The net proceeds were used to finance a portion of the Piedmont acquisition.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
Accelerated Stock Repurchase ProgramEquity Forwards
On April 6, 2015,In March 2016, Duke Energy marketed an equity offering of 10.6 million shares of common stock. In lieu of issuing equity at the time of the offering, Duke Energy entered into equity forward sale agreements with each of Goldman, Sachs & Co. and JPMorgan Chase Bank, National AssociationBarclays (the Dealers) to repurchase a total of $1.5 billion of Duke Energy common stock under an accelerated stock repurchase program (the ASR)Equity Forwards). Duke Energy made payments of $750 million to each of the Dealers and was delivered 16.6 million shares, with a total fair value of $1.275 billion, which represented approximately 85 percent of the total number of shares of Duke Energy common stock expected to be repurchased under the ASR. The company recorded the $1.5 billion payment as a reduction to common stock as of April 6, 2015. In June 2015, the Dealers delivered 3.2 million additional shares toEquity Forwards required Duke Energy to completeeither physically settle the ASR. Approximately 19.8transactions by issuing 10.6 million shares, or net settle in total, were delivered to whole or in part through the delivery or receipt of cash or shares. As of March 31, 2016, share dilution resulting from the agreements was determined under the treasury stock method.
Duke Energy and retired underphysically settled the ASR at an average price of $75.75 per share. The final number of shares repurchased was based uponEquity Forwards in full in October 2016 following the averageclose of the daily volume weighted average stock prices of Duke Energy’s common stock duringPiedmont acquisition. See Note 2 for additional information related to the term of the program, less a discount.Piedmont acquisition.
15.14. STOCK-BASED COMPENSATION
For employee awards, equity classified stock-based compensation cost is measured at the service inception date or the grant date, based on the estimated achievement of certain performance metrics or the fair value of the award, and is recognized as expense or capitalized as a component of property, plant and equipment over the requisite service period.
Pretax stock-based compensation costs, the tax benefit associated with stock-based compensation expense and stock-based compensation costs capitalized are included in the following table. | | | | Three Months Ended | | Nine Months Ended | | Three Months Ended |
| | September 30, | | September 30, | | March 31, |
| (in millions) | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
| | 2017 |
| | 2016 |
|
| Restricted stock unit awards | $ | 8 |
| | $ | 9 |
| | $ | 25 |
| | $ | 29 |
| | $ | 8 |
| | $ | 7 |
|
| Performance awards | 4 |
| | 5 |
| | 14 |
| | 18 |
| | 7 |
| | 5 |
|
| Pretax stock-based compensation cost | $ | 12 |
| | $ | 14 |
| | $ | 39 |
| | $ | 47 |
| | $ | 15 |
| | $ | 12 |
|
| Tax benefit associated with stock-based compensation expense | $ | 5 |
| | $ | 6 |
| | $ | 14 |
| | $ | 18 |
| | $ | 5 |
| | $ | 4 |
|
| Stock-based compensation costs capitalized | — |
| | 1 |
| | 2 |
| | 3 |
| | 1 |
| | 1 |
|
Prior to Duke Energy acquiring Piedmont, Piedmont had an incentive compensation plan for eligible officers and other participants. Piedmont's total stock-based compensation costs were approximately $2 million for the three months ended March 31, 2016.
16.15. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT RETIREMENT PLANS
Duke Energy maintains, and the Subsidiary Registrants participate in, qualified and non-qualified, non-contributory defined benefit retirement plans. The plans cover most U.S. employees using a cash balance formula. Under a cash balance formula, a plan participant accumulates a retirement benefit consisting of pay credits equal to a percentage of current eligible earnings based on age or the combination of age and years of service and interest credits. Certain employees are covered under plans that use a final average earnings formula. Under these average earnings formulas, a plan participant generally accumulates a retirement benefit based on their (i) highest three-year or four-year average earnings, (ii) years of participation or credited service, and (iii) various plan formula provisions (e.g., caps on years of participation or credited service). Duke Energy also maintains, and the Subsidiary Registrants participate in, non-qualified, non-contributory defined benefit retirement plans which cover certain executives. The qualified and non-qualified, non-contributory defined benefit plans are closed to new and rehired non-union and certain unionized employees.
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. The following table includes information related to Duke Energy's contributions to its U.S. qualified defined benefit pension plans. Duke Energy did not make any contributions to its U.S. qualified defined benefit pension plans during the ninethree months ended September 30,March 31, 2017 and 2016. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2015 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Contributions | $ | 143 |
| | $ | 42 |
| | $ | 42 |
| | $ | 21 |
| | $ | 21 |
| | $ | 4 |
| | $ | 9 |
|
Net periodic benefit costs disclosed in the tables below represent the cost of the respective benefit plan for the periods presented. However, portions of the net periodic benefit costs disclosed in the tables below have been capitalized as a component of property, plant and equipment. Amounts presented in the tables below for the Subsidiary Registrants represent the amounts of pension and other post-retirement benefit costs allocated by Duke Energy for employees of the Subsidiary Registrants. Additionally, the Subsidiary Registrants are allocated their proportionate share of pension and post-retirement benefit costs for employees of Duke Energy’s shared services affiliate that provides support to the Subsidiary Registrants. These allocated amounts are included in the governance and shared service costs discussed in Note 98. Duke Energy uses a December 31 measurement date for its defined benefit retirement plan assets and obligations.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
QUALIFIED PENSION PLANS
The following tables include the components of net periodic pension costs for qualified pension plans. | | | | Three Months Ended September 30, 2016 | Three Months Ended March 31, 2017 |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 36 |
| | $ | 12 |
| | $ | 11 |
| | $ | 6 |
| | $ | 4 |
| | $ | 1 |
| | $ | 2 |
| $ | 40 |
| | $ | 12 |
| | $ | 12 |
| | $ | 6 |
| | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 3 |
|
| Interest cost on projected benefit obligation | 83 |
| | 21 |
| | 27 |
| | 12 |
| | 14 |
| | 5 |
| | 7 |
| 82 |
| | 20 |
| | 25 |
| | 12 |
| | 13 |
| | 5 |
| | 7 |
| | 3 |
|
| Expected return on plan assets | (128 | ) | | (35 | ) | | (42 | ) | | (21 | ) | | (21 | ) | | (6 | ) | | (10 | ) | (136 | ) | | (35 | ) | | (43 | ) | | (21 | ) | | (21 | ) | | (7 | ) | | (11 | ) | | (6 | ) |
| Amortization of actuarial loss | 33 |
| | 8 |
| | 14 |
| | 6 |
| | 7 |
| | 1 |
| | 3 |
| 36 |
| | 8 |
| | 14 |
| | 6 |
| | 7 |
| | 1 |
| | 3 |
| | 3 |
|
| Amortization of prior service credit | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | (1 | ) | | — |
| | — |
| (6 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | (1 | ) |
| Other | 2 |
| | 1 |
| | 1 |
| | — |
| | 1 |
| | — |
| | — |
| 2 |
| | — |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 22 |
| | $ | 5 |
| | $ | 10 |
| | $ | 3 |
| | $ | 4 |
| | $ | 1 |
| | $ | 2 |
| $ | 18 |
| | $ | 3 |
| | $ | 8 |
| | $ | 3 |
| | $ | 4 |
| | $ | — |
| | $ | 1 |
| | $ | 2 |
|
| | | | Three Months Ended September 30, 2015 | Three Months Ended March 31, 2016 |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 40 |
| | $ | 13 |
| | $ | 11 |
| | $ | 6 |
| | $ | 5 |
| | $ | 1 |
| | $ | 3 |
| $ | 36 |
| | $ | 12 |
| | $ | 11 |
| | $ | 6 |
| | $ | 5 |
| | $ | 1 |
| | $ | 2 |
| | $ | 3 |
|
| Interest cost on projected benefit obligation | 81 |
| | 21 |
| | 26 |
| | 12 |
| | 14 |
| | 5 |
| | 7 |
| 83 |
| | 21 |
| | 26 |
| | 12 |
| | 14 |
| | 5 |
| | 7 |
| | 2 |
|
| Expected return on plan assets | (129 | ) | | (35 | ) | | (43 | ) | | (20 | ) | | (22 | ) | | (7 | ) | | (10 | ) | (129 | ) | | (35 | ) | | (42 | ) | | (21 | ) | | (21 | ) | | (7 | ) | | (10 | ) | | (6 | ) |
| Amortization of actuarial loss | 44 |
| | 10 |
| | 17 |
| | 8 |
| | 8 |
| | 3 |
| | 3 |
| 33 |
| | 8 |
| | 14 |
| | 6 |
| | 7 |
| | 1 |
| | 3 |
| | 2 |
|
| Amortization of prior service credit | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
| Other | 2 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| 3 |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 34 |
| | $ | 8 |
| | $ | 11 |
| | $ | 6 |
| | $ | 5 |
| | $ | 2 |
| | $ | 3 |
| $ | 22 |
| | $ | 5 |
| | $ | 9 |
| | $ | 3 |
| | $ | 5 |
| | $ | — |
| | $ | 2 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Service cost | $ | 109 |
| | $ | 36 |
| | $ | 32 |
| | $ | 18 |
| | $ | 14 |
| | $ | 3 |
| | $ | 6 |
|
| Interest cost on projected benefit obligation | 249 |
| | 64 |
| | 80 |
| | 37 |
| | 42 |
| | 15 |
| | 21 |
|
| Expected return on plan assets | (386 | ) | | (106 | ) | | (126 | ) | | (62 | ) | | (63 | ) | | (20 | ) | | (31 | ) |
| Amortization of actuarial loss | 99 |
| | 24 |
| | 41 |
| | 17 |
| | 21 |
| | 3 |
| | 9 |
|
| Amortization of prior service credit | (12 | ) | | (6 | ) | | (3 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
|
| Other | 6 |
| | 2 |
| | 2 |
| | 1 |
| | 1 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 65 |
| | $ | 14 |
| | $ | 26 |
| | $ | 10 |
| | $ | 14 |
| | $ | 1 |
| | $ | 5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2015 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Service cost | $ | 119 |
| | $ | 38 |
| | $ | 33 |
| | $ | 18 |
| | $ | 15 |
| | $ | 3 |
| | $ | 8 |
|
| Interest cost on projected benefit obligation | 244 |
| | 62 |
| | 78 |
| | 36 |
| | 41 |
| | 14 |
| | 21 |
|
| Expected return on plan assets | (387 | ) | | (104 | ) | | (127 | ) | | (61 | ) | | (66 | ) | | (20 | ) | | (31 | ) |
| Amortization of actuarial loss | 131 |
| | 30 |
| | 51 |
| | 25 |
| | 24 |
| | 8 |
| | 10 |
|
| Amortization of prior service credit | (11 | ) | | (6 | ) | | (3 | ) | | (1 | ) | | (1 | ) | | — |
| | — |
|
| Other | 6 |
| | 2 |
| | 2 |
| | 1 |
| | 1 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 102 |
| | $ | 22 |
| | $ | 34 |
| | $ | 18 |
| | $ | 14 |
| | $ | 5 |
| | $ | 8 |
|
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
NON-QUALIFIED PENSION PLANS
The following tables include the components of netNet periodic pension costs for non-qualified pension plans were not material for registrants with non-qualified pension costs.the three months ended March 31, 2017 and 2016. |
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 4 |
| | — |
| | 2 |
| | — |
| | — |
|
| Amortization of actuarial loss | 2 |
| | — |
| | 1 |
| | 1 |
| | 1 |
|
| Amortization of prior service credit | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 6 |
| | $ | — |
| | $ | 3 |
| | $ | 1 |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2015 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 3 |
| | — |
| | 1 |
| | — |
| | 1 |
|
| Amortization of actuarial loss | 2 |
| | — |
| | 1 |
| | — |
| | — |
|
| Net periodic pension costs | $ | 6 |
| | $ | — |
| | $ | 2 |
| | $ | — |
| | $ | 1 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
|
| Service cost | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on projected benefit obligation | 11 |
| | 1 |
| | 4 |
| | 1 |
| | 1 |
|
| Amortization of actuarial loss | 6 |
| | — |
| | 2 |
| | 1 |
| | 1 |
|
| Amortization of prior service credit | (1 | ) | | — |
| | — |
| | — |
| | — |
|
| Net periodic pension costs | $ | 18 |
| | $ | 1 |
| | $ | 6 |
| | $ | 2 |
| | $ | 2 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2015 |
| | | | 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 | 10 |
| | 1 |
| | 3 |
| | 1 |
| | 2 |
|
| Amortization of actuarial loss | 5 |
| | — |
| | 2 |
| | — |
| | 1 |
|
| Net periodic pension costs | $ | 17 |
| | $ | 1 |
| | $ | 6 |
| | $ | 1 |
| | $ | 3 |
|
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 set forth 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 co-payments.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
The following tables include the components of net periodic other post-retirement benefit costs. | | | | Three Months Ended September 30, 2016 | Three Months Ended March 31, 2017 |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | — |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 9 |
| | 2 |
| | 4 |
| | 2 |
| | 3 |
| | — |
| | 1 |
| 9 |
| | 2 |
| | 4 |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
|
| Expected return on plan assets | (2 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | — |
| | — |
| (3 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 2 |
| | — |
| | 5 |
| | 3 |
| | 2 |
| | (1 | ) | | — |
| 2 |
| | (1 | ) | | 5 |
| | 3 |
| | 2 |
| | — |
| | — |
| | — |
|
| Amortization of prior service credit | (35 | ) | | (4 | ) | | (26 | ) | | (16 | ) | | (8 | ) | | — |
| | (1 | ) | (29 | ) | | (2 | ) | | (21 | ) | | (14 | ) | | (8 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (26 | ) | | $ | (4 | ) | | $ | (17 | ) | | $ | (11 | ) | | $ | (3 | ) | | $ | (1 | ) | | $ | — |
| |
| Net periodic other post-retirement benefit | | $ | (20 | ) | | $ | (3 | ) | | $ | (12 | ) | | $ | (9 | ) | | $ | (4 | ) | | $ | — |
| | $ | — |
| | $ | — |
|
| | | | Three Months Ended September 30, 2015 | Three Months Ended March 31, 2016 |
| | | | 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 |
| Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Service cost | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 9 |
| | 2 |
| | 4 |
| | 2 |
| | 2 |
| | — |
| | 1 |
| 8 |
| | 2 |
| | 4 |
| | 2 |
| | 2 |
| | — |
| | 1 |
| | — |
|
| Expected return on plan assets | (3 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| (3 | ) | | (2 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss | 6 |
| | — |
| | 7 |
| | 5 |
| | 3 |
| | — |
| | — |
| |
| Amortization of actuarial loss (gain) | | 1 |
| | (1 | ) | | 5 |
| | 3 |
| | 2 |
| | — |
| | (1 | ) | | — |
|
| Amortization of prior service credit | (35 | ) | | (4 | ) | | (26 | ) | | (17 | ) | | (9 | ) | | — |
| | — |
| (35 | ) | | (3 | ) | | (26 | ) | | (17 | ) | | (9 | ) | | — |
| | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (22 | ) | | $ | (4 | ) | | $ | (15 | ) | | $ | (10 | ) | | $ | (4 | ) | | $ | — |
| | $ | 1 |
| |
| Net periodic other post-retirement benefit | | $ | (28 | ) | | $ | (4 | ) | | $ | (17 | ) | | $ | (12 | ) | | $ | (5 | ) | | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Service cost | $ | 2 |
| | $ | — |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 26 |
| | 6 |
| | 11 |
| | 6 |
| | 6 |
| | 1 |
| | 3 |
|
| Expected return on plan assets | (9 | ) | | (6 | ) | | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) |
| Amortization of actuarial loss (gain) | 5 |
| | (2 | ) | | 16 |
| | 9 |
| | 7 |
| | (2 | ) | | (1 | ) |
| Amortization of prior service credit | (106 | ) | | (10 | ) | | (77 | ) | | (50 | ) | | (26 | ) | | — |
| | (1 | ) |
| Net periodic other post-retirement benefit costs | $ | (82 | ) | | $ | (12 | ) | | $ | (50 | ) | | $ | (35 | ) | | $ | (13 | ) | | $ | (1 | ) | | $ | — |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2015 |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Service cost | $ | 4 |
| | $ | 1 |
| | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Interest cost on accumulated post-retirement benefit obligation | 27 |
| | 6 |
| | 11 |
| | 6 |
| | 5 |
| | 1 |
| | 3 |
|
| Expected return on plan assets | (9 | ) | | (6 | ) | | — |
| | — |
| | — |
| | — |
| | — |
|
| Amortization of actuarial loss (gain) | 19 |
| | (1 | ) | | 21 |
| | 14 |
| | 8 |
| | — |
| | (1 | ) |
| Amortization of prior service credit | (105 | ) | | (11 | ) | | (77 | ) | | (50 | ) | | (25 | ) | | — |
| | — |
|
| Net periodic other post-retirement benefit costs | $ | (64 | ) | | $ | (11 | ) | | $ | (44 | ) | | $ | (30 | ) | | $ | (12 | ) | | $ | 1 |
| | $ | 2 |
|
DEFINED CONTRIBUTION RETIREMENT PLANS
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC
Combined Notes to Condensed Consolidated Financial Statements – (Continued)
(Unaudited)
EMPLOYEE SAVINGS PLAN
Duke Energy sponsors, and the Subsidiary Registrants participate in, an employee savings planplans that coverscover substantially all U.S. employees. Most employees participate in a matching contribution formula where Duke Energy provides a matching contribution generally equal to 100 percent of employee before-tax and Roth 401(k) contributions of up to 6 percent of eligible pay per pay period. Dividends on Duke Energy shares held by the savings plan are charged to retained earnings when declared and shares held in the plan are considered outstanding in the calculation of basic and diluted earnings per share.
For new and rehired non-union and certain unionized employees who are not eligible to participate in Duke Energy’s defined benefit plans, an additional employer contribution of 4 percent of eligible pay per pay period, subject to a three-year vesting requirement, is provided to the employee’s savings plan account.
The following table presents employer contributions made by Duke Energy and expensed by the Subsidiary Registrants. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
|
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
|
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
|
| Three Months Ended September 30, | | | | | | | | | | |
| 2016 | $ | 39 |
| | $ | 13 |
| | $ | 12 |
| | $ | 8 |
| | $ | 3 |
| | $ | 1 |
| | $ | 2 |
|
| 2015 | 34 |
| | 11 |
| | 10 |
| | 7 |
| | 3 |
| | — |
| | 1 |
|
| Nine Months Ended September 30, | | | | | | | | | | |
| 2016 | $ | 130 |
| | $ | 44 |
| | $ | 39 |
| | $ | 27 |
| | $ | 11 |
| | $ | 3 |
| | $ | 6 |
|
| 2015 | 120 |
| | 40 |
| | 36 |
| | 26 |
| | 10 |
| | 2 |
| | 5 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Duke |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Progress |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | Carolinas |
| | Energy |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
| Three Months Ended March 31, | | | | | | | | | | | | | | | |
| 2017 | $ | 65 |
| | $ | 22 |
| | $ | 18 |
| | $ | 13 |
| | $ | 5 |
| | $ | 1 |
| | $ | 3 |
| | $ | 2 |
|
| 2016 | 52 |
| | 18 |
| | 15 |
| | 11 |
| | 4 |
| | 1 |
| | 2 |
| | 2 |
|
MONEY PURCHASE PENSION PLAN 17. INCOME TAXES
TAXES ON FOREIGN EARNINGS
As of December 31, 2015, Duke Energy's intention was to indefinitely reinvest foreign earnings of International Energy earned after December 31, 2014. In February 2016, Duke Energy announced it had initiated a process to divest the International Energy business segment, excluding the investment in NMC,provides, and in October 2016 Duke Energy entered sales agreements to complete the divestiture. Accordingly, Duke Energy no longer intends to indefinitely reinvest the undistributed earnings of International Energy. See Note 2 for additional information on the sale.
This changePiedmont participates in, the Company's intent, combined with the extension of bonus depreciation by Congress in late 2015, allows Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with historic unremitted foreign earnings by approximately $95 million for the nine months ended September 30, 2016.
EFFECTIVE TAX RATES
The effective tax rates from continuing operations for each of the Duke Energy Registrants are included in the following table. |
| | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2016 |
| | 2015 |
| | 2016 |
| | 2015 |
|
| Duke Energy | 32.9 | % | | 30.9 | % | | 30.0 | % | | 32.5 | % |
| Duke Energy Carolinas | 34.3 | % | | 36.5 | % | | 34.4 | % | | 36.3 | % |
| Progress Energy | 32.8 | % | | 25.0 | % | | 34.7 | % | | 31.8 | % |
| Duke Energy Progress | 31.4 | % | | 34.4 | % | | 33.5 | % | | 35.3 | % |
| Duke Energy Florida | 36.0 | % | | 30.1 | % | | 37.0 | % | | 35.2 | % |
| Duke Energy Ohio | 36.8 | % | | 39.3 | % | | 32.5 | % | | 37.6 | % |
| Duke Energy Indiana | 35.2 | % | | 37.0 | % | | 34.0 | % | | 36.6 | % |
The increase in the effective tax rate for Duke Energy for the three months ended September 30, 2016, is primarily due to audit adjustments and the tax benefit related to a manufacturing deduction in 2015Money Purchase Pension (MPP) plan, which is now limited duea defined contribution pension plan that allows employees to taxable income. The decrease in the effective tax rate for Duke Energy for the nine months ended September 30, 2016, is primarily due to lower income taxes on foreign earnings due todirect investments and assume risk of investment returns. In January 2017, a more efficient utilization of foreign tax credits. Refer to "Taxes on Foreign Earnings" above for additional information.
The decrease in the effective tax rate for Duke Energy Carolinas for the three months ended September 30, 2016, is primarily due to favorable tax return true-ups and a favorable change$2 million contribution was made to the manufacturing deduction. The decrease in the effective tax rate for Duke Energy Carolinas for the nine months ended September 30, 2016, is primarily due to a favorable state resolution related to prior year tax returns and favorable tax return true-ups.MPP plan.
The increase in the effective tax rate for Progress Energy for the three and nine months ended September 30, 2016, is primarily due to state tax benefits from legal entity restructuring in 2015 and the release of tax reserves in 2015 due to expired statutes.
PART I
DUKE ENERGY CORPORATION – DUKE ENERGY CAROLINAS, LLC – PROGRESS ENERGY, INC. –
DUKE ENERGY PROGRESS, LLC – DUKE ENERGY FLORIDA, LLC – DUKE ENERGY OHIO, INC. – DUKE ENERGY INDIANA, LLC – PIEDMONT NATURAL GAS COMPANY, INC.
Combined Notes to Condensed Consolidated Financial Statements – (Unaudited) – (Continued)
(Unaudited)
16. INCOME TAXES
EFFECTIVE TAX RATES
The decreaseeffective tax rates from continuing operations for each of the Duke Energy Registrants are included in the effective tax rate for Duke Energy Progress for the three and nine months ended September 30, 2016, is primarily due to the impact of tax return true-ups.following table. |
| | | | | |
| | Three Months Ended |
| | March 31, |
| | 2017 |
| | 2016 |
|
| Duke Energy | 32.4 | % | | 30.4 | % |
| Duke Energy Carolinas | 35.4 | % | | 34.1 | % |
| Progress Energy | 34.1 | % | | 36.7 | % |
| Duke Energy Progress | 34.1 | % | | 35.4 | % |
| Duke Energy Florida | 36.6 | % | | 37.9 | % |
| Duke Energy Ohio | 35.4 | % | | 26.9 | % |
| Duke Energy Indiana | 39.3 | % | | 30.2 | % |
| Piedmont | 37.9 | % | | 38.0 | % |
The increase in the effective tax rate (ETR) for Duke Energy for the three months ended March 31, 2017, is primarily due to lower investment tax credits due to lower solar investments in the current year, the inclusion of Piedmont's earnings at a higher ETR, and a tax charge related to the implementation of a new accounting standard related to stock compensation; partially offset by higher production tax credits related to wind projects placed in service. See Note 1 for additional information on the new accounting standard.
The increase in the ETR for Duke Energy Carolinas for the three months ended March 31, 2017, is primarily due to a favorable state resolution booked in 2016 related to prior year tax returns.
The decrease in the ETR for Progress Energy for the three months ended March 31, 2017, is primarily due to higher AFUDC equity and the amortization of excess North Carolina deferred tax.
The decrease in the ETR for Duke Energy Progress for the three months ended March 31, 2017, is primarily due to the amortization of excess North Carolina deferred tax.
The decrease in the ETR for Duke Energy Florida for the three and nine months ended September 30, 2016,March 31, 2017, is primarily due to a release of tax reserves in 2015 due to expired tax statutes.higher AFUDC equity.
The decreaseincrease in the effective tax rateETR for Duke Energy Ohio for the three months ended September 30, 2016,March 31, 2017, is primarily due to an increase in AFUDC equity. The decreaseimmaterial out of period adjustment in the effective tax rate for the nine months ended September 30, 2016, is primarily due to a favorable adjustmentprior year related to prior period depreciation and otherdeferred tax balances associated with property, plant and equipment.
The decreaseincrease in the effective tax rateETR for Duke Energy Indiana for the three months ended September 30, 2016,March 31, 2017, is primarily due to income tax levelization. The decreasean immaterial out of period adjustment in the effective tax rate for Duke Energy Indiana for the nine months ended September 30, 2016, is primarily due to a favorable adjustmentprior year related to prior period depreciation and otherdeferred tax balances associated with property, plant and equipment.
TAXES ON FOREIGN EARNINGS
As of December 31, 2015, Duke Energy's intention was to indefinitely reinvest any future undistributed foreign earnings earned after December 31, 2014. In February 2016, Duke Energy announced it had initiated a process to divest the International Disposal Group and, accordingly, no longer intended to indefinitely reinvest post-2014 undistributed foreign earnings. This change in the company's intent, combined with the extension of bonus depreciation by Congress in late 2015, allowed Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with historical unremitted foreign earnings by approximately $95 million for the three months ended March 31, 2016. Due to the classification of the International Disposal Group as discontinued operations, income tax amounts related to the International Disposal Group's foreign earnings are presented within Income from Discontinued Operations, net of tax on the Condensed Consolidated Statements of Operations. See Note 2 for additional information related to the sale of the International Disposal Group.
18.17. SUBSEQUENT EVENTS
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages across Florida and the Carolinas. Duke Energy has not completed the final accumulation of total estimated incremental storm restoration costs incurred. Duke Energy Florida intends to charge storm restoration costs to an FPSC approved storm reserve. Duke Energy Progress, given the magnitude of the storm, intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in its next base rate cases.
For information on additional subsequent events related to acquisitions and dispositions, regulatory matters, commitments and contingencies, debt and credit facilities, asset retirement obligations and common stockvariable interest entities see Notes 2, 4, 5, 6 7 and 14,12, respectively.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following combined Management’s Discussion and Analysis of Financial Condition and Results of Operations is separately filed by Duke Energy Corporation (collectively with its subsidiaries, Duke Energy) and Duke Energy Carolinas, LLC (Duke Energy Carolinas), Progress Energy, Inc. (Progress Energy), Duke Energy Progress, LLC (Duke Energy Progress), Duke Energy Florida, LLC (Duke Energy Florida), Duke Energy Ohio, Inc. (Duke Energy Ohio) and, Duke Energy Indiana, LLC (Duke Energy Indiana) and Piedmont Natural Gas Company, Inc. (Piedmont) (collectively referred to as the Subsidiary Registrants). However, none of the registrants make any representation as to information related solely to Duke Energy or the Subsidiary Registrants of Duke Energy other than itself.
DUKE ENERGY
Duke Energy is an energy company headquartered in Charlotte, North Carolina. Duke Energy operates in the United States (U.S.) primarily through its wholly owned subsidiaries, Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Ohio, and Duke Energy Indiana as well as in Latin America.
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 includes financial information prepared in accordance with generally accepted accounting principles (GAAP) in the U.S., as well as certain non-GAAP financial measures such as adjusted earnings, adjusted diluted earnings per share (EPS) and adjusted segment income, discussed below. Generally, a non-GAAP financial measure is a numerical measure Piedmont's results of financial performance, financial position or cash flows that excludes (or includes) amounts thatoperations are included in (or excluded from)Duke Energy's results for the most directly comparable measure calculated and presentedthree months ended March 31, 2017, but not for the three months ended March 31, 2016, as Piedmont's earnings are only included in accordance with GAAP. The non-GAAP financial measures should be viewed as a supplementDuke Energy's consolidated results subsequent to and not a substitutethe acquisition date. See below for financial measures presented in accordance with GAAP. Non-GAAP measures presented herein may not be comparable to similarly titled measures used by other companies.additional information regarding the acquisition.
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30, 2016,March 31, 2017, and with Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015.2016, Piedmont's Annual Report on Form 10-K for the year ended October 31, 2016, and the transition report filed by Piedmont on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016 to December 31, 2016.
Executive Overview
Acquisition of Piedmont Natural Gas
On October 3, 2016, Duke Energy completed the acquisition contemplated byof Piedmont for a total cash purchase price of $5.0 billion and assumed Piedmont's existing long-term debt, which had a fair value of approximately $2.0 billion at the Agreement and Plan of Merger (Merger Agreement) with Piedmont Natural Gas Company, Inc. (Piedmont), a North Carolina corporation primarily engaged in regulated natural gas distribution to residential, commercial, industrial and power generation customers in portions of North Carolina, South Carolina and Tennessee. As a resulttime of the acquisition. The acquisition Piedmont became a wholly owned subsidiary of Duke Energy.
Duke Energy’s acquisition of Piedmont provides a foundation for establishingDuke Energy to establish a broader, long-term strategic natural gas infrastructure platform within Duke Energy, complementing theto complement its existing natural gas pipeline investments and regulated natural gas business in the Midwest. Duke Energy’s business risk profile is expected to improve over time due to the increased proportion of the business that is regulated. Additionally, cost savings, efficiencies, and other benefits are expected from combined operations.
Duke Energy acquired Piedmont for approximately $5.0 billion in cashincurred pretax nonrecurring transaction and assumption of Piedmont's existing long-term debt, which had an estimated fair value of approximately $2.0 billion at the time of the acquisition. The excess of the purchase price over the estimated fair value of Piedmont's assets and liabilities onintegration costs associated with the acquisition date will be recorded as goodwill. Duke Energy estimatesof $16 million and $101 million for the transaction will result in incremental goodwillthree months ended March 31, 2017 and 2016, respectively. The 2016 amount includes $100 million of approximately $3.4 billion.
Duke Energy financed the transaction with a combination of debt, equity issuances and other cash sources. Financings to fund the transaction included $3.75 billion of long-term debt issued in August 2016, $750 million borrowed under a short-term loan facility (Term Loan Facility)Interest Expense, which was driven by unrealized losses on September 30, 2016, as well as the issuance of 10.6 million shares of common stock in October 2016. The share issuance resulted in net cash proceeds of approximately $723 million. See Note 6 to the Condensed Consolidated Financial Statements, "Debt and Credit Facilities," for additional informationforward-starting interest rate swaps related to the debt issuance and Note 14, "Common Stock," for additional information related to the equity issuance.
acquisition financing. Duke Energy anticipates recording charges or reductions in revenue, as applicable, of approximately $150 million to $175 million in the fourth quarter of 2016 associated with the acquisition. These charges include commitments made in conjunction with the transaction, such as charitable contributions and a one-time bill credit to Piedmont customers prior to December 2016, as well as professional fees and severance. Duke Energy also expects to incur system integration and other acquisition-related transition costs, primarily through 2018, that are necessary to achieve certain anticipated cost savings, efficiencies and other benefits.
See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information regarding the Piedmont acquisition, and Note 4 , "Regulatory Matters," for additional information regarding Duke Energy and Piedmont's joint investment in Atlantic Coast Pipeline, LLC (ACP).transaction.
Sale of International Energy
On October 10,In December 2016, Duke Energy reached agreements to sell the International Energy business segment, excluding the equity method investment in NMC (the Internationalsold its Latin American generation businesses (International Disposal Group) in two separate transactions withfor a combined enterprise value of approximately $2.4 billion. IncludingDuke Energy sold its Brazilian business to China Three Gorges for approximately $1.2 billion, including the impactassumption of debt, and its remaining Central and South American businesses to be assumed byI Squared Capital in a deal also valued at approximately $1.2 billion, including the buyers, working capital and other adjustments as well as local in-country taxes, Duke Energy expects theassumption of debt. The transactions to generate availablegenerated cash proceeds of between $1.7 billion and $1.9 billion, excluding transaction costs. The proceeds are expected to becosts, which were primarily used to reduce Duke Energy holding company debt. Existing favorable tax attributes will resultresulted in no immediate U.S. federal-level cash tax impacts.
Upon classificationDue to the transactions, results of the International Disposal Group as held for sale andare classified as discontinued operations in the fourth quarter of 2016, Duke Energy expectsoperations. See Note 2 to record an estimated pretax impairment charge of approximately $325 million to $375 million, primarily due to the cumulative foreign currency translation losses classified as accumulated other comprehensive loss. The transactions are expected to close by early 2017.
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, in the second quarter of 2016, 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 is included within Impairment Charges on the Condensed Consolidated Financial Statements, of Operations"Acquisitions and Dispositions" for the nine months ended September 30, 2016, and represents the excess of carrying value over the estimated fair value of the assets. The fair value of the assets was primarily determined from the income approach using discounted cash flows but also considered market information obtained in 2016.additional information.
Future Operating Segments
Due to the Piedmont acquisition and the agreements to sell the International Disposal Group, the chief operating decision maker changed how the business will be managed beginning in the fourth quarter of 2016. The financial reporting structure has been realigned to include the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure, and Commercial Renewables.
Electric Utilities and Infrastructure will be comprised of the regulated electric utilities in the Carolinas, Florida and the Midwest. This segment will also include the commercial transmission infrastructure investments.
Gas Utilities and Infrastructure will contain Piedmont, Duke Energy's local distribution companies in Ohio and Kentucky, and gas storage and pipeline investments.
Commercial Renewables will primarily include the company's non-regulated utility scale wind and solar generation assets.
International Energy will remain a segment until the divestiture is complete, although results of the equity method investment in NMC will be recast to Other in the fourth quarter of 2016.
Change In Segment Income
During the first quarter of 2016, the Duke Energy chief operating decision maker began to evaluate interim period segment performance based on financial information that includes the impact of income tax levelization within segment income. This represents a change from the previous measure, where the interim period impacts of income tax levelization were included within Other, and therefore excluded from segment income. As a result, prior period segment results presented have been recast to conform to this change.
Results of Operations
In this section, Non-GAAP Measures
Management’s Discussion and Analysis includes financial information prepared in accordance with generally accepted accounting principles (GAAP) in the U.S., as well as certain non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as a supplement to, and not a substitute for, financial measures presented in accordance with GAAP. Non-GAAP measures presented may not be comparable to similarly titled measures used by other companies because other companies may not calculate the measures in the same manner.
Duke Energy provides analysis and discussion of earnings and factors affecting earnings on both a GAAP and non-GAAP basis.
Managementmanagement evaluates financial performance in part based on non-GAAP financial measures, including adjusted earnings and adjusted diluted EPS. These itemsAdjusted earnings and adjusted diluted EPS represent income from continuing operations net of income (loss) attributable to noncontrolling interestsDuke Energy, adjusted for the dollar and per-shareper share impact of special items. SpecialAs discussed below, special items represent certain charges and credits, which management believes are not indicative of Duke Energy's ongoing performance, as discussed below. performance.
Management believes the presentation of adjusted earnings and adjusted diluted EPS provides useful information to investors, as it provides them with an additional relevant comparison of Duke Energy’s performance across periods. Management uses these non-GAAP financial measures for planning and forecasting and for reporting financial results to the Duke Energy Board of Directors, employees, stockholders, analysts and investors concerning Duke Energy’s financial performance.investors. Adjusted diluted EPS is also used as a basis for employee incentive bonuses. The most directly comparable GAAP measures for adjusted earnings and adjusted diluted EPS are Net Income Attributable to Duke Energy Corporation (GAAP Reported Earnings) and Diluted EPS Attributable to Duke Energy Corporation common stockholders.stockholders (GAAP Reported EPS), respectively.
Special items included in the periods presented include the following:following items, which management believes do not reflect ongoing costs:
Costs to achieve mergers and International impairmentAchieve Mergers represent charges that result from potential or completed strategic acquisitions and divestitures that do not reflect ongoing costs.acquisitions.
Cost savings initiativesSavings Initiatives represents severance charges related to company-wide initiatives, excluding merger integration, to standardize processes and systems, leverage technology and workforce optimization, which are not representative of ongoing costs.optimization.
Commercial Renewables Impairment represents an other-than-temporary impairment of certain equity method investments. Management believes the impairment does not reflect an ongoing cost.
Edwardsport Settlement and Ash Basin Settlement represent charges related to settlement agreements with regulators and other governmental entities and do not represent ongoing costs.
Midwest generation operations represents theAdjusted earnings also include operating results of the nonregulated Midwest generation business and Duke Energy Retail Sales (collectively, the Midwest GenerationInternational Disposal Group),Group, which have been classified as discontinued operations. Management believes inclusion of the Midwest Generationoperating results of the Disposal Group's operating resultsGroup within adjusted earnings and adjusted diluted EPS results in a better reflection of Duke Energy's financial performance during the period.
Management evaluates segment performance based on segment income. Segment income is defined as income from continuing operations netReconciliation of income attributableGAAP Reported Amounts to noncontrolling interests. Segment income includes intercompany revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements. Management also uses adjusted segment income as a measure of historical and anticipated future segment performance. Adjusted segment income is aAmounts
The following table reconciles non-GAAP financial measure, as it is based upon segment income adjusted for special items, which are discussed above. Management believes the presentation of adjusted segment income provides useful informationmeasures to investors, as it provides them with an additional relevant comparison of a segment’s performance across periods. Thetheir most directly comparable GAAP measure for adjusted segment income is segment income.
measures.Duke Energy’s adjusted earnings, adjusted diluted EPS, and adjusted segment income may not be comparable to similarly titled measures of another company because other entities may not calculate the measures in the same manner.
See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments,” for a discussion of Duke Energy’s segment structure.
|
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2017 | | 2016 |
| (in millions, except per-share amounts) | Earnings | | EPS | | Earnings | | EPS |
| GAAP Reported Earnings/GAAP Reported EPS | $ | 716 |
| | $ | 1.02 |
| | $ | 694 |
| | $ | 1.01 |
|
| Adjustments to Reported: | | | | | | | |
Costs to Achieve Mergers(a) | 10 |
| | 0.02 |
| | 74 |
| | 0.11 |
|
Cost Savings Initiatives(b) | — |
| | — |
| | 12 |
| | 0.02 |
|
Discontinued Operations(c) | — |
| | — |
| | (3 | ) | | (0.01 | ) |
| Adjusted Earnings/Adjusted Diluted EPS | $ | 726 |
| | $ | 1.04 |
| | $ | 777 |
| | $ | 1.13 |
|
| |
| (a) | Net of tax of $6 million in 2017 and $46 million in 2016. |
| |
| (b) | Net of tax of $8 million in 2016. |
| |
| (c) | The 2016 amount represents GAAP reported Income from Discontinued Operations, less the International Disposal Group operating results, which are included in adjusted earnings. |
Executive Overview
Three Months Ended September 30, 2016March 31, 2017 as compared to September 30, 2015March 31, 2016
GAAP Reported EPS attributable to Duke Energy Corporation common stockholders (Reported EPS) was $1.70$1.02 for the thirdfirst quarter of 20162017 compared to $1.35$1.01 for the thirdfirst quarter of 2015.2016. The increase in GAAP Reported EPS was driven by higher retail revenues duethe inclusion of Piedmont's earnings, lower costs to more favorable weather, favorable tax adjustments related to previously disposed businesses, and a chargeachieve mergers including losses in the prior year related to the Edwardsport settlement, partially offset by higheron forward-starting interest expenserate swaps related to the Piedmont acquisition financing, including losses on interest rate swaps.as well as lower operations and maintenance expense at Electric Utilities and Infrastructure; partially offset by warm winter weather in the current year and the absence of the International Disposal Group's earnings.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s thirdfirst quarter 20162017 adjusted diluted EPS was $1.68$1.04 compared to $1.47$1.13 for the thirdfirst quarter of 2015.2016.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2016 |
| (in millions, except per-share amounts) | Regulated Utilities |
| | International Energy |
| | Commercial Portfolio |
| | Total Reportable Segments |
| | Other |
| | Discontinued Operations |
| | Duke Energy |
| | Per Diluted Share |
|
| Reported Net Income Attributable to Duke Energy Corporation/Reported EPS | $ | 1,200 |
| | $ | 64 |
| | $ | (21 | ) | | $ | 1,243 |
| | $ | (189 | ) | | $ | 122 |
| | $ | 1,176 |
| | $ | 1.70 |
|
Costs to achieve, mergers(a) | — |
| | — |
| | — |
| | — |
| | 52 |
| | — |
| | 52 |
| | 0.07 |
|
Cost savings initiatives(b) | — |
| | — |
| | — |
| | — |
| | 12 |
| | — |
| | 12 |
| | 0.02 |
|
Commercial Renewables Impairment(c) | — |
| | — |
| | 45 |
| | 45 |
| | — |
| | — |
| | 45 |
| | 0.07 |
|
| Discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
| | (122 | ) | | (122 | ) | | (0.18 | ) |
| Adjusted earnings/Adjusted EPS | $ | 1,200 |
| | $ | 64 |
| | $ | 24 |
| | $ | 1,288 |
| | $ | (125 | ) | | $ | — |
| | $ | 1,163 |
| | $ | 1.68 |
|
| |
(a) | Net of $32 million tax benefit. |
| |
(b) | Net of $7 million tax benefit. Primarily consists of severance costs. |
| |
(c) | Net of $26 million tax benefit. Impairment charge related to certain equity method investments. See Note 13 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for additional information. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, 2015 |
| (in millions, except per-share amounts) | Regulated Utilities |
| | International Energy |
| | Commercial Portfolio |
| | Total Reportable Segments |
| | Other |
| | Discontinued Operations |
| | Duke Energy |
| | Per Diluted Share |
|
| Reported Net Income Attributable to Duke Energy Corporation/Reported EPS | $ | 905 |
| | $ | 69 |
| | $ | 8 |
| | $ | 982 |
| | $ | (45 | ) | | $ | (5 | ) | | $ | 932 |
| | $ | 1.35 |
|
Costs to achieve, Progress Energy merger(a) | — |
| | — |
| | — |
| | — |
| | 15 |
| | — |
| | 15 |
| | 0.02 |
|
Edwardsport settlement(b) | 56 |
| | — |
| | — |
| | 56 |
| | — |
| | — |
| | 56 |
| | 0.08 |
|
Ash basin settlement(c) | 4 |
| | — |
| | — |
| | 4 |
| | — |
| | — |
| | 4 |
| | 0.01 |
|
| Economic hedges (mark-to-market) | — |
| | — |
| | (1 | ) | | (1 | ) | | — |
| | | | (1 | ) | | — |
|
| Discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
| | 5 |
| | 5 |
| | 0.01 |
|
| Adjusted earnings/Adjusted EPS | $ | 965 |
| | $ | 69 |
| | $ | 7 |
| | $ | 1,041 |
| | $ | (30 | ) | | $ | — |
| | $ | 1,011 |
| | $ | 1.47 |
|
| |
(a) | Net of $9 million tax benefit. |
| |
(b) | Net of $34 million tax benefit. |
| |
(c) | Net of $3 million tax benefit. |
The increasedecrease in adjusted earnings for the three months ended September 30, 2016,March 31, 2017, compared to the same period in 2015,2016, was primarily due to:
Higher regulatedThe prior year operating results due to warmer weather in the current year, higher retail volumes and effective cost control efforts driving down operating expenses; as well as
Higher Commercial Portfolio earnings driven by additional wind farms placed in service and improved wind production.
Partially offset by:
The impact of a higher effective income tax rate.
Nine Months Ended September 30, 2016 as compared to September 30, 2015
Duke Energy's Reported EPS was $3.44 for the nine months ended September 30, 2016, compared to $3.36 for the nine months ended September 30, 2015. Reported EPS was higher due to favorable tax adjustments on previously disposed businesses, lower operations and maintenance expense at Regulated Utilities driven by cost control efforts, higher revenues from rider recoveries, and a favorable tax adjustment at International Energy. These favorable results were partially offset by an impairment of certain assets in Central America and higher costs to achieve mergers, including losses on interest rate swaps related to the Piedmont acquisition financing.
As discussed above, management also evaluates financial performance based on adjusted diluted EPS. Duke Energy’s adjusted diluted EPS was $3.88 for the nine months ended September 30, 2016, compared to $3.66 for the nine months ended September 30, 2015.
The following table reconciles non-GAAP measures, including adjusted diluted EPS, to their most directly comparable GAAP measures. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2016 |
| (in millions, except per-share amounts) | Regulated Utilities |
| | International Energy |
| | Commercial Portfolio |
| | Total Reportable Segments |
| | Other |
| | Discontinued Operations |
| | Duke Energy |
| | Per Diluted Share |
|
| Net Income Attributable to Duke Energy Corporation/Reported EPS | $ | 2,613 |
| | $ | 85 |
| | $ | 20 |
| | $ | 2,718 |
| | $ | (463 | ) | | $ | 124 |
| | $ | 2,379 |
| | $ | 3.44 |
|
Costs to achieve, mergers(a) | — |
| | — |
| | — |
| | — |
| | 195 |
| | — |
| | 195 |
| | 0.28 |
|
International impairment(b) | — |
| | 145 |
| | — |
| | 145 |
| | — |
| | — |
| | 145 |
| | 0.21 |
|
Cost savings initiatives(c) | — |
| | — |
| | — |
| | — |
| | 39 |
| | — |
| | 39 |
| | 0.06 |
|
Commercial Renewables Impairment(d) | — |
| | — |
| | 45 |
| | 45 |
| | — |
| | — |
| | 45 |
| | 0.07 |
|
| Discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
| | (124 | ) | | (124 | ) | | (0.18 | ) |
| Adjusted earnings/Adjusted EPS | $ | 2,613 |
| | $ | 230 |
| | $ | 65 |
| | $ | 2,908 |
| | $ | (229 | ) | | $ | — |
| | $ | 2,679 |
| | $ | 3.88 |
|
| |
(a) | Net of $120 million tax benefit. Primarily consists of losses on forward-starting interest rate swaps related to the Piedmont acquisition financing. |
| |
(b) | Net of $49 million tax benefit. Impairment charge related to certain assets in Central America. |
| |
(c) | Net of $24 million tax benefit. Primarily consists of severance costs. |
| |
(d) | Net of $26 million tax benefit. Impairment charge related to certain equity method investments. See Note 13 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for additional information. |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, 2015 |
| (in millions, except per-share amounts) | Regulated Utilities |
| | International Energy |
| | Commercial Portfolio |
| | Total Reportable Segments |
| | Other |
| | Eliminations/ Discontinued Operations |
| | Duke Energy |
| | Per Diluted Share |
|
| Net Income Attributable to Duke Energy Corporation/Reported EPS | $ | 2,311 |
| | $ | 157 |
| | $ | (15 | ) | | $ | 2,453 |
| | $ | (139 | ) | | $ | 25 |
| | $ | 2,339 |
| | $ | 3.36 |
|
Costs to achieve, Progress Energy merger(a) | — |
| | — |
| | — |
| | — |
| | 42 |
| | — |
| | 42 |
| | 0.05 |
|
Edwardsport settlement(b) | 56 |
| | — |
| | — |
| | 56 |
| | — |
| | — |
| | 56 |
| | 0.08 |
|
Midwest Generation operations(c) | — |
| | — |
| | 94 |
| | 94 |
| | — |
| | (94 | ) | | — |
| | — |
|
Ash basin settlement(d) | 4 |
| | — |
| | — |
| | 4 |
| | — |
| | — |
| | 4 |
| | 0.01 |
|
| Economic hedges (mark-to-market) | — |
| | — |
| | (1 | ) | | (1 | ) | | — |
| | — |
| | (1 | ) | | — |
|
| Discontinued operations | — |
| | — |
| | 41 |
| | 41 |
| | — |
| | 69 |
| | 110 |
| | 0.16 |
|
| Adjusted earnings/Adjusted EPS | $ | 2,371 |
| | $ | 157 |
| | $ | 119 |
| | $ | 2,647 |
| | $ | (97 | ) | | $ | — |
| | $ | 2,550 |
| | $ | 3.66 |
|
| |
(a) | Net of $25 million tax benefit. |
| |
(b) | Net of $34 million tax benefit. |
| |
(c) | Net of $53 million tax benefit. |
| |
(d) | Net of $3 million tax benefit. |
The increase in adjusted earnings for the nine months ended September 30, 2016, compared to the same period in 2015, was primarily due to:
Lower operations and maintenance expense at Regulated Utilities driven by effective cost control efforts, partially offset by an increase in storm restoration costs including those related to severe winter storms in the Carolinas;
Higher retail revenues from pricing and riders, including energy efficiency programs;
Lower income tax expense as a result of the Company's intent to no longer indefinitely reinvest the foreign earnings of the International Energy segment combined with more efficient utilizationDisposal Group, which was sold in December 2016. The 2016 operating results included a benefit from the revaluation of foreign tax credits.deferred income taxes. See Note 1716 to the Condensed Consolidated Financial Statements, "Income Taxes," for additional information; and
Higher results in Latin America primarilyLower regulated electric revenues due to favorable hydrologywarm winter weather in Brazil, partially offset by weaker foreign currency exchange rates;
Incremental earnings from the additional ownership interest in generating assets acquired from North Carolina Eastern Municipal Power Agency (NCEMPA); and
Reduction in weighted average shares outstanding primarily due to the prior-year accelerated stock repurchase.current year.
Partially offset by:
Lower resultsPiedmont's earnings contribution, net of financing costs, due to the absence of earnings from the Midwest Generation Disposal Group sold in April 2015;acquisition on October 3, 2016;
Increased depreciationLower operations and amortizationmaintenance expense primarilyat Electric Utilities and Infrastructure due to a higher amount of property, plantongoing cost efficiency efforts and equipmentsignificant storm costs in service;the prior year; and
Lower earningsHigher regulated electric revenues from International Energy's equity method investmentincreased pricing and riders driven by new rates in NMC, primarily due to lower methyl tertiary butyl ether (MTBE)DEP South Carolina, base rate adjustments in Florida, and methanol prices.energy efficiency rider revenues in North Carolina, as well as growth in retail volumes.
SEGMENT RESULTS
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 revenues and expenses that are eliminated in the Condensed Consolidated Financial Statements.
Due to the Piedmont acquisition and the sale of International Energy in the fourth quarter of 2016, Duke Energy's segment structure has been realigned to include the following segments: Electric Utilities and Infrastructure, Gas Utilities and Infrastructure and Commercial Renewables. The remaining information in this discussionremainder of results ofDuke Energy’s operations is presented as Other. Prior period information has been recast to conform to the current segment structure. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for further information on a GAAP basis.the Piedmont acquisition and International Energy sale and Note 3, “Business Segments,” for additional information on Duke Energy’s segments.
RegulatedElectric Utilities and Infrastructure | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 6,430 |
| | $ | 6,147 |
| | $ | 283 |
| | $ | 16,788 |
| | $ | 17,090 |
| | $ | (302 | ) | $ | 4,947 |
| | $ | 5,089 |
| | $ | (142 | ) |
| Operating Expenses | 4,385 |
| | 4,481 |
| | (96 | ) | | 12,124 |
| | 12,789 |
| | (665 | ) | | | | | |
| Fuel used in electric generation and purchased power | | 1,454 |
| | 1,577 |
| | (123 | ) |
| Operation, maintenance and other | | 1,271 |
| | 1,298 |
| | (27 | ) |
| Depreciation and amortization | | 737 |
| | 709 |
| | 28 |
|
| Property and other taxes | | 261 |
| | 262 |
| | (1 | ) |
| Impairment charges | | — |
| | 2 |
| | (2 | ) |
| Total operating expenses | | 3,723 |
| | 3,848 |
| | (125 | ) |
| Gains on Sales of Other Assets and Other, net | 1 |
| | 1 |
| | — |
| | 3 |
| | 10 |
| | (7 | ) | 3 |
| | 1 |
| | 2 |
|
| Operating Income | 2,046 |
| | 1,667 |
| | 379 |
| | 4,667 |
| | 4,311 |
| | 356 |
| 1,227 |
| | 1,242 |
| | (15 | ) |
| Other Income and Expenses | 75 |
| | 56 |
| | 19 |
| | 213 |
| | 187 |
| | 26 |
| 79 |
| | 63 |
| | 16 |
|
| Interest Expense | 293 |
| | 280 |
| | 13 |
| | 848 |
| | 829 |
| | 19 |
| 315 |
| | 270 |
| | 45 |
|
| Income Before Income Taxes | 1,828 |
| | 1,443 |
| | 385 |
| | 4,032 |
| | 3,669 |
| | 363 |
| 991 |
| | 1,035 |
| | (44 | ) |
| Income Tax Expense | 628 |
| | 538 |
| | 90 |
| | 1,419 |
| | 1,358 |
| | 61 |
| 356 |
| | 371 |
| | (15 | ) |
| Segment Income | $ | 1,200 |
| | $ | 905 |
| | $ | 295 |
| | $ | 2,613 |
| | $ | 2,311 |
| | $ | 302 |
| $ | 635 |
| | $ | 664 |
| | $ | (29 | ) |
| | | | | | | | | | | |
|
| | | | |
|
|
| Duke Energy Carolinas Gigawatt-hours (GWh) sales | 25,508 |
| | 23,737 |
| | 1,771 |
| | 67,890 |
| | 67,511 |
| | 379 |
| 20,781 |
| | 21,625 |
| | (844 | ) |
| Duke Energy Progress GWh sales | 20,033 |
| | 18,283 |
| | 1,750 |
| | 54,011 |
| | 50,000 |
| | 4,011 |
| 15,637 |
| | 17,149 |
| | (1,512 | ) |
| Duke Energy Florida GWh sales | 12,440 |
| | 11,513 |
| | 927 |
| | 31,542 |
| | 30,788 |
| | 754 |
| 8,305 |
| | 8,456 |
| | (151 | ) |
| Duke Energy Ohio GWh sales | 7,214 |
| | 6,698 |
| | 516 |
| | 19,117 |
| | 19,698 |
| | (581 | ) | 6,059 |
| | 6,107 |
| | (48 | ) |
| Duke Energy Indiana GWh sales | 9,073 |
| | 8,784 |
| | 289 |
| | 26,624 |
| | 25,217 |
| | 1,407 |
| 8,208 |
| | 9,394 |
| | (1,186 | ) |
| Total Regulated Utilities GWh sales | 74,268 |
| | 69,015 |
| | 5,253 |
| | 199,184 |
| | 193,214 |
| | 5,970 |
| |
| Total Electric Utilities and Infrastructure GWh sales | | 58,990 |
| | 62,731 |
| | (3,741 | ) |
| Net proportional Megawatt (MW) capacity in operation | | | | |
|
| | 49,411 |
| | 50,033 |
| | (622 | ) | 48,964 |
| | 50,111 |
| | (1,147 | ) |
Three Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Regulated Utilities’Electric Utilities and Infrastructure’s results were impacted by favorablewarm winter weather the prior year impairment associated with the September 2015 Edwardsport IGCC settlement,and increased rider revenues, higher weather-normal sales volumes,depreciation and an increase in wholesale power margins. These impacts wereamortization expense, partially offset by increased depreciationrider revenues and amortizationlower operations and maintenance expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $154$159 million increasedecrease in electric retail sales, net of fuel revenue,revenues, due to favorablewarm winter weather as compared toin the priorcurrent year; and
a $134$108 million decrease in fuel revenues driven by lower sales volumes.
Partially offset by:
a $108 million increase in rider revenues including amounts related to energy efficiency programs, Duke Energy Florida’s Nuclear Asset SecuritizationFlorida's nuclear asset securitization revenues, beginning in 2016, the additional ownership interest in certain generating assets acquired from NCEMPA in the third quarter of 2015, and increased revenues related to Duke Energy Indiana’sIndiana's clean coal equipment;equipment, as well as increased retail pricing due to the Duke Energy Progress South Carolina rate case and Duke Energy Florida's base rate adjustment for the Osprey acquisition; and
a $47an $11 million increase in weather-normal sales volumes to retail customers (net of fuel revenue) reflecting increased demand; and
a $32 million increase in wholesale power revenues, primarily due to additional volumes and capacity charges for customers served under long-term contracts, including the NCEMPA wholesale contract that became effective August 1, 2015.
Partially offset by:
a $104 million decrease in fuel revenues driven by lower fuel prices included in electric rates.current year.
Operating Expenses. The variance was driven primarily by:
a $98$123 million decrease in fuel expense, (includingincluding purchased power, and natural gas purchases for resale) primarily due to lower natural gassales volumes and lower coal prices, partially offset by increased generationhigher natural gas prices; and
a $27 million decrease in operations and maintenance expense primarily due to lower storm restoration costs and decreased labor costs, partially offset by higher sales volumes; and
an $85 million impairment charge in prior year related to the September 2015 Edwardsport IGCC settlement.environmental costs.
Partially offset by:
a $58$28 million increase in depreciation and amortization expense primarily due to additional plant in service, including the amortization of Duke Energy Florida's Crystal River 3 regulatory asset, and the additional ownership interest in generating assets acquired from NCEMPA in the third quarter of 2015; and
a $22 million increase in operations and maintenance expense primarily due to higher environmental and operational costs that are recoverable in rates, increased employee benefits costs, and higher storm restoration costs; partially offset by lower costs due to effective cost control efforts.service.
Other Income and Expenses, net.Expenses. The variance was driven primarily by higher allowance for funds used during construction (AFUDC) equity.
Interest Expense. The increase was primarily due to higher debt outstanding in the current year.
Income Tax Expense. The variance was primarily due to an increasea decrease in pretax income, partially offset by a lower effective tax rate.income. The effective tax rates for both the three months ended September 30,March 31, 2017 and 2016 and 2015 were 34.4 percent and 37.3 percent, respectively. The decrease in the effective tax rate is primarily due to an unfavorable prior period adjustment recorded in 2015.
Nine Months Ended September 30, 2016 as Compared to September 30, 2015
Regulated Utilities’ results were impacted by increased pricing and rider revenues, the prior year impairment associated with the September 2015 Edwardsport IGCC settlement, an increase in wholesale power margins, and increase in weather-normal sales volumes. These impacts were partially offset by increased depreciation and amortization expense, and higher property and other tax expense. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $739 million decrease in fuel revenues driven by lower fuel prices included in electric rates.
Partially offset by:
a $275 million increase in rider revenues including increased revenues related to energy efficiency programs, the additional ownership interest in certain generating assets acquired from NCEMPA in the third quarter of 2015, and increased revenues related to Duke Energy Indiana’s clean coal equipment, and retail electric pricing primarily due to the expiration of the North Carolina cost of removal decrement rider;
an $84 million increase in wholesale power revenues, primarily due to additional volumes and capacity charges for customers served under long-term contracts, including the NCEMPA wholesale contract that became effective August 1, 2015; and
a $40 million increase in weather-normal sales volumes to retail customers (net of fuel revenue) reflecting retail sales growth.
Operating Expenses. The variance was driven primarily by:
a $725 million decrease in fuel expense (including purchased power and natural gas purchases for resale) primarily due to lower natural gas and coal prices and lower natural gas volumes to full-service retail natural gas customers; and
an $85 million impairment charge in prior year related to the September 2015 Edwardsport IGCC settlement.
Partially offset by:
a $102 million increase in depreciation and amortization expense primarily due to additional plant in service, including the expiration of the North Carolina cost of removal decrement rider, and the additional ownership interest in generating assets acquired from NCEMPA in the third quarter of 2015; and
a $45 million increase in property and other taxes primarily due to higher property taxes across multiple jurisdictions and higher sales and use tax at Duke Energy Indiana.
Other Income and Expenses, net. The variance was driven primarily by higher AFUDC equity.
Income Tax Expense. The variance is due to an increase in pretax income and a lower effective tax rate. The effective tax rates for the nine months ended September 30, 2016 and 2015 were 35.2 and 37 percent, respectively. The decrease in effective tax rate is primarily due to favorable impacts of finalizing tax audits, favorable tax return true-ups and an unfavorable prior period adjustment recorded in 2015.35.9 percent.
Matters Impacting Future RegulatedElectric Utilities and Infrastructure Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Electric Utilities and Infrastructure's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
On May 18, 2016, the North Carolina Department of Environmental Quality (NCDEQ)NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the North Carolina Coal Ash Management Act of 2014 (Coal Ash Act) were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Regulated Utilities'Electric Utilities and Infrastructure's estimated asset retirement obligations (AROs) related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, and the closure work progresses and the closure method scope isand remedial methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Regulated Utilities’Electric Utilities and Infrastructure's financial position, results of operations and cash flows.position. See Note 7 to9 in Duke Energy's Annual Report on Form 10-K for the Condensed Consolidated Financial Statements, “Assetyear ended December 31, 2016, "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 the Dan River coal ash release and operations at othercertain North Carolina facilities with ash basins. The outcome of these lawsuits and potential fines and penalties could have an adverse impact on Regulated Utilities’Electric Utilities and Infrastructure's financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Regulated Utilities' financial position, results of operations and cash flows. See Note 4, “Regulatory Matters” and Note 7, "Asset Retirement Obligations," to the Condensed Consolidated Financial Statements for additional information.
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Duke Energy Progress filed a petition with the North Carolina Utilities Commission (NCUC) requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC has not completedruled on the petition. A final accumulation of total estimated incremental storm restoration costs incurred; however, the preliminary estimate is approximately $200 million. Given the magnitude of the storm, Duke Energy Progress intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in its next base rate cases. An order from regulatory
authorities disallowingthe NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could haveresult in an adverse impact on Regulated Utilities'Electric Utilities and Infrastructure's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| | 2016 |
| | 2015 |
| | Variance |
|
| Operating Revenues | $ | 245 |
| | $ | 281 |
| | $ | (36 | ) | | $ | 761 |
| | $ | 841 |
| | $ | (80 | ) |
| Operating Expenses | 177 |
| | 200 |
| | (23 | ) | | 713 |
| | 639 |
| | 74 |
|
| Loss on Sales of Other Assets and Other, net | (1 | ) | | — |
| | (1 | ) | | (2 | ) | | (1 | ) | | (1 | ) |
| Operating Income | 67 |
| | 81 |
| | (14 | ) | | 46 |
| | 201 |
| | (155 | ) |
| Other Income and Expenses | 23 |
| | 24 |
| | (1 | ) | | 62 |
| | 69 |
| | (7 | ) |
| Interest Expense | 19 |
| | 21 |
| | (2 | ) | | 63 |
| | 66 |
| | (3 | ) |
| Income Before Income Taxes | 71 |
| | 84 |
| | (13 | ) | | 45 |
| | 204 |
| | (159 | ) |
| Income Tax Expense (Benefit) | 4 |
| | 14 |
| | (10 | ) | | (48 | ) | | 44 |
| | (92 | ) |
| Less: Income Attributable to Noncontrolling Interests | 3 |
| | 1 |
| | 2 |
| | 8 |
| | 3 |
| | 5 |
|
| Segment Income | $ | 64 |
| | $ | 69 |
| | $ | (5 | ) | | $ | 85 |
| | $ | 157 |
| | $ | (72 | ) |
| | | | | | | | | | | | |
| Sales, GWh | 5,017 |
| | 4,590 |
| | 427 |
| | 16,522 |
| | 13,580 |
| | 2,942 |
|
| Net proportional MW capacity in operation | | | | |
|
| | 4,315 |
| | 4,333 |
| | (18 | ) |
Three Months Ended September 30, 2016 Carolinas and Duke Energy Progress intend to file rate cases in North Carolina in 2017 to recover costs of complying with CCR regulations and the Coal Ash Act, as Compared to September 30, 2015
International Energy’s results were impacted by lower earnings from the equity method investmentwell as costs of capital investments in NMC. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven primarily by:
a $39 million decrease in Central America due to lower average pricesgeneration, transmission and volumes;distribution systems and
a $9 million decrease in Peru due to lower hydrocarbon and energy sales volumes and average prices.
Partially offset by:
a $19 million any increase in Brazil dueexpenditures subsequent to stronger foreign currency exchange ratesprevious rate cases. Duke Energy Progress has filed notice with the NCUC that it intends to file a general rate case on or about June 1, 2017. In March 2017, Duke Energy Ohio filed an electric distribution base rate case application and higher average contract prices.
Operating Expenses.The variance was driven primarily by:
a $34 million decrease in Central America due to lower fuelsupporting testimony. Electric Utilities and purchased power costs; and
a $20 million decrease in Ecuador primarily due toInfrastructure's earnings could be adversely impacted if these rate cases are delayed or denied by the absence of a prior year impairment loss.NCUC or PUCO.
Partially offset by:
a $27 million increase in Brazil due to higher purchased power costs and stronger foreign currency exchange rates.
Other Income and Expense, net. The variance was primarily due to lower earnings from the equity method investment in NMC as a result of lower average MTBE prices, offset by lower butane costs and the receipt of an insurance reimbursement in Ecuador.
Income Tax Expense (Benefit). The effective tax rates for the three months ended September 30, 2016 and 2015 were 5.6 percent and 16.7 percent, respectively. The decrease in effective tax rate was primarily due to a true-up of foreign tax credits.
Nine Months Ended September 30, 2016 as Compared to September 30, 2015
International Energy’s results were impacted by an impairment charge related to certain assets in Central America, lower earnings from the equity method investment in NMC and unfavorable exchange rates in Latin America, partially offset by improved hydrology in Brazil and lower income taxes as a result of the company's intent to no longer indefinitely reinvest foreign earnings. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues.The variance was driven primarily by:
a $65 million decrease in Central America due to lower average prices; and
a $14 million decrease in Peru due to lower hydrocarbon average prices and volumes and lower energy sales volumes.
Operating Expenses.The variance was driven primarily by:
a $130 million increase in Central America due to the asset impairment, partially offset by lower purchased power and fuel costs; and
an $11 million increase in Peru due to higher purchased power costs, partially offset by lower hydrocarbon royalty costs.
Partially offset by:Gas Utilities and Infrastructurea $39 million decrease in Brazil due |
| | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| (in millions) | | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | | $ | 670 |
| | $ | 170 |
| | $ | 500 |
|
| Operating Expenses | | | | | | |
| Cost of natural gas | | 258 |
| | 49 |
| | 209 |
|
| Operation, maintenance and other | | 105 |
| | 32 |
| | 73 |
|
| Depreciation and amortization | | 57 |
| | 20 |
| | 37 |
|
| Property and other taxes | | 30 |
| | 18 |
| | 12 |
|
| Total operating expenses | | 450 |
| | 119 |
| | 331 |
|
| Operating Income | | 220 |
| | 51 |
| | 169 |
|
| Other Income and Expenses | | 18 |
| | 3 |
| | 15 |
|
| Interest Expense | | 26 |
| | 7 |
| | 19 |
|
| Income Before Income Taxes | | 212 |
| | 47 |
| | 165 |
|
| Income Tax Expense | | 79 |
| | 15 |
| | 64 |
|
| Segment Income | | $ | 133 |
| | $ | 32 |
| | $ | 101 |
|
| | | | | | | |
Piedmont LDC throughput (dekatherms) (a) | | 133,276,787 |
| | — |
| | 133,276,787 |
|
| Duke Energy Midwest LDC throughput (MCF) | | 30,830,999 |
| | 34,741,520 |
| | (3,910,521 | ) |
(a) Includes throughput subsequent to lower purchased power costs resulting from improved hydrologyDuke Energy's acquisition of Piedmont on October 3, 2016.
Three Months Ended March 31, 2017 as Compared to March 31, 2016
Gas Utilities and weaker foreign currency exchange rates, partially offset byInfrastructure’s higher variable costs; and
a $14 million decrease in Ecuador primarilyresults were almost entirely due to the absenceinclusion of a prior year impairment.
Other Income and Expense, net. The variance was primarily due to lowerPiedmont's earnings from the equity method investment in NMC as a result of lower average MTBE and methanol prices, as well as lower MTBE sales volumes due to planned maintenance, partially offset by lower butane costs, the absence of a prior year net currency remeasurement loss in Latin America, and the receipt of an insurance claim reimbursement in Ecuador.
Income Tax Expense (Benefit). The variance was due to a decrease in the effective tax rate and a decrease in pretax income. The decrease in the effective tax rate was primarilycurrent year as a result of Duke Energy's abilityacquisition of Piedmont on October 3, 2016. Piedmont's earnings included in Gas Utilities and Infrastructure's results were $99 million for the three months ended March 31, 2017. All variances are related to more efficiently utilize foreign tax credits.the inclusion of Piedmont's results of operations, except for the following:
Other Income and Expenses. The variance was driven primarily by higher earnings from Duke Energy's mid-stream gas pipeline investments that were owned prior to the Piedmont acquisition.
Matters Impacting Future Gas Utilities and Infrastructure Results
Gas Utilities and Infrastructure has a 24 percent ownership interest in Constitution Pipeline Company, LLC (Constitution), a natural gas pipeline project slated to transport natural gas supplies to major northeastern markets. On April 22, 2016, the New York State Department of Environmental Conservation denied Constitution’s application for a necessary water quality certification for the New York portion of the Constitution pipeline. Constitution has stopped construction and discontinued capitalization of future development costs until the project's uncertainty is resolved. To the extent the legal and regulatory proceedings have unfavorable outcomes, or if Constitution concludes that the project is not viable or does not go forward, an impairment charge of up to the recorded investment in the project, net of any cash and working capital returned, may be recorded. With the project on hold, funding of project costs has ceased until resolution of legal actions. Duke Energy is contractually obligated to provide funding of required operating costs, including the ownership percentage of legal expenses to obtain the necessary permitting for the project and project costs incurred prior to the denial of the water permit. If the legal actions result in an outcome where the project is abandoned, Constitution is obligated under various contracts to pay breakage fees that Gas Utilities and Infrastructure would be obligated to fund up to the ownership percentage, or potentially up to $10 million.
In 2013, the PUCO issued an order (PUCO order) approving Duke Energy Ohio’s recovery of costs incurred between 2008 and 2012 for environmental investigation and remediation of two former MGP sites. At March 31, 2017, Duke Energy Ohio had recorded in Regulatory assets on the Condensed Consolidated Balance Sheet approximately $100 million of estimated MGP remediation costs not yet recovered through the MGP rider mechanism. Intervenors have appealed to the Ohio Supreme Court the PUCO order authorizing recovery of these amounts. That appeal remains pending. Duke Energy Ohio cannot predict the outcome of the appeal before the Ohio Supreme Court or future action by the PUCO. If Duke Energy Ohio is not able to recover these remediation costs in rates, the costs could have an adverse impact on Gas Utilities and Infrastructure's financial position, results of operations and cash flows. See Note 174 to the Condensed Consolidated Financial Statements, “Income Taxes,”"Regulatory Matters," for additional information.
Matters Impacting Future International Energy ResultsPART I
International Energy's operations include conventional hydroelectric power generation facilities located in Brazil. The weather and recessionary economic conditions in Brazil during recent years have resulted in higher energy prices, lower electricity demand and unfavorable impacts to the exchange rate of Brazil's currency. These weather and economic conditions have also resulted in lawsuits brought to the Brazilian courts by certain hydroelectric generators to limit the financial exposure to the generators. International Energy's earnings and future cash flows could be adversely impacted if reservoir levels return to the recent low levels, from a further decline of the economic and political conditions within Brazil, or as a result of the outcome of legal matters in the Brazilian courts.
International Energy's earnings from an equity method investment in NMC reflect sales of methanol and MTBE, which generate margins that are directionally correlated with Brent crude oil prices. The recent decline in crude oil prices have reduced the earnings realized from NMC. Further weakness in the market price of Brent crude oil and related commodities may result in a further decline in earnings.
In October 2016, Duke Energy reached agreements to sell the International Disposal Group. As a result, the International Disposal Group will be classified as held for sale and as discontinued operations beginning in the fourth quarter of 2016. Upon classification as held for sale, International Energy expects to record an estimated pretax impairment charge of approximately $325 million to $375 million, primarily due to the cumulative foreign currency translation losses classified as accumulated other comprehensive loss. The transactions are expected to close by early 2017.
Commercial PortfolioRenewables | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 140 |
| | $ | 66 |
| | $ | 74 |
| | $ | 366 |
| | $ | 214 |
| | $ | 152 |
| $ | 128 |
| | $ | 114 |
| | $ | 14 |
|
| Operating Expenses | 141 |
| | 82 |
| | 59 |
| | 373 |
| | 255 |
| | 118 |
| | | | | |
| Operation, maintenance and other | | 77 |
| | 73 |
| | 4 |
|
| Depreciation and amortization | | 39 |
| | 30 |
| | 9 |
|
| Property and other taxes | | 9 |
| | 6 |
| | 3 |
|
| Total operating expenses | | 125 |
| | 109 |
| | 16 |
|
| Gains on Sales of Other Assets and Other, net | 1 |
| | — |
| | 1 |
| | 3 |
| | 6 |
| | (3 | ) | 2 |
| | 1 |
| | 1 |
|
| Operating Loss | — |
| | (16 | ) | | 16 |
| | (4 | ) | | (35 | ) | | 31 |
| |
| Operating Income | | 5 |
| | 6 |
| | (1 | ) |
| Other Income and Expenses | (69 | ) | | (3 | ) | | (66 | ) | | (63 | ) | | (3 | ) | | (60 | ) | (1 | ) | | (2 | ) | | 1 |
|
| Interest Expense | 15 |
| | 11 |
| | 4 |
| | 38 |
| | 33 |
| | 5 |
| 19 |
| | 11 |
| | 8 |
|
| Loss Before Income Taxes | (84 | ) | | (30 | ) | | (54 | ) | | (105 | ) | | (71 | ) | | (34 | ) | (15 | ) | | (7 | ) | | (8 | ) |
| Income Tax Benefit | (62 | ) | | (37 | ) | | (25 | ) | | (123 | ) | | (55 | ) | | (68 | ) | (39 | ) | | (33 | ) | | (6 | ) |
| Less: Loss Attributable to Noncontrolling Interests | (1 | ) | | (1 | ) | | — |
| | (2 | ) | | (1 | ) | | (1 | ) | (1 | ) | | — |
| | (1 | ) |
| Segment (Loss) Income | $ | (21 | ) |
| $ | 8 |
| | $ | (29 | ) | | $ | 20 |
| | $ | (15 | ) | | $ | 35 |
| |
| Segment Income | | $ | 25 |
| | $ | 26 |
| | $ | (1 | ) |
| | | | | | | | | | | | | | | | | |
| Renewable plant production, GWh | 1,801 |
| | 1,230 |
| | 571 |
| | 5,619 |
| | 3,913 |
| | 1,706 |
| 2,285 |
| | 2,060 |
| | 225 |
|
| Net proportional MW capacity in operation | | | | |
|
| | 2,725 |
| | 1,634 |
| | 1,091 |
| 2,907 |
| | 1,963 |
| | 944 |
|
Three Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Commercial Renewables' results were impacted by higher financing costs and new renewables projects placed in service.
Commercial Portfolio’s lower earningsOperating Revenues and Operating Expenses. The increases were primarily due to an impairment charge related to certain equity method investments in wind projects, partially offset by new wind and solar generation placed in service, and improved wind production. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $58 million increase in electric revenues due to growth in the REC Solar business; and
a $22 million increase in electric revenues from new wind and solar generation placed in service and improved wind production.
Operating Expenses. The variance was driven primarily by:
a $55 million increase in operating expenses due to growth in the REC Solar business; and
a $13 million increase in operating expenses from new wind and solar generation placed in service.
Other Income and Expenses, net. Interest Expense.The variance was due to a $71 million pretax impairment charge related to certain equity method investments indriven primarily by new wind projects. See Note 13 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for additional information.project financings and less capitalized interest.
Income Tax Benefit. The variance was primarily due to an increase in pretax losses. The decrease in the effective tax rate was primarily due to the impact oflosses and higher production tax credits for the renewables portfolio.
Nine Months Ended September 30, 2016 as Compared to September 30, 2015
Commercial Portfolio’s higher earnings were primarily due to a state tax charge recorded in the prior year(PTCs) related to the Midwest Generation business, new wind and solar generationprojects placed in service, and improved wind production, partially offset by an impairment charge relatedlower investment tax credits (ITCs) due to certain equity methodlower solar investments in wind projects. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The variance was driven primarily by:
a $115 million increase in electric revenues due to acquisition and growth of REC Solar; and
a $52 million increase in electric revenues from new wind and solar generation placed in service and improved wind production.
Partially offset by:
a $14 million decrease due to the shift of the residual Midwest Generation business out of Commercial Portfolio following the sale of the Midwest Generation Disposal Group.
Operating Expenses. The variance was driven primarily by:
a $111 million increase in operating expenses due to acquisition and growth of REC Solar; and
a $26 million increase in operating expenses from new wind and solar generation placed in service.
Partially offset by:
a $28 million decrease due to the shift of the residual Midwest generation business out of Commercial Portfolio following the sale of the Midwest Generation Disposal Group. See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information.
Other Income and Expenses, net. The variance was driven primarily by:
a $71 million pretax impairment charge related to certain equity method investments in wind projects. See Note 13 to the Condensed Consolidated Financial Statements, "Variable Interest Entities," for additional information.
Partially offset by:
a $12 million increase in equity earnings from the Commercial Pipeline business.
Income Tax Benefit.The variance was primarily due to a $41 million charge in the prior year related to changes in state tax apportionment factors on deferred taxes resulting from the sale of the Midwest Generation Disposal Group in the second quarter of 2015 and the impact of production tax credits for the renewables portfolio.current year.
Matters Impacting Future Commercial PortfolioRenewables Results
Changes or variability in assumptions used in calculating the fair value of the Commercial Renewables reporting units for goodwill testing purposes including but not limited to, legislative actions related to tax credit extensions, long-term growth rates and discount rates, could significantly impact the estimated fair value of the Commercial Renewables reporting units. In the event of a significant decline in the estimated fair value of the Commercial Renewables reporting units, goodwill impairment charges could be recorded. The carrying value of goodwill within Commercial Renewables was approximately $122 million at March 31, 2017.
Persistently low market pricing orfor wind resources, primarily in the ErcotEnergy Reliability Council of Texas West market, and the future expiration of tax incentives including Investment Tax CreditsITCs and Production Tax CreditsPTCs could result in adverse impacts to the future results of Commercial Renewables.
| | | | Three Months Ended September 30, | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 32 |
| | $ | 17 |
| | $ | 15 |
| | $ | 91 |
| | $ | 78 |
| | $ | 13 |
| $ | 33 |
| | $ | 29 |
| | $ | 4 |
|
| Operating Expenses | 128 |
| | 64 |
| | 64 |
| | 316 |
| | 177 |
| | 139 |
| | | | | |
| Fuel used in electric generation and purchased power | | 15 |
| | 11 |
| | 4 |
|
| Operation, maintenance and other | | 8 |
| | 36 |
| | (28 | ) |
| Depreciation and amortization | | 26 |
| | 34 |
| | (8 | ) |
| Property and other taxes | | 3 |
| | 9 |
| | (6 | ) |
| Impairment charges | | — |
| | 2 |
| | (2 | ) |
| Total operating expenses | | 52 |
| | 92 |
| | (40 | ) |
| Gains on Sales of Other Assets and Other, net | 5 |
| | 3 |
| | 2 |
| | 16 |
| | 16 |
| | — |
| 5 |
| | 5 |
| | — |
|
| Operating Loss | (91 | ) | | (44 | ) | | (47 | ) | | (209 | ) | | (83 | ) | | (126 | ) | (14 | ) | | (58 | ) | | 44 |
|
| Other Income and Expenses | 12 |
| | (2 | ) | | 14 |
| | 30 |
| | 8 |
| | 22 |
| 21 |
| | 17 |
| | 4 |
|
| Interest Expense | 157 |
| | 91 |
| | 66 |
| | 553 |
| | 285 |
| | 268 |
| 134 |
| | 205 |
| | (71 | ) |
| Loss Before Income Taxes | (236 | ) | | (137 | ) | | (99 | ) | | (732 | ) | | (360 | ) | | (372 | ) | (127 | ) | | (246 | ) | | 119 |
|
| Income Tax Benefit | (50 | ) | | (95 | ) | | 45 |
| | (276 | ) | | (229 | ) | | (47 | ) | (52 | ) | | (101 | ) | | 49 |
|
| Less: Income Attributable to Noncontrolling Interests | 3 |
| | 3 |
| | — |
| | 7 |
| | 8 |
| | (1 | ) | 2 |
| | 3 |
| | (1 | ) |
| Net Expense | $ | (189 | ) | | $ | (45 | ) | | $ | (144 | ) | | $ | (463 | ) | | $ | (139 | ) | | $ | (324 | ) | $ | (77 | ) | | $ | (148 | ) | | $ | 71 |
|
Three Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Other's higherlower net expense was driven by higherlower interest expense related to the Piedmont acquisition financing, decreased severance accruals increasedand decreased charitable donations and prior year tax benefits.donations. The following is a detailed discussion of the variance drivers by line item.
Operating Expenses. The increasevariance was primarily due to an increasea decrease in severance accruals increaseand a decrease in donations to the Duke Energy Foundation and costs related to the Piedmont acquisition.Foundation. 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.Expenses. The increase was primarily driven by higher earnings from NMC due to higher returns on investments that support employee benefit obligations.commodity prices.
Interest Expense. The increasedecrease was primarily due to Piedmont acquisition financing costs in the prior year, including bridge facility costs and$93 million of unrealized losses on forward-starting interest rate swaps. For additional information see Notes 2 and 109 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.
Income Tax Benefit. The variance was primarily due to a decrease in the effective tax rate, partially offset by an increase in pretax losses. The effective tax rates for the three months ended September 30,March 31, 2017 and 2016 and 2015 were 21.240.9 percent and 69.341.1 percent, respectively. The decrease in the effective tax rate was primarily due to a change in manufacturing deduction, impacts of finalizing federal tax audits and the benefit from legal entity restructuring recorded in 2015.
Nine Months Ended September 30, 2016 as Compared to September 30, 2015
Other's higher net expense was due to higher interest expense related to the Piedmont acquisition financing, severance accruals and donations to the Duke Energy Foundation. The following is a detailed discussion of the variance drivers by line item.
Operating Revenues. The increase was primarily due to the shift of the residual Midwest Generation business from the Commercial Portfolio segment to Other in the second quarter of 2015. See Note 3 to the condensed consolidated Financial Statements, "Business Segments," for additional information.
Operating Expenses. The increase was primarily due to severance accruals, an increase in donations to the Duke Energy Foundation, costs related to the Piedmont acquisition and higher charges in the current year due to the shift of the residual Midwest Generation business from the Commercial Portfolio segment to Other in the second quarter of 2015. See Note 3 to the Condensed Consolidated Financial Statements, “Business Segments,” for additional information.
Other Income and Expenses, net. The increase was primarily due to higher returns on investments that support employee benefit obligations.
Interest Expense. The increase was primarily due to Piedmont acquisition financing, including bridge facility costs and losses on forward-starting interest rate swaps. For additional information see Notes 2 and 10 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions" and "Derivatives and Hedging," respectively.
Income Tax Benefit. The variance was primarily due to an increase in pretax losses, partially offset by a decrease in the effective tax rate. The effective tax rates for the nine months ended September 30, 2016 and 2015 were 37.7 percent and 63.6 percent, respectively. The decrease in the effective tax rate was primarily due to a change in the manufacturing deduction, tax levelization and the benefit from legal entity restructuring recorded in 2015.
Matters Impacting Future Other Results
Included in Other is Duke Energy Ohio’sOhio's 9 percent ownership interest in OVEC, which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an inter-company power agreement (ICPA), Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio's ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization, and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. Deterioration in the credit quality or bankruptcy of one or more parties to the ICPA could increase the costs of OVEC. In addition, certain proposed environmental rulemaking costs could result in future increased cost allocations.
The retired Beckjord generating station (Beckjord), previously an asset of Commercial Portfolio, became an asset of Other after the sale of the Midwest Generation Disposal Group. Beckjord, a nonregulated facility retired during 2014, is not subject to the U.S. Environmental Protection Agency (EPA)EPA rule related to the disposal of Coal Combustion Residuals (CCR)CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with on-site storage of coal ash, the costs could have an adverse impact on Other's financial position, results of operations and cash flows.
Earnings from an equity method investment in NMC reflect sales of methanol and methyl tertiary butyl ether (MTBE), which generate margins that are directionally correlated with Brent crude oil prices. Weakness in the market price of Brent crude oil and related commodities may result in a decline in earnings. Duke Energy's economic ownership interest will decrease from 25 percent to 17.5 percent upon successful startup of NMC's polyacetal production facility, which is expected to occur in the second quarter of 2017.
U.S. federal tax reform has become an important priority of the current Congress and Administration. Any substantial revision to the U.S. tax code, including a loss of the ability to deduct interest expense, could adversely impact Duke Energy's future earnings, cash flows or financial position.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
Three and Nine Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Discontinued Operations, Net of Tax. The variance was primarily driven by a $122 million income tax benefit resulting2016 earnings from immaterial out of period deferred tax liability adjustments related to previouslythe International Disposal Group, which was sold businesses.in December 2016. See Note 2 to the Condensed Consolidated Financial Statements, “Acquisitions"Acquisitions and Dispositions,”" for moreadditional information.
DUKE ENERGY CAROLINAS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 and the Annual Report on Form 10-K for the year ended December 31, 2015.2016.
| | | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 5,641 |
| | $ | 5,669 |
| | $ | (28 | ) | $ | 1,716 |
| | $ | 1,740 |
| | $ | (24 | ) |
| Operating Expenses | 3,880 |
| | 4,005 |
| | (125 | ) | | | | | |
| Losses on Sales of Other Assets and Other, net | (1 | ) | | — |
| | (1 | ) | |
| Fuel used in electric generation and purchased power | | 428 |
| | 421 |
| | 7 |
|
| Operation, maintenance and other | | 482 |
| | 512 |
| | (30 | ) |
| Depreciation and amortization | | 254 |
| | 259 |
| | (5 | ) |
| Property and other taxes | | 68 |
| | 67 |
| | 1 |
|
| Total operating expenses | | 1,232 |
| | 1,259 |
| | (27 | ) |
| Operating Income | 1,760 |
| | 1,664 |
| | 96 |
| 484 |
| | 481 |
| | 3 |
|
| Other Income and Expenses, net | 121 |
| | 125 |
| | (4 | ) | |
| Other Income and Expenses | | 37 |
| | 37 |
| | — |
|
| Interest Expense | 316 |
| | 313 |
| | 3 |
| 103 |
| | 107 |
| | (4 | ) |
| Income Before Income Taxes | 1,565 |
| | 1,476 |
| | 89 |
| 418 |
| | 411 |
| | 7 |
|
| Income Tax Expense | 539 |
| | 536 |
| | 3 |
| 148 |
| | 140 |
| | 8 |
|
| Net Income | $ | 1,026 |
| | $ | 940 |
| | $ | 86 |
| $ | 270 |
| | $ | 271 |
| | $ | (1 | ) |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
| Increase (Decrease) over prior year | 20162017 |
|
| Residential sales | (1.79.4 | )% |
| General service sales | 0.1(2.1 | )% |
| Industrial sales | (1.10.3 | )% |
| Wholesale power sales | 8.01.8 | % |
| Joint dispatch sales | (38.869.2 | )% |
| Total sales | 0.6(3.9 | )% |
| Average number of customers | 1.4 | % |
NineThree Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Operating Revenues. The variance was driven primarily by:
a $179an $84 million decrease in retail sales, net of fuel revenues, driven by lower fuel prices includeddue to warm winter weather in electric retail and wholesale rates.the current year.
Partially offset by:
a $65$31 million increase in retail pricing and rate riders, which primarily reflects increasedrider revenues related to energy efficiency programs and the expiration of the North Carolina cost of removal decrement rider;programs;
a $35$23 million increase in electric sales, net of fuel revenues to retail customers due to favorable weather compared to the prior year;changes in generation mix, partially offset by lower sales volumes; and
a $28$5 million increase in weather-normal electricretail sales volumes, net of fuel revenues, to retail customers due to load growth; and
a $26 million increase in wholesale power revenues, net of sharing, primarily due to additional volumes for customers served under long-term contracts.revenues.
Operating Expenses. The variance was driven primarily by:
by a $163$30 million decrease in fuel used in electric generation and purchased power primarily related to lower natural gas and coal prices, as well as a change in generation mix.
Partially offset by:
a $23 million increase in depreciation and amortization expense primarily due to higher amount of property, plant and equipment in service; and
a $13 million increase in operatingoperations and maintenance expense primarily due to higherlower storm restoration costs and severance expenses,decreased labor costs, partially offset by lower expenses at generating plants.
higher energy efficiency program costs.
Income Tax Expense. The variance was primarily due to an increase in pretax income partially offset byand a lowerhigher effective tax rate. The effective tax rates for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 were 34.435.4 percent and 36.334.1 percent, respectively. The decreaseincrease in the effective tax rate was primarily due to a favorable state resolution booked in 2016 related to prior year tax returns and favorable tax true-ups.returns.
Matters Impacting Future Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Duke Energy Carolinas' financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Duke Energy Carolinas' estimated asset retirement obligationsAROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, and the closure work progresses, and the closure method scope isand remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Carolinas' financial position, results of operations and cash flows.position. See Note 7 to9 in Duke Energy's Annual Report on Form 10-K for the Condensed Consolidated Financial Statements, “Assetyear ended December 31, 2016, "Asset Retirement Obligations,”" for additional information.
Duke Energy Carolinas is a party to multiple lawsuits and subject to fines and other penalties related to the Dan River coal ash release and operations at othercertain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Duke Energy Carolinas’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
An order from regulatory authorities disallowing recoveryDuke Energy Carolinas intends to file a rate case in North Carolina in 2017 to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs relatedof capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to closure of ash impoundments could have an adverse impact onprevious rate cases. Duke Energy Carolinas' financial position, results of operations and cash flows. See Note 4, “Regulatory Matters” and Note 7, "Asset Retirement Obligations," toearnings could be adversely impacted if the Condensed Consolidated Financial Statements for additional information.rate case is delayed or denied by the NCUC.
PROGRESS ENERGY
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 and the Annual Report on Form 10-K for the year ended December 31, 2015.2016.
| | | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 7,645 |
| | $ | 7,941 |
| | $ | (296 | ) | $ | 2,179 |
| | $ | 2,332 |
| | $ | (153 | ) |
| Operating Expenses | 5,814 |
| | 6,150 |
| | (336 | ) | | | | | |
| Fuel used in electric generation and purchased power | | 726 |
| | 860 |
| | (134 | ) |
| Operation, maintenance and other | | 544 |
| | 592 |
| | (48 | ) |
| Depreciation and amortization | | 313 |
| | 290 |
| | 23 |
|
| Property and other taxes | | 117 |
| | 119 |
| | (2 | ) |
| Impairment charges | | — |
| | 2 |
| | (2 | ) |
| Total operating expenses | | 1,700 |
| | 1,863 |
| | (163 | ) |
| Gains on Sales of Other Assets and Other, net | 18 |
| | 18 |
| | — |
| 8 |
| | 6 |
| | 2 |
|
| Operating Income | 1,849 |
| | 1,809 |
| | 40 |
| 487 |
| | 475 |
| | 12 |
|
| Other Income and Expenses, net | 79 |
| | 63 |
| | 16 |
| |
| Other Income and Expenses | | 24 |
| | 20 |
| | 4 |
|
| Interest Expense | 497 |
| | 504 |
| | (7 | ) | 206 |
| | 160 |
| | 46 |
|
| Income From Continuing Operations Before Taxes | 1,431 |
| | 1,368 |
| | 63 |
| |
| Income Tax Expense From Continuing Operations | 496 |
| | 435 |
| | 61 |
| |
| Income From Continuing Operations | 935 |
| | 933 |
| | 2 |
| |
| Loss From Discontinued Operations, net of tax | — |
| | (2 | ) | | 2 |
| |
| Income Before Income Taxes | | 305 |
| | 335 |
| | (30 | ) |
| Income Tax Expense | | 104 |
| | 123 |
| | (19 | ) |
| Net Income | 935 |
| | 931 |
| | 4 |
| 201 |
| | 212 |
| | (11 | ) |
| Less: Net Income Attributable to Noncontrolling Interests | 8 |
| | 8 |
| | — |
| 2 |
| | 3 |
| | (1 | ) |
| Net Income Attributable to Parent | $ | 927 |
| | $ | 923 |
| | $ | 4 |
| $ | 199 |
| | $ | 209 |
| | $ | (10 | ) |
NineThree Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Operating Revenues. The variance was driven primarily by:
a $469$126 million decrease in fuel and capacity revenues fromdriven by lower retail customers primarily due to lower natural gas prices,sales and changes in generation mix andat Duke Energy Progress, as well as decreased demand from retail customers; partially offset by increasedand capacity rates to retail customers at Duke Energy Florida.
Partially offset by:Florida;
a $124$67 million increasedecrease in rate riders, including increasedretail sales, net of fuel revenues, relateddue to energy efficiency programs, the additional ownership interest in certain generating assets acquired from NCEMPA in the third quarter of 2015, higher nuclear asset securitization revenueswarm winter weather in the current year, and an increase in energy conservation and environmental cost recovery clause revenues, partially offset by lower nuclear cost recovery clause rider revenues due to suspending recovery for the Levy nuclear project in 2015;year; and
a $34$10 million increasedecrease in wholesale power revenues primarily due to a new NCEMPA contract effective August 1, 2015, partially offset by lower peak demand at Duke Energy Progress and wholesale contracts that expired in the prior year at Duke Energy Florida.Florida, partially offset by higher peak demand at Duke Energy Progress.
Partially offset by:
a $29 million increase in rider revenues related to energy efficiency programs at Duke Energy Progress, and nuclear asset securitization revenues beginning in July 2016 at Duke Energy Florida; and
a $15 million increase in retail pricing due to the Duke Energy Progress South Carolina rate case and Duke Energy Florida's base rate adjustment for the Osprey acquisition.
Operating Expenses. The variance was driven primarily by:
a $441$134 million decrease in fuel used in electric generation and purchased powerexpense primarily due to lower natural gas prices,retail sales and changes in generation mix at Duke Energy Progress, as well as lower deferred fuel costs and decreased purchased power at Duke Energy Florida; and
a $48 million decrease in operations and maintenance expense due to lower storm restoration costs as well as decreased labor and lower generation costs, partially offset by increased purchased power.plant outage costs.
Partially offset by:
a $73$23 million increase in depreciation and amortization expense primarily due to additional plant in service including the additional ownership interest in generating assets acquired from NCEMPA; and
a $27 million increase in operations and maintenance expense primarily due to an increase in costs recoverable through the energy conservation cost recovery clause and an increase in employee benefit costs, partially offset by a decrease in payroll and labor costs.nuclear regulatory asset amortization.
Other Income and Expenses, net.Interest Expense. The variance was driven byprimarily due to higher AFUDC equity return on the Citrus County Combined Cycle and Hines Chiller Uprate projects in the current year and gains on insurance policies, both at Duke Energy Florida.debt outstanding.
Income Tax Expense. The variance was primarily due to an increasea decrease in pretax income and a higherlower effective tax rate. The effective tax raterates for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 were 34.734.1 percent and 31.836.7 percent, respectively. The increasedecrease in the effective tax rate was primarily due to state tax benefits from legal entity restructuring in 2015higher AFUDC equity and the releaseamortization of tax reserves in 2015 due to expired statutes.excess North Carolina deferred tax.
Matters Impacting Future Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Progress Energy’s financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Progress Energy's estimated asset retirement obligationsAROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, and the closure work progresses, and the closure method scope isand remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Progress Energy's financial position, results of operations and cash flows.position. See Note 7 to9 in Duke Energy's Annual Report on Form 10-K for the Condensed Consolidated Financial Statements, “Assetyear ended December 31, 2016, "Asset Retirement Obligations,”" for additional information.
Duke Energy Progress Energy is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Progress Energy’s financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Progress Energy’s financial position, results of operations and cash flows. See Note 4, “Regulatory Matters” and Note 7, "Asset Retirement Obligations," to the Condensed Consolidated Financial Statements for additional information.
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC has not completedruled on the petition. A final accumulation of total estimated incremental storm restoration costs incurred; however, the preliminary estimate is approximately $200 million. Given the magnitude of the storm, Duke Energy Progress intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in its next base rate cases. An order from regulatory authorities disallowingthe NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could haveresult in an adverse impact on Progress Energy's financial position, results of operations and cash flows.
On May 2, 2017, Duke Energy Progress filed notice with the NCUC that it intends to file a general rate case on or about June 1, 2017. Duke Energy Progress will seek to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Progress Energy's earnings could be adversely impacted if the rate case is delayed or denied by the NCUC.
DUKE ENERGY PROGRESS
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 and the Annual Report on Form 10-K for the year ended December 31, 2015.2016.
| | | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 4,103 |
| | $ | 4,130 |
| | $ | (27 | ) | $ | 1,219 |
| | $ | 1,307 |
| | $ | (88 | ) |
| Operating Expenses | 3,154 |
| | 3,238 |
| | (84 | ) | | | | | |
| Fuel used in electric generation and purchased power | | 364 |
| | 448 |
| | (84 | ) |
| Operation, maintenance and other | | 350 |
| | 386 |
| | (36 | ) |
| Depreciation and amortization | | 181 |
| | 175 |
| | 6 |
|
| Property and other taxes | | 40 |
| | 41 |
| | (1 | ) |
| Total operating expenses | | 935 |
| | 1,050 |
| | (115 | ) |
| Gains on Sales of Other Assets and Other, net | 2 |
| | 2 |
| | — |
| 2 |
| | 1 |
| | 1 |
|
| Operating Income | 951 |
| | 894 |
| | 57 |
| 286 |
| | 258 |
| | 28 |
|
| Other Income and Expenses, net | 47 |
| | 49 |
| | (2 | ) | |
| Other Income and Expenses | | 19 |
| | 17 |
| | 2 |
|
| Interest Expense | 188 |
| | 175 |
| | 13 |
| 82 |
| | 63 |
| | 19 |
|
| Income Before Income Taxes | 810 |
| | 768 |
| | 42 |
| 223 |
| | 212 |
| | 11 |
|
| Income Tax Expense | 271 |
| | 271 |
| | — |
| 76 |
| | 75 |
| | 1 |
|
| Net Income and Comprehensive Income | $ | 539 |
| | $ | 497 |
| | $ | 42 |
| $ | 147 |
| | $ | 137 |
| | $ | 10 |
|
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
| Increase (Decrease) over prior period | 20162017 |
|
| Residential sales | (3.77.3 | )% |
| General service sales | 0.1(3.0 | )% |
| Industrial sales | —2.1 | % |
| Wholesale power sales | 21.4(11.6 | )% |
| Joint dispatch sales | 39.4(18.5 | )% |
| Total sales | 8.0(8.8 | )% |
| Average number of customers | 1.3 | % |
NineThree Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Operating Revenues. The variance was driven primarily by:
a $166$76 million decrease in fuel revenues driven by lower natural gas pricesretail sales and changes in generation mix; and
a $12$40 million decrease in intercompany Joint Dispatch Agreement (JDA) coal blending revenues; and
a $7 million decreaseretail sales, net of fuel revenues, due to warm winter weather in transmission revenues driven by lower volumes and a settlement with customers that reduced the rate of return on equity.current year.
Partially offset by:
a $111$13 million increase in rider revenues due to a rider established in December 2015 to recover costs associated with the purchase of NCEMPA’s ownership interest in certain generating assets, and growth in rider revenues related to energy efficiency programs;
a $9 million increase in retail pricing due to the Duke Energy Progress South Carolina rate case; and
a $52an $8 million increase in wholesale power revenues primarily due to a new NCEMPA contract effective August 1, 2015, partially offset by lowerhigher peak demand.
Operating Expenses. The variance was driven primarily by:
a $167an $84 million decrease in fuel used in electric generation and purchased powerexpense primarily due to lower natural gas pricesretail sales and changes in generation mix.
Partially offset by:mix; and
a $64$36 million increasedecrease in depreciationoperations and amortization expensesmaintenance expense primarily due to additional plant in service, including the additional ownership interest in generating assets acquired from NCEMPA in the third quarter of 2015; and
a $17 million increase in property and other taxes due to a 2015 North Carolina Franchise Tax refund and increases in current year property taxes in North Carolina and South Carolina.lower storm restoration costs.
Interest Expense. The variance was primarily driven bydue to higher debt outstanding, as well as interest related to new debt issuances in 2015.charges on North Carolina fuel overcollections.
Income Tax Expense. The variance was primarily due to an increase in pretax income, partially offset by a lower effective tax rate, partially offset by an increase in pretax income.rate. The effective tax rates for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 were 33.534.1 percent and 35.335.4 percent, respectively. The decrease in the effective tax rate was primarily due to the impactamortization of tax return true-ups.excess North Carolina deferred tax.
Matters Impacting Future Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Duke Energy Progress’ financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
On May 18, 2016, the NCDEQ issued proposed risk classifications for all coal ash surface impoundments in North Carolina. All ash impoundments not previously designated as high priority by the Coal Ash Act were designated as intermediate risk. Certain impoundments classified as intermediate risk, however, may be reassessed in the future as low risk pursuant to legislation signed by the former North Carolina governor on July 14, 2016. Duke Energy Progress' estimated asset retirement obligationsAROs related to the closure of North Carolina ash impoundments are based upon the mandated closure method or a probability weighting of potential closure methods for the impoundments that may be reassessed to low risk. As the final risk ranking classifications in North Carolina are delineated, final closure plans and corrective action measures are developed and approved for each site, and the closure work progresses, and the closure method scope isand remedial action methods are determined, the complexity of work and the amount of coal combustion material could be different than originally estimated and, therefore, could materially impact Duke Energy Progress' financial position, results of operations and cash flows.position. See Note 7 to9 in Duke Energy's Annual Report on Form 10-K for the Condensed Consolidated Financial Statements, “Assetyear ended December 31, 2016, "Asset Retirement Obligations,”" for additional information.
Duke Energy Progress is a party to multiple lawsuits and subject to fines and other penalties related to operations at certain North Carolina facilities with ash basins. The outcome of these lawsuits, fines and penalties could have an adverse impact on Duke Energy Progress’ financial position, results of operations and cash flows. See Note 5 to the Condensed Consolidated Financial Statements, “Commitments and Contingencies,” for additional information.
An order from regulatory authorities disallowing recovery of costs related to closure of ash impoundments could have an adverse impact on Duke Energy Progress’ financial position, results of operations and cash flows. See Notes 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015, "Asset Retirement Obligations," for additional information.
In the fourth quarter of 2016, Hurricane Matthew caused historic flooding, extensive damage and widespread power outages within the Duke Energy Progress service territory. Duke Energy Progress filed a petition with the NCUC requesting an accounting order to defer incremental operation and maintenance and capital costs incurred in response to Hurricane Matthew and other significant 2016 storms. Current estimated incremental costs are approximately $116 million. The NCUC has not completedruled on the petition. A final accumulation of total estimated incremental storm restoration costs incurred; however, the preliminary estimate is approximately $200 million. Given the magnitude of the storm, Duke Energy Progress intends to request approval to defer the incremental costs incurred to a regulatory asset for recovery in its next base rate cases. An order from regulatory authorities disallowingthe NCUC that disallows the deferral and future recovery of all or a significant portion of the incremental storm restoration costs incurred could haveresult in an adverse impact on Duke Energy Progress' financial position, results of operations and cash flows.
On May 2, 2017, Duke Energy Progress filed notice with the NCUC that it intends to file a general rate case on or about June 1, 2017. Duke Energy Progress will seek to recover costs of complying with CCR regulations and the Coal Ash Act, as well as costs of capital investments in generation, transmission and distribution systems and any increase in expenditures subsequent to previous rate cases. Duke Energy Progress' earnings could be adversely impacted if the rate case is delayed or denied by the NCUC.
DUKE ENERGY FLORIDA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 and the Annual Report on Form 10-K for the year ended December 31, 2015.2016.
| | | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 3,538 |
| | $ | 3,803 |
| | $ | (265 | ) | $ | 959 |
| | $ | 1,024 |
| | $ | (65 | ) |
| Operating Expenses | 2,652 |
| | 2,904 |
| | (252 | ) | | | | | |
| Fuel used in electric generation and purchased power | | 362 |
| | 412 |
| | (50 | ) |
| Operation, maintenance and other | | 191 |
| | 205 |
| | (14 | ) |
| Depreciation and amortization | | 132 |
| | 114 |
| | 18 |
|
| Property and other taxes | | 77 |
| | 78 |
| | (1 | ) |
| Impairment charges | | 1 |
| | 2 |
| | (1 | ) |
| Total operating expenses | | 763 |
| | 811 |
| | (48 | ) |
| Operating Income | 886 |
| | 899 |
| | (13 | ) | 196 |
| | 213 |
| | (17 | ) |
| Other Income and Expenses, net | 30 |
| | 12 |
| | 18 |
| |
| Other Income and Expenses | | 16 |
| | 5 |
| | 11 |
|
| Interest Expense | 143 |
| | 149 |
| | (6 | ) | 70 |
| | 41 |
| | 29 |
|
| Income Before Income Taxes | 773 |
| | 762 |
| | 11 |
| 142 |
| | 177 |
| | (35 | ) |
| Income Tax Expense | 286 |
| | 268 |
| | 18 |
| 52 |
| | 67 |
| | (15 | ) |
| Net Income | $ | 487 |
| | $ | 494 |
| | $ | (7 | ) | $ | 90 |
| | $ | 110 |
| | $ | (20 | ) |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Wholesale power sales include both billed and unbilled sales. Total sales includes billed and unbilled retail sales, and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
| Increase (Decrease) over prior period | 20162017 |
|
| Residential sales | 3.0(8.4 | )% |
| General service sales | 0.80.4 | % |
| Industrial sales | (2.50.4 | )% |
| Wholesale and other | 29.25.1 | % |
| Total sales | 2.4(1.8 | )% |
| Average number of customers | 1.61.4 | % |
NineThree Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Operating Revenues. The variance was driven primarily by:
a $303$50 million decrease in fuel and capacity revenues primarily due to decreased fuel prices to retail customers, partially offset by increaseddemand and capacity rates to retail customers;
a $27 million decrease in retail sales, net of fuel revenues, due to warm winter weather in the current year; and
an $18 million decrease in wholesale power revenues primarily driven by contracts that expired in the prior year.
Partially offset by:
a $16 million increase in weather-normal sales volumes to retail customers in the current year;
a $15 million increase in other revenue primarily due to a transmission customer settlement charge taken in the prior year, increased transmission demand and higher transmission rates; and
a $13 million increase in rider revenues primarily due to nuclear asset securitization revenues beginning in 2016 and July 2016;
an $11 million increase in energy conservation cost recovery clauseweather-normal sales volumes to retail customers in the current year; and environmental cost recovery clause revenues
a $6 million increase in retail pricing due to high recovery rates in 2016, partially offset by a decrease in nuclear cost recovery clause revenues due to suspending recovery of the Levy nuclear project in 2015.base rate adjustment for the Osprey acquisition.
Operating Expenses. The variance was driven primarily by:
a $274$50 million decrease in fuel used in electric generation and purchased powerexpense primarily due to lower deferred fuel expensecosts and lower generation costs,decreased purchased power, partially offset by increased purchased power.
Partially offset by:higher generation costs; and
a $24$14 million increasedecrease in operations and maintenance expense primarily due to decreased labor costs and planned outage costs.
Partially offset by:
an $18 million increase in costs recoverable through the energy conservation cost recovery clausedepreciation and an increaseamortization expense primarily due to additional plant in employee benefit costs, partially offset by a decrease in payroll and labor costs.service, as well as nuclear regulatory asset amortization.
Other Income and Expenses, net.Expenses. The variance was driven by higher AFUDC equity return on the Citrus County Combined Cycle and Hines Energy Complex Chiller Uprate projects in the current year and gains on insurance policies.
Interest Expense. The variance was primarily due to higher debt outstanding and lower debt returns, driven by the CR3 debt return recorded prior to the securitization of CR3 in June of 2016.
Income Tax Expense. The variance was primarily due to an increasea decrease in pretax income and a higherdecrease in effective tax rate. The effective tax rates for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 were 37.036.6 percent and 35.237.9 percent, respectively. The increasedecrease in the effective tax rate was primarily due to a release of tax reserves in 2015 due to expired tax statutes.higher AFUDC equity.
DUKE ENERGY OHIO
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 and the Annual Report on Form 10-K for the year ended December 31, 2015.2016.
| | | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 1,433 |
| | $ | 1,453 |
| | $ | (20 | ) | | | | | |
| Regulated electric | | $ | 337 |
| | $ | 340 |
| | $ | (3 | ) |
| Regulated natural gas | | 170 |
| | 170 |
| | — |
|
| Nonregulated electric and other | | 11 |
| | 6 |
| | 5 |
|
| Total operating revenues | | 518 |
| | 516 |
| | 2 |
|
| Operating Expenses | 1,178 |
| | 1,231 |
| | (53 | ) | | | | | |
| Fuel used in electric generation and purchased power – regulated | | 97 |
| | 111 |
| | (14 | ) |
| Fuel used in electric generation and purchased power – nonregulated | | 15 |
| | 10 |
| | 5 |
|
| Cost of natural gas | | 54 |
| | 49 |
| | 5 |
|
| Operation, maintenance and other | | 130 |
| | 119 |
| | 11 |
|
| Depreciation and amortization | | 67 |
| | 61 |
| | 6 |
|
| Property and other taxes | | 72 |
| | 71 |
| | 1 |
|
| Total operating expenses | | 435 |
| | 421 |
| | 14 |
|
| Gains on Sales of Other Assets and Other, net | 2 |
| | 8 |
| | (6 | ) | — |
| | 1 |
| | (1 | ) |
| Operating Income | 257 |
| | 230 |
| | 27 |
| 83 |
| | 96 |
| | (13 | ) |
| Other Income and Expenses, net | 6 |
| | (2 | ) | | 8 |
| |
| Other Income and Expenses | | 4 |
| | 2 |
| | 2 |
|
| Interest Expense | 63 |
| | 58 |
| | 5 |
| 22 |
| | 20 |
| | 2 |
|
| Income from Continuing Operations Before Income Taxes | 200 |
| | 170 |
| | 30 |
| 65 |
| | 78 |
| | (13 | ) |
| Income Tax Expense from Continuing Operations | 65 |
| | 64 |
| | 1 |
| 23 |
| | 21 |
| | 2 |
|
| Income from Continuing Operations | 135 |
| | 106 |
| | 29 |
| 42 |
| | 57 |
| | (15 | ) |
| Income from Discontinued Operations, net of tax | 36 |
| | 23 |
| | 13 |
| — |
| | 2 |
| | (2 | ) |
| Net Income | $ | 171 |
| | $ | 129 |
| | $ | 42 |
| $ | 42 |
| | $ | 59 |
| | $ | (17 | ) |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
| Increase (Decrease) over prior year | 20162017 |
|
| Residential sales | (1.32.9 | )% |
| General service sales | 0.6(1.7 | )% |
| Industrial sales | (0.60.2 | )% |
| Wholesale power sales | (69.0153.2 | )% |
| Total sales | (2.90.8 | )% |
| Average number of customers | 0.8 | % |
NineThree Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Operating Revenues.The variance was driven primarily by:
an $8 million increase in PJM transmission revenues;
a $40$6 million increase in rider revenues primarily due to energy efficiency programs and a rate increase for the distribution capital investment rider, partially offset by a decrease in the percentage of income payment plan rider due to a rate decrease: and
a $5 million increase in other revenues related to Ohio Valley Electric Corporation (OVEC).
Partially offset by:
an $11 million decrease in fuel revenues driven byprimarily due to lower electric fuel prices and sales volumes, partially offset by higher costs passed through to natural gas pricescustomers due to higher natural gas prices; and decreased
an $8 million decrease in electric retail sales, volumes;net of fuel revenues, due to warm winter weather in the current year.
Operating Expenses. The variance was driven primarily by:
an $11 million increase in operations and maintenance expense due to higher energy efficiency program costs, higher storm costs, and higher transmission and distribution operations costs; and
a $3$6 million decreaseincrease in depreciation and amortization expense due to less favorable weather compared to the prior year.additional plant in service.
Partially offset by:
a $23 million increase in the energy efficiency rider due to a prior year unfavorable regulatory order limiting the ability to utilize energy efficiency banked savings.
Operating Expenses. The variance was driven by a $52$14 million decrease in the cost of natural gas, primarily due to decreasedfuel expense driven by lower sales volumes and lower natural gas prices.electric fuel costs.
Income Tax Expense. The variance was primarily due to an increasea decrease in pretax income, partially offset by a lowerhigher effective tax rate. The effective tax rate for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 were 32.535.4 percent and 37.626.9 percent, respectively. The decreaseincrease in the effective tax rate was primarily due to a favorablean immaterial out of period adjustment in the prior year related to prior period depreciation and otherdeferred tax balances associated with property, plant and equipment.
Discontinued Operations, Net of Tax. The variance was primarily due to an income tax benefit resulting from immaterial out of period deferred tax liability adjustments related to the Midwest Generation Disposal Group, partially offset by the Midwest Generation Disposal Group's operating results in 2015. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions," for additional information.
Matters Impacting Future Results
An order from regulatory authorities disallowing recovery of costs related to closure of ash basins could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows. See NotesNote 4 “Regulatory Matters” and Note 7, "Asset Retirement Obligations," to the Condensed Consolidated Financial Statements, “Regulatory Matters” and Note 9 in Duke Energy's Annual Report on Form 10-K for the year ended December 31, 2016, "Asset Retirement Obligations," for additional information.
Duke Energy Ohio’s nonregulated Beckjord station, a facility retired during 2014, is not subject to the EPA rule related to the disposal of CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with on-site storage of coal ash at the facility, the costs could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows.
On November 13,In 2013, the Public Utilities Commission of Ohio (PUCO)PUCO issued an order (PUCO order) approving a settlement of Duke Energy Ohio’s natural gas base rate case and authorizing the recovery of costs incurred between 2008 and 2012 for environmental investigation and remediation of two former manufactured gas plant (MGP)MGP sites. At September 30, 2016,March 31, 2017, Duke Energy Ohio had recorded in Regulatory assets on the Condensed Consolidated Balance Sheet approximately $101$100 million of estimated MGP remediation costs not yet recovered through the MGP rider mechanism. Intervenors have appealed to the Ohio Supreme Court the PUCO order authorizing recovery of these amounts. That appeal remains pending. The PUCO order also established deadlines for costs to be incurred at certain sites in order to be for the costs to be recoverable. On May 16, 2016, Duke Energy Ohio filed an application to extend the deadline of December 31, 2016, for the East End site. The amount of Regulatory assets previously discussed includes $46 million of costs expected to be incurred after the December 31, 2016 deadline. Duke Energy Ohio cannot predict the outcome of the appeal before the Ohio Supreme Court or future action by the PUCO. If Duke Energy Ohio is not able to recover these remediation costs in rates, the costs could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
Duke Energy Ohio has a 9 percent ownership interest in OVEC, which owns 2,256 MW of coal-fired generation capacity. As a counterparty to an ICPA, Duke Energy Ohio has a contractual arrangement to receive entitlements to capacity and energy from OVEC’s power plants through June 2040 commensurate with its power participation ratio, which is equivalent to Duke Energy Ohio’s ownership interest. Costs, including fuel, operating expenses, fixed costs, debt amortization, and interest expense, are allocated to counterparties to the ICPA, including Duke Energy Ohio, based on their power participation ratio. The value of the ICPA is subject to variability due to fluctuations in power prices and changes in OVEC’s costs of business. Deterioration in the credit quality or bankruptcy of one or more parties to the ICPA could increase the costs of OVEC. In addition, certain proposed environmental rulemaking costs could result in future increased cost allocations.
On March 2, 2017, Duke Energy Ohio filed an electric distribution base rate application with the PUCO to address recovery of electric distribution system capital investments and any increase in expenditures subsequent to previous rate cases. The application also includes requests to continue certain current riders and establish new riders related to LED Outdoor Lighting Service and regulatory mandates. Duke Energy Ohio's earnings could be adversely impacted if the rate case and requested riders are delayed or denied by the PUCO. See Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for additional information.
DUKE ENERGY INDIANA
Management’s Discussion and Analysis should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and Notes for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 and the Annual Report on Form 10-K for the year ended December 31, 2015.2016.
| | | | Nine Months Ended September 30, | Three Months Ended March 31, |
| (in millions) | 2016 |
| | 2015 |
| | Variance |
| 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | $ | 2,225 |
| | $ | 2,223 |
| | $ | 2 |
| $ | 758 |
| | $ | 714 |
| | $ | 44 |
|
| Operating Expenses | 1,636 |
| | 1,750 |
| | (114 | ) | | | | | |
| Fuel used in electric generation and purchased power | | 251 |
| | 228 |
| | 23 |
|
| Operation, maintenance and other | | 174 |
| | 162 |
| | 12 |
|
| Depreciation and amortization | | 125 |
| | 125 |
| | — |
|
| Property and other taxes | | 22 |
| | 23 |
| | (1 | ) |
| Total operating expenses | | 572 |
| | 538 |
| | 34 |
|
| Operating Income | 589 |
| | 473 |
| | 116 |
| 186 |
| | 176 |
| | 10 |
|
| Other Income and Expenses, net | 15 |
| | 9 |
| | 6 |
| |
| Other Income and Expenses | | 8 |
| | 4 |
| | 4 |
|
| Interest Expense | 136 |
| | 132 |
| | 4 |
| 44 |
| | 44 |
| | — |
|
| Income Before Income Taxes | 468 |
| | 350 |
| | 118 |
| 150 |
| | 136 |
| | 14 |
|
| Income Tax Expense | 159 |
| | 128 |
| | 31 |
| 59 |
| | 41 |
| | 18 |
|
| Net Income | $ | 309 |
| | $ | 222 |
| | $ | 87 |
| $ | 91 |
| | $ | 95 |
| | $ | (4 | ) |
The following table shows the percent changes in GWh sales and average number of customers. The percentages for retail customer classes represent billed sales only. Total sales includes billed and unbilled retail sales and wholesale sales to incorporated municipalities, public and private utilities and power marketers. Amounts are not weather-normalized. |
| | |
| Increase (Decrease) over prior year | 20162017 |
|
| Residential sales | (2.54.1 | )% |
| General service sales | (0.11.3 | )% |
| Industrial sales | 0.6— | % |
| Wholesale power sales | 38.3(42.7 | )% |
| Total sales | 5.6(12.6 | )% |
| Average number of customers | 1.11.2 | % |
NineThree Months Ended September 30, 2016March 31, 2017 as Compared to September 30, 2015March 31, 2016
Operating Revenues. The variance was driven primarily by:
a $46$28 million increase in retail pricingrider revenues related to Edwardsport IGCC and rate riderenergy efficiency programs; and
a $17 million increase in fuel revenues primarily due to increased revenues relatedhigher purchased power costs passed through to clean coal equipment and Edwardsport IGCC; and
a $29 million increase in wholesale revenues due to new contractscustomers and higher demand.
Partially offset by:
a $71 million decrease in fuel revenues, including emission allowances, primarily due to a decrease in fuel prices.financial transmission right (FTR) revenues.
Operating Expenses. The variance was driven primarily by:
an $89a $23 million decreaseincrease in fuel used in electric generation and purchased power expense, primarily due to higher purchased power volumes and prices, partially offset by lower fuel prices and the net benefitcosts due to expense of reduced purchased power and increased internallower generation; and
an $85 million impairment charge in the prior year related to the September 2015 Edwardsport IGCC settlement.
Partially offset by:
a $26$14 million increase in propertyoperations and other taxes,maintenance expense due to growth in energy efficiency programs and higher expenses at Edwardsport IGCC.
Other Income and Expenses. The variance was primarily driven by higher sales and use tax due to the partial reversal in 2015 of a tax reserve upon settlement of the matter;
a $25 million increase in depreciation and amortization expenses primarily due to a higher amount of property, plant and equipment in service; and
an $8 million impairment charge in the current year related to the early retirement of certain metering equipment.AFUDC equity.
Income Tax Expense. The variance was primarily due to an increase in pretax income.income and a higher effective tax rate. The effective tax rates for the ninethree months ended September 30,March 31, 2017 and 2016 and 2015 were 34.039.3 percent and 36.630.2 percent, respectively. The decreaseincrease in the effective tax rate was primarily due to a favorablean immaterial out of period adjustment in the prior year related to prior period depreciation and otherdeferred tax balances associated with property, plant and equipment.
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 asset retirement obligations.AROs. 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 financial position, results of operations and cash flows.
The IURC approved a settlement agreement between Duke Energy Indiana and multiple parties that resolves all disputes, claims and issues from the IURC proceedings related to post-commercial operating performance and recovery of ongoing operating and capital costs at the Edwardsport IGCC generating facility. Pursuant to the terms of this agreement, the agreement imposes a cost cap for retail recoverable operations and maintenance costs in the second half of 2016, andthrough 2017. An inability to manage operating costs in accordance with caps imposed pursuant to the agreement could have an adverse impact on Duke Energy Indiana's financial position, results of operations and cash flows. See Note 4 to the Condensed Consolidated Financial Statements, “Regulatory Matters,” for additional information.
PIEDMONT
Management’s Discussion and Analysis should be read in conjunction with the Condensed Consolidated Financial Statements and Notes for the three months ended March 31, 2017, Piedmont's Annual Report on Form 10-K for the year ended October 31, 2016, and the transition report filed on Form 10-Q (Form 10-QT) as of December 31, 2016, for the transition period from November 1, 2016 to December 31, 2016.
|
| | | | | | | | | | | |
| | Three Months Ended March 31, |
| (in millions) | 2017 |
| | 2016 |
| | Variance |
|
| Operating Revenues | | | | | |
| Regulated natural gas | $ | 498 |
| | $ | 481 |
| | 17 |
|
| Nonregulated natural gas and other | 2 |
| | 2 |
| | — |
|
| Total operating revenues | 500 |
| | 483 |
| | 17 |
|
| Operating Expenses | | | | | |
| Cost of natural gas | 205 |
| | 197 |
| | 8 |
|
| Operation, maintenance and other | 77 |
| | 74 |
| | 3 |
|
| Depreciation and amortization | 35 |
| | 34 |
| | 1 |
|
| Property and other taxes | 13 |
| | 11 |
| | 2 |
|
| Total operating expenses | 330 |
| | 316 |
| | 14 |
|
| Operating Income | 170 |
| | 167 |
| | 3 |
|
| Equity in Earnings of Unconsolidated Affiliates | 3 |
| | 16 |
| | (13 | ) |
| Interest Expense | 20 |
| | 17 |
| | 3 |
|
| Income Before Income Taxes | 153 |
| | 166 |
| | (13 | ) |
| Income Tax Expense | 58 |
| | 63 |
| | (5 | ) |
| Net Income | $ | 95 |
| | $ | 103 |
| | $ | (8 | ) |
The following table shows the percent changes in dekatherms delivered and average number of customers. The percentages for all throughput deliveries represent billed and unbilled sales. Amounts are not weather-normalized. |
| | |
| Increase (Decrease) over prior year | 2017 |
|
| Residential deliveries | (23.2 | )% |
| Commercial deliveries | (19.9 | )% |
| Industrial deliveries | (7.1 | )% |
| Power generation deliveries | (12.4 | )% |
| For resale | (12.7 | )% |
| Total throughput deliveries | (14.3 | )% |
| Secondary market volumes | (1.7 | )% |
| Average number of customers | 1.5 | % |
Piedmont's throughput was 133,276,787 dekatherms and 155,446,586 dekatherms for the three months ended March 31, 2017 and 2016, respectively. Due to the margin decoupling mechanism in North Carolina and weather normalization adjustment (WNA) mechanisms in South Carolina and Tennessee, changes in throughput deliveries do not have a material impact on Piedmont's revenues or earnings. The margin decoupling mechanism adjusts for variations in residential and commercial use per customer, including those due to weather and conservation. The 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.
Three Months Ended March 31, 2017 as Compared to March 31, 2016
Operating Revenues.The variance was driven primarily by:
a $13 million increase in revenues to residential and commercial customers, net of natural gas costs passed through to customers, primarily due to IMR rate adjustments and customer growth, partially offset by decreased volumes delivered due to warmer weather; and
an $8 million increase due to higher natural gas costs passed through to customers, primarily due to higher natural gas prices.
Partially offset by:
a $3 million decrease in secondary market activity primarily due to lower margin sales.
Operating Expenses.The variance was driven by:
An $8 million increase in costs of natural gas, primarily due to higher natural gas prices and decreased opportunity for capacity release transactions; and
A $6 million increase in other operating expenses, primarily due to higher severance expense, increased property taxes and depreciation attributable to additional plant in service.
Equity in Earnings of Unconsolidated Affiliates. The variance was primarily due to equity earnings from the investment in SouthStar in the prior year. Piedmont sold its 15 percent membership interest in SouthStar on October 3, 2016.
Income Tax Expense. The variance was primarily due to a decrease in pretax income. The effective tax rates for the three months ended March 31, 2017 and 2016 were 37.9 percent and 38.0 percent, respectively.
Matters Impacting Future Results
On April 1, 2017, Piedmont transferred its ownership interests in Atlantic Coast Pipeline, LLC (ACP) and Constitution to a wholly owned subsidiary of Duke Energy at book value. As a result, Piedmont will not recognize equity earnings (or losses) from these investments in future periods.
LIQUIDITY AND CAPITAL RESOURCES
Sources and Uses of Cash
Duke Energy relies primarily upon cash flows from operations, debt issuances and its existing cash and cash equivalents to fund its domestic liquidity and capital requirements. Duke Energy’s capital requirements arise primarily from capital and investment expenditures, repaying long-term debt and paying dividends to shareholders. See Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015,2016, for a summary and detailed discussion of projected primary sources and uses of cash for 20162017 to 2018.2019.
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.
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 may at times 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 business.
At September 30, 2016, Duke Energy had cash and cash equivalents of $6.2 billion, of which $526 million is held by entities domiciled in foreign jurisdictions. The increase in cash and cash equivalents was primarily due to proceeds from debt issuances intended to fund the Piedmont acquisition, as discussed below.
Piedmont Acquisition
On October 3, 2016, Duke Energy completed the acquisition contemplated by the Merger Agreement with Piedmont for a total cash price of approximately $5.0 billion and assumed Piedmont's existing long-term debt, which had an estimated fair value of approximately $2.0 billion.
Financings to fund the transaction included $3.75 billion of long-term debt issued in August 2016, and $750 million borrowed under the Term Loan Facility on September 30, 2016.
Following the close of the Piedmont acquisition, Duke Energy physically settled the Equity Forwards in full by delivering 10.6 million shares of common stock in exchange for net cash proceeds of approximately $723 million. The net proceeds were used to finance a portion of the Piedmont acquisition.
See Notes 2 and 14 to the Condensed Consolidated Financial Statements, “Acquisitions and Dispositions" and "Common Stock," respectively, for additional information on the Piedmont acquisition financing.
International Energy
In December 2014, Duke Energy declared a taxable dividend of historical foreign earnings in the form of notes payable to repatriate approximately $2.7 billion of cash held and expected to be generated by International Energy over a period of up to eight years. As of September 30, 2016, approximately $1.6 billion has been remitted.
As of December 31, 2015, Duke Energy’s intention was to indefinitely reinvest foreign earnings of International Energy earned after December 31, 2014. In February 2016, Duke Energy announced it had initiated a process to divest the International Energy Disposal Group. On October 10, 2016, Duke Energy reached agreements to sell the International Disposal Group in two separate transactions with a combined enterprise value of approximately $2.4 billion. The transactions are expected to close by early 2017.
For further information on the sale of International Energy, refer to Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions."
Accordingly, Duke Energy no longer intends to indefinitely reinvest the undistributed earnings of International Energy. This change in Duke Energy's intent, combined with the extension of bonus depreciation by Congress in late 2015, allows Duke Energy to more efficiently utilize foreign tax credits and reduce U.S. deferred tax liabilities associated with historic unremitted foreign earnings by approximately $95 million for the nine months ended September 30, 2016.
Proceeds received from the notes described above or resulting from a sale of International Energy are expected to be used by Duke Energy to reduce debt and fund the operations and growth of domestic businesses.
CREDIT FACILITIES AND REGISTRATION STATEMENTS
Master Credit Facility Summary
In March 2017, Duke Energy has aamended its Master Credit Facility with ato increase its capacity offrom $7.5 billion throughto $8 billion, and to extend the termination date of the facility from January 2020.30, 2020, to March 16, 2022. The amendment also added Piedmont as a borrower within the Master Credit Facility. Piedmont's separate $850 million credit facility was terminated in connection with the amendment. With the amendment, the Duke Energy Registrants, excluding Progress Energy (Parent), have borrowing capacity under the Master Credit Facility up to a specified sublimit for each borrower. Duke Energy has the unilateral ability at any time to increase or decrease the borrowing sublimits of each borrower, subject to a maximum sublimit for each borrower. The amount available under the Master Credit Facility has been reduced to backstop issuances of commercial paper, certain letters of credit and variable-rate demand tax-exempt bonds that may be put to the Duke Energy Registrants at the option of the holder. Duke Energy Carolinas and Duke Energy Progress are also required to each maintain $250 million of available capacity under the Master Credit Facility as security to meet obligations under plea agreements reached with the U.S. Department of Justice in 2015 related to violations at North Carolina facilities with ash basins. The table below includes the current borrowing sublimits and available capacity under the Master Credit Facility. | | | | September 30, 2016 | March 31, 2017 |
| | | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | Duke |
| | |
| | Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| Duke |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | Energy |
| | |
| (in millions) | Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| Energy |
| | (Parent) |
| | Carolinas |
| | Progress |
| | Florida |
| | Ohio |
| | Indiana |
| | Piedmont |
|
Facility size(a) | $ | 7,500 |
| | $ | 3,400 |
| | $ | 1,100 |
| | $ | 1,000 |
| | $ | 950 |
| | $ | 450 |
| | $ | 600 |
| $ | 8,000 |
| | $ | 3,400 |
| | $ | 1,100 |
| | $ | 1,000 |
| | $ | 950 |
| | $ | 450 |
| | $ | 600 |
| | $ | 500 |
|
| Reduction to backstop issuances | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commercial paper(b) | (1,652 | ) | | (1,027 | ) | | (300 | ) | | (150 | ) | | — |
| | (25 | ) | | (150 | ) | (3,134 | ) | | (1,822 | ) | | (469 | ) | | (402 | ) | | — |
| | (30 | ) | | (150 | ) | | (261 | ) |
| Outstanding letters of credit | (77 | ) | | (70 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| (71 | ) | | (62 | ) | | (4 | ) | | (2 | ) | | (1 | ) | | — |
| | — |
| | (2 | ) |
| Tax-exempt bonds | (116 | ) | | — |
| | (35 | ) | | — |
| | — |
| | — |
| | (81 | ) | (81 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (81 | ) | | — |
|
| Coal ash set-aside | (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| (500 | ) | | — |
| | (250 | ) | | (250 | ) | | — |
| | — |
| | — |
| | — |
|
| Available capacity | $ | 5,155 |
|
| $ | 2,303 |
|
| $ | 511 |
|
| $ | 598 |
|
| $ | 949 |
|
| $ | 425 |
|
| $ | 369 |
| $ | 4,214 |
|
| $ | 1,516 |
|
| $ | 377 |
|
| $ | 346 |
|
| $ | 949 |
|
| $ | 420 |
|
| $ | 369 |
| | $ | 237 |
|
| |
| (a) | Represents the sublimit of each borrower. Certain sublimits were reallocated in May 2017 to provide additional liquidity to certain borrowers in light of near-term funding needs. |
| |
| (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 Condensed Consolidated Balance Sheets. |
Term Loan Facility
On February 22, 2016, Duke Energy entered into a six-month term loan facility with commitments totaling $1.0 billion (the Term Loan). On August 1, 2016, Duke Energy and each of the lenders amended and restated certain terms of this facility, resulting in aggregate commitments of $1.5 billion and extending the maturity date to July 31, 2017. As of September 30, 2016, $850 million has been drawn under the amended and restated term loan, including $750 million used to fund a portion of the Piedmont acquisition.
On October 28, 2016, Duke Energy drew the remaining $650 million available under the $1.5 billion Term Loan and used the proceeds to manage short-term liquidity and for general corporate purposes. The terms and conditions of the Term Loan are generally consistent with those governing Duke Energy’s Master Credit Facility.
Shelf Registration
In September 2016, Duke Energy filed a Form S-3registration statement (Form S-3) with the Securities and Exchange Commission (SEC).SEC. Under this Form S-3, which is uncapped, the Duke Energy Registrants, excluding Progress Energy, may issue debt and other securities in the future at amounts, prices and with terms to be determined at the time of future offerings. The registration statement was filed to replace a similar prior filing upon expiration of its three year term, and also allows for the issuance of common stock by Duke Energy.
In January 2017, Duke Energy amended its Form S-3 to add Piedmont as a registrant and included in the amendment a prospectus for Piedmont under which it may issue debt securities in the same manner as other Duke Energy Registrants.
DEBT MATURITIES
The following table shows the significant components of Current maturities of long-term debtLong-Term Debt on the Condensed Consolidated Balance Sheets. The Duke Energy Registrants currently anticipate satisfying these obligations with cash on hand and proceeds from additional borrowings. | | | (in millions) | Maturity Date | | Interest Rate |
| | September 30, 2016 |
| Maturity Date | | Interest Rate |
| | March 31, 2017 |
|
| Unsecured Debt | | | | | | | | |
| Duke Energy (Parent) | November 2016 | | 2.150 | % | | $ | 500 |
| August 2017 | | 1.625 | % | | 700 |
|
| Duke Energy (Parent) | April 2017 | | 1.034 | % | | 400 |
| |
Duke Energy(a) | May 2017 | | 15.681 | % | | 56 |
| |
| Duke Energy (Parent) | August 2017 | | 1.625 | % | | 700 |
| |
| Piedmont | | September 2017 | | 8.510 | % | | 35 |
|
| Secured Debt | | | | | | | | |
| Duke Energy | June 2017 | | 2.155 | % | | 45 |
| June 2017 | | 2.605 | % | | 45 |
|
| Duke Energy | | June 2017 | | 2.455 | % | | 34 |
|
| First Mortgage Bonds | | | | | | | | |
| Duke Energy Florida | | September 2017 | | 5.800 | % | | 250 |
|
| Duke Energy Progress | | November 2017 | | 1.252 | % | | 200 |
|
| Duke Energy Carolinas | December 2016 | | 1.750 | % | | 350 |
| January 2018 | | 5.250 | % | | 400 |
|
| Duke Energy Progress | March 2017 | | 1.035 | % | | 250 |
| |
| Duke Energy Florida | September 2017 | | 5.800 | % | | 250 |
| |
| Tax-exempt Bonds | | | | | |
| Duke Energy Carolinas | February 2017 | | 3.600 | % | | 77 |
| |
Other(b) | | | | 573 |
| |
Other(a) | | | | | 313 |
|
| Current maturities of long-term debt | | | | $ | 3,201 |
| | | | $ | 1,977 |
|
| |
| (a) | The interest rate includes country-specific risk premiums. |
| |
(b) | Includes capital lease obligations, amortizing debt and small bullet maturities. |
CASH FLOWS FROM OPERATING ACTIVITIES
The relatively stable operating cash flows of Regulated Utilities compose a substantial portion of Duke Energy’s cashCash flows from operations. Regulated Utilities’ 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, and legal costs and related settlements can affect the timing and level of cash flows from operations.
Duke Energy believes it has sufficient liquidity resources through the commercial paper markets, and ultimately the Master Credit 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,” in the Duke Energy Registrants’ Annual ReportReports on Form 10-K for the year ended December 31, 2015, for additional information).
Restrictive Debt Covenants
The Duke Energy Registrants’ debt and credit agreements contain various financial and other covenants. The Master Credit Facility contains a covenant requiring the debt-to-total capitalization ratio not to not exceed 65 percent for each borrower.all borrowers except Piedmont. The debt-to-total capitalization ratio for Piedmont is not to exceed 70 percent. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of September 30, 2016,March 31, 2017, each of the Duke Energy Registrants were 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 the acceleration of other significant indebtedness of the borrower or some of its subsidiaries. None of the debt or credit agreements contain material adverse change clauses.
Credit Ratings
Credit ratings are intended to provide credit lenders a framework for 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 deteriorate, credit ratings could be negatively impacted.
The Duke Energy Registrants each hold credit ratings by Fitch Ratings, Inc. (Fitch), Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Rating Services (S&P). TheIn April 2017, Fitch Ratings, Inc. (Fitch) withdrew credit ratings of the Subsidiary Registrants, with the exclusion of Piedmont who was not previously rated by Fitch, due to commercial reasons. Fitch will continue to provide credit ratings for Duke Energy Registrants' credit ratings and outlooks from Fitch, Moody's and S&P have not changed since February 2016, except for the Duke Energy Corporation outlook from Fitch. In October 2016, Fitch removed Duke Energy Corporation's ratings from rating watch negative and assigned a negative outlook.
In October 2016, S&P downgraded Piedmont's issuer credit rating and senior unsecured debt rating to A- from A and commercial paper to A-2 from A-1. S&P removed Piedmont's ratings from credit watch with negative implications and assigned a negative outlook. These actions aligned Piedmont’s S&P credit ratings with those of Duke Energy Corporation, under S&P’s group rating methodology.Corporation.
Cash Flow Information
The following table summarizes Duke Energy’s cash flows. | | | | | Nine Months Ended | | Three Months Ended |
| | | September 30, | | March 31, |
| (in millions) | | 2016 |
| | 2015 |
| | 2017 |
| | 2016 |
|
| Cash flows provided by (used in): | | | | | | | | |
| Operating activities | | $ | 5,592 |
| | $ | 5,396 |
| | $ | 1,289 |
| | $ | 1,682 |
|
| Investing activities | | (5,555 | ) | | (3,291 | ) | | (2,399 | ) | | (1,758 | ) |
| Financing activities | | 5,285 |
| | (2,771 | ) | | 1,596 |
| | (3 | ) |
| Changes in cash and cash equivalents included in assets held for sale | | | — |
| | 30 |
|
| Net increase (decrease) in cash and cash equivalents | | 5,322 |
| | (666 | ) | | 486 |
| | (49 | ) |
| Cash and cash equivalents at beginning of period | | 857 |
| | 2,036 |
| | 392 |
| | 383 |
|
| Cash and cash equivalents at end of period | | $ | 6,179 |
| | $ | 1,370 |
| | $ | 878 |
| | $ | 334 |
|
OPERATING CASH FLOWS
The following table summarizes key components of Duke Energy’s operating cash flows. | | | | | Nine Months Ended | | Three Months Ended |
| | | September 30, | | March 31, |
| (in millions) | | 2016 |
| | 2015 |
| | 2017 |
| | 2016 |
|
| Net income | | $ | 2,392 |
| | $ | 2,349 |
| | $ | 717 |
| | $ | 699 |
|
| Non-cash adjustments to net income | | 3,585 |
| | 3,762 |
| | 1,237 |
| | 1,060 |
|
| Contributions to qualified pension plans | | — |
| | (143 | ) | |
| Payments for asset retirement obligations | | (443 | ) | | (208 | ) | | (134 | ) | | (112 | ) |
| Working capital | | 58 |
| | (364 | ) | | (531 | ) | | 35 |
|
| Net cash provided by operating activities | | $ | 5,592 |
| | $ | 5,396 |
| | $ | 1,289 |
| | $ | 1,682 |
|
The variance was driven primarily due to:
a $422$566 million increasedecrease in cash flows from working capital primarily due to higher property tax accrualsthe absence of the International Disposal Group's operating cash flows, lower regulated electric revenues due to warmer winter weather in the current year and the timing of payments and lower coal stock inventory due to managementpayment of high inventory levels through less delivery receipts and higher utilization as a result of warmer than normal weather, partially offset by higher current year receivables;accruals.
Partially offset by:
a $235$195 million increase in payments fornet income after non-cash adjustments, primarily due to the closure of ash basins and nuclear decommissioning of Crystal River Unit 3.additional earnings attributed to the Piedmont acquisition.
INVESTING CASH FLOWS
The following table summarizes key components of Duke Energy’s investing cash flows. | | | | | Nine Months Ended | | Three Months Ended |
| | | September 30, | | March 31, |
| (in millions) | | 2016 |
| | 2015 |
| | 2017 |
| | 2016 |
|
| Capital, investment and acquisition expenditures | | $ | (5,450 | ) | | $ | (6,168 | ) | | $ | (2,335 | ) | | $ | (1,704 | ) |
| Available for sale securities, net | | 59 |
| | 20 |
| | 19 |
| | 15 |
|
| Proceeds from sale of the Midwest Generation Disposal Group | | — |
| | 2,792 |
| |
| Other investing items | | (164 | ) | | 65 |
| | (83 | ) | | (69 | ) |
| Net cash used in investing activities | | $ | (5,555 | ) | | $ | (3,291 | ) | | $ | (2,399 | ) | | $ | (1,758 | ) |
The variance was primarily due to:
a $2,792$631 million decrease in proceeds mainly due to prior year sale of the Midwest Generation Disposal Group to Dynegy Inc.;
Partially offset by:
a $718 million decreaseincrease in capital, investment and acquisition expenditures primarily due to the prior year purchase of NCEMPA ownership interestsgrowth in certain generating assets.regulated generation investments and natural gas infrastructure.
FINANCING CASH FLOWS
The following table summarizes key components of Duke Energy’s financing cash flows. | | | | | Nine Months Ended | | Three Months Ended |
| | | September 30, | | March 31, |
| (in millions) | | 2016 |
| | 2015 |
| | 2017 |
| | 2016 |
|
| Issuance of common stock related to employee benefit plans | | $ | 7 |
| | $ | 16 |
| |
| Issuances of long-term debt, net | | 7,659 |
| | 516 |
| | $ | 1,155 |
| | $ | 751 |
|
| Notes payable and commercial paper | | (647 | ) | | (113 | ) | | 1,063 |
| | (158 | ) |
| Dividends paid | | (1,731 | ) | | (1,685 | ) | | (600 | ) | | (570 | ) |
| Repurchase of common shares | | — |
| | (1,500 | ) | |
| Other financing items | | (3 | ) | | (5 | ) | | (22 | ) | | (26 | ) |
| Net cash provided by (used in) financing activities | | $ | 5,285 |
| | $ | (2,771 | ) | | $ | 1,596 |
| | $ | (3 | ) |
The variance was due primarily to:
a $7,143$1,221 million increase in net proceeds from issuances of notes payable and commercial paper primarily as a result of the repayment of commercial paper at the end of 2016 with proceeds from the sale of the international business; and
a $404 million increase in proceeds from net issuances of long-term debt mainly due to the issuancetiming of $3,750 millionissuances and redemptions of senior unsecured notes used to fund a portion of the Piedmont acquisition, $1,294 million of senior secured bonds used to finance the recovery of certain retired nuclear generation assets and other issuances primarily used to fund capital expenditures, pay down outstanding commercial paper and repay debt maturities; and
a $1,500 million decrease in cash outflows due to the prior year repurchase of 19.8 million common shares under the accelerated stock repurchase program.
Partially offset by:
a $534 million increase in net payments of notes payable and commercial paper, primarily due to repayment of commercial paper, partially offset by proceeds from the Term Loan used primarily to fund a portion of the Piedmont acquisition. These cash outflows were primarily made with proceeds from long-term debt issuances.debt.
Summary of Significant Debt Issuances
Piedmont Acquisition Financing
In August 2016, Duke Energy issued $3.75 billion of senior unsecured notes in three separate series to fund a portion of the Piedmont acquisition. The $4.9 billion senior unsecured bridge financing facility with Barclays Capital, Inc. was terminated following the issuance of this long-term debt. See Note 2 to the Condensed Consolidated Financial Statements, "Acquisitions and Dispositions", for additional information on the Piedmont acquisition.
Solar Facilities Financing
In August 2016, Emerald State Solar, LLC, an indirect wholly owned subsidiary of Duke Energy, entered into a portfolio financing of approximately 22 North Carolina solar facilities. The $333 million term loan facility consists of Tranche A of $228 million secured by substantially all the assets of the solar facilities and Tranche B of $105 million secured by an Equity Contribution Agreement with Duke Energy. Proceeds were used to reimburse Duke Energy for a portion of previously funded construction expenditures related to the Emerald State Solar, LLC portfolio. The initial interest rate on the loans was six months London Interbank Offered Rate (LIBOR) plus an applicable margin of 1.75 percent plus a 0.125 percent increase every three years thereafter. In connection with this debt issuance, Emerald State Solar, LLC entered into two interest rate swaps to convert the substantial majority of the loan interest payments from variable rates to fixed rates of approximately 1.81 percent for Tranche A and 1.38 percent for Tranche B, plus the applicable margin.
Nuclear Asset-Recovery Bonds
In June 2016, DEFPF issued $1,294 million of nuclear asset-recovery bonds and used the proceeds to acquire nuclear asset-recovery property from its parent, Duke Energy Florida. The nuclear asset-recovery bonds are payable only from and secured by the nuclear asset-recovery property. DEFPF is consolidated for financial reporting purposes; however, the nuclear asset-recovery bonds do not constitute a debt, liability or other legal obligation of, or interest in, Duke Energy Florida or any of its affiliates other than DEFPF. The assets of DEFPF, including the nuclear asset-recovery property, are not available to pay creditors of Duke Energy Florida or any of its affiliates. Duke Energy Florida used the proceeds from the sale to repay short-term borrowings under the intercompany money pool borrowing arrangement and make an equity distribution of $649 million to the ultimate parent, Duke Energy (Parent), which repaid short-term borrowings. See Notes 4 and 13 to the Condensed Consolidated Financial Statements, "Regulatory Matters" and "Variable Interest Entities," respectively, for additional information.
The following table summarizes significant debt issuances (in millions). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Nine Months Ended September 30, 2016 |
| | | | | | | | 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 |
|
| Unsecured | | | | | | | | | | | | | | | | | |
April 2016(a) | April 2023 | | 2.875 | % | | $ | 350 |
| | $ | 350 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| August 2016 | September 2021 | | 1.800 | % | | 750 |
| | 750 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| August 2016 | September 2026 | | 2.650 | % | | 1,500 |
| | 1,500 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| August 2016 | September 2046 | | 3.750 | % | | 1,500 |
| | 1,500 |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| First Mortgage Bonds | | | | | | | | | | | | | | | | | |
March 2016(b) | March 2023 | | 2.500 | % | | 500 |
| | — |
| | 500 |
| | — |
| | — |
| | — |
| | — |
|
March 2016(b) | March 2046 | | 3.875 | % | | 500 |
| | — |
| | 500 |
| | — |
| | — |
| | — |
| | — |
|
May 2016(c) | May 2046 | | 3.750 | % | | 500 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 500 |
|
June 2016(b) | June 2046 | | 3.700 | % | | 250 |
| | — |
| | — |
| | — |
| | — |
| | 250 |
| | — |
|
September 2016(d) | October 2046 | | 3.400 | % | | 600 |
| | — |
| | — |
| | — |
| | 600 |
| | — |
| | — |
|
September 2016(b) | October 2046 | | 3.700 | % | | 450 |
| | — |
| | — |
| | 450 |
| | — |
| | — |
| | — |
|
| Secured Debt | | | | | | | | | | | | | | | | | |
June 2016(e) | March 2020 | | 1.196 | % | | 183 |
| | — |
| | — |
| | — |
| | 183 |
| | — |
| | — |
|
June 2016(e) | September 2022 | | 1.731 | % | | 150 |
| | — |
| | — |
| | — |
| | 150 |
| | — |
| | — |
|
June 2016(e) | September 2029 | | 2.538 | % | | 436 |
| | — |
| | — |
| | — |
| | 436 |
| | — |
| | — |
|
June 2016(e) | March 2033 | | 2.858 | % | | 250 |
| | — |
| | — |
| | — |
| | 250 |
| | — |
| | — |
|
June 2016(e) | September 2036 | | 3.112 | % | | 275 |
| | — |
| | — |
| | — |
| | 275 |
| | — |
| | — |
|
| August 2016 | June 2034 | | 2.747 | % | | 228 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| August 2016 | June 2020 | | 2.747 | % | | 105 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
| Total issuances | | | | | $ | 8,527 |
|
| $ | 4,100 |
| | $ | 1,000 |
|
| $ | 450 |
|
| $ | 1,894 |
|
| $ | 250 |
|
| $ | 500 |
|
|
| | | | | | | | | | | | | | | |
| | | | | Three Months Ended March 31, 2017 |
| | | | | | | Duke |
| | Duke |
|
| | Maturity | Interest |
| | Duke |
| | Energy |
| | Energy |
|
| Issuance Date | Date | Rate |
| | Energy |
| | Florida |
| | Ohio |
|
| Secured Debt | | | | | | | | |
February 2017(a) | June 2034 | 4.120 | % | | $ | 587 |
| | $ | — |
| | $ | — |
|
| First Mortgage Bonds | | | | | | | |
January 2017(b) | January 2020 | 1.850 | % | | 250 |
| | 250 |
| | — |
|
January 2017(b) | January 2027 | 3.200 | % | | 650 |
| | 650 |
| | — |
|
March 2017(c) | June 2046 | 3.700 | % | | 100 |
| | — |
| | 100 |
|
| Total issuances | | | | $ | 1,587 |
|
| $ | 900 |
|
| $ | 100 |
|
| |
| (a) | Portfolio financing of four Texas and Oklahoma wind facilities. Secured by substantially all of the assets of these wind facilities and nonrecourse to Duke Energy. Proceeds were used to pay down outstanding commercial paperreimburse Duke Energy for a portion of previously funded construction expenditures. |
| |
| (b) | Debt issued to fund capital expenditures for ongoing construction and capital maintenance, to repay at maturity a $250 million aggregate principal amount of bonds due September 2017 and for general corporate purposes. |
| |
(b)(c) | Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance and for general corporate purposes. |
| |
(c) | Proceeds were used to repay $325 million of unsecured debt due June 2016, $150 million of first mortgage bonds due July 2016 and for general corporate purposes. |
| |
(d) | Proceeds were used to fund capital expenditures for ongoing construction, capital maintenance, to repay short-term borrowings under the intercompany money pool borrowing arrangement and for general corporate purposes. |
| |
(e) | The nuclear asset-recovery bonds are sequential pay amortizing bonds. The maturity date above represents the scheduled final maturity date for the bonds. |
In April 2017, Duke Energy (Parent) issued $420 million of unsecured notes with a fixed interest rate of 3.364 percent and maturity date of April 2025. The net proceeds were used to refinance $400 million of unsecured debt at maturity and to repay outstanding commercial paper.
OTHER MATTERS
Environmental Regulations
The Duke Energy is subject to international, federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. The Subsidiary Registrants are subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These regulations can be changed from time to time and result in new obligations of the Duke Energy Registrants.
The following sections outline various proposed and recently enacted regulations that may impact the Duke Energy Registrants. Refer to Note 4 to the Condensed Consolidated Financial Statements, "Regulatory Matters," for further information regarding potential plant retirements and regulatory filings related to the Duke Energy Registrants.
Coal Combustion Residuals
OnIn April 17, 2015, the EPA published in the Federal Register a rule to regulate the disposal of CCR from electric utilities as solid waste. The federal regulation which became effective in October 2015, classifies CCR as nonhazardous waste under Subtitle D of the Resource Conservation and Recovery Act and allows for beneficial use of CCR with some restrictions. The regulation applies to all new and existing landfills, new and existing surface impoundments receiving CCR and existing surface impoundments that are no longer receiving CCR but contain liquid located at stations currently generating electricity (regardless of fuel source). The rule establishes requirements regarding landfill design, structural integrity design and assessment criteria for surface impoundments, groundwater monitoring, protection and protectionremedial procedures and other operational and reporting procedures to ensure the safe disposal and management of CCR. As a result of the EPA rule, Duke Energy Carolinas, Progress Energy, Duke Energy Progress, Duke Energy Ohio and Duke Energy Indiana recorded additional ARO amounts during 2015. Various industry and environmental parties have appealed the EPA's CCR rule in the D.C. CircuitU.S. Court of Appeals.Appeals for the District of Columbia (D.C. Circuit Court). On April 18, 2016, the EPA filed a motion with the federal court to settle five issues raised in litigation. On June 14, 2016, the court approved the motion with respect to all of those issues. A decision by the court on the remaining issues is expected in the secondthird quarter of 2017. Duke Energy does not expect a material impact from the settlement or that it will result in additional asset retirement obligationARO adjustments.
In addition to the requirements of the federal CCR regulation, CCR landfills and surface impoundments will continue to be independently regulated by most states. As a result of the EPA rule, the Subsidiary Registrants recorded asset retirement obligation amounts during 2015. Cost recovery for future expenditures will be pursued through the normal ratemaking process with federal and state utility commissions and via wholesale contracts, which permit recovery of necessary and prudently incurred costs associated with Duke Energy’s regulated operations. For more information, see Note 9, “Asset Retirement Obligations,” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015.
Beckjord, a facility retired during 2014, is not subject to the EPA rule related to the disposal of CCR from electric utilities. However, if costs are incurred as a result of environmental regulations or to mitigate risk associated with on-site storage of coal ash at the facility, the costs could have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows. Costs incurred by Ohio Valley Electric Corporation (OVEC) related to environmental regulations could also have an adverse impact on Duke Energy Ohio's financial position, results of operations and cash flows.2016.
Coal Ash Management Act of 2014
Asset retirement obligations recorded on the Duke Energy Carolinas and Duke Energy Progress Condensed Consolidated Balance Sheets at September 30, 2016,March 31, 2017, and December 31, 2015,2016, include the legal obligation for closure of coal ash basins and the disposal of related ash as a result of the Coal Ash Act, the EPA CCR rule and other agreements. In January 2016, the NCDEQ published draft proposed risk classifications for sites not specifically delineated by the Coal Ash Act as high priority. These risk rankings were generally determined based on three primary criteria: structural integrity of the impoundments and impacts to both surface water and to groundwater. The NCDEQ's draft proposed classifications categorized 12 basins at four sites as intermediate risk and four basins at three sites as low risk. Basins at high priority sites (Dan River, Riverbend, Asheville and Sutton) require closure through excavation including a combination of transferring the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of high-priority basins is required to be completed no later than August 1, 2019, except for Asheville which is required to be completed no later than August 1, 2022. Intermediate risk basins require closure through excavation including a combination of converting the basin to a lined industrial landfill, transferring of the ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of intermediate risk basins is required to be completed no later than December 31, 2024. Low risk basins require closure through either the combination of the installation and maintenance of a cap system and groundwater monitoring system designed to minimize infiltration and erosion or other closure options available to intermediate risk basins. Closure of low risk basins is required to be completed no later than December 31, 2029. The NCDEQ's draft proposed classifications also categorized nine basins at six sites as “low-to-intermediate” risk, thereby not assigning a definitive risk ranking at that time. On May 18, 2016, the NCDEQ issued new proposed risk classifications, proposing to rank all originally proposed low risk and "low-intermediate""low-to-intermediate" risk sites as intermediate.
On July 14, 2016, the former governor of North Carolina signed legislation, which amended the Coal Ash Act and required Duke Energy to undertake dam improvement projects and to provide access to a permanent alternative drinking water source to certain residents within a half mile of coal ash basin compliance boundaries and to certain other potentially impacted residents. The new legislation also ranks basins at the H.F. Lee, Cape Fear and Weatherspoon stations as intermediate risk consistent with Duke Energy's previously announced plans to excavate those basins. These specific intermediateintermediate-risk basins require closure through excavation including a combination of transferring ash to an appropriate engineered landfill or conversion of the ash for beneficial use. Closure of these specific intermediateintermediate-risk basins is required to be completed no later than August 1, 2028. Upon satisfactory completion of the dam improvement projects and installation of alternative drinking water sources by October 15, 2018, the legislation requires the NCDEQ to reclassify sites proposed as intermediate risk, excluding H.F. Lee, Cape Fear and Weatherspoon, as low risk. In January 2017, NCDEQ issued preliminary approval of Duke Energy's plans for the alternative water sources.
Additionally, the newJuly 2016 legislation requires the installation and operation of three large-scale coal ash beneficiation projects, which are expected to produce reprocessed ash for use in the concrete industry. Closure of basins at sites with these beneficiation projects are required to be completed no later than December 31, 2029. Upon satisfactory completion2029. On October 5, 2016, Duke Energy announced Buck Steam Station as a first location for one of the dam improvement projects and installation of alternate drinking water sources by October 15, 2018, the legislation requires the NCDEQ to reclassify sites proposed as intermediate risk, excludingbeneficiation projects. On December 13, 2016, Duke Energy announced H.F. Lee Cape Fear and Weatherspoon, as low risk.the second location. Duke Energy intends to announce the third location by July 1, 2017.
PerProvisions of the Coal Ash Act final proposed classifications were to be subject toprohibit cost recovery in customer rates for unlawful discharge of ash impoundment waters occurring after January 1, 2014. The Coal Ash Management Commission (Coal Ash Commission) approval. In March 2016,Act leaves the Coal Ash Commission created bydecision 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, was disbandedDuke Energy has submitted comprehensive site assessments and groundwater corrective plans to NCDEQ and will submit to NCDEQ site-specific coal ash impoundment closure plans in advance of closure. These plans and all associated permits must be approved by the Governor of North Carolina based on a North Carolina Supreme Court ruling regarding the constitutionality of the body. The new legislation eliminates the Coal Ash Commission and transfers responsibility for ash basinNCDEQ before closure oversight to the NCDEQ.work can begin.
Estimated asset retirement obligations have been recognized based on the assigned risk categories or a probability weighting of potential closure methods. Costs incurred have been deferred as regulatory assets and recovery will be pursued through the normal ratemaking process with federal and state utility commissions, which permit recovery of necessary and prudently incurred costs associated withFor more information, see Note 9, “Asset Retirement Obligations,” in Duke Energy’s regulated operations.
Mercury and Air Toxics Standards
The final Mercury and Air Toxics Standards (MATS) rule was issuedAnnual Report on February 16, 2012. The rule established emission limitsForm 10-K for hazardous air pollutants from new and existing coal-fired and oil-fired steam electric generating units. The rule required sources to comply with emission limits by April 16, 2015, or by April 16, 2016, with approved extension. Strategies to achieve compliance included installation of new air emission control equipment, development of monitoring processes, fuel switching and acceleration of retirement for some coal-fired electric-generation units. All of Duke Energy's coal-fired units are in compliance with the emission limits, work practices standards and other requirements of the MATS rule.year ended December 31, 2016.
Clean Water Act 316(b)
The EPA published the final 316(b) cooling water intake structure rule on August 15, 2014, with an effective date of October 14, 2014. The rule applies to 26 of the electric generating facilities the Duke Energy Registrants own and operate. The rule allows for several options to demonstrate compliance and provides flexibility to the state environmental permitting agencies to make determinations on controls, if any, that will be required for cooling water intake structures. Any required intake structure modifications and/or retrofits are expected to be installed in the 2019 to 2022 time frame. Petitions challenging the rule have been filed by several groups. It is unknown at this time when the courts will rule on the petitions. The Duke Energy Registrants cannot predict the outcome of these matters.
Steam Electric Effluent Limitations Guidelines
On January 4, 2016, the final Steam Electric Effluent Limitations Guidelines (ELG) rule became effective. The rule establishes new requirements for wastewater streams associated with steam electric power generation and includes more stringent controls for any new coal plants that may be built in the future. Affected facilities must comply between 2018 and 2023, depending on timing of new Clean Water Act (CWA) permits. Most, if not all, of the steam electric generating facilities the Duke Energy Registrants own are likely affected sources. The Duke Energy Registrants are well positionedwell-positioned to meet the majority of the requirements of the rule due to current efforts to convert to dry ash handling. Petitions challenging the rule have been filed by several groups. On March 16, 2015, Duke Energy Indiana filed its own legal challenge to the rule with the Seventh Circuit Court of Appeals specific to the ELG for wastewater associated rule focused on the limits imposed on integrated gas combined-cycle facilities. All challenges to the rule have been consolidated in the Fifth Circuit Court of Appeals. Initial petitioner briefs are due DecemberOn April 13, 2017, the EPA administrator granted petitions from the Utility Water Act Group and U.S. Small Business Administration requesting reconsideration and an administrative stay of compliance dates in the ELG rule that have not yet passed pending judicial review, effective April 25, 2017. Briefing in the case was scheduled to conclude on July 5, 2016. It is unknown at this time when2017, however, on April 24, 2017, the courts will ruleFifth Circuit Court of Appeals granted EPA's request to stay the pending litigation on the petitions.ELG rule until August 12, 2017. By the end of the stay period, EPA intends to inform the court of the portions of the rule, if any, that it will seek to have remanded to the agency for further rulemaking. The Duke Energy Registrants cannot predict the outcome of these matters.
Estimated Cost and Impacts of Rulemakings
Duke Energy will incur capital expenditures to comply with the environmental regulations and rules discussed above. The following table provides five-year estimated costs, excluding AFUDC, of new control equipment that may need to be installed on existing power plants primarily to comply with the Coal Ash Act requirements for conversion to dry disposal of bottom ash and fly ash, CWA 316(b) and ELGs through December 31, 2020.2021. The table excludes ash basin closure costs recorded asin Asset retirement obligations on the Condensed Consolidated Balance Sheets. For more information related to asset retirement obligations,AROs, see Note 7, “Asset Retirement Obligations” in this Form 10-Q, and Note 9, “Asset Retirement Obligations” in Duke Energy’s Annual Report on Form 10-K10‑K for the year ended December 31, 2015.2016. |
| | |
(in millions) | Estimated Cost |
|
Duke Energy | 1,650 |
|
Duke Energy Carolinas | 755 |
|
Progress Energy | 430 |
|
Duke Energy Progress | 370 |
|
Duke Energy Florida | 60 |
|
Duke Energy Ohio | 115 |
|
Duke Energy Indiana | 350 |
|
|
| | | |
| (in millions) | Estimated Cost |
|
| Duke Energy | $ | 1,235 |
|
| Duke Energy Carolinas | 530 |
|
| Progress Energy | 360 |
|
| Duke Energy Progress | 260 |
|
| Duke Energy Florida | 100 |
|
| Duke Energy Ohio | 125 |
|
| Duke Energy Indiana | 220 |
|
The Duke Energy Registrants also expect to incur increased fuel, purchased power, operation and maintenance and other expenses, in addition to costs for replacement generation for potential coal-fired power plant retirements, as a result of these regulations. Actual compliance costs incurred may be materially different from these estimates due to reasons such as the timing and requirements of EPA regulations and the resolution of legal challenges to the rules. The Duke Energy Registrants intend to seek rate recovery of necessary and prudently incurred costs associated with regulated operations to comply with these regulations.
Cross-State Air Pollution Rule
On December 3, 2015, the EPA proposed a rule to lower the Cross-State Air Pollution Rule (CSAPR) Phase 2 state ozone season nitrogen oxide (NOX) emission budgets for 23 eastern states, including North Carolina, Ohio, Kentucky and Indiana. The EPA also proposed to eliminate the CSAPR Phase 2 ozone season state NOX budgets for Florida and South Carolina. On September 7, 2016, the EPA finalized athe CSAPR update ruleUpdate Rule that reduces the CSAPR Phase 2 state ozone season NOX emission budgets for 22 eastern states, including Ohio, Kentucky and Indiana. In the final CSAPR update rule,Update Rule, the EPA removed Florida, South Carolina and North Carolina from the ozone season NOx program. Beginning in 2017, Duke Energy Registrants in these states will not be subject to any CSAPR ozone season NOx emission limitations. For the states that remain in the program, the reduced state ozone season NOx emission budgets will taketook effect on May 1, 2017. In Kentucky and Indiana, where Duke Energy Registrants own and operate coal-fired electric generating units (EGUs) subject to the final rule requirements, potential near-term responses could include changing unit dispatch to run certain generating units less frequently and/or purchasing NOx allowances from the trading market. Longer term, upgrading the performance of existing NOx controls is an option. Numerous parties have filed petitions with the D.C. Circuit Court challenging various aspects of the CSAPR Update Rule. The court has yet to set a briefing schedule. Duke Energy Registrants cannot predict the outcome of these matters.
Carbon Pollution Standards for New, Modified and Reconstructed Power Plants
On October 23, 2015, the EPA published a final rule in the Federal Register establishing carbon dioxide (CO2) emissions limits for new, modified and reconstructed power plants. The requirements for new plants do not apply to any facility that Duke Energy currently has in operation, but would apply to plants that commenced construction after January 8, 2014. The EPA set an emissions standard for coal units of 1,400 pounds of CO2 per gross MWh, which would require the application of partial carbon capture and storage (CCS) technology for a coal unit to be able to meet the limit. Utility-scale CCS is not currently a demonstrated and commercially available technology for coal-fired electric generating units,EGUs, and therefore the final standard effectively prevents the development of new coal-fired generation. The EPA set a final standard of 1,000 pounds of CO2 per gross MWh for new natural gas combined-cycle units. Petitions challenging
On March 28, 2017, President Trump signed an Executive Order directing EPA to review the rule have beenand determine whether to suspend, revise or rescind it. On the same day, the Department of Justice (DOJ) filed a motion with the D.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by several groups. Initial petitioner briefs were submittedEPA. Subsequent to the court on October 13, 2016. Final briefsDOJ motion, the D.C. Circuit Court canceled oral argument in the case, are due February 6,which had been scheduled for April 17, 2017. Oral arguments haveOn April 28, 2017, the court ordered that the litigation be suspended for 60 days and directing parties to file supplemental briefs by May 15, 2017, addressing whether the rule should be remanded to EPA rather than be suspended. The rule remains in effect pending the outcome of litigation and EPA’s review. EPA has not been scheduled.announced a schedule for completing its review. The Duke Energy Registrants cannot predict the outcome of these matters, but do not expect the impacts of the current final standards will be material to Duke Energy's financial position, results of operations or cash flows.
Clean Power Plan (CPP)
On October 23, 2015, the EPA published in the Federal Register the final CPPClean Power Plan (CPP) rule that regulates CO2emissions from existing fossil fuel-fired electric generating units.EGUs. The CPP establishesestablished CO2emission rates and mass cap goals that apply to existing fossil fuel-fired electric generation units. UnderEGUs. Petitions challenging the CPP, states were required to develop and submit a final compliance plan, or an initial plan with an extension request, to the EPA by September 6, 2016. States that receive an extension must submit a final completed plan to the EPA by September 6, 2018. The EPA intends to review and approve or disapprove state plans within 12 months of receipt. The CPP does not directly impose regulatory requirements on the Duke Energy Registrants. State implementation plans will include the regulatory requirements that will apply to the Duke Energy Registrants. The EPA also published a proposed federal plan for public comment. A federal plan would be applied to states that fail to submit a plan to the EPA or where a state plan is not approved by the EPA.
Legal challenges to the final CPPrule have been filed by stakeholders. Onseveral groups and on February 9, 2016, the Supreme Court issued a stay of the final CPP rule, halting implementation of the CPP until legal challenges are resolved. The statesStates in which the Duke Energy Registrants operate have suspended work on the CPP in response to the stay. Oral arguments before 10 of the 11 judges on D.C. Circuit Court were heard on September 27, 2016. The court is expected to decidehas not issued its opinion in the case in early 2017..
ComplianceOn March 28, 2017, President Trump signed an Executive Order directing EPA to review the CPP and determine whether to suspend, revise or rescind the rule. On the same day the DOJ filed a motion with CPP could cause the industryD.C. Circuit Court requesting that the court stay the litigation of the rule while it is reviewed by EPA. On April 28, 2017, the court issued an order to replace coal generation with natural gassuspend the litigation for 60 days and renewables. Costsdirecting parties to operate coal-fired generation plants continuefile supplemental briefs by May 15, 2017, addressing whether the rule should be remanded to grow due to increasing environmental compliance requirements, including ash management costs unrelated to CPP, which may result in the retirement of coal-fired generation plants earlierEPA rather than be suspended. Neither the Executive Order nor the court's order changes the current end of useful lives. If the CPP is ultimately upheld by the courts and implementation goes forward, the Duke Energy Registrants could incur increased fuel, purchased power, operation and maintenance and other costs for replacement generation as a result of this rule. Due to the uncertainties related to the implementationstatus of the CPP, which is under a legal hold by the U.S. Supreme Court. The EPA has not announced a schedule for completing its review. The Duke Energy Registrants cannot predict the outcome of these matters.
Global Climate Change
For other information on global climate change and the potential impacts on Duke Energy, see “Other Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015.2016.
Nuclear Matters
For other information on nuclear matters and the potential impacts on Duke Energy, see “Other Matters” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015.2016.
New Accounting Standards
See Note 1 to the Condensed Consolidated Financial Statements, “Organization and Basis of Presentation,” for a discussion of the impact of new accounting standards.
Off-Balance Sheet Arrangements
During the three and nine months ended September 30, 2016,March 31, 2017, there were no material changes to Duke Energy’s off-balance sheet arrangements. For information on Duke Energy’s off-balance sheet arrangements, see “Off-Balance Sheet Arrangements” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015.2016.
Contractual Obligations
Duke Energy enters into contracts that require payment of cash at certain specified periods, based on certain specified minimum quantities and prices. During the three and nine months ended September 30, 2016,March 31, 2017, there were no material changes in Duke Energy’s contractual obligations. For an in-depth discussion of Duke Energy’s contractual obligations, see “Contractual Obligations” and “Quantitative and Qualitative Disclosures about Market Risk” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Duke Energy’s Annual Report on Form 10-K for the year ended December 31, 2015.2016.
Subsequent Events
See Note 1817 to the Condensed Consolidated Financial Statements, “Subsequent Events,” for a discussion of subsequent events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
During the three and nine months ended September 30, 2016,March 31, 2017, there were no material changes to the Duke Energy’sEnergy Registrants' disclosures about market risk. For an in-depth discussion of the Duke Energy’sEnergy Registrants' market risks, see “Management’s Discussion and Analysis of Quantitative“Quantitative and Qualitative Disclosures about Market Risk” in Duke Energy’sItem 7 of the Annual Report on Form 10-K for the year ended December 31, 2015.Duke Energy Registrants.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by the Duke Energy Registrants in the reports they file or submit under the Securities Exchange Act of 1934 (Exchange Act) are 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 are accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated the effectiveness of their disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2016,March 31, 2017, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.
Changes in Internal Control over Financial Reporting
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Duke Energy Registrants have evaluated changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended September 30, 2016,March 31, 2017, and have concluded no change has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding material legal proceedings, including regulatory and environmental matters, that became reportable events or in which there were material developments in the third quarter of 2016, see Note 4, "Regulatory Matters," and Note 5, "Commitments and Contingencies," to the Condensed Consolidated Financial Statements.
MTBE Litigation
On June 29, 2007,19, 2014, the New Jersey DepartmentCommonwealth of Environmental Protection (NJDEP)Pennsylvania filed suit against among others, Duke Energy Merchants, (DEM),LLC, an indirect wholly owned subsidiary of Duke Energy, among others, 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 case was moved to federal court and consolidated in an existing multidistrict litigation docket of pending MTBE cases. DEM and NJDEP have reached an agreement in principle to settle the case for a payment by DEM of $1.7 million. On February 19, 2016, the court approved a Consent Decree executed by the parties which settles the case. Payment was made in February 2016. The case was dismissed byis currently in the court on April 29, 2016. DEM is also a defendant in a similar case filed by the Commonwealth of Pennsylvania on June 19, 2014. That case has been moved to the consolidated multidistrict proceeding. Discovery in this case continues.discovery phase.
ITEM 1A. RISK FACTORS
Please see the additional risk factors below affecting Duke Energy's business as a result of the Piedmont acquisition. These risk factors are inIn addition to those presentedthe other information set forth in this report, careful consideration should be given to the factors discussed in Part I, “Item 1A. Risk Factors” in the Duke Energy Registrants’Registrants' Annual Report on Form 10-K, for the year ended December 31, 2015, which could materially affect the Duke Energy Registrants’ financial condition or future results. Except for the updates below, there have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2015.
We may not be able to complete necessary or desirable pipeline expansion or infrastructure development or maintenance projects, which may delay or prevent us from serving our natural gas customers or expanding our natural gas business.
In order to serve current or new natural gas customers or expand our service to existing customers, we need to maintain, expand or upgrade our distribution, transmission and/or storage infrastructure, including laying new pipeline and building compressor stations. Various factors may prevent or delay us from completing such projects or make completion more costly, such as the inability to obtain required approval from local, state and/or federal regulatory and governmental bodies, public opposition to the project, inability to obtain adequate financing, competition for labor and materials, construction delays, cost overruns, and inability to negotiate acceptable agreements relating to rights-of-way, construction or other material development components. As a result, we may not be able to adequately serve existing natural gas customers or support customer growth, or could result in higher than anticipated cost, both of which would negatively impact our earnings.
The availability of adequate interstate pipeline transportation capacity and natural gas supply may decrease.
We purchase almost all of our gas supply from interstate sources that must then be transported to our service territory. Interstate pipeline companies transport the gas to our system under firm service agreements that are designed to meet the requirements of our core markets. A significant disruption to or reduction in that supply or interstate pipeline capacity due to events including but not limited to, operational failures or disruptions, hurricanes, tornadoes, floods, freeze off of natural gas wells, terrorist or cyber-attacks or other acts of war, or legislative or regulatory actions or requirements, including remediation related to integrity inspections, could reduce our normal interstate supply of gas and thereby reduce our earnings. Moreover, if additional natural gas infrastructure, including but not limited to exploration and drilling rigs and platforms, processing and gathering systems, off-shore pipelines, interstate pipelines and storage, cannot be built at a pace that meets demand, then our growth opportunities would be limited and our earnings negatively impacted.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
There were no issuer purchases of equity securities during the thirdfirst quarter of 2016.2017.
ITEM 6. EXHIBITS
Exhibits filed herein are designated by an asterisk (*). All exhibits not so designated are incorporated by reference to a prior filing, as indicated. Items constituting management contracts or compensatory plans or arrangements are designated by a double asterisk (**). The Company agrees to furnish upon request to the Commission 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 |
| 4.1 | FourteenthForty-fifth Supplemental Indenture, dated as of August 12, 2016March 27, 2017, (incorporated by reference to Exhibit 4.1 to registrant'sRegistrant's Current Report on Form 8-K filed on August 12, 2016,March 27, 2017, File No. 1-32853)1-01232). | X | | | | | | | | | | | | |
4.2 | Fifty-Third Supplemental Indenture, dated as of September 1, 2016 (incorporated by reference to Exhibit 4.1 to registrant's Current Report on Form 8-K filed on September 9, 2016, File No. 1-03274). | | | | | | | | | X | | | | |
4.3*4.2 | Eighty-SixthFifteenth Supplemental Indenture, dated as of September 1, 2016 (incorporated by reference to Exhibit 4.1 to registrant's Current Report on Form 8-K filed on September 16, 2016, File No. 1-15929). | | | | | | | X | | | | | | |
10.1 | Purchase and Sale Agreement by and among Duke Energy International Group S.à.r.l., Duke Energy International Brazil Holdings S.à.r.l. and China Three Gorges (Luxembourg) Energy S.à.r.l., dated as of October 10, 2016 (incorporated by reference to Exhibit 2.1 to registrant's Current Report on Form 8-K filed on October 13, 2016, File No. 1-32853).April 11, 2017. | X | | | | | | | | | | | | | | |
10.210.1 | PurchaseAmendment No. 3 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.,Consent, dated as of October 10, 2016March 16, 2017, among 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 2.2.10.1 to registrant'sRegistrants' Current Report on Form 8-K filed on October 13, 2016,March 17, 2017, File No. 1-32853)Nos. 1-32853, 1-04928, 1-03382, 1-03274, 1-01232, 1-03543, 1-06196). | X | | X | | | | X | | X | | X | | X | | X |
| *10.2** | Performance-Based Retention Award Agreement.
| X | | | | | | | | | | | | | | |
| *10.3** | Performance Award Agreement. | X | | | | | | | | | | | | | | |
| *10.4** | Restricted Stock Unit Award Agreement. | X | | | | | | | | | | | | | | |
| *12 | Computation of Ratio of Earnings to Fixed Charges – DUKE ENERGY CORPORATION. | X | | | | | | | | | | | | | | |
| *31.1.1 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | | | | | | | | | | | | | | |
| *31.1.2 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | X | | | | | | | | | | | | |
| *31.1.3 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | X | | | | | | | | | | |
| *31.1.4 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | X | | | | | | | | |
| *31.1.5 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | X | | | | | | |
| *31.1.6 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | X | | | | |
| *31.1.7 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | | | X | | |
| *31.1.8 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | | | | | X |
| *31.2.1 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | X | | | | | | | | | | | | | | |
| *31.2.2 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | X | | | | | | | | | | | | |
| *31.2.3 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | X | | | | | | | | | | |
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*31.2.3 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | X | | | | | | | | |
| *31.2.4 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | X | | | | | | | | |
| *31.2.5 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | X | | | | | | |
| *31.2.6 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | X | | | | |
| *31.2.7 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | | | X | | |
| *31.2.8 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | | | | | X |
| *32.1.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | | | | | | | | | | | | | | |
| *32.1.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | X | | | | | | | | | | | | |
| *32.1.3 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | X | | | | | | | | | | |
| *32.1.4 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | X | | | | | | | | |
| *32.1.5 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | X | | | | | | |
| *32.1.6 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | X | | | | |
| *32.1.7 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | | | X | | |
| *32.1.8 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | | | | | X |
| *32.2.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | X | | | | | | | | | | | | | | |
| *32.2.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | X | | | | | | | | | | | | |
| *32.2.3 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | X | | | | | | | | | | |
| *32.2.4 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | X | | | | | | | | |
| *32.2.5 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | X | | | | | | |
| *32.2.6 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | X | | | | |
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| *32.2.7 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | | | X | | |
| *32.2.8 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | | | | | | | | | | | | | | | X |
| *101.INS | XBRL Instance Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *101.SCH | XBRL Taxonomy Extension Schema Document. | X | | X | | X | | X | | X | | X | | X | | X |
| *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 |
The total amount of securities of the registrant or its subsidiaries authorized under any instrument with respect to long-term debt not filed as an exhibit does not exceed 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis. The registrant agrees, upon request of the SEC, to furnish copies of any or all of such instruments to it.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned thereunto duly authorized. |
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DUKE ENERGY CORPORATION DUKE ENERGY CAROLINAS, LLC PROGRESS ENERGY, INC. DUKE ENERGY PROGRESS, LLC DUKE ENERGY FLORIDA, LLC DUKE ENERGY OHIO, INC. DUKE ENERGY INDIANA, LLC PIEDMONT NATURAL GAS COMPANY, INC.
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| Date: | November 4, 2016May 9, 2017 | /s/ STEVEN K. YOUNG |
| | | Steven K. Young
Executive Vice President and Chief Financial Officer (Principal Financial Officer)
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| Date: | November 4, 2016May 9, 2017 | /s/ WILLIAM E. CURRENS JR. |
| | | William E. Currens Jr.
Senior Vice President, Chief Accounting Officer
and Controller
(Principal Accounting Officer) |
